Rajini style: How, why a mutual fund delivers 20%+ returns

How shallow and incomplete would an answer be if one replied, "He is a superstar", to a "Who is Rajinikanth?" question? That would do such a disservice to his acting prowess, early-day struggles, and subsequent meteoric rise. Similarly, just reading the headline of a mutual fund delivering 20 per cent-plus returns and then mindlessly investing in them would be equally frivolous. That's because a mutual fund's success, like Rajinikanth's, isn't built in a day. So, let's trace the journey of a successful mutual fund from its humble beginnings to understand what has made it tick so far. Phase 1: Audition Let's take any random mutual fund that has delivered strong double-digit returns in the recent past. Ok, my eyes fall on Kotak Focused Equity Fund . It has delivered an eye-catching 24.2 per cent return in the last three years. Phase 2: Rigorous rehearsal Since the key ingredient to success is preparation, let's trace the fund's gruntwork in its initial days. While Kotak Focused Fund received little over Rs 1,000 crore from investors when it launched in July 2019, it invested only Rs 109 crore across 19 stocks, as per its first portfolio disclosure. The rest of the money was in cash and yet to be invested, as you can see in the table below: Period Cash (%) Equity (%) Stocks purchased Stocks sold Jul 2019 90.90 9.10 19 0 Aug 2019 21.50 78.50 11 0 Sep 2019 6.60 93.40 3 3 Oct 2019 3.90 96

This article was originally published on June 06, 2023.