Emerging Mutual Funds- The debate of Big Vs Small

1. Emerging Mutual Funds- The debate of Big VsSmall • These days most financial planning discussions are incomplete without Mutual Funds. Their easy access, affordability due to SIP, returns potential and flexibility have made them the crowd favorite. There is something for everyone. But sometimes too much choice also becomes a problem. One of the most common debates is regarding the size of the fund- Should you go for a large sized fund or can you trust a smaller but emerging mutual fund with your hard-earned money? Read on to findout. • Importance of Fund Size in MutualFunds • We have often heard that bigger the better, even for your mutual fund investments. The fund size or AUM (Asset Under Management) is considered as an important yardstick while picking the best funds. A bigger AUM value does have its own advantages. Suchas: • Costbenefits • A larger fund size enjoys significant cost benefits. As the fund grows in size, the associated fixed costs become a smaller proportion of the overall expenses. This helps in improving the fund’s efficiency and bringing down the expenseratio. • MoreOpportunities • A bigger fund allows the fund managers to display their skills and expertise more effectively. They can take bigger bets and capitalize on the marketopportunities. • Liquidity • Larger funds deliberately dodge stocks with inadequate liquidity. They usually have more liquid funds in their portfolio as compared to their smaller counterparts. On the other hand, an extremely small sized fund is vulnerable to liquidity pressure. Such funds performance can get adversely impacted by high redemptionpressure. • However, for all the above pros, a bigger fund size can also become a hindrance in somematters. • Variety • Compared to the larger sized funds, the smaller counterparts are able to access a much wider variety of stocks • ExecutionalNimbleness • Smaller funds are nimbler in terms of execution. They can move in or out of stocks at a much faster pace. • ImpactCost • Larger funds usually invest in high volumes. When they start buying a large number of stocks, they drive up that specific stock’s price. This makes the fund’s average purchase cost also go up. On the other hand, massive selling by such funds can crash the stock’s price. Smaller funds do not suffer as much from thisissue. • Here is a list of the emerging mutual fundsthat you should consider for inclusion in yourportfolio: • Invesco India Mid CapFund • Canara Robeco Equity DiversifiedFund • Invesco India Growth OpportunitiesFund

2. Invesco India ContraFund • Canara Robeco Equity HybridFund • Principal Emerging BluechipFund • Edelweiss Large CapFund • Edelweiss Mid CapFund • Principal Multi Cap GrowthFund • IDFC Core EquityFund • Quantum Equity FoFScheme • IDFC Sterling ValueFund • Quantum Long Term Equity ValueFund • FinalWords • A smart investor is one who can look beyond the funds’ size. There are a host of quantitative (performance track record, expense ratio, investment strategy during bull and bear market cycles, ability to withstand downturns, etc.) as well as qualitative factors (management quality, track record of fund manager, etc.) that should form the basis of your mutual fundinvestment. • Small can also be significant, if it has potential. Always remember that funds are not good just because they are big in size. Invest in funds which have a good track record and potential to grow in the future, irrespective of their size. Moreover, size is a fluid concept. What is small or emerging today, can become big tomorrow. In fact, most of the blue chip or large top-performing funds started small. They were good and had potential, and hence eventually becamelarge. • If you limit your mutual fund investment decisions to just the larger crowd favorite funds, you may end up overlooking some emerging mutual funds that could go on to become futurestalwarts.