HOW TO USE OLM 50: one-stop guide for mutual fund (MF) investments

Thisis your one-stop guide for mutual fund (MF) investments. OLM 50 is Outlook Money’s list of choicest funds that merit your attention, selected after an exhaustive study. It comprises funds from equity debt and mixed categories. You won’t find liquid funds here because this is an investment portfolio. Liquid funds are meant for parking surplus cash for short-term needs, they are not a permanent destination. Each edition of OLM 50 may carry a few new funds in place of some old ones, weeding out consistent non-performers or those where management changes have taken place, which would need to be tested. Only for fresh investments. OLM 50 may or may not cater to your existing investments. If your fund is not a part of OLM 50, it doesn’t necessarily mean you should exit. Also, if you have invested in a fund that was part of OLM 50 earlier, but is no longer in the list, it doesn’t mean you need to churn immediately. There could be many reasons as to why we knocked out a fund: management change, consistently declining performance and so on. Core and Satellite. A ‘core’ fund is more of an evergreen fund whose investment strategy is more long-lasting like plain-vanilla funds. A ‘satellite’ fund is a fair-weather fund, such as thematic or sector funds, that works in only certain market conditions.

Usually, your allocation to core funds should be more than to satellite funds, with the exact ratio depending on your risk profile. If you are risk-averse, your allocation to ‘core’ funds should be more, and vice-versa. Morningstar classifies large-cap and mid-cap schemes as per their portfolios and not their offer documents. Hence, you could find a fund that is, for instance, classified as a mid-cap fund in one quarter and a large-cap in the other. Other schemes. There are many five- or four- star rated funds that may not appear in OLM 50. It doesn’t mean they are not worthy. It could also mean that there are better alternatives. It also doesn’t mean all other schemes, other than OLM 50, merit a sell. With our MF coverage, we will keep you apprised of any investment opportunities that merit a sell, as also buy opportunities. How many. Though OLM 50 has many schemes, you shouldn’t invest in all. Pick seven to eight schemes. You might find many schemes from the same fund house in a category due to a superior track record. It’s best to diversify across fund houses. If you are a conservative, risk-averse investor with a time horizon of a year or two, pick more funds from the debt platter. But if you are in for the long haul, equity funds are your best bet.