This document outlines the structured, documented, and repeatable process followed by Khushi Wealth Private Limited (ARN - 195636) for identifying, evaluating, and shortlisting mutual fund schemes for client distribution. Our selection process is based entirely on objective analysis, risk-category mapping, and compliance requirements. Scheme selection is never driven by commission incentives.
Our fund selection follows this step-by-step process:
| Step | Action | Details |
|---|---|---|
| Step 1 | Identify Investment Category | Based on client's goal, investment horizon, and assessed risk profile, identify the suitable MF category (Large Cap, Mid Cap, Small Cap, Flexi Cap, Hybrid, Debt, ELSS, Index, etc.). |
| Step 2 | AMC Screening | Evaluate AMC reputation, total AUM size, regulatory track record (no SEBI action), fund management team stability, and operational efficiency. |
| Step 3 | Scheme Performance Analysis | Compare rolling returns across 1-year, 3-year, and 5-year periods against the scheme's benchmark index and category average. Avoid relying only on point-to-point returns. |
| Step 4 | Risk-Adjusted Return Analysis | Evaluate Sharpe Ratio (return per unit of risk), Sortino Ratio (downside risk), Standard Deviation, and Maximum Drawdown to assess risk-reward balance. |
| Step 5 | Expense Ratio Comparison | Compare expense ratios within the peer category. Lower expense ratio is preferred as it has a significant impact on long-term wealth creation. |
| Step 6 | Fund Manager Review | Assess fund manager's tenure with the scheme, track record across market cycles, and investment style consistency. Flag schemes with more than 2 fund manager changes in 3 years. |
| Step 7 | Portfolio Quality Check | For equity funds: check sector concentration, single-stock exposure, and market-cap allocation. For debt funds: check credit quality (minimum AA-), maturity profile, and concentration risk. |
| Step 8 | SEBI Riskometer Mapping | Map each shortlisted scheme to its SEBI Riskometer category (Low, Low-to-Moderate, Moderate, Moderately High, High, Very High) and match to client risk profiles (Conservative / Moderate / Aggressive). |
| Step 9 | Director Approval | Final recommended scheme list reviewed and approved by the Director before being used for client distribution. No scheme is recommended without Director sign-off. |
| Step 10 | Yearly Review | Recommended list reviewed every year. Underperforming schemes replaced based on the same objective criteria. Ad-hoc reviews triggered by major market events or regulatory changes. |
The following are automatically excluded from our recommended list: (a) Schemes from AMCs under SEBI regulatory action or warning; (b) Schemes with high portfolio concentration in a single stock or sector beyond category norms; (c) Debt schemes with significant exposure to below-investment-grade (below AA-) securities; (d) Schemes with more than 2 fund manager changes in the last 3 years; (e) Close-ended or interval schemes unless specifically required for a client's goal; (f) SIF products with opaque strategy or inadequate risk disclosure.
AMC factsheets and monthly portfolio disclosures; Value Research and Morningstar India for performance data and fund ratings; AMFI website for NAV and AUM data; SEBI Riskometer classification for risk categorization; SEBI Mutual Fund filings portal for SID/SAI/KIM documents.
Every shortlisted scheme is mapped to one of three client risk categories: Conservative (score 0-30), Moderate (score 31-60), or Aggressive (score 61-100). No scheme whose SEBI Riskometer category exceeds the client's assessed risk level is recommended. If a client insists on an unsuitable scheme, the Execution-Only process is followed with written unsuitability communication and client consent as per our SOP.
| CLIENT RISK PROFILE |
CLIENT TIME HORIZON | ||
|---|---|---|---|
| SHORT TERM (< 3 Years) |
MEDIUM TERM (3 — 7 Years) |
LONG TERM (> 7 Years) |
|
|
LOW RISK (Conservative) Score: 0-35% Very Cautious / Cautious Investor |
Liquid Funds Overnight Funds Ultra Short Duration Money Market Funds Arbitrage Funds Equity: 0-10% Debt: 90-100% |
Short Duration Funds Banking & PSU Funds Corporate Bond Funds Conservative Hybrid Equity Savings Funds Equity: 10-25% Debt: 75-90% |
Conservative Hybrid Balanced Hybrid (limited) Large Cap (up to 15%) Gilt Funds (long duration) Target Maturity Funds Equity: 15-30% Debt: 70-85% |
|
MODERATE RISK (Balanced) Score: 35-65% Moderate / Mod. Aggressive Investor |
Ultra Short Duration Low Duration Funds Short Duration Funds Arbitrage Funds Equity Savings Funds Equity: 15-30% Debt: 70-85% |
Balanced Hybrid Aggressive Hybrid Large Cap Funds Flexi Cap Funds Dynamic Asset Allocation Equity: 40-60% Debt: 40-60% |
Flexi Cap Funds Multi Cap Funds Large & Mid Cap Mid Cap (limited) ELSS (Tax Saving) Equity: 50-70% Debt: 30-50% |
|
HIGH RISK (Aggressive) Score: 65-100% Aggressive / Very Aggressive Investor |
Equity Savings Funds Dynamic Asset Allocation Large Cap Funds Arbitrage + Equity mix Balanced Advantage Equity: 30-50% Debt: 50-70% |
Large Cap Funds Flexi Cap Funds Multi Cap Funds Mid Cap Funds Value / Contra Funds Equity: 60-80% Debt: 20-40% |
Mid Cap Funds Small Cap Funds Sectoral / Thematic Focused Funds ELSS (Tax Saving) Momentum / Factor Equity: 80-100% Debt: 0-20% |
Khushi Wealth Private Limited is fully independent with no AMC shareholding, employment, directorship, or financial affiliation with any Asset Management Company. Our fund selection is based solely on the objective criteria described above and is never influenced by commission rates, incentive trips, gifts, or any non-monetary benefits from AMCs. Our internal audit process (conducted annually) periodically reviews recommendation patterns for any commission bias.