Parag parikh flexi cap AUM has increased a lot, it might find harder to perform in years to come as its AUM increases more.
Universe of stocks, whom mutual fund can make it more than 5 percent of portfolio decreases with increase in AUM.
Let me help you with an example. You might have seen in case of maharastra scooters, parag parikh flexi and tax saver both bought it but it is just a small size of parag parikh flexi portfolio, even though flexi cap fund owns substaintial shares in maharastra scooters.
Can you think of more such examples where a small cap was added in parag parikh tax saver but not in flexi cap version?
Generally, a mutual fund can make stocks, more than 5 percent of its portfolio, only in companies with market cap greater than its AUM, without facing any liquidity issues.
Therefore with increase in AUM, universe of stocks in which a mutual fund can take meaningful stake by making it more than 5 percent of its portfolio decreases with increase in AUM.
Try finding number of stocks with market cap greater than 50000, 40000, 20000, 10000, 5000, 2000 and 1000. Things will become clear.
Though some mutual funds can even perform better after huge AUM like nippon small cap fund, which is an exception by diversifying a lot. Parag parikh flexi can also become an exception due to capable managment but risk and reward is not in our favour. Also, considering we have an alternative, why invest in flexi cap with huge AUM?
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