Invest In Most Focused Dynamic Equity Fund

One can consider to invest in Motilal Oswal Most Focused Dynamic Equity Fund during IPO or as an ongoing fund. The fund Mutual fund scheme from the house of motilal oswal can help to get better returns with lower volatility. The fund aims to generate long term capital appreciation for investors by investing only in high quality stocks.

Most Focused Dynamic Equity Fund investment allocation will be changed dynamically among equity, debt and equity derivatives. The allocation is based on MOVI (Motilal Oswal Value Index).

Most Focused Dynamic Equity Fund-movi-level-based-investment-strategy

First a short introduction about MOVI Index.  It is maintained and updated by IISL for Motilal Oswal. It is in existence since 1st January 1999.  From the above, it can be seen that if MOVI is below 70, fund manager will invest 100% of funds in Equity.  If it is at 95, the investment will be 70% in equities and 30% in debt.  When MOVI moves above 130, the equity exposure as per MOVI  will be 0.  Note that in the last scenario, the fund manager has 30% Long only equity exposure.  35% each is allocated to Equity Derivatives and Debt.

What is MOSt Focused Dynamic Equity Mutual Fund Scheme?

It a scheme to switch investments between equity, debt and equity derivatives based on MOVI index.  Re-balancing of portfolio is is done every fortnight and a day before F&O Expiry on stock exchanges.  MOVI is calculated taking into account Price/Earnings (P/E), Price/Book(P/B) and Dividend yield of Nifty 50 Index.  So when valuations appear higher as per MOVI, allocation to equity is less and vice versa.

Why to invest MOSt Focused Dynamic Equity Mutual Fund?

The primary reason is it takes out emotions from investing.  The MOVI index is maintained by IISL, a third party and values are updated on Motilal Oswal website on a daily basis.  Dynamic Asset Allocation helps to generate reasonable returns even in volatile markets. It helps to generate superior returns during volatile markets too with less volatility.  It offers transparency as NIFTY MOVI values are published on the MOAMC website on a daily basis.

rebalancing-example-based-on-movi-index

As can be seen in the above example, Nifty index gave 12.73% return.  The same rebalanced as per MOVI values gave a return of 13.34%.  The difference of less than a percent appears too small.  But notice the Standard deviation which shows the volatility.  It is almost 40% less compared to non re-balanced index.

low-movi-cheap-valuations-and-high-movi-is-expensive-valuationsIf you notice low values of Motilal Oswal Value Index based investment gave superior returns when its value is below 100.  The returns were better over 1 year, 2 year and 3 year period.  The returns in Nifty 50 when the value is above 100 is always less and even negative in 1 year period.

Investment Philosophy of Most  Focused Dynamic Equity Fund:

As with most of other funds from Motilal Oswal AMC, the strategy is Buy Right, Sit Tight.  In Buy Right, the fund invests only in companies which fulfill QGLP (Quality, Growth, Longevity and Price). Once purchased, they keep the stocks to ride the entire growth cycle.  The scheme will invest in around 20-25 quality stocks selected based on the above qualities.

Important Details of Most Dynamic Equity Fund
Type of SchemeAn open ended Equity Fund
 PlansRegular and Direct
 OptionsDividend (Payout and Reinvestment) and Growth
Minimum Application Amt. Rs. 5,000/- and in multiples of Re. 1/- thereafter
Minimum Additional Application  Amt  Rs. 1,000/- and in multiples of Re. 1/- thereafter
Minimum Redemption Amt.Rs. 1,000/- and in multiples of Re. 1/- thereafter
Systematic Investment Plan (SIP)Minimum installment amount – Rs. 1,000/-(weekly/fortnightly/ monthly) and Rs. 2,000/- (quarterly) and in multiples of Re. 1/- thereafter with minimum of 6 installments for weekly/fortnightly  monthly frequency and minimum 3 installments for quarterly frequency. The dates for Auto Debit Facility shall be on the 1st, 7th,14th, 21st or 28th of every month
Entry and Exit LoadNil
 Fund ManagersTaher Badshah (For equity component) Abhiroop Mukherjee (For debt component)
Benchmark IndexCRISIL Balanced Fund Index

Risk level:  Moderately High as per Riskometer.

NFO of Most  Focused Dynamic Equity Fund Opens on 6 Sep 2016 and Closes on 20 September 2016.

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Most of the information in this article and pictures are taken from literature from Motilal Oswal AMC. Please read the offer document, KIM carefully before taking investment decision.

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