What is the best combination of active and passive mutual funds, including broader market index and factor index funds, for a long-term investment portfolio (10+ years)?
- Parag Parikh Flexi Cap Fund.
- Quant Small Cap Fund.
- UTI Nifty 200 Momentum 30 Index Fund.
Suggesting index is not because we have to beat the market, but because we make sure we dont earn less than market returns.There is no reason of mixing. We dont know what equity returns will be in next decades to come. That can be index or active. Better to stick to our skills , earning potentials and keep investing. Also exploring a way to make money from individual stocks is always a welcome.
Note : Survivorship bias is the concept we should understand before doing anything in life.
Step 1: become Boglehead
Step 2: Pray daily that your Index doesn’t ends up like Japan, Greece, Italy or Pakistan.
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Thanks for your suggestions. Why not any broad market based index, Acive Midcap fund?
I agree that there are no guarantees in either active or passive investing. Therefore, I believe it’s wise to diversify and balance investments in both approaches. Direct investing in stocks can be rewarding, but it demands a significant amount of time and effort, which most people cannot afford.
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there is no single solution which fits everyones needs but in general say equal weight of
- Nifty index
- Nifty Next 50 index
- 200 Momentum 30 index
- Low volatility index
- Gold index
- US Total market index
- Medium duration debt fund
- Liquid fund
Should give clue about the combination.
if you have time… you may like to go thru discussion here
its lengthy though… you have been warned 
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Thank you for the insightful details. With the availability of the Nifty LargeMid Cap 250 fund, do you think investing in the Nifty 50, Next 50, or Midcap 150 Index Funds still makes sense, or would there be significant overlap?
Apart from this Just curious
You already mentioned Nifty 50 and Nifty next 50 then Isn’t Nifty 100 Low Volatility 30 Index overlap both of them?
Doesn’t make any sense. LargeMid cap is 50% into Nifty 100 and 50% into Nifty mid 150
Was thinking about your suggestion about largemidcap. As I understand next 50 and midcap 150 are strongly co-related. So behavior wise there is significant overlap.
Nifty LargeMid Cap 250 fund has slightly less correlation expected to have less drawdowns. So it can act as stabilizer while doing portfolio re-balance. yes it can be part of portfolio.
oh yes… but I look overlap from index behavior point of view. All three do not have very strong co-relation with each other so over long period its possible to achieve slightly better performance and slightly lower drawdown.
Got your point. Where can I find co-relation between these indices. Can you please share some data/links?
oh frankly i am not able find out single source… titbits are available on web
- Finance websites like personalfinanceplan e.g. Nifty 50 vs Nifty Next 50 vs Nifty Factor Indices (Alpha, Momentum, Value, Quality, Low Volatility) (2022) | Personal Finance Plan
- Few threads opened in this forum by Bhuvan e.g. Good times become good memories, but bad times become good lessons
- Literature by funhouses like whiteoak, icici etc for multi allocation or hybrid mutual funds eg fund presentation document of WhiteOak_Capital_Multi_Cap_Fund
In any case, if you happen to come across a source where co-relation data is updated regularly do let us know
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I am quite confused with this. Are you suggesting to keep allocation of Nifty next 50 along with Nifty LargeMidcap 250 and avoid midcap 150?
yes… I mean this is my opinion that if I am investing in Nifty next 50 then i do not need to invest midcap 150
| Mahindra Multicap Fund | MAHI_MANU_MULT_1F6A940 | 36.68 |
|---|---|---|
| Mahindra SmallCap Fund | MAHI_MANU_SMAL_E0JJ8U | 18.38 |
| Motilal Oswal Small Cap Fund | MOTI_OSWA_SMAL_11PYRIT | 11.27 |
| Motilal Oswal Midcap Fund | MOTI_OSWA_MIDC_1E5B8T2 | 96.15 |
| Quant Momentum | QUAN_MOME_DIR_LLKT7K | 14.7 |
| Motilal Oswal Microcap Fund - i | MOTI_OSWA_NIFT_84KT56 | 15.36 |
| Motila Oswal 200 MOM-30 - i | MOTI_OSWA_NIFT_108LOL7 | 17.28 |
| Bandhan Nifty Alpha 50 i | BAND_NIFT_ALPH_1EDZ6YT | 14.14 |
currently i am investing in SIP mode in all these fund - some fund old more then 5 years - 62% return i got in one year - last 5 year its give 30.1%
i will continue to my rest of my life then i will handover to children and instruct to continue SIP for next generation
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In this list there is no Equity orianted active funds? don’t you think any active flexicap and smallcap fund is required? or we can say by investing in LM250 or NN50 & Midcap 150 Index we are covering diversified market so no need of active flexicap fund.
There are endless discussions about active and passive funds.
It’s personal choice I suppose that I choose to invest in passive funds. Somehow I find it difficult to select a active fund which can perform better than corresponding index for 10+years.
In any case I think asset allocation plays far more important role in long term wealth creation than choosing fund in particular category .
What do you suggest a good asset allocation for young investors? Many suggest 65% equity, 25-35% debt 5-10 gold/silver? I also feel nowadays debt fund are not tax friendly so do you think hybrid equity fund can work instead of pure debt fund?
its highly personal decision as everyone needs and wants are unique. In general yes majority portion should be in equity, followed by high quality debt and minor portion gold,
Again its individual choice. One may like to stay away from gold, one may like to include international equity as part of equity chunk of allocation .
yes… hybrid funds are tax friendly …as of now. It may or may not be true in future.
However currently there are no completely passive hybrid funds ( fixed allocation, index of every asset). At least not I am aware of.
So its tough choice.
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