Summary of "Last 1 year: Mutual Funds are performing badly. How to identify better funds? | Akshat Shrivastava"

Summary of Financial Strategies, Market Analyses, and Business Trends

Main Theme: The video discusses why mutual funds have underperformed over the last year and how retail investors can identify and build better-performing mutual funds using a common-sense approach, focusing on asset quality, timing, and cost efficiency.

Key Market Analyses and Observations:

Many popular Indian mutual funds (e.g., Parakar, Quant, SBI, ICICI, Franklin) have delivered poor 1-year and YTD returns, with some even showing losses.
The presenter’s own self-managed fund, created in January, has yielded approximately 25% returns YTD, outperforming most mutual funds in India.
Market timing and point of entry are critical; buying during market dips (e.g., April dip) significantly boosts returns.
SIP (Systematic Investment Plan) strategies, while popular, are overused and may not generate alpha since many retail investors follow them blindly.
Historical Nifty SIP returns show variable phases: significant growth (1999-2010), average returns (2010-2020), and poor recent performance, cautioning against blind long-term SIP investing.
Mutual fund returns depend heavily on the underlying assets they hold, not just the fund manager’s skill.
Example: Parakar fund’s strong past returns were partly due to significant exposure to US stocks during their rally.

Methodology / Step-by-Step Guide to Identify or Build Better Mutual Funds:

1. Understand Asset Quality:

Invest in funds with high-quality underlying assets (e.g., Indian private banks, US tech stocks like Netflix, Meta).
Define what “good asset quality” means for your portfolio.

2. Minimize Commissions:

Avoid funds with high commissions.
Consider building and managing your own fund to save on fees.

3. Focus on Point of Entry / Market Timing:

Invest when markets or specific sectors are cheap (value investing).
Avoid investing heavily when markets are overvalued.
Example: Buying midcap funds during consolidation zones yielded 100% returns.

4. Maintain Cash-to-Investment Ratio:

Keep some cash reserve (e.g., 20%) to deploy during market dips.
Adjust exposure based on market valuation (e.g., 100% invested at 15-20% discount, 80% invested near all-time highs).

5. Manage Reinvestment Risk:

When booking profits, have a clear plan for reinvesting proceeds.
Avoid being forced to reinvest in overvalued assets.

The Presenter’s Three Mutual Fund Constructs:

Fund 1: Bulk Fund

Invests only when the market is cheap.
Buys in bulk during market dips (e.g., April dip).
No regular SIP; timing-based bulk investments.

Fund 2: Sensible or Smart SIP Fund

SIP investments made only when the market is trading at a discount (e.g., >5% below recent highs).
Invests in a curated list of 25-30 high-quality stocks across markets (India, US, possibly Bitcoin).
Combines SIP discipline with value-based entry.

Fund 3: Retirement / Legacy Fund

Focuses on next-generation, frontier tech companies (e.g., space exploration, AI-driven healthcare, CRISPR technology).
Diversified across 20-30 companies, accepting some will fail but hoping others become multi-baggers.
Less frequent tracking, long-term holding strategy.
Bitcoin may be included as part of diversification.

Additional Insights:

Retail investors have structural advantages over mutual fund managers (e.g., ability to hold cash, smaller capital size, flexibility in timing).
Mutual fund managers often cannot hold large cash reserves due to fund size and investor expectations.
Using common sense, patience, and understanding market cycles can help retail investors outperform many mutual funds.
The presenter does not claim to be smarter than mutual fund managers but credits his outperformance to commission savings, better timing, diversification, and tax efficiency.

Presenters / Source:

Akshat Shrivastava

Summary: Akshat Shrivastava critiques the poor recent performance of mutual funds and advocates for a strategic, value-based approach to mutual fund investing. He emphasizes the importance of asset quality, market timing, low commissions, cash management, and reinvestment planning. He shares his own three-fund strategy tailored for bulk investing, smart SIPs, and retirement, combining Indian and US markets with frontier tech and crypto exposure. The video encourages retail investors to leverage their advantages and use common sense rather than blindly following popular SIP advice.