What funds must I invest in for retirement planning? What funds are ideal for my children's education planning?
Mutual funds are ideal investment options for retirement and child planning. However they must form only a part of such portfolios. Here's why. Capital protection is one of the foremost requirements of a retirement or education fund. And there is not a single mutual fund that carries a capital guarantee on your principal amount. For this reason you cannot afford to ignore instruments such as the Public Provident Fund (PPF), National Savings Certificate (NSC) and the like. These instruments offer a decent risk-free return on investment. However, these may not suffice for your post retirement or child planning needs. For this reason you could look at equity-oriented mutual funds to boost returns. But when considering equity instruments, take cognizance of one's time horizon of investment. The longer you can stay invested, the more equity allocation you can afford. Hence, if you are 27 years old and plan to retire at 60, you can invest the bulk of your portfolio in equity oriented schemes. This is true for planning children's education as well. If your child is 16 years old and you need the money in two years, you should completely avoid equity funds.
As you near your goal, you ought to start redeeming your equity investments and re-invest these in safer debt-oriented instruments. Hence when you are about 56-58 years old, you can institute a systematic withdrawal plan and re-invest the money in safer instruments. The category of balanced funds is especially useful for such life stage planning. These funds invest at least 65 per cent of the corpus in equity and the rest is in debt instruments. Hence when the equity segment of the fund does exceedingly well, the fund rebalances the portfolio, booking profits in equity and transferring to debt. Thereby your risk exposure is kept in check.
(Source: Value Research)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Thursday, November 29, 2007
Reliance's Rating Goes Down
In the latest issue of Mutual Fund Insight dated 15 Oct - 14 Nov, 2007, wherein the Top 25 Funds are listed, the Reliance Vision Fund is shown as part of the list on page 4 and page 26. However, on page 14 and page 106, where the top rated funds are listed, Reliance Vision Fund is shown having a 4 star rating with a down arrow, whereas the Reliance Growth Fund has been given a 5 star.
Can you let us know the reason for this apparent discrepancy?
-Suresh V Rao
The list of the 25 first class funds picked by us is based on in-depth analysis and research carried out by our team at Value Research. The list was not based solely on the fund ratings assigned to each fund, but also on the various other fund attributes.
Regarding the fund rating given to the Reliance Vision Fund, the Value Research Fund Ratings are updated on a monthly basis. Reliance Vision, which was previously a 5 star rated fund for almost 5 years, was assigned a 4 star rating on 30th September 2007. Due to this, you can see the down arrow next to the fund name in the magazine, which signifies that the star rating of the fund has fallen as compared to the previous month.
(Source: Value Research)
Can you let us know the reason for this apparent discrepancy?
-Suresh V Rao
The list of the 25 first class funds picked by us is based on in-depth analysis and research carried out by our team at Value Research. The list was not based solely on the fund ratings assigned to each fund, but also on the various other fund attributes.
Regarding the fund rating given to the Reliance Vision Fund, the Value Research Fund Ratings are updated on a monthly basis. Reliance Vision, which was previously a 5 star rated fund for almost 5 years, was assigned a 4 star rating on 30th September 2007. Due to this, you can see the down arrow next to the fund name in the magazine, which signifies that the star rating of the fund has fallen as compared to the previous month.
(Source: Value Research)
Difficult To Predict Direction
In his current avatar as the CIO Equity, Rajah is trying to improve the bandwidth of his fund management team. One of the top and most respected fund managers of the Indian mutual fund industry, he manages Franklin Prima Plus and Franklin India Flexi Cap. He also manages several Fund of Funds. Rajah's prior stints were in Tata Steel (1986-88), Indbank Merchant Banking Services (1990-94) and Kothari Pioneer (1994). Sukumar is an alumnus of University of Roorkee and IIM (Bangalore)
Do you see a market crash in the near future?
It's difficult to predict the direction of the market. While the recent rally has been liquidity driven, on a fundamental basis we continue to be positive about the economy and corporates.
What is the strategic and tactical orientation of your fund?
The fund focuses on wealth creating companies whose competitive advantage will translate into superior return on capital. We follow a bottom- up stock picking approach and choose the best companies, irrespective of sector classification.
This fund tends to focus more on growth companies with a predominant exposure to large-caps.
Which are your top sector preferences?
Since we adopt a bottom-up investing style, the sectoral allocations are a derivative of the individual picks rather than any top-down views. Overall, we expect well-managed companies taking advantage of the buoyant domestic demand, increased capex and growing offshoring story to deliver superior, risk-adjusted, long-term returns. As on September, the top sectors in our fund were financial services, consumer non-durables and media.
(Source: Value Research)
Do you see a market crash in the near future?
It's difficult to predict the direction of the market. While the recent rally has been liquidity driven, on a fundamental basis we continue to be positive about the economy and corporates.
What is the strategic and tactical orientation of your fund?
The fund focuses on wealth creating companies whose competitive advantage will translate into superior return on capital. We follow a bottom- up stock picking approach and choose the best companies, irrespective of sector classification.
This fund tends to focus more on growth companies with a predominant exposure to large-caps.
Which are your top sector preferences?
Since we adopt a bottom-up investing style, the sectoral allocations are a derivative of the individual picks rather than any top-down views. Overall, we expect well-managed companies taking advantage of the buoyant domestic demand, increased capex and growing offshoring story to deliver superior, risk-adjusted, long-term returns. As on September, the top sectors in our fund were financial services, consumer non-durables and media.
(Source: Value Research)
Kotak 30 - Decent Record
Looking to grow big by focusing on large cap, the kotak-30 seems to be on the right path. Not one to raise eyebrows, the fund has been a steady performer and the same can be expected in the future
No one has ever accused Kotak 30 of being the most exciting offering out there. But this four-star rated fund has managed to build a steady long-term record of decent returns. The year 2004 was the best in its performance history and the only one when it landed in the top quartile. Its returns of 37 per cent placed it ninth in the category of 81 funds. In the subsequent two years, it beat the category average by a comfortable margin.
The name could be a misnomer though. It is not an index fund benchmarked against the Sensex. Its simply reflective of a portfolio restricted to 30 stocks (any stocks). Often the assets are well spread, but at times the fund manager does take concentrated bets. Of late, the fund's overweight position in the technology sector has been brought down from over 25 per cent to 15 per cent. Currently, the fund is betting big on the energy sector which accounts for 19.46 per cent of the assets.
The fund essentially has a growth focus with a strong large-cap bias. The mid- and small-cap exposure varies from negligible to none.
Not an aggressive churner, stocks like Larsen & Toubro, Reliance Industries and Deccan Chronicle have been there for a considerable length of time.
Others like BHEL, ONGC and State Bank of India have been in the portfolio intermittently, but with reasonable continuity.
Though a fund manager switch took place in January this year, Krishna Sanghvi has not strayed from the strategy of investing in a small, focused portfolio of large-cap stocks.
(Source: Value Research)
No one has ever accused Kotak 30 of being the most exciting offering out there. But this four-star rated fund has managed to build a steady long-term record of decent returns. The year 2004 was the best in its performance history and the only one when it landed in the top quartile. Its returns of 37 per cent placed it ninth in the category of 81 funds. In the subsequent two years, it beat the category average by a comfortable margin.
The name could be a misnomer though. It is not an index fund benchmarked against the Sensex. Its simply reflective of a portfolio restricted to 30 stocks (any stocks). Often the assets are well spread, but at times the fund manager does take concentrated bets. Of late, the fund's overweight position in the technology sector has been brought down from over 25 per cent to 15 per cent. Currently, the fund is betting big on the energy sector which accounts for 19.46 per cent of the assets.
The fund essentially has a growth focus with a strong large-cap bias. The mid- and small-cap exposure varies from negligible to none.
Not an aggressive churner, stocks like Larsen & Toubro, Reliance Industries and Deccan Chronicle have been there for a considerable length of time.
Others like BHEL, ONGC and State Bank of India have been in the portfolio intermittently, but with reasonable continuity.
Though a fund manager switch took place in January this year, Krishna Sanghvi has not strayed from the strategy of investing in a small, focused portfolio of large-cap stocks.
(Source: Value Research)
Wednesday, November 28, 2007
Expect Minor Correction
Mahesh Patil, a respected fund manager, handles several equity schemes at Birla. Birla Sun Life International Equity is the latest addition to his kitty. Prior to his current role, Patil worked with Reliance Infocomm (business strategy), Motilal Oswal Securities (senior research analyst) and Parag Parikh Financial Advisory Services. He holds a degree in electrical engineering, MMS in finance and a CFA degree from ICFAI Hyderabad.
Do you see a market crash in the near future?
I don't see a major market crash in the near future. The long term trend is still up. However, after the smart rally we have seen in the last few weeks, one can expect a short correction of about 5-7 per cent in the near future.
What is the strategic and tactical orientation of your fund?
Birla Sunlife Equity fund is positioned as a multi-cap fund with a growth oriented investment style. Tactically, the fund takes about 25 -30 per cent exposure with a medium term view (mainly in mid caps) to ride certain sectoral trends and growth momentum. It also takes a certain amount of exposure in the sunrise sectors with a long-term view.
Which are your top sector preferences?
Engineering/Power Equipment Telecom
(Source: Value Research)
Do you see a market crash in the near future?
I don't see a major market crash in the near future. The long term trend is still up. However, after the smart rally we have seen in the last few weeks, one can expect a short correction of about 5-7 per cent in the near future.
What is the strategic and tactical orientation of your fund?
Birla Sunlife Equity fund is positioned as a multi-cap fund with a growth oriented investment style. Tactically, the fund takes about 25 -30 per cent exposure with a medium term view (mainly in mid caps) to ride certain sectoral trends and growth momentum. It also takes a certain amount of exposure in the sunrise sectors with a long-term view.
Which are your top sector preferences?
Engineering/Power Equipment Telecom
(Source: Value Research)
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