Reliance Focused Equity Fund - Focused Gain From Diversified Equities
Diversification in the portfolio of mutual funds allow investors to take advantage of overall gains in the equity market but the selection of a large number of stocks might restrict the returns. In such a case, a mutual fund that selects a limited number of stocks throughout the equity market can be highly rewarding. Reliance Focused Equity Fund follows a focused approach of selecting stocks throughout the market segments. It is a focused fund but also regarded as multi-cap fund as the stocks are selected from large, mid, and small-cap category.
Reliance Focused Equity Fund - At a Glance
The mandate of the fund has been revamped 2 times since inception. Reliance Mutual Fund launched this scheme in December 2006 as a multi-cap fund which followed a diversified approach to select a large number of stocks. Later on, the allocation in the mid and small-cap fund was significant and eventually, it became a mid and small-cap fund in 2015. Later on, the mandate was changed again in 2018 and it became a focused fund that selects stocks throughout the market segments. Mr Vinay Sharma has been handling the portfolio of the new mandate and has done it efficiently. Under every mandate, this fund has done well to deliver long term capital appreciation to the investors and has provided multibagger returns in the long term.
What Makes it Unique?
The fund manager of Reliance Focused Equity Fund has the freedom to select the best-suited stocks for long term capital appreciation throughout the market but the number of stocks selected cannot be more than 30. As per the norms of SEBI, a focused fund can only invest in 30 stocks maximum but no restriction exists on the type or size of the stocks. Diversification in the portfolio is used to reduce the volatility but over-diversification can reduce the overall gains. To enjoy better returns from an over-diversified portfolio, it is essential for a large number of stocks in the portfolio to deliver positive outcomes which are practically rare to occur. Reducing the number of stocks in the portfolio can be the ultimate solution for a multi-cap fund to gain better returns.
Reliance Focused Equity Fund invests in less than 30 stocks and each stock is selected after a comprehensive inspection on various parameters. This allows the investors to invest in the focused portfolio that contains stocks of good quality and maximum growth potential. This strategy has been successful in recent years and the fund has rewarded the investors with impressive returns. The past performance of the fund for the long term cannot be considered to assess the scheme as the mandate has been revamped last year.
Reliance Focused Equity Fund - Stock Selection Strategy
As the fund manager is only allowed to select less than 30 stocks, he is precise and selects the stocks through a blend of top-down and bottom-up approach. To diversify the portfolio with a focused approach, stocks from 9-12 sectors are chosen. Cyclical and sensitive stocks are highly chosen. The growth-oriented investment strategy is used to deliver consistent gains to investors. Nearly 60-70% of the corpus is invested in large-cap stocks while nearly 30% is invested in mid-cap stocks. A smaller proportion of 5-10% is also invested in the small-cap stocks for increasing the capital gains. The top holders in the portfolio are the leaders of their respective sectors. HDFC Bank, ITC, SBI, ICICI Bank, and L&T are the top holders.
What is the Risk Involved?
Due to a focused portfolio or less number of stocks in the portfolio, the risk factor is slightly higher than other multi-cap funds. Compared to other schemes in the focused category, it has a slightly higher allocation in the mid and small-cap stocks. This increases the standard deviation or volatility of the scheme. Reliance Focused Equity Fund possesses high moderately high risk but has the ability to deliver exponential returns in the favourable market conditions. The risk to reward ratio is, however, better than the majority of the other focused mutual funds.
Who Should Invest in Reliance Focused Equity Fund?
Reliance Focused Equity Fund is suitable for investors who prefer a focused approach to invest. It involves higher risk but can also provide better returns under the right market conditions. The investor must be prepared to face fluctuations in the short term while in the long term through SIP, high returns can be expected. Reliance Focused Equity Fund has been chosen by a large number of investors and is also one of the most chosen schemes in the category. Thousands of investors have gained remarkable gains in the past. To check how your financial objective can be achieved through this scheme, use SIP calculator available at our website.
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