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Why I Invest in Parag Parikh Long Term Equity Mutual Fund (PPFAS)?

Why I Invest in Parag Parikh Long Term Equity Mutual Fund (PPFAS)?

By Adarsh Thampy. Last updated on April 7, 2020

I started investing in Parag Parikh Long Term Equity Fund (PPFAS mutual fund), back in December 2016. Since then, I have been a regular investor.

A lot of people ask me which mutual funds I invest in since I work in the FinTech space. For them, here is my answer.

My equity mutual fund portfolio consists only of 3 funds. One of them is PPFAS.

In this post, I will explain why I chose PPFAS and why I continue investing in them.

Disclaimer: I do not get paid directly or indirectly for writing this post. Just because I invest in PPFAS does not mean you should. Please consult a qualified financial advisor to understand your suitability.

Why I invest in PPFAS mutual fund?

#1: Short-term returns do not matter

The first questions most people ask me when I say I invest with PPFAS is – “What returns do you get?”

My honest answer to them was – “I do not know!”

Before I sat down to write this post, I did not know what my returns were. So I sat down to calculate my returns.

As of writing this article, my XIRR return is around 15%.

Not earth-shattering returns. Not too bad either. Equity returns in India have averaged over 14% in the last couple of decades. And these returns are definitely above the inflation rate. So overall, they are doing well.

Besides, for long-term investors, monitoring returns at such an early stage does not matter.

EDIT: They have updated their mobile app and website to now show XIRR returns.

#2: They practice value investing

PPFAS value investing

I have always been intrigued by the concept of “value investing“.

You buy a stock based on its intrinsic value. And you hold on to the stock for a really long time.

The problem with following value investing is two-fold:

  1. I do not have the time to sit and pour through company balance sheets and follow the news to pick stocks
  2. Even if I did have the time, I did not want to!

There. It’s as simple as that.

I’d rather spend that time with my family, or even take a break and watch TV. I don’t want to be productive 100% of the time. Sometimes, I just want to be lazy and not do anything.

Investing in a mutual fund with value investing as the core principle seemed like a no-brainer to me.

#3: They understand behavioral investing

I am a strong believer in the fact that investment returns are greater than investor returns. This means that investors drive down their own returns by making silly investment decisions based on news or market conditions.

So when a product tries to prevent investors from making a mistake in a subtle way, I notice.

When I log in to the mobile app, I do not see any mention of my return percentage. Even on the web app, they do not mention it anywhere. I had to go through the transaction statements, manually enter them into an excel sheet, and calculate the XIRR returns.

While some people might see that as a bad thing, I find this wonderful. There is nothing that triggers investors to make bad investment decisions that see their return % fluctuate.

When your investment loses value, you behave irrationally. When you don’t realize that your investment fluctuates, you have peace of mind.

They also have only one fund per category. There are no 100s of flavors of funds to pick from adding to the confusion.

#4: They are mindful of your time

PPFAS customer communication zen

There’s hardly any sort of “engagement” from them unless some action is required.

The only communication I receive from them is my monthly account statement and confirmation when my investments are processed. No annoying push notifications, calls, or SMS.

When my SIP expired, a lady called me to remind me to set up a SIP. I mentioned that I will do net banking and that was it. No annoying follow-up emails, SMS, or calls.

They recently launched their liquid fund. Any other mutual fund would have spammed the hell out of you asking you to invest. They just sent one email announcement about the NFO.

When I log into the mobile app, I notice an option to invest in their liquid fund. That’s it!

#5: Investment in international equities

They hold Google, Facebook, and a few other international stocks. I would love to diversify across geographies while keeping my mutual funds at a minimum. PPFAS helps with that.

#6: Longer exit load for 2 years

Most mutual funds have an exit load until 1 year. However, PPFAS has exit load until 2 years. For some, this might be a disadvantage. But for me, it’s one more behavioral reinforcement element that helps me stay invested longer.

#7: Communication from the beginning is clear – This is for long-term investors only

Their logo is a tortoise. If that was not a dead giveaway, look at all the emails they send or the messages on their website. You can’t miss that fact that PPFAS stands for two things – value investing and long-term investors.

They go so far as to dissuade people from investing in their fund if they are not a right fit!

PPFAS might not be for you
A screen-grab from PPFAS website.

#8: Founders and employees of PPFAS have skin in the game

As of writing this article, 4.19% of the AUM (Assets Under Management) are held by “insiders” in PPFAS. When someone commits to growing your money, by applying the same to their money, that says something.

When should you exit PPFAS mutual fund?

With time, with management and regulatory changes, PPFAS could change. They might deviate from their original philosophy or consistently provide returns lower than inflation.

As an informed investor, if you decide to invest through PPFAS, make sure you review your portfolio quarterly or twice a year to see how they are doing.

If at some point I decide to stop investing in the fund, I’ll update the post with the reason.

Should I invest only in this fund?

No.

Like the saying goes – Don’t put all your eggs in one basket. PPFAS limits their investments to a handful of stocks. So you need to diversify and invest in a few other mutual funds as well.

I wrote the PPFAS mutual funds review so that I’d have a resource to point to people when they ask why I invest 50% of my equity investments in this fund.

Do not invest in Parag Parikh Long Term Equity Mutual Fund or any other mutual fund because someone does the same. Do your own research to understand if it suits you. If you are not sure, ask a financial advisor.

What are your thoughts?

Do you invest in PPFAS? Or do you have an alternate suggestion? Share your thoughts in the comment section below.

About Adarsh Thampy

Husband, practical investor, and product manager. Learned about investing the hard way by making several financial mistakes. Adarsh has built several financial products for both India and US investors.

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Reader Interactions

Comments

  1. Value Investor says

    June 6, 2018 at 10:12 am

    Excellent write-up. Whats the other MF that you invest in? Could you share your thoughts on that as well as this means you also have 50% of your MF portfolio going to that.

    Thanks

    Reply
    • Adarsh Thampy says

      June 6, 2018 at 11:15 am

      Dear Value Investor,

      The other MF is Quantum Long Term Equity Value Fund. However, I am still evaluating if I should continue because their performance has not been great. I am also heavily invested in their liquid fund. However, the performance for that is also pretty bad.

      Reply
      • Primo says

        July 22, 2019 at 12:43 pm

        When you say the performance for the liquid fund is bad, are you referring to Quantum or PPFAS?

        Reply
      • Pravin padmakar jadhav says

        December 25, 2019 at 8:01 am

        Advise your good advisor before Investing in quantum fund…Poor champ

        Reply
      • JayeshV Bheda says

        June 26, 2020 at 5:42 pm

        I had been investing in Quantum since 2014 through sip.

        I just stopped sip and redeemed all units due lagging performance off the late.

        The xirr benchmark performance is 4% annualized since 2014 whereas quantum is still in negative return after 6 six years of sip.

        Switched to PPFAS with sip and entire redemption of quantum.

        Reply
  2. Murali says

    February 4, 2019 at 8:10 am

    I think along with fund like PPFAS, it will be good to have a growth fund like Mirae Asset India equity fund, that keeps the returns flowing even for shorter time duration of less than 5 yrs.
    Better not to stick only one approach of value investing which is like putting everything into one basket.

    But as mentioned in this blog, this a great fund to have in portfolio which greatly reduces volatility.

    Reply
    • sania dutta says

      May 30, 2019 at 7:04 pm

      I agree with you

      Reply
  3. sania dutta says

    May 30, 2019 at 7:02 pm

    where is your other half equity invested

    Reply
  4. Amit says

    October 14, 2019 at 2:07 pm

    I invested ppfa is this is the best option or not

    Reply
  5. Geeta says

    November 28, 2019 at 1:13 am

    which mutual fund AMC allow NRI living in USA to invest in mutual funds in Indian mutual fund AMC?

    Reply
  6. Geeta says

    November 28, 2019 at 1:16 am

    what are the top 3 banks for NRI living in USA to open an NRE account for buying mutual funds with Indian Mutual Fund AMC?

    Reply
  7. Shivi says

    April 6, 2020 at 3:39 pm

    This seems really old article. You forgot to update insiders holding of AUM. It’s now less than 5 percent as on April 6, 2020. The fund however is good indeed.

    Reply
    • Tanumoy Das says

      January 13, 2021 at 1:35 pm

      As on 31st December’2020, the “insider holding of AUM” is reduced to 2.80% . However, the fund is still performing very well.

      Reply
  8. Veena vijay says

    July 22, 2020 at 4:27 pm

    How do I invest in ppfas? Through their web page?

    Reply

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