Some changes in methodology, selection and presentation

I have not been comfortable with deriving the risk estimation by using the monthly returns. This is simply not consistent with the long-term investment philosophy. Therefore, I have started taking the average of two worst yearly performances in the last nine years as a measure of downside risk. This is not perfect but still better than what I have been using earlier.

This change also implies that the list of rated funds will only have funds with operating history of more than nine years. This will certainly exclude some funds from coverage.

There are only two such five-star funds: Quantum Long Term Equity Fund and ICICI Prudential Balanced Advantage Fund. There are also a handful of such four-star funds as given below. They all will come back to the list in due course of time, hopefully with similar or better ratings.

• HDFC Mid-Cap Opportunities Fund
• IDFC Tax Saver Fund - Regular Plan
• L&T Indo Asia Fund
• L&T Tax Advantage Fund
• Religare Invesco Tax Plan
• Tata Tax Advantage Fund – 1
• Templeton India Equity Income Fund
• UTI India Lifestyle Fund

The third and final change relates to categorizing the funds. There are too many funds in existence and this only makes the selection complicated. I will split the funds into two groups according to the fundamental difference in their portfolio construction: sector-specific and broadly diversified.

Since the latter groups is still very large, I will list all five- four- and three- star funds on top. The worse performing funds of two- and one- star ratings will be listed at the bottom. This is more of a cosmetic change.

I wish you all a very healthy, happy and prosperous new year ahead.