Principal SMART Equity Fund Review

 

Principal SMART Equity Fund Review

Pricipal SMART Equity fund is the new fund launched by Principal Mutual Fund. Let us understand this mutual fund better in this article and weather you should invest in this fund or not?

Well, In Layman’s language, it is a Hybrid Fund means it will invest the investors’ capital both in equity and debt.

But well, it’s not the ordinary mutual fund. It allocates its assets between equity and debt in entirely different manner. It basically tracks the P/E of Nifty Stocks and according to it, the fund will move your money between equity and debt.

As a Rule, if the PE will be more than 16 than the fund will invest less in equity and more in debt. if PE is more than 28 than the fund will take out all of your money from equity and invest entire amount in debt. And when the PE will be less than 16, it will invest majority of your money in equity to get the advantage of attractive valuations.

Thus, the entire asset allocation of this fund mainly depends on the P/E ratio of Nifty stocks.

Now, the obvious question is that, in which types of stocks the fund will invest your money? Well, the fund will invest in largecap stocks mainly.

The minimum investment to buy into this opportunity is Rs 5,000. There is no entry load. The exit load is 2% if you decide to move out of the scheme before completing one year. It stands reduced to 1%, if you decide to move out before completing two years. If you remain invested for more than two years there will be no exit load.

Should You Invest in Principal SMART Equity Fund?

NO. You should not invest in such kind of fancy funds. This is because during the time of higher valuations (PE more than 16), if this period lasts for longer time than you may miss the entire stock market rally.

Another thing is that, it mainly invests in largecap stocks so you won’t get much exposure to midcap stocks.

Thus, in my opinion, pure Vanilla (Equity Diversified) funds are still better than this fund. This is because you can add midcap funds in your portfolio also. And for debt component, you can have 1-2 debt funds.

However, the word “SAFETY’ is so much popular among financially unaware investors that they attract to invest in such kind of fancy schemes.