Page 34 - mutual-fund-insight - Mar 2021_Neat

COVER STORY

the risk become too much?
There’s no one-size-fits-all
*YLKP[ YPZR M\UKZ HZ WSHJLK VU [OL answer to that. It has to be an
YPZR V TL[LY outcome of your investing needs.

There is a wide variation in Moderately You also need to think about your
the risk scores of the funds Moderate High willingness to pursue higher
Low to High risk. The events of the last one-two
in the credit-risk category. returns at the expense of higher
Moderate
years can be of great help as they
provide some real evidence of how
Low Very High wrong things can go, and whether
you are up for them, instead of
scenarios built up in the head or
RISKOMETER
Figures represent the number of funds; Excludes funds suspended for sale on a piece of paper.
Now does that disappoint you?
Were you hoping for a more
(UHS`ZPZ VM [OL JYLKP[ YPZR JH[LNVY` precise answer? Well, here’s one
that can bring more objectivity to
Funds giving high returns are also those high on risk using the risk-o-meter, though we
z Moderate z Moderately High z High z Very High admit it’s not the perfect one and
Exposure to AA and below rated papers (%) 90 of caution, here’s what you can do.
may not work in every situation.
But for those of you who want to
80
keep it simple and err on the side
70
60
For every debt category, you
50
would see one or the other risk
40
grade in which majority of the
funds bunch up. For instance, the
30
ultra-short-duration funds bunch
20
10
category, or the dynamic bonds
0
funds cluster up in the ‘Moderate’
-48 -42 -36 -30 -24 -18 -12 -6 0 6 12 18 up in the ‘Low to Moderate’
category. You can think of it as a
1-year returns (%)
Returns as on January 29, 2021; Excludes funds suspended for sale reasonable level of risk
Credit exposure data as on December 31, 2020; also includes unrated securities commensurate with the investment
mandate of that category.
that funds giving high returns are /6> ;6 <:, ;/, Therefore, you can use it as a
high on risk, there are quite a few 90:2 6 4,;,9 -69 benchmark or the reference-risk
funds which are giving negative level and compare it with the risk
one-year returns but are also +,*0:065 4(205.& grade of your fund. If your fund
ranked higher on risk. These are Now that the relevance of risk-o- moves a notch higher than this
the ones where the defaults/ meter in pointing out the risks in reference level, that’s the time to
downgrades have already debt funds is established, the big look at it more closely to
materialised, given their riskier question is – how can investors understand what’s contributing to
portfolio complexion translating use it in their investment decision- that additional risk.
into negative returns. making? At what risk grade does You can get a lot of the

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THQVYP[` VM [OL M\UKZ I\UJO \W @V\ JHU \ZL P[ HZ H ILUJOTHYR VY [OL YLMLYLUJL YPZR SL]LS HUK
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32 Mutual Fund Insight March 2021
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