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 2 funds. One of them is PPFAS.
In this post, I will explain why I chose PPFAS and why I continue investing in them.
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.
#2: They practice 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:
- I do not have the time to sit and pour through company balance sheets and follow the news to pick stocks
- 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
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!
#8: Founders and employees of PPFAS have skin in the game
As of writing this article, 10.72% 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.
What are your thoughts?
Do you invest in PPFAS? Or do you have an alternate suggestion? Share your thoughts in the comment section below.
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
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.
When you say the performance for the liquid fund is bad, are you referring to Quantum or PPFAS?
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.
I agree with you
where is your other half equity invested