DWS Mutual Fund announced a 10% dividend (Rs 1.00 per unit on a face value of Rs 10), under the dividend option of DWS TAX SAVING FUND .
The record date of the same has been fixed as
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Sunday, January 27, 2008
10% Dividend into DWS Tax Saving Fund.
Catch top & consistent performer - UTI Infrastructure Fund
Are you exploring investment avenues to earn handsome gains? Better ways to achieving this objective is to invest in equities or equity oriented instruments in an increasingly popular Indian markets. But one needs to be cautious in the search of better returns, as your investment is exposing to risk of losing of capital invested. UTI Infrastructure Fund can help you to manage this task efficiently. If you look at the objective of UTI Infrastructure and performance of the fund since launch, you will observe that the fund stood firm to its objectives. Launched in March 2004, the UTI Infrastructure with objective of providing the investors growth of capital over a period of time as well as to make periodical distribution of income from investment in stocks of respective sectors of the Indian economy.
UTI Infrastructure has delivered first-rate returns in the long as well as short term horizon. Look at returns (annualised) over the past one year, the fund bestowed 64.39% beating the benchmark BSE 100 index by a wide margin of 18.86%. In longer term perspective, the fund presented returns of 53.82% and 56.09% during the past two and three years respectively, as against 40.88% and 43.82% provided by benchmark index in the same period. In the near term also, the fund reported return (absolute) of 55.38% in last six months, as against 41.85% returns delivered by benchmark index in the same period.
When queried by myiris about how the fund is different from its peers, Sanjay Dongre, manager of the fund said, "Consistency is our USP. UTI Infrastructure Fund has been, one of the most consistent performers, on a longer time horizon, among the theme based funds available in the market." "We have been sticking to the investment objective of the fund. Unlike other funds, UTI Infrastructure Fund has a good mix of large cap and mid cap stocks," he added.
During the year, total assets corpus of the fund jumped by 165.40% to Rs 14,173.8 million in September 2007 compared with Rs 5,340.54 million in October 2006.Since the past performance of the fund does not provide any guarantee of future, investors needs to understand how the fund house is utilising your money. Let's understand this process step by step. At least 90% of total assets corpus of the fund is invested in equities and rest in the debt instruments. The fund while picking up the stocks, selects high growth oriented stocks. "UTI Infrastructure Fund follows a top down approach with regard to stock selection, keeping in mind the evolving economic scenario. The fund endeavour to pick sectors, which are expected to perform better and select fundamentally strong companies within those sectors," Dongre said.
The fund is primarily betting on basic engineering, energy, and construction sectors. These sectors are accounting for about 57% of total assets corpus. Commenting on prospects of these sectors, Dongre said, "We continue to remain bullish on these sectors and we feels that there is significant value that can be extracted over the long term."
The hike in fund allocation in union budget to rural infrastructure development, to boost to power generation and transmission segments together with rise in defence capital expenditure by government are some of the positives for the engineering companies. The government is largely focusing on power sector to remove power scarcity. Recently, the government granted two of the Ultra Mega Power Projects (UMPP) at Sasan and Mundra. This is expected to help companies engaged in the business of power. Since government spending on infrastructure is the most important growth driver for construction companies, the proposed increase in allocation in union budget will translate into awarding of more projects.
While advising to the investors, Dongre said, "Person having higher risk appetite and medium to long term horizon should invest in UTI Infrastructure Fund. Never attempt to time the market, systematic investment plan is the best way of taking advantage of volatility in the stock market."
(by myiris)
UTI Infrastructure has delivered first-rate returns in the long as well as short term horizon. Look at returns (annualised) over the past one year, the fund bestowed 64.39% beating the benchmark BSE 100 index by a wide margin of 18.86%. In longer term perspective, the fund presented returns of 53.82% and 56.09% during the past two and three years respectively, as against 40.88% and 43.82% provided by benchmark index in the same period. In the near term also, the fund reported return (absolute) of 55.38% in last six months, as against 41.85% returns delivered by benchmark index in the same period.
When queried by myiris about how the fund is different from its peers, Sanjay Dongre, manager of the fund said, "Consistency is our USP. UTI Infrastructure Fund has been, one of the most consistent performers, on a longer time horizon, among the theme based funds available in the market." "We have been sticking to the investment objective of the fund. Unlike other funds, UTI Infrastructure Fund has a good mix of large cap and mid cap stocks," he added.
During the year, total assets corpus of the fund jumped by 165.40% to Rs 14,173.8 million in September 2007 compared with Rs 5,340.54 million in October 2006.Since the past performance of the fund does not provide any guarantee of future, investors needs to understand how the fund house is utilising your money. Let's understand this process step by step. At least 90% of total assets corpus of the fund is invested in equities and rest in the debt instruments. The fund while picking up the stocks, selects high growth oriented stocks. "UTI Infrastructure Fund follows a top down approach with regard to stock selection, keeping in mind the evolving economic scenario. The fund endeavour to pick sectors, which are expected to perform better and select fundamentally strong companies within those sectors," Dongre said.
The fund is primarily betting on basic engineering, energy, and construction sectors. These sectors are accounting for about 57% of total assets corpus. Commenting on prospects of these sectors, Dongre said, "We continue to remain bullish on these sectors and we feels that there is significant value that can be extracted over the long term."
The hike in fund allocation in union budget to rural infrastructure development, to boost to power generation and transmission segments together with rise in defence capital expenditure by government are some of the positives for the engineering companies. The government is largely focusing on power sector to remove power scarcity. Recently, the government granted two of the Ultra Mega Power Projects (UMPP) at Sasan and Mundra. This is expected to help companies engaged in the business of power. Since government spending on infrastructure is the most important growth driver for construction companies, the proposed increase in allocation in union budget will translate into awarding of more projects.
While advising to the investors, Dongre said, "Person having higher risk appetite and medium to long term horizon should invest in UTI Infrastructure Fund. Never attempt to time the market, systematic investment plan is the best way of taking advantage of volatility in the stock market."
(by myiris)
UTI Infrastructure Advantage Fund debuts at Rs 9.56
UTI Infrastructure Advantage Fund - Series I, has debuted at Rs 9.56 per unit as against a face value of Rs 10 per unit yesterday. (Check out - Mutual Fund New Fund Listings)
UTI Infrastructure Advantage Fund - Series I NFO was launched on November 12, 2007 and closed on December 18, 2007.
UTI – Infrastructure Advantage Fund - Series I, is a three year close-ended equity scheme with an investment objective to provide income stribution and /or medium to long term capital appreciation by investing predominantly in equity / equity related instruments in the companies engaged either directly or indirectly in the infrastructure growth of the Indian economy.
(by moneycontrol)
Pick your child's insurance plan carefully
What’s the biggest financial commitment of a parent today? At least two out of three say, “It’s to meet the rising costs of their child’s education.” The fact is that most financial planners say that as inflation rises, the first thing to get impacted is the education sector. Planning for the child’s future is an important step. Child insurance plans are one of the tools that help parents secure the financial future of their child. Children’s insurance policies have always been popular in India, but their significance has gone up of late due to rising costs, particularly in education, says Aviva India associate director Vishal Gupta. Earlier, the trend was that a policy was taken in a child’s name, which was a simple money-back plan. Now, parents take a term cover in their name, which would be replaced if there is any loss of income due to the untimely death of any of the earning parents. So, it has the twin benefits of investment and protection, says Pranav Mishra, senior VP & head products, ICICI Prudential Life Insurance. How do these plans work? Most of these child insurance plans aim to meet your financial needs. For example, ICICI Prudential Life has three variants under the SmartKid plan. These insurance plans provide you with funds at pre-fixed intervals, which will help you meet your child’s financial needs at different milestone years. In addition to this, if a parent signs up for an income benefit rider, the child gets 10% of the sum assured till the child reaches his/her milestone years, which compensates the income loss. Similarly, if you have a Unit Linked Insurance Policies (ULIP)-linked endowment plan in your child’s name, you can prematurely withdraw 20% of the sum assured after 5 years from the effective date of the policy. In the case of Aviva’s Little Master Plan, you can avail of the benefit of premium waiver. In case of a parent’s death, all future premiums are paid in a lump sum to take back as partial withdrawals during the last five policy years. If the parent opts for a comprehensive health benefit rider, upon contracting 18 listed illnesses, your child can avail of the above benefits. Similarly, if the parent opts for an income-benefit rider, in case of the death of the parent, the plan provides a regular pre-determined income at every future policy anniversary to meet the present education expenses. These are either conventional endowment plans or ULIPs, which aim to generate handsome returns over and above the insurance cover for the earning parents. Are they worth the money? There are various savings instruments available like PPF, MFs, shares, gold, real estate, etc. Adds Mr Gupta, “The insurer pays the sum assured to the nominees immediately after the demise of the parents. Additionally, the insurance company starts putting in the premium amount into the same plan on behalf of the policyholder. This money keeps growing and is given to the nominee once the policy matures. However, financial planners have a different take. They say a child plan is nothing but an endowment policy, which could either be a ULIP or a conventional plan. Touchstone Wealth Planners certified financial planner (director) Rishi Nathany explains: “I would suggest an investor should go for a MF. Insurance is any day costlier.” A parent should go for a term policy be it a working father or a mother, on whose income the child’s future is dependent. That will take care of the child’s financial needs in case of untimely death of any of the working parents. Then, for the child’s future, you should create a specific financial plan through systematic investment planning (SIP) in mutual funds (equity/balanced). Most parents start planning for their children over 10-20 years before their milestone years. Now, equity is one of the asset classes that generates handsome returns over this time span, he adds. If you are a risk averse investor, you can look for a balanced fund or MIP structure to invest in MFs. Kotak Asset Management’s Kotak Star Kid aims to provide for a parent’s goal of creating wealth for his/her child, through the SIP route. Explains Kotak Asset Management CEO Sandesh Kirkire, “Under the Star Kid Plan, which comes with an insurance component, if there is a calamity and you are not able to fund your SIP, the scheme will take care of the remaining unpaid SIPs.” But then, nothing stops an individual from separating his investments and risk needs. A pure term cover from an insurer coupled with investments from top rated equity/balanced funds should do the trick. (by outlook money) |
Save and be Insured
Kotak MF offers SIP with a cheap life cover
Bundling your insurance and investment needs into one is an expensive proposition. For example, unit-linked insurance policies charge a first-year commission as high as 30 per cent.
But, now you have a mutual fund (MF) that will meet both these needs at a much lower cost.
Kotak MF has launched Kotak Star Kid (KSK), which merges investment and insurance needs at a lower cost. All you need to do is start a fresh systematic investment plan (SIP) in either the Kotak 30 scheme or the Kotak Tax Saver fund over a tenure of either 5, 10, 15 or 20 years. You can then appoint your child as the nominee.
KSK offers you a life cover—provided by Kotak Life Insurance—at an entry load of 3.25 per cent, 1 percentage point more than what SIPs typically charge (2.25 per cent).
Your choice is not unlimited though; the mutual fund has laid out the options for you depending on your age (see Your Options). Since KSK is aimed at fulfilling the needs of your child and also insuring them, it is open for ages 23 to 45 years.
How much cover?
At any time after the 13th month, your cover is the sum total of the remaining SIP instalments. For instance, if a unitholder opts for a 5-year SIP at a monthly sum of
Rs 5,000, and dies in the 13th month, the amount that the nominee gets will work out to be Rs 2.40 lakh (60 months less 12 months x Rs 5,000). Until the 12th month, the cover is 10 times the monthly SIP value. Under both cases, the nominee will also receive the prevailing value of all the instalments already made. No medical tests are required up to a maximum cover of Rs 10 lakh; between Rs 10 lakh and a maximum cover limit of Rs 1 crore, tests are mandatory. KSK does not cover existing SIPs; you’ll need to start a fresh one if you wish to opt for this facility.
KSK is akin to the Super SIP facility that DSP ML MF had launched in 2005, but is different in bits. Despite being a good initiative, the product found few takers as many investors refused to commit money for the long-term. Sandesh Kirkire, chief executive officer, Kotak MF, however, is confident that KSK will work because he says the product is simpler to understand than Super SIP. “Also, KSK is an on-going facility and is open throughout. Unlike SSIP, we do not intend to keep it open for a limited time period,” says Kirkire.
Should you opt for it?
At present, KSK is available only in Kotak 30 and Kotak Tax Saver. It’s not yet available in Kotak Opportunities fund (KOF)—the MF’s most successful fund in the past three years. Kirkire assures that KOF and a host of other Kotak schemes will soon get included in KSK. By turning the tables on insurance companies on the back of sweetening systematic investing with a cheap insurance cover, here’s one effort that ought to give a boost to the MF industry caught on the wrong side on account of aggressive mis-selling of Ulips on the back of higher commission. Opt for KSK in Kotak 30 or wait till the MF includes KOF in the plan.
(by outlook money)
Bundling your insurance and investment needs into one is an expensive proposition. For example, unit-linked insurance policies charge a first-year commission as high as 30 per cent.
But, now you have a mutual fund (MF) that will meet both these needs at a much lower cost.
Kotak MF has launched Kotak Star Kid (KSK), which merges investment and insurance needs at a lower cost. All you need to do is start a fresh systematic investment plan (SIP) in either the Kotak 30 scheme or the Kotak Tax Saver fund over a tenure of either 5, 10, 15 or 20 years. You can then appoint your child as the nominee.
KSK offers you a life cover—provided by Kotak Life Insurance—at an entry load of 3.25 per cent, 1 percentage point more than what SIPs typically charge (2.25 per cent).
Your choice is not unlimited though; the mutual fund has laid out the options for you depending on your age (see Your Options). Since KSK is aimed at fulfilling the needs of your child and also insuring them, it is open for ages 23 to 45 years.
How much cover?
At any time after the 13th month, your cover is the sum total of the remaining SIP instalments. For instance, if a unitholder opts for a 5-year SIP at a monthly sum of
Rs 5,000, and dies in the 13th month, the amount that the nominee gets will work out to be Rs 2.40 lakh (60 months less 12 months x Rs 5,000). Until the 12th month, the cover is 10 times the monthly SIP value. Under both cases, the nominee will also receive the prevailing value of all the instalments already made. No medical tests are required up to a maximum cover of Rs 10 lakh; between Rs 10 lakh and a maximum cover limit of Rs 1 crore, tests are mandatory. KSK does not cover existing SIPs; you’ll need to start a fresh one if you wish to opt for this facility.
KSK is akin to the Super SIP facility that DSP ML MF had launched in 2005, but is different in bits. Despite being a good initiative, the product found few takers as many investors refused to commit money for the long-term. Sandesh Kirkire, chief executive officer, Kotak MF, however, is confident that KSK will work because he says the product is simpler to understand than Super SIP. “Also, KSK is an on-going facility and is open throughout. Unlike SSIP, we do not intend to keep it open for a limited time period,” says Kirkire.
Should you opt for it?
At present, KSK is available only in Kotak 30 and Kotak Tax Saver. It’s not yet available in Kotak Opportunities fund (KOF)—the MF’s most successful fund in the past three years. Kirkire assures that KOF and a host of other Kotak schemes will soon get included in KSK. By turning the tables on insurance companies on the back of sweetening systematic investing with a cheap insurance cover, here’s one effort that ought to give a boost to the MF industry caught on the wrong side on account of aggressive mis-selling of Ulips on the back of higher commission. Opt for KSK in Kotak 30 or wait till the MF includes KOF in the plan.
(by outlook money)
Maiden Dividend under Lotus India Tax Plan
Lotus India Mutual Fund has announced a maiden dividend of 15% (i.e. Rs 1.50 per unit on the face value of Rs. 10) under the dividend option of Lotus India Tax Plan. The record date for the same has been fixed as January 28, 2008.
(by valueresearch)
Fund Selection
I invest Rs 7,500 every month in five funds - HDFC Top 200, Reliance NRI Equity, Sundaram BNP Paribas Select Mid Cap, Magnum Global and Reliance Growth. How is my fund selection? Should I replace any? Which is a better option for SIP - growth or dividend reinvestment?
-Dr. Karthik
Your fund selection has been wise and a look at your portfolio returns reaffirms this. But you must remember to assess your funds vis-à-vis your risk profile. As of now your fund selection is such that the portfolio has a mid-cap tilt to it. Given your long investment horizon this should not be a problem per se. As to your second query there is no difference in returns between the growth and dividend reinvestment option. The difference between the two options arises only in funds that do not invest in equity instruments or those that invest less than 35 per cent of their assets in equity. Such funds attract a dividend distribution tax payable at the time of distribution of dividends. But since you are invested in equity oriented mutual funds there is no applicable dividend distribution tax either. So as long as you are investing in equity oriented funds you needn't worry about which option to select. And your choice can depend on whether you want a payout or increase the number of units.
(by value research)
-Dr. Karthik
Your fund selection has been wise and a look at your portfolio returns reaffirms this. But you must remember to assess your funds vis-à-vis your risk profile. As of now your fund selection is such that the portfolio has a mid-cap tilt to it. Given your long investment horizon this should not be a problem per se. As to your second query there is no difference in returns between the growth and dividend reinvestment option. The difference between the two options arises only in funds that do not invest in equity instruments or those that invest less than 35 per cent of their assets in equity. Such funds attract a dividend distribution tax payable at the time of distribution of dividends. But since you are invested in equity oriented mutual funds there is no applicable dividend distribution tax either. So as long as you are investing in equity oriented funds you needn't worry about which option to select. And your choice can depend on whether you want a payout or increase the number of units.
(by value research)
Thursday, January 24, 2008
Profit Booking
I invested in Franklin India Bluechip Fund(dividend option) at different levels. Now that the NAV has risen, I plan to book some profits and rebalance my portfolio. But I can't figure out which of the units will be redeemed. Will it be earlier investments or the later ones? How will I figure out the value of my investments after partial redemption?
-Deepti Mukherjee
Your query reveals that booking profits is not an easy exercise at times. From the investment details you have supplied, you own a total of 3,763 units of Franklin India Bluechip Fund. We gather that you wish to redeem profits of Rs 1,23,135 from the current valuation of Rs 1,63,635.
As a first step, you can redeem units by filling in a redemption request for the sum of Rs 1,23,135 and the fund would deduct the necessary number of units. But as an informed investor it is always good to be in command of one's investments. So here goes.
Investments and redemptions in mutual funds follow a principle called first-in first-out (FIFO). This means that the investments made first will be the first to be redeemed and so on. In order to book profits of Rs 1,23,135, you will have to redeem a certain number of units. At an NAV of Rs 43.48 per unit, you will have to redeem 2,832 units. On the basis of the FIFO principle, the first batch of units to be redeemed will be those purchased first and then the next batch and so forth and so on. Hence units purchased on February 8 (412.201), September 12 (90.09), September 19 (465.983) and October 1 (717.017) will be the first to go. The only purchase that will be partially diluted is the 1,150 units purchased on October 4, 2002. Of this you will end up retaining only 3.82 units.
As for the status of your remaining investments, the balance units will be maintained with the fund house until you wish to redeem them. And these units will be the most recently purchased ones totaling 931.46 units i.e. 3.82 units from October 4 and 927.644 from the purchase made on October 18.
(by valueresearch)
-Deepti Mukherjee
Your query reveals that booking profits is not an easy exercise at times. From the investment details you have supplied, you own a total of 3,763 units of Franklin India Bluechip Fund. We gather that you wish to redeem profits of Rs 1,23,135 from the current valuation of Rs 1,63,635.
As a first step, you can redeem units by filling in a redemption request for the sum of Rs 1,23,135 and the fund would deduct the necessary number of units. But as an informed investor it is always good to be in command of one's investments. So here goes.
Investments and redemptions in mutual funds follow a principle called first-in first-out (FIFO). This means that the investments made first will be the first to be redeemed and so on. In order to book profits of Rs 1,23,135, you will have to redeem a certain number of units. At an NAV of Rs 43.48 per unit, you will have to redeem 2,832 units. On the basis of the FIFO principle, the first batch of units to be redeemed will be those purchased first and then the next batch and so forth and so on. Hence units purchased on February 8 (412.201), September 12 (90.09), September 19 (465.983) and October 1 (717.017) will be the first to go. The only purchase that will be partially diluted is the 1,150 units purchased on October 4, 2002. Of this you will end up retaining only 3.82 units.
As for the status of your remaining investments, the balance units will be maintained with the fund house until you wish to redeem them. And these units will be the most recently purchased ones totaling 931.46 units i.e. 3.82 units from October 4 and 927.644 from the purchase made on October 18.
(by valueresearch)
Invest In Debt Too
I am 37 and my investments are in mutual funds and stocks. I have two saving goals in mind: My child's education (17 years from now) and my retirement (23 years from now). I also invest Rs 27,000 every month in mutual funds through a systematic investment plan.I need some guidance in pruning my portfolio to help me achieve a growth of approximately 14 per cent annually.
KG Manohar
On the quality front, you score high. Though we do spot some mismanagement where quantity is concerned. But upfront, be reassured that you are pretty much on track. Your expectation of 14 per cent per annum seems reasonable too. Going by that return, your current monthly SIPs of Rs 27,000 would cross Rs 1 crore in another 13 years (assuming you invest regularly all through this period in well performing funds).
Taking Stock
Mutual funds account for 73 per cent of your overall investments while the balance 27 per cent has been invested directly in stocks. Keep in mind that when you maintain a combined portfolio of stocks and equity funds, your funds may have investments in the very stocks/sectors which you have directly bought into. If you do not pay heed to this, your portfolio could get dangerously skewed towards a sector or a particular stock without you being aware of it. Currently, your stock portfolio consists of 16 stocks with a 7 per cent exposure to Reliance Industries (RIL). But when we when we clubbed your stock and fund investments, your overall exposure to the stock goes up to 16.15 per cent.
The same is the case with your sector allocations. Your stock portfolio had a 12 per cent exposure to the energy sector. But when we looked at the overall impact and clubbed it with your mutual fund exposure of 10 per cent to that sector, the energy exposure shot up to 22 per cent. Quite a difference, isn't it?
You must make an effort to track your investments. You can employ the Value Research Online Portfolio Manager tool on this website to arrive at the exact allocation. You will also be able to monitor the market-cap exposure with this tool. Right now, the large-cap component of your portfolio stands at 60 per cent, mid-cap at 31 per cent and small-cap at 9 per cent.
We have always stressed that one should have a ceiling on the exposure to a particular sector, stock or a fund. So you can exit or reduce holdings of certain stocks in case you feel that the exposure to a particular sector or stock is exceeding your pre-determined limit.
Shed Some Weight
Owning 21 funds is not the issue. What matters is the type of funds they are. And you do have some good picks. Nine are 5-star rated and four have a 4-star rating.
But what came across as absurd was that in five schemes you have invested in both, the dividend and growth options. This doubles the fund count unnecessarily. And, since you have time on your side and a regular income too, why did you consider a dividend plan at all?
In case you had some misgivings on this front, let's clear the air. Though a dividend reinvestment and the growth option are identical (as the money continues to remain invested in such schemes), the dividend payout option differs. Once a dividend is declared, the net asset value (NAV) of the fund falls in the same proportion. This way you end up liquidating your own investments. So, the dividend that you get from funds is nothing but your own money coming back to you!
The mistake investors tend to make is to equate a fund's dividend with that of a stock. In the case of stocks, a dividend does not affect the price of the scrip as it is given out of the company's surplus reserves. So, the dividend that you get is over and above the value of your shares. So to make your fund portfolio lighter, we suggest you convert your dividend payout option into the dividend reinvestment option. We also suggest that you exit from UTI Services Sector and UTI Software. They are high-risk sectoral funds which do not have a good rating. You are better off without them. That will leave you with 14 equity schemes (considering growth and dividend reinvestment as the same).
Get Bold
What is lacking in your portfolio is conviction. Out of the 21 fund schemes, 11 of them account for less than 3 per cent each. Likewise, you have six stocks with less than 1 per cent allocation. Such small holdings, even if they appreciate rapidly, would add no value to the overall portfolio.For mutual funds, the best strategy is to invest in a few that have a good track record. Pick two to three funds that can act as your core holdings. You can even throw in a mid-cap fund to add to the aggression. The same principle holds true when investing in stocks. Small allocations add no great value to your portfolio. Continue to invest in stocks only if you have the expertise of managing your stock investments.
Get Balanced
Your portfolio has a negligible debt component of 1 per cent, something that needs to be immediately corrected. Even if you have a long-term plan, you must have some exposure to debt. Do consider some debt fund like Kotak Flexi Debt and ICICI Prudential Long Term. Please ensure that you maintain the debt component as the equity portion would constantly increase on a monthly basis. Here's where the online tool would help tremendously.
Get Going
Decide how much of an exposure you would like to have to debt and maintain your portfolio allocation. As you approach the timeline for your goals, gradually shift the money from equity to debt.
Stick to your SIP approach of investing in mutual funds and avoid adding any more funds to your portfolio. Your need not change your current SIPs which are all in good funds. Just don't clutter your portfolio with too many stocks and funds.
All the best!
(by valueresearch)
KG Manohar
On the quality front, you score high. Though we do spot some mismanagement where quantity is concerned. But upfront, be reassured that you are pretty much on track. Your expectation of 14 per cent per annum seems reasonable too. Going by that return, your current monthly SIPs of Rs 27,000 would cross Rs 1 crore in another 13 years (assuming you invest regularly all through this period in well performing funds).
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Taking Stock
Mutual funds account for 73 per cent of your overall investments while the balance 27 per cent has been invested directly in stocks. Keep in mind that when you maintain a combined portfolio of stocks and equity funds, your funds may have investments in the very stocks/sectors which you have directly bought into. If you do not pay heed to this, your portfolio could get dangerously skewed towards a sector or a particular stock without you being aware of it. Currently, your stock portfolio consists of 16 stocks with a 7 per cent exposure to Reliance Industries (RIL). But when we when we clubbed your stock and fund investments, your overall exposure to the stock goes up to 16.15 per cent.
The same is the case with your sector allocations. Your stock portfolio had a 12 per cent exposure to the energy sector. But when we looked at the overall impact and clubbed it with your mutual fund exposure of 10 per cent to that sector, the energy exposure shot up to 22 per cent. Quite a difference, isn't it?
You must make an effort to track your investments. You can employ the Value Research Online Portfolio Manager tool on this website to arrive at the exact allocation. You will also be able to monitor the market-cap exposure with this tool. Right now, the large-cap component of your portfolio stands at 60 per cent, mid-cap at 31 per cent and small-cap at 9 per cent.
We have always stressed that one should have a ceiling on the exposure to a particular sector, stock or a fund. So you can exit or reduce holdings of certain stocks in case you feel that the exposure to a particular sector or stock is exceeding your pre-determined limit.
Shed Some Weight
Owning 21 funds is not the issue. What matters is the type of funds they are. And you do have some good picks. Nine are 5-star rated and four have a 4-star rating.
But what came across as absurd was that in five schemes you have invested in both, the dividend and growth options. This doubles the fund count unnecessarily. And, since you have time on your side and a regular income too, why did you consider a dividend plan at all?
In case you had some misgivings on this front, let's clear the air. Though a dividend reinvestment and the growth option are identical (as the money continues to remain invested in such schemes), the dividend payout option differs. Once a dividend is declared, the net asset value (NAV) of the fund falls in the same proportion. This way you end up liquidating your own investments. So, the dividend that you get from funds is nothing but your own money coming back to you!
The mistake investors tend to make is to equate a fund's dividend with that of a stock. In the case of stocks, a dividend does not affect the price of the scrip as it is given out of the company's surplus reserves. So, the dividend that you get is over and above the value of your shares. So to make your fund portfolio lighter, we suggest you convert your dividend payout option into the dividend reinvestment option. We also suggest that you exit from UTI Services Sector and UTI Software. They are high-risk sectoral funds which do not have a good rating. You are better off without them. That will leave you with 14 equity schemes (considering growth and dividend reinvestment as the same).
Get Bold
What is lacking in your portfolio is conviction. Out of the 21 fund schemes, 11 of them account for less than 3 per cent each. Likewise, you have six stocks with less than 1 per cent allocation. Such small holdings, even if they appreciate rapidly, would add no value to the overall portfolio.For mutual funds, the best strategy is to invest in a few that have a good track record. Pick two to three funds that can act as your core holdings. You can even throw in a mid-cap fund to add to the aggression. The same principle holds true when investing in stocks. Small allocations add no great value to your portfolio. Continue to invest in stocks only if you have the expertise of managing your stock investments.
Get Balanced
Your portfolio has a negligible debt component of 1 per cent, something that needs to be immediately corrected. Even if you have a long-term plan, you must have some exposure to debt. Do consider some debt fund like Kotak Flexi Debt and ICICI Prudential Long Term. Please ensure that you maintain the debt component as the equity portion would constantly increase on a monthly basis. Here's where the online tool would help tremendously.
Get Going
Decide how much of an exposure you would like to have to debt and maintain your portfolio allocation. As you approach the timeline for your goals, gradually shift the money from equity to debt.
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Stick to your SIP approach of investing in mutual funds and avoid adding any more funds to your portfolio. Your need not change your current SIPs which are all in good funds. Just don't clutter your portfolio with too many stocks and funds.
All the best!
(by valueresearch)
Monday, January 21, 2008
60% Dividend in Kotak Opportunities Fund
Kotak Mutual Fund announced a 60% dividend (Rs 6.00 per unit on a face value of Rs 10), under the dividend option of Kotak Opportunities Fund. The record date of the same has been fixed as January 25, 2008.
(by valuereseach)
40% Dividend under DWS Alpha Equity Fund
Deutsche Mutual Fund has announced a dividend of 40% (i.e. Rs 4 per unit on the face value of Rs 10) under the dividend option of DWS Alpha Equity Fund. The record date for the same has been fixed as January 25, 2008.
(by valuereseach)
DSPML Equity Fund declares 70% Dividend
DSPML Mutual Fund has announced a dividend of 70% (i.e. Rs 7 per unit on the face value of Rs 10) under the dividend option of DSPML Equity Fund. The record date for the same has been fixed as January 25, 2008.
(by valuereseach)
ING Mutual Revises Exit Load under its Equity Funds
ING Mutual Fund has revised the exit load structure under the following equity schemes: ING Select Stocks, ING Tax Savings, ING Nifty Plus, ING Domestic Opportunities, ING Midcap, ING A.T.M., ING L.I.O.N., ING Dividend Yield and ING Balanced.
From 21st January 2008, theses funds will be charging an exit load of 1% for investment less than Rs.1 crore if redeemed within 6 months and 0.50% if redeemed after 6 months but before 1 year.
(by valuereseach)
8% Dividend in UTI Dividend Yield Fund
UTI Mutual Fund announced a 8% dividend (Rs 0.80 per unit on a face value of Rs 10), under the dividend option of UTI Dividend Yield Fund.
The record date of the same has been fixed as January 23, 2008.
(by valuereseach)
Load Revision under Equity Funds of Kotak Mutual
Kotak Mutual Fund has revised the exit load structure under the following equity schemes: Kotak 30, Kotak Tech, Kotak MNC, Kotak Balance, Kotak Global India, Kotak Midcap, Kotak Contra, Kotak Opportunities, Kotak Lifestyle and Kotak Equity FOF.
From 21st January 2008, theses funds will be charging an exit load of 1% for investment less than Rs.5 crores if redeemed within 6 months and 0.50% if redeemed after 6 months but within 1 year.
(by valueresearch)
Introduction of Institutional Plan in DSPML Technology.com
With effect from January 15, 2008, DSPML Mutual Fund has introduced an institutional plan under DSPML Technology.com. After the introduction, the existing plan will be referred to as DSPML Technology.com-Regular Plan.
The following would be applicable for the institutional plan:
1. The eligible investors under the institutional plan would be banking companies, public financial institutions, insurance companies, FIIs, pension funds, portfolio managers NBFCs and provident funds.
2. The minimum application amount would be Rs 5 crore and subsequent purchase for a minimum amount of Rs 5 lakh.
3. There will no entry or exit load.
4. The estimated recurring expenses would be 1.45 per cent on an annual basis.
5. It will offer growth and dividend options. The dividend option will offer payout and reinvestment facility.
(by valueresearch)
Extension of NFO Period for ABN Amro Interval Fund Quarterly Plan L
ABN Amro Mutual Fund has announced the extension of new fund offer period for ABN Amro Interval Fund Quarterly Plan L. The closing date has been extended from January 15, 2008 to January 21, 2008.
(by valueresearch)
(by valueresearch)
UTI Mutual Announces Closure of UTI SCUP
UTI Mutual Fund has announced the closure of UTI Senior Citizen Unit Scheme. The scheme will be terminated on February 18, 2008.
(by valueresearch)
ABN Amro Opportunities Fund Announces Change in Load
ABN Amro Mutual Fund has announced a modification in the exit load of ABN Amro Opportunities Fund, with effect from January 15, 2008.
(by valueresearch)
Tuesday, January 15, 2008
ICICI Prudential Announces Dividend in Two Equity Schemes
ICICI Prudential Mutual Fund has announced a dividend of 20 per cent each in the dividend options of the following schemes: ICICI Prudential Tax Plan and ICICI Prudential Emerging Star.
The record date for the above dividends is January 18, 2008.
(By Valueresearch)
Investing By NRIs
I am a non-resident Indian (NRI). Are NRIs allowed to invest in Indian mutual funds? If yes, what is the incentive for people like us?
-Saloni Verma
Yes, NRIs are allowed to invest in mutual funds in India. The cheques can either be drawn on your FCNR/NRE bank account (on a repatriable basis) or NRO/NRSR (on a non-repatriable basis). You will also need a PAN number.
Since you are based abroad, Indian mutual funds may well serve your needs. A fund can offer you a diversified portfolio of debt and equity securities, or a mix of both. On the fixed income side, higher interest rates on Indian debt securities make it an attractive option compared to developed markets where interest rates are on the lower side. Debt funds would be an ideal way to start your investment innings here. The clear differential between interest rates will also negate the impact of any adverse movement in the exchange rate. However, we suggest that you park your funds for the long-term as short-term investments won't yield much.
Currency risk could be significant in the short term, as witnessed recently. However, over the long term, these fluctuations tend to smoothen out. Further, the current economic indicators point to a strengthening of the rupee over the long term - something that could work in your favour. The Indian economy is one of the fastest growing economies in the world. Also, loads are on the lower side vis-a-vis markets like the US. Among equity funds, there are a number of funds-generally focused on larger and more liquid stocks which have a good track record. Further, most fund houses, banks and brokerages give investors the option of investing on the Internet. As for incentives, there are no special tax breaks for NRI investors.
(Source: Value Research)
-Saloni Verma
Yes, NRIs are allowed to invest in mutual funds in India. The cheques can either be drawn on your FCNR/NRE bank account (on a repatriable basis) or NRO/NRSR (on a non-repatriable basis). You will also need a PAN number.
Since you are based abroad, Indian mutual funds may well serve your needs. A fund can offer you a diversified portfolio of debt and equity securities, or a mix of both. On the fixed income side, higher interest rates on Indian debt securities make it an attractive option compared to developed markets where interest rates are on the lower side. Debt funds would be an ideal way to start your investment innings here. The clear differential between interest rates will also negate the impact of any adverse movement in the exchange rate. However, we suggest that you park your funds for the long-term as short-term investments won't yield much.
Currency risk could be significant in the short term, as witnessed recently. However, over the long term, these fluctuations tend to smoothen out. Further, the current economic indicators point to a strengthening of the rupee over the long term - something that could work in your favour. The Indian economy is one of the fastest growing economies in the world. Also, loads are on the lower side vis-a-vis markets like the US. Among equity funds, there are a number of funds-generally focused on larger and more liquid stocks which have a good track record. Further, most fund houses, banks and brokerages give investors the option of investing on the Internet. As for incentives, there are no special tax breaks for NRI investors.
(Source: Value Research)
Wednesday, January 9, 2008
Ground Rules for Investing
Investing is a complex exercise only because we insist on making it so. But the basic principles are simple. As simple that anyone can become a good investor just by following simple and easily understood rules, which also help avoid big mistakes. Here are my rules for investment success.
Develop a Plan: For your short-term goals, make sure you're taking appropriate risks. Invest money that you'll need in the next two years to five years in cash and short-term bonds. If you've taken on too much risk for short-term objectives, pull back now. There's no telling where the bottom of this market is. It's better to cut your losses and preserve the money you already have for short-term goals. For your long-term financial goals, consider equities.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
(by valueresearch)
Develop a Plan: For your short-term goals, make sure you're taking appropriate risks. Invest money that you'll need in the next two years to five years in cash and short-term bonds. If you've taken on too much risk for short-term objectives, pull back now. There's no telling where the bottom of this market is. It's better to cut your losses and preserve the money you already have for short-term goals. For your long-term financial goals, consider equities.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
(by valueresearch)
No Clear Focus
I have been investing in mutual funds from the last one year but have no knowledge on the funds I am investing in. I am not looking for a short term gain, but would like to stay invested over the next three to five years. Could you share with me some inputs on my portfolio? Do suggest funds that you feel should be replaced.
-Sanjay Pandita
First and foremost your portfolio lacks a clear focus. You are invested in many different kinds of funds, from one that invests overseas to one that actively hedges its portfolio (Reliance Equity). The net result is that your portfolio lacks a robust core holding. To address this we suggest that you look at a five or four star rated diversified equity fund that has a large cap tilt to it. You can make such a selection from our website or from the fund score card printed in our magazine.
-Sanjay Pandita
First and foremost your portfolio lacks a clear focus. You are invested in many different kinds of funds, from one that invests overseas to one that actively hedges its portfolio (Reliance Equity). The net result is that your portfolio lacks a robust core holding. To address this we suggest that you look at a five or four star rated diversified equity fund that has a large cap tilt to it. You can make such a selection from our website or from the fund score card printed in our magazine.
Since you have little knowledge about your funds we suggest that you go through the 'analysis' section of the fund page on our website. This will at least remove ambiguity on the objective of the fund.
As far as your current holdings are concerned, HDFC Mid-Cap Opportunities looks on track. Reliance Equity has delivered returns in line with the average peer; the fund's investment mandate is such that you will have to contend with average returns. SBI Infrastructure Fund has also delivered returns in line with other infrastructure players. The worrisome holding is that of Fidelity International Opportunities. It is too soon to comment on the fund, given that it is yet to release a single portfolio. So we don't know what kind of companies the fund is investing in or anything about the actual investment style. We advise you to keep a close eye on this fund. The only addition you need to make is that of a single diversified equity fund. Don't make the mistake of investing in every fund that sounds interesting, stick to quality funds that have an established track record.
Concerning your investment strategy, there are two aspects that we don't completely agree with. The first is that of investing lump-sum amounts. Especially since you are new to investing, it is better to stick to a systematic way of investing. The logic behind this is to eliminate the risk of adverse timing in entering the market. Opt for a Systematic Investment Plan (SIP).
The second aspect that we would recommend is to avoid investing in close-ended funds. The close-ended nature of these funds means that in the initial years you cannot withdraw your money without incurring a considerable cost. Plus the liquidity window of many such funds makes redemption a tedious job.
(by valueresearch)
Bustling with Energy
The Reliance Diversified Power has the numbers to boast, but as any specialized fund, this fund has the chances of falling as well. Investors are advised to take a careful look before jumping in…
You can't blame the fund manager for creating a portfolio that encompasses financial service companies. Power generation is monopolised by the public sector and there are simply not enough sound power companies available. But in all fairness, the stocks in the portfolio are either pure power plays or those that have a significant stake in this sector.
You may disagree with the investment mandate, but you can't argue with the numbers. The fund delivered an astounding 81.37 per cent in 2005 and 58.78 per cent in 2006. As on November 2, the year-to-date (103.97 per cent) and one-year return (130.38 per cent) was impressive. But don't get too swayed by the performance. This is a sector fund at the end of the day and most scrips in this sector are trading at a significant premium to their earnings. In a bear phase, they could get severely thrashed. Going by the returns of the June 2006 quarter, this is quite a possibility.
Besides the usual risk that accompanies a sector specific fund, this one likes to take big wagers. At close to Rs 2,300 crore, the assets under management (AUM) are significant but spread across only 18-20 stocks. Until recently, it was not unusual to find single scrips hogging 13-15 per cent of the fund's AUM. Recently, there has been a decline on this front. The allocation to the top five has reduced to 31 per cent from an earlier high of 41 per cent in January.
If the fund manager is restricted by the investment universe, he has ample flexibility on other fronts. His mandate actually permits him to invest the entire portfolio in not only equity, but also entirely in fixed income securities (of power companies and those related to the power sector). So this equity offering can well turn into a debt fund.
With the mandate to even go 100 per cent in cash and equivalents, the cash holdings are significant if the fund manager does not find good investment opportunities. As of September 30, 25 per cent of the fund's portfolio was held in cash. The high PE multiples could be a reason, but it could also be attributed to the deluge of inflows which have more than trebled the fund's AUM in the past one year. What's interesting is that the high cash holding has not dented the fund's performance.
The fund manager is not restricted by market capitalisation either. The portfolio can tilt towards any market capitalisation, so don't get influenced by its current mid-cap slant.
The power sector has huge potential given the gigantic fiscal outlays and supply gaps in the sector. And the ever expanding directory of listed power generation companies will translate into more investment opportunities and better valuations as well. But bear in mind that the sector is well courted by managers of diversified equity funds. So check your overall exposure to this sector before you consider an investment.
(by valueresearch)
You can't blame the fund manager for creating a portfolio that encompasses financial service companies. Power generation is monopolised by the public sector and there are simply not enough sound power companies available. But in all fairness, the stocks in the portfolio are either pure power plays or those that have a significant stake in this sector.
You may disagree with the investment mandate, but you can't argue with the numbers. The fund delivered an astounding 81.37 per cent in 2005 and 58.78 per cent in 2006. As on November 2, the year-to-date (103.97 per cent) and one-year return (130.38 per cent) was impressive. But don't get too swayed by the performance. This is a sector fund at the end of the day and most scrips in this sector are trading at a significant premium to their earnings. In a bear phase, they could get severely thrashed. Going by the returns of the June 2006 quarter, this is quite a possibility.
Besides the usual risk that accompanies a sector specific fund, this one likes to take big wagers. At close to Rs 2,300 crore, the assets under management (AUM) are significant but spread across only 18-20 stocks. Until recently, it was not unusual to find single scrips hogging 13-15 per cent of the fund's AUM. Recently, there has been a decline on this front. The allocation to the top five has reduced to 31 per cent from an earlier high of 41 per cent in January.
If the fund manager is restricted by the investment universe, he has ample flexibility on other fronts. His mandate actually permits him to invest the entire portfolio in not only equity, but also entirely in fixed income securities (of power companies and those related to the power sector). So this equity offering can well turn into a debt fund.
With the mandate to even go 100 per cent in cash and equivalents, the cash holdings are significant if the fund manager does not find good investment opportunities. As of September 30, 25 per cent of the fund's portfolio was held in cash. The high PE multiples could be a reason, but it could also be attributed to the deluge of inflows which have more than trebled the fund's AUM in the past one year. What's interesting is that the high cash holding has not dented the fund's performance.
The fund manager is not restricted by market capitalisation either. The portfolio can tilt towards any market capitalisation, so don't get influenced by its current mid-cap slant.
The power sector has huge potential given the gigantic fiscal outlays and supply gaps in the sector. And the ever expanding directory of listed power generation companies will translate into more investment opportunities and better valuations as well. But bear in mind that the sector is well courted by managers of diversified equity funds. So check your overall exposure to this sector before you consider an investment.
(by valueresearch)
Subtle Differences
Both ABN Amro Future Leaders and ICICI Pru Emerging Star focus on small stocks. Yet the differences in portfolios are glaring.
Mid- and small-cap stocks are bringing a smile to everyone's face. For this reason we decided to compare two funds - ABN Amro Future Leaders and ICICIPru Emerging Star - both of which are heavy on such stocks.
Though Emerging Star defines its mandate as investing in diversified mid-cap stocks, it has a very broad definition of mid cap. The mid-cap universe includes any stock that has a market capitalization between Rs 100 crore and Rs 2,000 crore.
Future Leaders, on the other hand, is not that precise in its objective. The fund will focus on high growth stocks in the mid- and small-cap segment. The fund will look for companies that offer opportunities for long-term growth and are driven by dynamic style of management and entrepreneurial flair.
Going by the above objectives, it's not surprising to find that both keep switching between mid and small caps quite frequently. For example for the last four months (August- November 2007), Emerging Star had been a mid cap fund. But prior to this, for another four months it had small-cap heavy portfolio (April 2007 to July 2007). Future Leaders started out as a mid cap offering in April 2006 but changed its complexion to small caps by April 2007. It remained a small cap-heavy fund for another two months and then was again back to its mid-cap orientation.
While both funds vary their complexion quite frequently, they are both currently focused on reducing their large-cap exposure. Large caps, which were seen in small quantities in Emerging Star till September this year, are nowhere to be seen now. The Future Leaders fund has quite drastically lowered it large-cap exposure from over 16 per cent (August 2007) to less than 7 per cent (November 2007).
Emerging Star comes across as the much more focused option if one goes by its objective and allocation to equity. It permits a maximum 10 per cent exposure to debt and the same for cash. But Future Leaders has the leeway to touch its cash exposure to 35 per cent and the same holds for debt. But despite being more focused, Emerging Star was always the more diversified option with a huge portfolio. But it is moving more towards the style of Future Leaders in its concentration of portfolio. Emerging Star has consciously and gradually worked on reducing the number of stocks from 70 (November 2006) to 44 (November 2007). If you thought 70 was too large, you should note that they had 81 in May 2006. Future Leaders has maintained the portfolio at more of less 30-35 stocks since October 2006. Of course, they too have started off with as many as 50 stocks in the portfolio. Both have negligible amounts in cash.
But once you begin to look at the portfolios, all similarities end. At first blush, it appears that both their preferences for technology are identical. After all, it is the top sector in each portfolio accounting for 20 per cent of the assets. But dig a little deeper and a different picture emerges. Emerging Star's conviction in technology has not diminished reduced and the fund has maintained this level of concentration in the sector for the past one year. But Future Leaders has cut down on technology and added financial services along the way. Technology formed over 30 per cent and financial services 4 per cent of the Future Leader's assets in September 2007. Now, financial services accounts for over 18 per cent and technology has dropped to 20 per cent (November 2007). Emerging Star has taken a diametrically opposite stance and sold all of its financial services in October and November.
Future Leaders also has a preference for basic/engineering (17.26 per cent) and healthcare (9.76 per cent) but Emerging Star tilts towards metal and metal products (15.27 per cent), services (14.27 per cent), construction (13.37 per cent) and basic/engineering (8.29 per cent).
Long-term holdings in ICIC Pru Emerging Star include stocks like Sintex Industries, Subex Azure, Orient Paper and Deccan Chronicle but Future Leaders sticks with Elecon Engineering and Phoenix Lamps. In fact, the difference in their investment philosophy is quite stark from the fact that both have only two stocks in common.
The differences don't only exist in their portfolio but also in their assets. Emerging Star has seen its assets rise over the past three years to over Rs 889 crore. But Future Leaders has seen a dip from Rs 589 crore (May 2006) to Rs 98.38 crore (November 2007). The reason for these fluctuations in assets is probably a lot to do with their performance.
Barring two instances, Emerging Star has always beaten the category average, sometimes by a huge margin, in a surging market. The two instances were in the September quarters of 2006 and 2007. While the equity diversified category's returns September 2006 quarter stood at 15.73 per cent, the fund's return was marginally less at 14.83 per cent. In September 2007 quarter was bad for the fund. It generated returns of just over 5 per cent when the category's returns were at 14 per cent. But it remains to be seen how this fund proves itself in a falling market. For example, in second quarter of 2006 when the markets lost heavily, though the fund beat its benchmark CNX Nifty Junior, it lagged behind the category average. In this period the fund had lost over 16 per cent compared to the category's loss of 13.5 per cent. Similarly, in the first quarter of 2007, the fund was neither able to beat the category nor its benchmark.
On the other hand, ABN Amro, which is relatively a new fund, is yet to show its brilliance. In its short history it has been able to beat the benchmark (CNX Mid Cap) and the category average only once. That was in the December 2006 quarter when the fund's 17.19 per cent return was much better than that of its benchmark (10.83 per cent) and the category average (11.37 per cent). Unfortunately, in the first quarter of 2007, Future Leaders lost by more than 10 per cent, underperforming the category average and the benchmark. It will have to put up better numbers to increase its assets.
(by valueresearch)
Mid- and small-cap stocks are bringing a smile to everyone's face. For this reason we decided to compare two funds - ABN Amro Future Leaders and ICICIPru Emerging Star - both of which are heavy on such stocks.
Though Emerging Star defines its mandate as investing in diversified mid-cap stocks, it has a very broad definition of mid cap. The mid-cap universe includes any stock that has a market capitalization between Rs 100 crore and Rs 2,000 crore.
Future Leaders, on the other hand, is not that precise in its objective. The fund will focus on high growth stocks in the mid- and small-cap segment. The fund will look for companies that offer opportunities for long-term growth and are driven by dynamic style of management and entrepreneurial flair.
Going by the above objectives, it's not surprising to find that both keep switching between mid and small caps quite frequently. For example for the last four months (August- November 2007), Emerging Star had been a mid cap fund. But prior to this, for another four months it had small-cap heavy portfolio (April 2007 to July 2007). Future Leaders started out as a mid cap offering in April 2006 but changed its complexion to small caps by April 2007. It remained a small cap-heavy fund for another two months and then was again back to its mid-cap orientation.
While both funds vary their complexion quite frequently, they are both currently focused on reducing their large-cap exposure. Large caps, which were seen in small quantities in Emerging Star till September this year, are nowhere to be seen now. The Future Leaders fund has quite drastically lowered it large-cap exposure from over 16 per cent (August 2007) to less than 7 per cent (November 2007).
Emerging Star comes across as the much more focused option if one goes by its objective and allocation to equity. It permits a maximum 10 per cent exposure to debt and the same for cash. But Future Leaders has the leeway to touch its cash exposure to 35 per cent and the same holds for debt. But despite being more focused, Emerging Star was always the more diversified option with a huge portfolio. But it is moving more towards the style of Future Leaders in its concentration of portfolio. Emerging Star has consciously and gradually worked on reducing the number of stocks from 70 (November 2006) to 44 (November 2007). If you thought 70 was too large, you should note that they had 81 in May 2006. Future Leaders has maintained the portfolio at more of less 30-35 stocks since October 2006. Of course, they too have started off with as many as 50 stocks in the portfolio. Both have negligible amounts in cash.
But once you begin to look at the portfolios, all similarities end. At first blush, it appears that both their preferences for technology are identical. After all, it is the top sector in each portfolio accounting for 20 per cent of the assets. But dig a little deeper and a different picture emerges. Emerging Star's conviction in technology has not diminished reduced and the fund has maintained this level of concentration in the sector for the past one year. But Future Leaders has cut down on technology and added financial services along the way. Technology formed over 30 per cent and financial services 4 per cent of the Future Leader's assets in September 2007. Now, financial services accounts for over 18 per cent and technology has dropped to 20 per cent (November 2007). Emerging Star has taken a diametrically opposite stance and sold all of its financial services in October and November.
Future Leaders also has a preference for basic/engineering (17.26 per cent) and healthcare (9.76 per cent) but Emerging Star tilts towards metal and metal products (15.27 per cent), services (14.27 per cent), construction (13.37 per cent) and basic/engineering (8.29 per cent).
Long-term holdings in ICIC Pru Emerging Star include stocks like Sintex Industries, Subex Azure, Orient Paper and Deccan Chronicle but Future Leaders sticks with Elecon Engineering and Phoenix Lamps. In fact, the difference in their investment philosophy is quite stark from the fact that both have only two stocks in common.
The differences don't only exist in their portfolio but also in their assets. Emerging Star has seen its assets rise over the past three years to over Rs 889 crore. But Future Leaders has seen a dip from Rs 589 crore (May 2006) to Rs 98.38 crore (November 2007). The reason for these fluctuations in assets is probably a lot to do with their performance.
Barring two instances, Emerging Star has always beaten the category average, sometimes by a huge margin, in a surging market. The two instances were in the September quarters of 2006 and 2007. While the equity diversified category's returns September 2006 quarter stood at 15.73 per cent, the fund's return was marginally less at 14.83 per cent. In September 2007 quarter was bad for the fund. It generated returns of just over 5 per cent when the category's returns were at 14 per cent. But it remains to be seen how this fund proves itself in a falling market. For example, in second quarter of 2006 when the markets lost heavily, though the fund beat its benchmark CNX Nifty Junior, it lagged behind the category average. In this period the fund had lost over 16 per cent compared to the category's loss of 13.5 per cent. Similarly, in the first quarter of 2007, the fund was neither able to beat the category nor its benchmark.
On the other hand, ABN Amro, which is relatively a new fund, is yet to show its brilliance. In its short history it has been able to beat the benchmark (CNX Mid Cap) and the category average only once. That was in the December 2006 quarter when the fund's 17.19 per cent return was much better than that of its benchmark (10.83 per cent) and the category average (11.37 per cent). Unfortunately, in the first quarter of 2007, Future Leaders lost by more than 10 per cent, underperforming the category average and the benchmark. It will have to put up better numbers to increase its assets.
(by valueresearch)
New Funds - Birla Sun Life Special Situations Fund
Birla Sun Life Special Situation Fund is the latest offering which will follow an investment strategy that would take advantage of Special Situations and Contrarian investment style. The fund has defined Special Situations as potential gains from merger, acquisition, demerger, restructuring, divesting, buy backs, new funding etc. The fund may also invest in companies that are currently out of favor, overlooked or ignored for poor results, product failures, factor affecting the industry, political interventions, etc. The fund plans to invest 80 percent of the proceeds in equity and the remaining 20 percent in fixed income securities.
Scheme Details
Issue Opens: December 17, 2007
Issue Closes: January 15, 2008
Fund Category: Open-End, Equity Scheme
Benchmark Index: BSE 200
Minimum Investment: Rs. 5000
Entry Load: 2.25 per cent for investment of less than Rs 5 crores
Exit Load: For investment of Rs. 5 crores, an exit load of 0.50 per cent will be charged if the units are redeemed out within six months from the date of allotment.
About the Fund Manager
A. Balasubramaniam is the designated fund manager for the scheme who has a total experience of 15 years in the financial industry and is working with Birla Sun Life AMC for the last 10 years. Prior to joining Birla Sun Life AMC, he was working with GIC Mutual Fund
Currently, he is managing Birla Advantage Fund, Birla MNC, Birla Mid Cap, Birla India GenNext, Birla MIP, Birla MIP II Savings 5, Birla MIP II Wealth 25, Birla Sun Life MIP, Birla Balance and Birla Sun Life'95.
Birla Sun Life AMC
Birla Sun Life AMC started its operation in the year 1994. Currently they are managing assets worth Rs 31,370 crore. The fund house's 21 equity fund offerings contribute over 26 per cent to its total asset under management. Out of its thirteen rated equity funds, two are rated 1-star, three are rated 2-star, two are rated 3-star, five are rated 4- star while Birla Sun Life Frontline Equity enjoys a 5-star rating.
Performance of Similar Funds
Currently, there is only one fund with similar investment style - Fidelity India Special Situations Fund. This is a Rs 2,234 crore diversified equity fund which has delivered a return of 48.15 per cent (as on December 26, 2007) since its launch in April 2006.
In recent years Birla Sun Life equity funds have been impressive. The fund holds great promise if the fund manager is able to derive the best from its broad team of managers and analysts managing a wide array of equity funds. These fund portfolios often show interesting special situation stocks ideas. This fund could be a worthy consideration for NFO fans, seeking an opportunistic bet from a proven fund family.
(by value research)
Monday, January 7, 2008
Dividends in HDFC Mutual Fund's Schemes
HDFC mutual fund has a declared the dividend under the dividend option of HDFC Core & Satellite Fund and HDFC Long Tern Advantage fund. Record date for both the schemes will be 10 January 2008. The details are as below:
HDFC Core & Satellite Fund Dividend Rs. 3.00 (Amount of Div Per Unit)
HDFC Long Tern Advantage Fund Dividend Rs 6.00 (Amount of Div Per Unit)
60% dividend in Kotak 30
Kotak 30 has announced a 30 per cent dividend (Rs 3 per unit on a face value of Rs 10) under its dividend option. The record date for the same is January 11, 2007.
This is the second dividend from the fund during this year and the eleventh dividend since its launch in December, 1998. Prior to this, the fund had declared a 30% dividend in July 2007.
(by value research)
This is the second dividend from the fund during this year and the eleventh dividend since its launch in December, 1998. Prior to this, the fund had declared a 30% dividend in July 2007.
(by value research)
36% Dividend under JM Basic Fund
JM Financial Mutual Fund has announced a dividend of 36% (i.e. Rs 3.60 per unit on the face value of Rs. 10) under the dividend option of JM Basic Fund. The record date for the same has been fixed as January 11, 2008.
(by value research)
Reliance Diversified Power Sector - Bustling with Energy -
The Reliance Diversified Power has the numbers to boast, but as any specialized fund, this fund has the chances of falling as well. Investors are advised to take a careful look before jumping in…
You can't blame the fund manager for creating a portfolio that encompasses financial service companies. Power generation is monopolised by the public sector and there are simply not enough sound power companies available. But in all fairness, the stocks in the portfolio are either pure power plays or those that have a significant stake in this sector.
You may disagree with the investment mandate, but you can't argue with the numbers. The fund delivered an astounding 81.37 per cent in 2005 and 58.78 per cent in 2006. As on November 2, the year-to-date (103.97 per cent) and one-year return (130.38 per cent) was impressive. But don't get too swayed by the performance. This is a sector fund at the end of the day and most scrips in this sector are trading at a significant premium to their earnings. In a bear phase, they could get severely thrashed. Going by the returns of the June 2006 quarter, this is quite a possibility.
Besides the usual risk that accompanies a sector specific fund, this one likes to take big wagers. At close to Rs 2,300 crore, the assets under management (AUM) are significant but spread across only 18-20 stocks. Until recently, it was not unusual to find single scrips hogging 13-15 per cent of the fund's AUM. Recently, there has been a decline on this front. The allocation to the top five has reduced to 31 per cent from an earlier high of 41 per cent in January.
If the fund manager is restricted by the investment universe, he has ample flexibility on other fronts. His mandate actually permits him to invest the entire portfolio in not only equity, but also entirely in fixed income securities (of power companies and those related to the power sector). So this equity offering can well turn into a debt fund.
With the mandate to even go 100 per cent in cash and equivalents, the cash holdings are significant if the fund manager does not find good investment opportunities. As of September 30, 25 per cent of the fund's portfolio was held in cash. The high PE multiples could be a reason, but it could also be attributed to the deluge of inflows which have more than trebled the fund's AUM in the past one year. What's interesting is that the high cash holding has not dented the fund's performance.
The fund manager is not restricted by market capitalisation either. The portfolio can tilt towards any market capitalisation, so don't get influenced by its current mid-cap slant.
The power sector has huge potential given the gigantic fiscal outlays and supply gaps in the sector. And the ever expanding directory of listed power generation companies will translate into more investment opportunities and better valuations as well. But bear in mind that the sector is well courted by managers of diversified equity funds. So check your overall exposure to this sector before you consider an investment.
(by value research)
You can't blame the fund manager for creating a portfolio that encompasses financial service companies. Power generation is monopolised by the public sector and there are simply not enough sound power companies available. But in all fairness, the stocks in the portfolio are either pure power plays or those that have a significant stake in this sector.
You may disagree with the investment mandate, but you can't argue with the numbers. The fund delivered an astounding 81.37 per cent in 2005 and 58.78 per cent in 2006. As on November 2, the year-to-date (103.97 per cent) and one-year return (130.38 per cent) was impressive. But don't get too swayed by the performance. This is a sector fund at the end of the day and most scrips in this sector are trading at a significant premium to their earnings. In a bear phase, they could get severely thrashed. Going by the returns of the June 2006 quarter, this is quite a possibility.
Besides the usual risk that accompanies a sector specific fund, this one likes to take big wagers. At close to Rs 2,300 crore, the assets under management (AUM) are significant but spread across only 18-20 stocks. Until recently, it was not unusual to find single scrips hogging 13-15 per cent of the fund's AUM. Recently, there has been a decline on this front. The allocation to the top five has reduced to 31 per cent from an earlier high of 41 per cent in January.
If the fund manager is restricted by the investment universe, he has ample flexibility on other fronts. His mandate actually permits him to invest the entire portfolio in not only equity, but also entirely in fixed income securities (of power companies and those related to the power sector). So this equity offering can well turn into a debt fund.
With the mandate to even go 100 per cent in cash and equivalents, the cash holdings are significant if the fund manager does not find good investment opportunities. As of September 30, 25 per cent of the fund's portfolio was held in cash. The high PE multiples could be a reason, but it could also be attributed to the deluge of inflows which have more than trebled the fund's AUM in the past one year. What's interesting is that the high cash holding has not dented the fund's performance.
The fund manager is not restricted by market capitalisation either. The portfolio can tilt towards any market capitalisation, so don't get influenced by its current mid-cap slant.
The power sector has huge potential given the gigantic fiscal outlays and supply gaps in the sector. And the ever expanding directory of listed power generation companies will translate into more investment opportunities and better valuations as well. But bear in mind that the sector is well courted by managers of diversified equity funds. So check your overall exposure to this sector before you consider an investment.
(by value research)
Friday, January 4, 2008
70% Dividend under Franklin India Bluechip Fund
Franklin Templeton Mutual Fund has announced a dividend of 70% (i.e. Rs 7 per unit on the face value of Rs 10) under the dividend option of Franklin India Bluechip Fund. The record date for the same has been fixed as January 9, 2008.
(by valueresearch)
Birla Sun Life Tops The Charts
The Value Research Fund Rating for the month of December saw as many as six funds gain entry into the Value Research Five Star Funds family. These esteemed funds were Birla Income Plus, Principal Child Benefit, Principal MIP, ICICI Prudential Income Multiplier Reg, Grindlays GSF PF Inst and ING Domestic Opportunities.
ING Domestic Opportunities finally earned the five star tag after a three month wait. This is the fund's first ever five-star holding.
It was also a first time entry into the five star family for Principal MIP Plan, after a rating life of four years. Another significant improvement has been made by Birla Floating Rate LT. After fluctuating between the two and three star ratings, Birla Floating Rate LT has moved up two steps to become a 4 star fund thanks to its improved returns and reduced risk.
Things were however not so good for ICICI Prudential Dynamic. After enjoying the four star rating for six successive months, the fund fell back to the two star category in the month of November, but now it is trying to regain its position and scored a three star rating for the month of December.
HSBC Equity has made a smart recovery as far as the ratings are concerned. After languishing in the three star fund family for eleven months, the fund has again gained entry into the four star category. This fund started its rating life with a four star tag but at the beginning of this year it had slipped down to 3 stars.
This month, while six funds earned the five star rating, the same number of funds lost their 5-star tag. Taurus Libra Bond slipped to become a 1-star fund after enjoying the 3-star tag for the past twelve months.
As far as the fund families are concerned, the top position is jointly shared by Birla Sun Life AMC and ICICI Prudential AMC with six of its funds finding a place in the top-rated category. Closely following it is SBI Mutual; lagging behind by just one step with five 5-star rated funds.
However, when we combine the number of four and five star funds: Birla Sun Life AMC tops the chart with 16 four star rated funds and 6 five star rated funds. ICICI Prudential AMC comes at the second position with ten 4-star rated funds and six 5-star rated funds.
On the whole, of the total 463 rated funds, 35 funds have been upgraded and almost as many 36 funds, downgraded. 392 funds have maintained a status quo.
ING Domestic Opportunities finally earned the five star tag after a three month wait. This is the fund's first ever five-star holding.
It was also a first time entry into the five star family for Principal MIP Plan, after a rating life of four years. Another significant improvement has been made by Birla Floating Rate LT. After fluctuating between the two and three star ratings, Birla Floating Rate LT has moved up two steps to become a 4 star fund thanks to its improved returns and reduced risk.
Things were however not so good for ICICI Prudential Dynamic. After enjoying the four star rating for six successive months, the fund fell back to the two star category in the month of November, but now it is trying to regain its position and scored a three star rating for the month of December.
HSBC Equity has made a smart recovery as far as the ratings are concerned. After languishing in the three star fund family for eleven months, the fund has again gained entry into the four star category. This fund started its rating life with a four star tag but at the beginning of this year it had slipped down to 3 stars.
This month, while six funds earned the five star rating, the same number of funds lost their 5-star tag. Taurus Libra Bond slipped to become a 1-star fund after enjoying the 3-star tag for the past twelve months.
As far as the fund families are concerned, the top position is jointly shared by Birla Sun Life AMC and ICICI Prudential AMC with six of its funds finding a place in the top-rated category. Closely following it is SBI Mutual; lagging behind by just one step with five 5-star rated funds.
However, when we combine the number of four and five star funds: Birla Sun Life AMC tops the chart with 16 four star rated funds and 6 five star rated funds. ICICI Prudential AMC comes at the second position with ten 4-star rated funds and six 5-star rated funds.
On the whole, of the total 463 rated funds, 35 funds have been upgraded and almost as many 36 funds, downgraded. 392 funds have maintained a status quo.
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(by valueresearch)
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