Mutual Fund Invesment

Monday, December 10, 2007

Will Infra Funds Run?

Q. I have invested Rs. 3,000 pm in last 1 year in SBI Magnum Tax Gain, HDFC LT Advantage Fund and Franklin India Taxshield. Should I continue investing in these?
A. All funds selected by you are top rated good funds performing well. Continue investing.

Q. When is the right time to invest in mutual funds? What happens when the market declines?
A. It is always a good time to invest in equity funds if you are investing for few years. Funds also fall when market falls, but over time equity proves to be best performing asset class.

Q. Which is the best mutual fund in banking/financial sector and power sector?
Yogesh Mathur

A. There are only two banking funds -- UTI Banking and Reliance Banking Fund. The only fund which invests in power sector stocks is Reliance Diversified Power Fund.

Q. I have started investing Rs. 1,000 through SIP in Kotak Tax Saver. How much return can I expect in 10 years?
K.K.Mishra
A. It is difficult to guess the return from your fund over the next 10 years. Kotak Tax Saver is a relatively new fund and you can think of investing in ELSS funds like SBI Magnum Tax Gain, HDFC Tax Saver or Sundaram tax Saver.

Q. What is the future of UTI Life Style Fund and HDFC Top 200 fund?
Anil Dwivedi
A. HDFC Top 200 is a well diversified equity fund with good track record, a 5-Star Rating and good potential. UTI Life Style fund is a very new fund launched in July this year. Stay invested for some time and then evaluate its performance.

Q. I want to invest Rs. 10,000 each in HDFC Equity Fund and Sundaram BNP Paribas India Leadership fund for next 5 years. Is my decision right?
A. Both are well performing funds. Invest in both.

Q. I am investing Rs 1000 each in HDFC TOP 200 fund and Franklin India Flexicap fund through SIP for 3 years. Are these good funds?
A. You have build a portfolio of good funds. Continue investing.

Q. Is Reliance Automatic Plan Suitable for investment? What will be the return after 8 years for the investment of Rs 10000 per year?
A. Reliance Automatic Plan is a ULIP plan and its better you opt for a Term plan for insurance and invest the remaining in mutual funds. It is not possible to estimate returns after 8 years.

Q. In view of Infrastructure growth story, I want to invest Rs.10,000 pm through SIP for 2-3 years. Please suggest BEST amongst UTI and TATA Infrastructure Funds.
Swapnil
A. Opt for the UTI Infrastructure Fund. It is a five star rated fund and has been a consistent performer.

(by valueresearch)

Good Funds to Invest

A. Choose from any top performing five or four star rated fund like Birla Frontline Equity, Reliance Vision, HDFC Equity, or Franklin India Prima Plus.

Q. Will the market go up or down in the short term?
A. It is difficult to predict future market movements. For investing, consider a systematic investment plan and avoid lump sum investments.

Q. I had invested in Sundaram BNP Paribas Rural India Fund. Please advise its future?

A. It is a relatively new fund which has done well till now. Remain invested and evaluate its performance over time.

Q. How is Sundaram Capex (G) fund? Is it same as infrastructural funds?
Sharma S. Amritsar

A. Sundaram Capex fund has a portfolio that looks identical to an infrastructure fund. It's not a very old fund, but has done exceptionally well in the past one year.

Q. I want to buy UTI Infrastructure Advantage and ICICI Prudential Real Estate. Both are new. Is my choice right.
Sanjay Gupta Feroypur, Punjab
A. UTI Infrastructure Advantage is a closed end infrastructure sector fund whereas ICICI Prudential Real Estate fund is a closed ended debt fund which will invest in the real estate sector.

As new funds have no track record or performance history, it is better you invest in some old, performing funds which have a good track record.

Q. I did a sip of Rs. 1000 per month in SBI Magnum Tax Gain, Reliance Vision, Reliance Power and ICICI Infrastructure. I want to invest for a long term.How's my decision?
Amar
A. These funds make a good portfolio. Continue investing.

Q. What about HDFC Unit Linked Young Star. I can invest Rs. 25000/- monthly. Should I invest in this or somewhere else? Please suggest.

A. ULIPs are expensive products. Choose any well performing diversified equity fund for investment like HDFC Equity, Reliance Vision, or DSP ML Equity. For life insurance, opt for a term plan.

Q. I have invested Rs 20000 in UTI Contra Fund. Shall I continue or withdraw?
- Pramod, Sambalpur
A. UTI Contra is a relatively new fund which has not done well. Withdraw and invest in some other top performing equity diversified funds.

Q. I want to invest Rs. 5 lacs in one go. Please suggest the funds. Rajendra Sharma
A. If you want to invest in one go, invest in a liquid fund like HDFC Cash Management Savings or TATA Liquid. From these funds initiate a systematic transfer plan (STP) to a top performing diversified equity fund like HDFC Equity or TATA Pure Equity.

Q. I want to invest Rs. 30000 for tax planning. Please suggest me good funds.
Tanuj

Liquidity Driven Market

Relatively a new fund manager, Chawla has been given charge of three funds -Birla Equity, Birla Gen Next and Birla Mid Cap. Chawla manages Birla Mid Cap with his senior colleague Balasubramanium. Prior to joining Birla Sun Life AMC, Chawla has worked with SBI Capital Markets. He holds a masters degree in management.

Do you see a market crash in the near future?
In the last one month, FIIs have pumped in monies equivalent to what they had put in during the last six months. Hence we are seeing a liquidity driven market. Whenever the flows slow down we may get a good buying opportunity. We do not see a market crash. The valuations are still not very expensive and the overall business environment is more favourable. This would boost the overall consumer confidence going forward.

What is the strategic and tactical orientation of your fund?
Birla Equity Plan Tax 99 is an open-ended, equity linked savings scheme (ELSS) with the objective of achieving long-term growth of capital along with income tax relief for investments.

Which are your top sector preferences?
Industrials
Banking

(by value research)

Birla Equity Plan-D

It has been a go-getter fund, beating the category average in 4 of the past 5 years. And despite frequent changes in its managerial position, Birla Equity Plan kept offering good return on investments

You won't catch the fund manager napping here. Aggressive portfolio churning, swift moves and strategically timed entry and exit into opportunistic sectors are what this fund is all about. The fund has displayed an uncanny ability to sense an opportunity at the right time. It did so during the third quarter of 2006 by timing its entry in banking stocks to perfection.

Moreover, the fund manager does not mind going against the herd. For instance, the fund has maintained its position in the automobile sector at a high of over 13 per cent through this bear phase while the average category exposure to the sector has hovered around 7 per cent.

Despite frequent fund manager changes (the current one is the fifth), the fund has not skipped a beat and continues to outshine the pack. Barring one year, the fund has consistently beaten the category returns over the past five years.

But the latest fund manager change has brought about a visible alteration in the portfolio. From the earlier 35 stocks, scattered evenly across market cap segments, the portfolio has expanded to 44. This may dilute the risk, but also the returns. In a more concentrated portfolio, each stock has a significant impact on the fund's returns.

Perhaps, these are early signs of a shift in strategy towards a more conservative bend. But aggressive investors should not jump ship just yet. Going by the past performance, excellent stock picks and the track record of the fund house, it would be wise to adopt a wait-and-watch approach.

(by valueresearch)

Sunday, December 9, 2007

In MFs Vanilla is the Best Flavour

I've always thought that investing in mutual funds was about getting a decent return on one's investment without having to go through the complexity of investment management oneself. You write a cheque and that's that. After that, which sector or industry is doing well or badly and what to move in or out of is no longer your headache. All that is the fund manager's problem. In fact, this offloading of decisions to a professional fund manager is the whole point of investing in a mutual fund. However, when I look at the kind of funds that are being offered to the public and the kind that the public is buying, I see a very different picture.

During November and December so far, 11 new equity mutual funds have been offered to the public. Out of these one-exactly one-is of the type where the fund manager will be taking the entire gamut of investing decisions. In all others, you-the investor-will have to lend him a helping hand. Let me explain. Almost all funds that are launched nowadays are specialised in some way. There are real estate funds, energy funds, small companies funds, emerging marketing funds, and so on and so forth. Per se, there's nothing wrong with the idea of specialised funds. I'm sure many of these will be well-run and provide great returns to their investors. There's no harm in a small percentage of one's investments in specialised funds.

However, when almost the entire market for mutual funds gets converted to specialised funds, then there's a problem, because deciding between these funds is a job by itself. When you invest in a well-run generic equity fund that can invest in any kind of company, then it's the fund manager who decides what type of sector, industry or size of company to invest in. It's his job to analyse trends and figure out how much of your money needs to be in technology or oil companies or infrastructure or real estate or whatever. But when you invest in specialised funds, then that analysis and that decision has to be made by you. You must take a call on what percentage of your investments to put in what industry and when to put it in and when to pull it out and switch to some other industry or type of company. Does this sound like a good deal to you? It doesn't sound like one to me.

By investing in specialised funds investors are losing out on what I believe is the major advantages of investing in mutual funds. And yet if you look at the hype being rolled out by the fund companies' marketing machinery, you'd think that specialised funds were the only things that make sense. And the reason is that for that for the marketing machinery, this strategy does make sense. All marketing people know that unless you differentiate your product from the competitors, you're going to have a hard time selling it. Now there are two ways of differentiating a fund. Either you can differentiate by actual track record of the fund manager, the fund company and the fund. Or you can invent meaningless features and specialisations. Guess which one is easier to do?

I know it's hard to avoid something special and choose a simple alternative. But when it comes to mutual funds, Vanilla really is the best flavour.

(Source: Value Research)