Focused funds are high risk high are high return options

Scheme	Date	1Y Avg Return	3Y Avg Return	5Y Avg Return
Franklin India Focused Equity Fund	31/03/2019	23.92	22.44	20.69
Reliance Focused Equity Fund	31/03/2019	26.97	23.14	20.66
SBI Focused Equity Fund	31/03/2019	21.35	19.10	19.75
Quant Focused Fund	31/03/2019	23.75	22.20	19.03
Axis Focused 25 Fund	31/03/2019	19.04	16.40	18.02
Aditya Birla Sun Life Focused Equity Fund	31/03/2019	18.05	17.36	16.42
Motilal Oswal Focused 25 Fund – Regular Plan	31/03/2019	17.66	14.52	16.15
DSP Focus Fund	31/03/2019	18.07	15.81	14.39
Principal Focused Multicap Fund	31/03/2019	16.68	14.90	13.74
HDFC Focused 30 Fund	31/03/2019	18.61	14.81	13.23
ICICI Prudential Focused Equity Fund	31/03/2019	15.11	14.05	13.13
Sundaram Select Focus Fund – Regular Plan	31/03/2019	15.06	12.22	10.57
IDFC Focused Equity Fund – Regular Plan	31/03/2019	15.49	12.19	10.53
IIFL Focused Equity Fund – Regular Plan	31/03/2019	9.99	11.40
IDBI Focused 30 Equity Fund – Regular Plan	31/03/2019	-5.23	–
BNP Paribas Focused 25 Equity Fund – Regular Plan	31/03/2019	-10.65	–

Source – Valueresearchonline

The answer to that ultimately lies in your risk profile and ability to remain invested for long periods.

A focused equity fund is a new category defined by market regulator SEBI. These funds run concentrated portfolios with a maximum of 30 stocks. Many of these funds are erstwhile large cap or mid and small cap funds which were converted to focused funds post the recategorization.

As a result, the portfolio leaning in terms of market capitalisation reflects the previous position in large cap or a mix of large mid and small cap – rather than being a true multicap fund in most cases.

Common features

1. Limited number of stocks – mostly between 20-30 in number
2. Most funds with the exception of 1 or 2 have a large cap bias
3. The standard deviation or volatility of returns is higher than benchmark in most cases.

Here is a quick quiz to see if these funds are meant for you

1. Are you looking for long term wealth creation?
2. Can you absorb volatility in the short term?
3. Are you patient enough to hold on even if the fund is giving you a negative return?
4. Will you hold the fund at least for 7 years?
5. Are you willing to invest some time by yourself or with an advisor to choose the right fund?
6. Are you willing to pick the right fund manager rather than focus on the past returns of these funds?

If and only if your answer to all these questions is a YES, you should consider investing in a focused equity fund.

And remember diversifying your portfolio and adhering to asset allocationAsset allocation is essentially an official term for what you intuitively know is a healthy investment practice. For starters most households are likely to own some property and gold. That is diversification in asset allocation. You allocate the money you... More is the foundation for long term wealth creation. Don’t go putting all your eggs in one basket!