There's a new kid on the mutual fund block and it seems like it's trying to make a unique debut. Bharti AXA is the latest entrant in the Indian mutual fund space and has got some good news for eco-friendly investors. The company has devised a unique eco-friendly plan in which the investors would receive all the communication from the fund company like account statement, portfolio statement, etc through emails or SMS. This eco plan will be available for investors investing up to Rs. 2 lakh.This may turn out to be a win-win situation for both investors and the AMC. Investors won't
have to maintain thick files containing the communiqué from the AMC and the AMC will in turn save on the cost of paper and postage charges. Moreover the savings earned by the AMC through this would be passed on to the investor as 0.25 per cent reduction in the recurring expenses. This means that if an investor invests Rs 1,000 per month through SIP for 5 years, he can save upto Rs 500, considering a conservative rate of return of 10 per cent per annum. This may not seem much for an investment of Rs 60,000, but if one wants to go green, this is better than nothing.
(by valueresearch)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Thursday, May 15, 2008
Does Size Matter?
Most mutual fund investors are not bothered by the size of the fund they invest in. In fact, few of them are even aware that funds have a characteristic called size, or that fund size refers to the amount of money that a mutual fund scheme is managing. The few who are aware of this are generally of the opinion that larger is better. I suppose the logic is that if a fund has been given a lot of money to manage then this proves that the fund must be good.Is this true? Not quite. While fund size does matter, it matters for a very different reason. Large equity funds are
difficult to manage in many situations, as the recent travails of India's largest equity fund are in the process of demonstrating. Reliance Natural Resources Fund was launched in January 2008. To be precise, the new fund offer (NFO) opened on January 1, 2008 and closed on 30th January. Thus, it caught the peak (and the tail-end) of the stock markets' bull run. Such was the hype of the times that it collected a huge Rs 5,660 crore during the NFO itself. I rather think that the fund was also helped by the similarity between its name and that of the company Reliance Natural Resources Limited, which is also from the ADA group. This company's stock price went through the roof between September and January.
Anyhow, Reliance Natural Resources Fund was extremely lucky in its timing. It collected a huge amount of money but when the time came to deploy the money, the markets had already crashed. As a result, this fund has not actually deployed a majority of that money. In March, 62 per cent of that huge corpus was being held uninvested instead of being deployed in stocks. In April, this percentage had declined a bit was still at a high 52 per cent. These high cash levels have helped protect this fund from losses while the stock markets were declining. If the timing had been a little different and the fund had deployed the money before the crash, then its investors would have been in a sorry state indeed.However, from now on, a combination of huge size and hesitant markets is going to be a problem. Not deploying the money for long would lead to poor performance if the markets go up but deploying it would lead to poor performance if the markets go up. Sure, this problem exists for all equity funds currently. Nonetheless, when a large high profile fund is hovering at the edge of the psychologically important NAV level of Rs 10, then it's especially acute. As all fund managers and fund marketing men know, it's far worse for your NAV to fall from Rs 10 to Rs 9 than (for example) it is to fall from Rs 20 to Rs 18, even though the investors' losses are the same in both cases. I imagine that having a single digit NAV would rather diminish the bragging rights bestowed by running India's largest equity fund.The big-is-good marketing message is also often extended to fund companies. Fund distributors flogging funds from the larger fund companies like Reliance, ICICI Prudential, UTI and HDFC never fail to mention this fact. The logic is supposedly similar to that of individual funds. If the fund company is big, it must be doing something right. While that is true, that 'something' it is doing right could be just marketing. All in all, size matters, but not always. There are a different set of very real problems that are faced by very small funds and fund companies. However, outside the extremes, it is difficult to see any real evidence of size having any effect on performance. As a positive factor, the size of a fund or a fund company is of relevance to its owners, not to its investors.
(by valueresearch)
difficult to manage in many situations, as the recent travails of India's largest equity fund are in the process of demonstrating. Reliance Natural Resources Fund was launched in January 2008. To be precise, the new fund offer (NFO) opened on January 1, 2008 and closed on 30th January. Thus, it caught the peak (and the tail-end) of the stock markets' bull run. Such was the hype of the times that it collected a huge Rs 5,660 crore during the NFO itself. I rather think that the fund was also helped by the similarity between its name and that of the company Reliance Natural Resources Limited, which is also from the ADA group. This company's stock price went through the roof between September and January.
Anyhow, Reliance Natural Resources Fund was extremely lucky in its timing. It collected a huge amount of money but when the time came to deploy the money, the markets had already crashed. As a result, this fund has not actually deployed a majority of that money. In March, 62 per cent of that huge corpus was being held uninvested instead of being deployed in stocks. In April, this percentage had declined a bit was still at a high 52 per cent. These high cash levels have helped protect this fund from losses while the stock markets were declining. If the timing had been a little different and the fund had deployed the money before the crash, then its investors would have been in a sorry state indeed.However, from now on, a combination of huge size and hesitant markets is going to be a problem. Not deploying the money for long would lead to poor performance if the markets go up but deploying it would lead to poor performance if the markets go up. Sure, this problem exists for all equity funds currently. Nonetheless, when a large high profile fund is hovering at the edge of the psychologically important NAV level of Rs 10, then it's especially acute. As all fund managers and fund marketing men know, it's far worse for your NAV to fall from Rs 10 to Rs 9 than (for example) it is to fall from Rs 20 to Rs 18, even though the investors' losses are the same in both cases. I imagine that having a single digit NAV would rather diminish the bragging rights bestowed by running India's largest equity fund.The big-is-good marketing message is also often extended to fund companies. Fund distributors flogging funds from the larger fund companies like Reliance, ICICI Prudential, UTI and HDFC never fail to mention this fact. The logic is supposedly similar to that of individual funds. If the fund company is big, it must be doing something right. While that is true, that 'something' it is doing right could be just marketing. All in all, size matters, but not always. There are a different set of very real problems that are faced by very small funds and fund companies. However, outside the extremes, it is difficult to see any real evidence of size having any effect on performance. As a positive factor, the size of a fund or a fund company is of relevance to its owners, not to its investors.
(by valueresearch)
Sunday, April 13, 2008
Invest in Existing Funds
Seeing the market condition, should I invest in a new fund or in an existing fund?
- Raj, Aurangabad
It is always advisable to invest in existing funds which have a good performance history. Invest in well rated funds on a monthly basis via SIP. SIP technique will help you average the cost in the long run.
If I invest online in mutual funds, will the units be allotted at same time at current price? If not then when and at wat price?
-Sanjeev
If you invest in mutual funds via the fund house website or through some online broker, you should take note of the cut off time that the site specifies. If you transact before the cut off time you would get units as per same day's NAV. Else you would get the NAV of the next business day.
What is the future of Reliance Growth fund for long time?
-Devender
Reliance growth is a five star rated aggressive mid cap fund which has good track record. Invest in the fund with a long term view, if you have a high risk appetite.
I have to invest Rs. 1.3 lakh for 1 year. Please suggest Fund?
-U.R. Singh, SILVASSA
Equity fund investments are not recommended for 1 year time horizon. For such a time span consider a well rated debt fund like Kotak Flexi Debt or ICICI Pru Long Term.
Is it required to have a Demat A/C for Mutual Fund? Which is less risk MF or a SHARES?
No. For investing in mutual funds you do not need a demat account. You need to have a PAN card, a savings account and KYC compliance (for amount above Rs 50000). A mutual fund is less risky than a stock, as in mutual funds your money is invested in various stocks, thereby diversifying the portfolio and reducing the risk.
I want to invest 1 Lac in equity fund. Please tell me some fund's in which it'll be doubled in the shortest term.
Mutual funds have associated market risks and do not give assured returns. To be aggressive opt for some mid cap funds like Reliance Growth, Birla Mid Cap, or Sundaram Select Midcap. These funds are agressive and tend to be more volatile than diversified funds.
How to know about the track record of a mutual fund?
You can know about the track record of a mutual fund by visiting valueresearchonline.com. The site would help you analyse the fund performance and compare it to other funds in a category.
Which is the best open ended fund in which high risk and high return?
If you wish to invest in a high risk mutual fund, go for a mid cap fund. These funds tend to be more aggressive than large cap oriented fund. Some good mid cap funds are Sundaram Select Midcap, Reliance Growth and Birla Midcap.
I have invested in Franklin Bluechip fund - Rs 10000 for 3yrs. Is it a good fund or not?
Franklin Bluechip is a three star rated large cap oriented fund. Off late the fund has been an average performer and there are better funds in which you can invest like Reliance Vision, Sundaram Select Focus or HDFC Top 200.
I have invested Rs 60,000 in LIC ULIP for tax saving under section 80C.How is the performance of the fund. Should I continue for next year?
One should avoid investing in ULIPs due as they have high associated charges. These charges would eat up your returns in the long run. For the performance of the fund contact the company or visit the companies website.
(by value research)
- Raj, Aurangabad
It is always advisable to invest in existing funds which have a good performance history. Invest in well rated funds on a monthly basis via SIP. SIP technique will help you average the cost in the long run.
If I invest online in mutual funds, will the units be allotted at same time at current price? If not then when and at wat price?
-Sanjeev
If you invest in mutual funds via the fund house website or through some online broker, you should take note of the cut off time that the site specifies. If you transact before the cut off time you would get units as per same day's NAV. Else you would get the NAV of the next business day.
What is the future of Reliance Growth fund for long time?
-Devender
Reliance growth is a five star rated aggressive mid cap fund which has good track record. Invest in the fund with a long term view, if you have a high risk appetite.
I have to invest Rs. 1.3 lakh for 1 year. Please suggest Fund?
-U.R. Singh, SILVASSA
Equity fund investments are not recommended for 1 year time horizon. For such a time span consider a well rated debt fund like Kotak Flexi Debt or ICICI Pru Long Term.
Is it required to have a Demat A/C for Mutual Fund? Which is less risk MF or a SHARES?
No. For investing in mutual funds you do not need a demat account. You need to have a PAN card, a savings account and KYC compliance (for amount above Rs 50000). A mutual fund is less risky than a stock, as in mutual funds your money is invested in various stocks, thereby diversifying the portfolio and reducing the risk.
I want to invest 1 Lac in equity fund. Please tell me some fund's in which it'll be doubled in the shortest term.
Mutual funds have associated market risks and do not give assured returns. To be aggressive opt for some mid cap funds like Reliance Growth, Birla Mid Cap, or Sundaram Select Midcap. These funds are agressive and tend to be more volatile than diversified funds.
How to know about the track record of a mutual fund?
You can know about the track record of a mutual fund by visiting valueresearchonline.com. The site would help you analyse the fund performance and compare it to other funds in a category.
Which is the best open ended fund in which high risk and high return?
If you wish to invest in a high risk mutual fund, go for a mid cap fund. These funds tend to be more aggressive than large cap oriented fund. Some good mid cap funds are Sundaram Select Midcap, Reliance Growth and Birla Midcap.
I have invested in Franklin Bluechip fund - Rs 10000 for 3yrs. Is it a good fund or not?
Franklin Bluechip is a three star rated large cap oriented fund. Off late the fund has been an average performer and there are better funds in which you can invest like Reliance Vision, Sundaram Select Focus or HDFC Top 200.
I have invested Rs 60,000 in LIC ULIP for tax saving under section 80C.How is the performance of the fund. Should I continue for next year?
One should avoid investing in ULIPs due as they have high associated charges. These charges would eat up your returns in the long run. For the performance of the fund contact the company or visit the companies website.
(by value research)
No MFs Dedicated To Silver
Which funds trade in silver? Any funds where metals, and oil and gas form the bulk of the portfolio?
-Shivi Kanwar
There are four schemes that invest in physical gold (known as Gold Exchange Traded Funds of ETFs), but none that invest or trade in silver. There is also no specific mutual fund scheme which invests only in metals and oil and gas sector stocks. You can consider SBI Magnum Comma which has been consistently increasing its exposure to the metal sector over the past one year. By December 2007, its investment in the sector stood at over 30 per cent. Its one-year return (as on January 11, 2008) was 77.72 per cent. You can also look at UTI Energy (formerly UTI Petro Fund) and Reliance Diversified Power.
(by valuerresearch)
-Shivi Kanwar
There are four schemes that invest in physical gold (known as Gold Exchange Traded Funds of ETFs), but none that invest or trade in silver. There is also no specific mutual fund scheme which invests only in metals and oil and gas sector stocks. You can consider SBI Magnum Comma which has been consistently increasing its exposure to the metal sector over the past one year. By December 2007, its investment in the sector stood at over 30 per cent. Its one-year return (as on January 11, 2008) was 77.72 per cent. You can also look at UTI Energy (formerly UTI Petro Fund) and Reliance Diversified Power.
(by valuerresearch)
FDs v/s Debt Funds
Why should one opt for a pure debt fund in place of other safer investments like bank FDs? The five star rated debt fund - Kotak Flexi Debt has generated an annual return of 7.28 per cent (as on February 14, 2008) for a three year period, whereas any bank FD would have fetched more than that.
-Rahul Maheshwari
It is true that fixed deposits (FDs) are a safer investment option when compared to debt funds. Debt funds are sensitive to interest rate fluctuations unlike an FD which offers a fixed interest rate for a fixed tenure. But the most important difference between these two is the tax treatment on gains. The interest earned on a fixed deposit is to be added on to your income irrespective of the term of the FD. Further, there is no distinction between short or long term capital gains tax in FDs. This overall reduces the yield of a fixed deposit, especially if you fall in the 30 per cent tax bracket.
What makes debt funds a better choice is the tax treatment on its gains. Just like FDs, if you redeem a debt fund within one year then you need to add the gains to your income (Short term capital gains). In case you redeem the investment after one year (long term capital gains) you can avail the indexation benefit.
(by valueresearch)
-Rahul Maheshwari
It is true that fixed deposits (FDs) are a safer investment option when compared to debt funds. Debt funds are sensitive to interest rate fluctuations unlike an FD which offers a fixed interest rate for a fixed tenure. But the most important difference between these two is the tax treatment on gains. The interest earned on a fixed deposit is to be added on to your income irrespective of the term of the FD. Further, there is no distinction between short or long term capital gains tax in FDs. This overall reduces the yield of a fixed deposit, especially if you fall in the 30 per cent tax bracket.
What makes debt funds a better choice is the tax treatment on its gains. Just like FDs, if you redeem a debt fund within one year then you need to add the gains to your income (Short term capital gains). In case you redeem the investment after one year (long term capital gains) you can avail the indexation benefit.
(by valueresearch)
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