GOODFUNDSADVISOR

RELIGARE TAX PLAN - RETURN KICKER

2012-01-24T04:03:00.000-08:00

The Tax Saving Action is in Full Force.

Choose your investments wisely. And move away from "Tax Saving" mindset to the more efficient "Tax Planning"!!!!

While the options for you are plenty...PPF, Insurance, NPS, etc. it is undoubtedly the Equity Linked Saving Schemes that win hands down.

Avoid Insurance, expect Term Insurance.....but do consider PPF as they will take care of your Debt exposure.

NPS has a cap of 50% for equity exposure and hence is not recommended by me.

Yes, ELSS continues to the BEST option for your Tax Saving under Section 80C.

Before reading further I strongly recommend you to read....

http://goodfundsadvisor.blogspot.com/2010/03/best-tax-saving-funds.html

Among the Equity Linked Savings Schemes, I have been a favourite of Religare Tax Plan since its inception in December 2006. Not without reason too as the Fund has truly been impressive both in bull and bear phases.

Religare Tax Plan is among the more 'aggressive' of the ELSS umbrella. However this mid cap exposure has not done any harm to the Fund's performance even in Bear Markets, which is truly remarkable.

The Fund tends to stay fully invested and avoid Cash calls....the 3 year mandatory lock-in period obviously helps.

The stock selection is very active and the top ten holdings have seen regular changes.

But the churning has not affected the Funds performance. The Focus on Bottom up stock picking and the avoidance of Cyclical plays have been the reason for its consistency.

Fund Manager Vetri Subramaniam and Vinay Paharia have largely restricted exposure to Large Cap ...in fact at one point of time, the Large Cap exposure of Religare Tax Plan was below 25%...

The Fund has reasonable diversification and does not shy away from booking profits.

The fund has also given 4 Dividends in the last 4 years.

The Fund has consistently beaten its Benchmark throughout its tenure and by a fair margin.

The Fund corpus is 109 crores which is a cause of concern but the consistently strong performance has managed to soothe the concerns.

Once the Direct Tax Code kicks in, the ELSS may become defunct as an investment alternative...make the maximum use of it till then.

If you are aggressive investor and would not mind volatility then Religare Tax Plan is the one for you.

You can also have a look at Taurus Tax Shield, though the Asset Size of only 65 crores is a cause of concern.

Other investors should seriously look at Canara Robecco Equity Tax Saver, HDFC Tax Saver, Kotak Tax Saver, Fidelity Tax Advantage among others.

Best of luck,

Srikanth Matrubai

Also visit
http://equityadvise.blogspot.com

Which Large cap for sip investment??

2012-01-02T04:27:00.000-08:00

A client is confused as to which Large cap he should go for……

Mr.Vijay Sampath wrote :

“Hello Sir, I like your blog for its easy language. Sir, I want to invest in an Large Cap Fund through Sip.
I have zeroed in on Kotak Opportunities Fund and IDFC Imperial Equity Fund, which one would you suggest?”.

SRIKANTH MATRUBAI replied :
Hi Vijay,
It is good that you have decided to take the sip to investing which is the BEST way to invest as it helps in averaging your costs and help in accumulating corpus with even small sums every month.

“Opportunity Funds”, as the name suggests are flexible and try to benefit from attractive opportunites that the market keeps throwing up every now and then.

Kotak Opportunities Fund relies on combining top-down and bottom-up approaches. Kotak Opportunities Fund is an aggressive diversified scheme which invests a minimum of 60% of its corpus in large cap stocks and remaining in mid-cap stocks.

Kotak Opportunities Fund actively mixes up its portfolio and appears to book profits as and when the opportunity arises. Given this active portfolio management combined with a strategy to actively shift across sector and market caps, the fund would be more suitable for aggressive investors. It should not be the only fund in your portfolio, but rather an addition to perk up returns.

Now, coming to whether Kotak Opportunities Fund is better or IDFC Premier Equity Fund…………………
Actually the comparision itself is wrong as Kotak Opportunities Fund is more concentrated towards Large caps whereas IDFC Premier Equity Fund is more of a Mid and small cap play.
Kotak has almost 60% in Large Cap whereas IDFC Premier Equity fund has only 6% in Large caps.

It would be more acceptable when Kotak Opportunities fund is compared with IDFC Imperial Equity Fund, which has a high concentration of Large caps.

Now look at the comparison and take a decision.

Kotak Opportunities Fund has scored over the IDFC Imperial Equity Fund over 3 year period giving 17.83% v/s 15.22% and both have given similar returns over 5 year period.

On Expenses Front, IDFC Imperial Equity Fund has an expense ratio of 2.29% whereas Kotak Opportunities has a lower expense at 2.05%.

Cyclical Holdings :
Here too, Kotak Opportunities Fund scores over IDFC Imperial Equity Fund because Kotak has a lesser %age of cyclical stocks at 43% whereas IDFC has a rather uneasy 64%…

Cash :
Kotak tends to have a cash holding ranging between 6% to 8% whereas at IDFC the cash holding has always been on the higher side at 15% to 20%. I personally feel that the falling markets has helped IDFC because it tends to have a larger portion in Cash…but going forward this could turn against the Fund.

However, on the risk taken to generate returns IDFC scores over Kotak.

Even if we compare Kotak Opportunities Fund with IDFC Premier Equity fund, during the last 3 year period, IDFC Permier Equity returned an annualized 7.58% while Kotak Opportunities delivered 7.60%. Both funds beat the benchmark BSE 100 index (return: 3.75% annualized) comprehensively over the same timeframe.

Calendar Year	2010	2009	2008	2007	2006
KOTAK OPPORTUNITIES- GROWTH (%)	18.5	80.13	-56.77	91.01	38.7

The performance figures in the table above are calculated using NAV, assuming Growth option. Performance figures of over 1 year are annualised.(Eg. A 33.1% gain in 3 years works out to a 10% gain per year when annualised.)

3 yr Annualised Volatility		26.56
3 yr Sharpe ratio		0.52

IN CONCLUSION :

I certainly feel that Kotak Opportunity Fund can add significant value to your portfolio over the long term especially via SIPs.

Note : I have given the comparison only for the two funds you have specifically asked about, this is not to say that Kotak Opportunities Fund is the BEST Large cap. For the answer to that, keep visiting my blog.

Regards,
Srikanth Matrubai

Also visit
http://equityadvise.blogspot.com

Infrastructure Bonds ARE Back in Action!!

2011-12-11T07:17:00.000-08:00

The additional tax benefit provider (sec 80CCF) in form of Infrastructure bondsÃ‚Â…let us see how they fare and which company bond to invest.

A spate of Infra Bonds have hit the markets in the recent weeks and much more are expected.
After IDFC and L&T, IFCI has now come out with a Infrastructure Bond which allows deduction under section 80ccf.

Compared to other two bond issues, IFCI definitely scores better because of its higher interest yield.

IFCI which had already come with 1st Tranche has come out again, albeit with a much higher interest rate now.

Compared to other two bond issues, IFCI definitely scores better because of its higher interest yield.

With this Bonds, you get an additional 20000 Tax Benefit over and above the 1 lakh under Sec80c.

The Bonds will be listed on BSE after the mandatory lock in of 5 years, thus giving you the required liquidity.

And, thankfully, no TDS will be deducted.

These Infra bonds typically have a lock in of 5 years and later on are listed on Stock markets wherein you can sell.

Moreover, all the Bond issuers also give the option of buyback facility.

You can make use of the same depending on the Interest rate scenarios at that time.

I strongly urge to make maximum use of this facility and take advantage of this benefit.

On an investment of Rs.20k, an individual in the Top Tax Bracket of 30% can make a saving of Rs.6000 and also earn an interest of 9% to 9.09% which, however, for the Highest Bracket Tax Payer, the effective yield works out to more than 13%Ã‚Â…..

If you have observed last year, interest rate on the bonds kept on increasing for every issue, but this is unlikely to happen this year as the Interest rates are at their peak and the RBI has already indicated that the interest rates could be moderated.

This will ensure that the coming issues will be priced at similar rate of interest rates or in fact, even lower.

Better to lock in the higher interest rates with the IFCI Infastructure Bond.

Those Tax payers who have exhausted their Exemption for Investments of Rs.1 lakhs in Sec 80c, 80ccc, 80ccd can look at these Infra Bonds.

With interest rates at the peak, this is the right time to invest in these bonds rather than waiting for further issues wherein the interest could be lesser.

Invest now. The earlier the better.

Regards,
Srikanth Matrubai

P.S.
For form downloads, visit the following link and put my code as 82593
http://www.rrfinance.com/Bond_Pdf/Infrastructureissues1.aspx

Also visit
http://equityadvise.blogspot.com

TATA RETIREMENT SAVINGS FUND

2011-10-18T06:18:00.000-07:00

Modelled to cater to your retirement needs.

With rising inflation especially Medical Inflation, and the fact that there is no Social Security by the Govt of India, it is necessary to be adequately prepared when it comes to Retirement Planning.

With this in mind, Tata Mutual Fund has come out with Tata Retirement Savings Fund. The Fund aims to provide a financial-planning tool for long-term financial security based on retirement-planning goals.

INVESTMENT STRATEGY :
The strategy of the fund will be predominantely Large Caps with a mix of mid-cap firm, however, the focus will mainly be on big caps.

This retirement-specific mutual fund scheme has an "Auto-Switch" facility. The fund is designed to meet the investment needs of investors in different age brackets. It offers three options to investors—'Progressive Plan', 'Moderate Plan' and 'Conservative Plan'—with varied percentage of equity and debt assets.

The "Auto-Switch" feature is supposed to do away with the hassles of adjusting the equity-debt proportion of the portfolio with increasing age. The fund is assuming that the investor depends on his "advisor" for switching assets between equity and debt with increasing age. The facility of "auto-switch" does the necessary asset allocation automatically—as the investor crosses into a different age bracket.

The progressive plan is for investors below 45 years of age, with 85-100 per cent of funds allocation in the equity assets. Once the investor turns 45 he/she would be automatically switched to the moderate plan, where the equity allocation will come down to 65-85 per cent.

Thereafter, at the age of 60, investors will be shifted to the conservative plan, where fund allocations in debt assets will reach as high as 100 per cent. In short, a single scheme will turn out to be a debt scheme after being an equity scheme

Exit load: It carries a 5 per cent exit load if redeemed within one year, 4 per cent if redeemed between 1 and 2 years, 3 per cent if redeemed between 2 and 3 years, 2 per cent if redeemed between 3 and 4 years, 1 percent if redeemed after 5 years from the date of allotment.

The Age Limits are not compulsory and can be flexibly used by an investor as he pleases.

COMMENTS & REVIEWS :
It is imperative that Planning for a comfortable and Financially sound Retirement is a Must.
Every investor should be careful and savvy to plan for Retirement. He should take the help of his Financial Advisor in preparing a Solid Retirement Plan.

For those who are short of time or who do not have a Financial Advisor to look after their investments, then this Fund is a "MUST HAVE" and is a good alternative to passive investors.

Similar products in the market like the Templeton India Pension Plan & UTI Retirement Benefit Fund invest upto 40% in equities and though relatively safe may not be able to generate Alpha returns which the TATA RETIREMENT SAVINGS FUND is capable of.

And it is a well know fact that Equities yield higher returns compared with any other investment class.

NOTE :

THE FUND HAS A HUGE EXIT LOAD OF 5% PROGRESSIVELY REDUCING....TO DISCOURAGE EARLY WITHDRAWAL FROM THE FUND.

THE FUND OFFERS ONLY "GROWTH" OPTIONS SINCE THE FUND AIM IS TO BUILD A HUGE CORPUS FOR YOUR RETIREMENT.

VERDICT :

Definitely better option compared to other options like the PPF, Insurance, etc which are available in the market right now.
I think if you do not have a Financial Advisor, you can go for the Fund.
Otherwise, your Financial Advisor should be able to create a Much better and more Diversified Retirement Portfolio for you.

Go for the Auto Switch Option, but keep a hawk eye on the performance and switch yourself before the "Auto Switch" if your Financial Advisor says so.

Final Verdict, the combo of Diversified Funds + Term Insurance + Real Estate + Gold is the Best formula for your Retirement Planning

HAPPY RETIREMENT,

SRIKANTH MATRUBAI

Also visit
http://equityadvise.blogspot.com

AN ANALYSIS OF L&T MIP - WEALTH BUILDER FUND NFO

2011-10-09T07:01:00.000-07:00

Now, let us analyses whether this Fund is indeed capable of Building Wealth.

For Starters, note this fund isa Monthly Income Plan with the tweak being that the Fund is ready to invest upto 30% in Equities unlike other MIPs who restrict the same to about 10-15%.

N Sivaraman, president and whole-time director at L&T Finance Holdings, said, Â“In this present challenging environment, where the risk of rising interest rates has increased and global markets seem to be volatile, we believe that the product could offer risk-adjusted returns and can serve as an alternative under fixed-income products.Â”

The fund expects short-term rates to remain stable going forward as bank certificate of deposits issuances may not be high as in the previous financial year. Interest rates are not expected to remain high on a sustained basis, therefore, investment at the present levels may provide opportunities when the cycle reverses.

On fund allocation towards equitie, the Fund Manager Sanjay Gupta said, Â“Indian growth seems to be relatively strong in relation to the global and developed market growth. At present, the Indian economy is most likely to be at the end of a rate tightening cycle, which may be a favourable environment to invest in equities.”

Benign commodity prices and cooling of oil prices internationally may boost the Indian economy,

COMMENTS & REVIEW :
tHE fUND IS Nothing but actually a Debt Oriented Mutual Fund with a exposure to Equities to provide additional “return kicker”.
Conservative Investors looking for a bit extra return the traditional Fixed Deposits can look at the fund.

If youÂ’re looking for ultra risk-free return, this is not it.

Limit your time horizon of investment to about 2 years and take a Fresh Call at that time.

Who should Invest in MIP’s ?

1. Investors looking for regular Income
2. Conservative investors looking for better returns
3. Investors who want to park a big sum of money with a 2 year time frame….

My suggestion :
1. Choose dividend option

SPECIAL COMMENTS :
Investors are requested to note that with Fund onwards, “Transaction Charge” could be collected depending on the choice of your Distributor.
So, get clear picture from your Advisor/Distributor whether your investment will be subject to this Transaction Charge.

I am NOT Opting OUT of the Transaction Charge, (that is, I am NOT chargingÂ….as I am a Advisor and not a Agent)….
Also visit
http://equityadvise.blogspot.com

Make a health promise

2011-10-05T07:51:00.001-07:00

Now, you can make a Health Promise for your loved ones online and help them live a healthier and more wholesome life! To know more, log on to http://gotaf.socialtwist.com/redirect?l=26kzu I have already taken health promise. Have you?

FREE LIFE INSURANCE BY MUTUAL FUNDS.....AN ANALYSIS

2011-09-03T01:57:00.000-07:00

Many AMCs are offering Free Life Insurance Cover with SIP investments.

Should you take the offer???

Srikanth Matrubai analyses....

I have always advised against mixing Investments with Insurance.
But,
but,
there is a combo bundled product wherein Free Life Insurance cover is given by Mutual Funds like Birla, Reliance and Kotak.
Let us analyse whether they are worth being looked into......
Let us look at each AMC separately and see what they are offering.

Birla Century Sip gives you a cover which will be equivalent to your market value of the units you have or 100 times your monthly sip whichever is less.

Under the Century SIP option, if the investor makes monthly SIP instalments, the insurance cover for the first year will be 10 times the SIP amount and in the second year it will go up to 50 times and 100 times from third year onwards, subject to a minimum SIP instalment of Rs 1000 and maximum cover of Rs 20 lakh per investor. Among the Birla Funds you can consider Birla Sunlife Frontline Equity Fund, Birla sunlife Dividend Yield Fund and Birla Sunlife Equity Fund.

Kotak Mutual Fund also offers Life Insurance Cover wherein in case of death of Parent, the fund will invest the Balance Sips in the name of the Child. Among Kotak Funds you can consider KOTAK K50 FUND.

Reliance Mutual Funds is also offering Free Life Insurance Cover through SIP Insure.

In Reliance SIP Insure, Reliance will pay the unpaid instalments of the future SIPs in the event of the death of the investor during the sip tenure.

Among Reliance Funds, you can consider RELIANCE GROWTH FUND AND RELIANCE EQUITY OPPORTUNITIES FUND.

Kotak and Reliance Mutual Fund offer similar type of Life Insurance. The difference between the two being that in Kotak, the nominee has to be compulsorily your kid, whereas in Reliance, it could be anybody.
Also, in Kotak, the unpaid installments is paid to the nominee....

However, Reliance does not offer the cover for its Tax Saving Scheme.The drawback with both of them,is that the Insurance actually reduces going forward and becomes NIL when your sip ends!.

Principal Personal Tax Saver and Principal Tax Saving Fund offer Personal Accident Insurance Cover upto 150 times the number of units you purchase.

HDFC too offer Personal Accident Insurance Cover, the coverage will be equivalant to 10 times of the cost of outstanding units maximum upto Rs. 10 lac and this is offered only for its HDFC CHILDREN'S GIFT PLAN.

Earlier, DWS was offering a simple and uncomplicated Term Insurance cover of 5 times your Investment as Life Insurance, subject to a maximum of 5 lakhs. However, this has been stopped for reasons best known to them.

SHOULD YOU TAKE THE OFFER??

MY ANSWER IS ……

YES....HERE'S WHY.....

While skceptics will always find loopholes in any product as with these products, I personally feel that if you want to invest for long term, why not use this added benefit.

When you invest in this combo,

1. Long Term Investment Benefit will be ensured.

2. No Matter what, your Targeted Amount will be reached.

3. As some so called experts (one CFP has even written a lenghty article titled "DO NOT INVEST IN MUTUAL FUND SIP".....Lol.....Excellent Attention grabbing Headline,)

these funds have 2% exit load....I do not see anything wrong in them.

When you are ready to pay 2-5% charges every year in ULIPs (and some hidden too), then giving 2.25% (max) AMC charges should not stop you in investing in such a excellent product.

Moreover, most importantly, in Schemes like Birla Century SIP, you can stop your sip after 3 years and still can continue to enjoy the Insurance Cover.

Take Dividend Payout :

If you feel that you are forced to stick to one fund throught just for the sake of insurance, I Suggest you to take the Dividend Payout option and invest the proceeds in Balanced Funds..and also STOP further sips after 3 years.

Exit load is charged to prevent investors from premature withdrawal....and encourage long term investment.

The Same ‘Expert”(?) said that in event of death, nominee will redeem and has to bear 2% exit load:, well, I am sure no nominee will crib about 2% when he is getting the Insurance amount as well as the fund value.

Regarding exiting paying 2% exit charge on withdrawal after bad performance, again, 2% should not come in way of coming out of a dud fund....and moreover, why invest in such a fund in the first place???

Caveat :

These Mutual Funds have the right to modify the terms of Insurance, especially after the most unethical modification done by DWS Mutual Fund, read (http://goodfundsadvisor.blogspot.com/2010/03/dws-mutual-funds-ethical-kill.html)

If other AMCs do follow this unethical move by DWS, (which is most unlikely), then you are in for a shocker...

Also, liquidity becomes an issue when you go for these Free Insurance offered by Mutual Funds.

Note :
In Birla, the Insurance Coverage will gradually Increase^^^^^^^^^
but in Reliance and Kotak, the Insurance Coverage will gradually decrease.
Ideally, one can take a sip in 1 Birla and 1 Reliance/Kotak, this way your Insurance Coverage will be more or less the same throughout.
Experts like Dhirendra Kumar, Suresh Sadagopan, Veer Sardesai have endorsed that these products make for good investment.

So, investors, the Combo product gives you Insurance Cover in an absolutely cheap way and be seriously looked especially if you are investing in Reliance/Birla/Kotak funds.

And, yes, your Primary Motive should an investment and the Fund should qualify for that, the Insurance Bait should be taken only as a Value addition and should not be the sole criteria for investing in these funds.

PLEASE DO NOT TAKE THIS AS A REPLACEMENT AS FOR REGULAR TERM INSURANCE OR ULIP.

Best of luck,

Srikanth Matrubai

Also visit
http://equityadvise.blogspot.com

SBI GOLD FUND - INVEST

2011-08-30T11:11:00.000-07:00

SBI has come with SBI Gold Fund.
You can invest if you are under exposed to Gold.

SBI has launched SBI Gold Fund – its FoF that feeds into its gold ETF.
The SBI Gold Fund is very similar to Reliance Gold Savings Fund and hence
the working of the fund is known to most of you, my clients.

If you have not yet understood its working…please read…
http://goodfundsadvisor.blogspot.com/2011/02/reliance-gold-savings-fund.html

This fund will be investing in the gold exchange traded fund (ETF) as an
underlying. So this method is very convenient to those investors who are
not very comfortable with buying the gold ETF through the stock
exchanges.
SBI Gold fund will enjoy the same tax benefits as any exchange traded gold
ETF.
There will no limits on investment.

GOLD PRICE OUTLOOK :

Gold has been a star performer for the past 4 years.
Being seen as a safe haven across universe, Gold has been chased by all

types of investors. The recent Economic upheavel across the World has

pushed up the Gold prices and there is no reason why Gold should not do
well.
Gold, as we know, has been a star performer for the past couple of years.
Gold is a counter cyclical in nature and hence an ideal asset tool in
diversification.
Gold should be looked at as a diversification, as a hedge in your portfolio.
Even if everything else goes wrong, this is one asset that would do well,
particularly in times of uncertainty. So it should be looked at from an asset
allocation or diversification point of view, rather than taking a view on the
price where it is trading today.

Why invest in SBI Gold Fund??

There are 6 reasons for you to invest in a Gold Saving Fund and SBI Gold
Fund in particular…
1.
In Gold ETF space, SBI Gold has been a outperformer because the Fund has
been fully invested and has minimal tracking error.
2. The SIP option gives you the advantage of buying Gold in as small
quantity of Rs.100/- which is not possible with a Gold ETF.
3. Yes, being a Fof, there is no Compulsion of Demat Account.
4. Excellent way to accumulate Gold without being concerned about the
Secuirty, Purity, making charges, etc.
5. Taxation laws enable you to take the benefit of Long Term Capital Gains
after just period of one year of its holding which is not so in case of Physical
Gold.
6. The Biggest plus point for the Gold Saving Fund according to me, going
forward, Gold is going to be more and more volatile, hence will benefit SIP
investors immensely.
SIP in SBI Gold Fund NFO is likely to generate higher Returns than GOLD
ETF, with the assumption that Gold Prices may continue to be VOLATILE by
5-10% . Investor will be invest in this Fund during Declines in Gold
Prices(via SIP of course). This is likely to Reduce the Cost of Purchase of GOLD UNITS in Fund
of Funds.

Gold recent sharp rise will see it going periodic price correction which will
help SIP investors average their cost.
For someone, who has no exposure to Gold at all, this Fund is an excellent
way to get an exposure and set his Asset Allocation right.
If you are investing through Sips, YES go for SBI Gold Fund…otherwise it is a
Strong NO!!!
Best of luck,
Srikanth Matrubai

Also visit
http://equityadvise.blogspot.com

FUND FOR INVESTMENT HORIZON FOR 25 YEARS...

2011-08-23T08:34:00.000-07:00

Hi Sir,

I have an ongoing sip in HDFC Top 200 fund.
I am thinking of going for a sip in IDFC Premier Equity Fund and DSP Top 100 Equity Fund.
I am 30 years old. My horizon is 25 years.
I want to have a Huge Retirement Kitty.

Please give me your valuable suggestion.
Regards,
Sreenath

SRIKANTH SHANKAR MATRUBAI replies :

Hi, Sreenath,

It is always better if you have a amount in your mind when you start planning.

The best way for this is to calculate your Retirement Corpus

You can find the retirement calculator in many financial websites.

I had written a rather long article on retirement and you can find the same here...

http://goodfundadvisor.hubpages.com/hub/BEST-FUND-FOR-RETIREMENT

The fact that you are investing through sips itself shows that you are on the right path.

However, your choice of funds need to be changed.

HDFC top 200 can be continued.
In Mid cap, go for IDFC Premier Equity Fund.
But, I do not see any reason for another Large Cap fund when you already have a sip in Hdfc top 200 fund.
I suggest you rather go for a Diversified Equity Fund like the Fidelity Equity Fund or the DSP BR Equity Fund.
More so, since your horizon is 25 years...quite a good time to ride over the volatility.
My personal favourite would be the Pramerica Dynamic Fund.
Also please take care to switch your equity gains steadily into balance funds and then further to debt funds as you near your goal.
Another caveat....
do not stick with 1 fund throughout....keep an eagle eye over developments like the Change in Fund Manager, Change in Investment Mandate, Continuous slip up in performance....
If such thing is noticed, do not hesitate to switch from the fund and consider moving to a better promising fund.

Best of luck,
Regards,
Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

SUNIL SINGHANIA SHARES HIS THOUGHTS....

2011-08-17T04:29:00.000-07:00

Had an opportunity to have a chit chat with Sunil Singhania, the soft spoken Head of Equities, Reliance Mutual Fund.

He was positive about the markets going forward.

He said "the recent sell off will now encourage fence sitters to get into the markets now, especially the Long Term Money may not get such cheap valuations."
"The repeat of 2008 market crash is unlikely. Things were different then...the situation is much much better now. There is absolutely no need to panic and I would rather look at this sell off as a BUYING OPPORTUNITY"
On Economy he revealed "India growing at 7% compared to 8% last year is a slowdown, but India normally takes 3 forward steps and 1 backward step, and I would say that the 1 backward step has been taken and the future looks only rosier and India is a good bet for Global investors.
Inflation is showing definite signs of cooling off which should ensure that Interest Rate hike is done away with"

On Reliance Banking Fund : "Banks tend to grow 150% more than the GDP and the fact that the Indian economy is under banked, the Sector is very attractive. The interest too is near its peak, if not peaked already, the Reliance Banking Fund is the Fund for not just the Aggressive investors even for the average investor, especially if he is investing through SIPs".

On Reliance Pharma Fund : "Pharma as a sector has done tremondously well in the past. While valuations are looking stretched, you should remember that growing health consciousness and India as a Medical destination getting attention will hold the Pharma sector in focus".

On Reliance Infra Fund : "yes, the fund has disappointed many investors. But the peaking of interest rates angurs well for the sector. And moreover, if you have observed, many companies have been shedding excess baggage by way of diluting stake and in some cases, selling off the unrelated business which increases their focus on their Primary business. We are looking at companies which have a sustainable business model and the revenue is visible and we strongly believe that this Fund has a huge potential above average return to Long Term investors".

On Reliance Gold Fund : "Gold was in a different orbit for the past 2-3 years and would find extremely difficult to replicate the same kind of returns. Look at Gold more as a hedge and a defensive bet rather than as an investment avenue which will fetch you huge returns"

Finally, when asked for 1 single advise he would like to give investors, he said : “Do not let the short term movements affect your long term asset allocation. Stay invested in weak markets, you will make loads of money’..

Regards,
Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

ASSOCHAM MEET

2011-06-22T10:41:00.000-07:00

Recently, ASSOCHAM arranged a Conferance on Investor Education.
The Conferance was held at the Bharat Hotels' THE GRAND ASHOK. (now the LALIT ).
The conferance was attended by Shri. Salman Kurshid, besides other dignitaries.
some clips from that meet.

Also visit http://equityadvise.blogspot.com

THE FUND EVERY INVESTOR SHOULD HAVE

2011-05-20T10:17:00.000-07:00

HDFC PRUDENCE FUND - THE BALANCED FUND THAT WORKS LIKE EQUITY FUND

WANT EQUITY RETURNS WITHOUT THE ACCOMPANYING VOLATILITY AND HEADACHE?????

Then, the answer is .... without any second thoughts....

HDFC PRUDENCE FUND!!!!!

This seed of thought was sown in my mind when one of clients, Munnawar Ali, asked this question.

Munnawar Ali wrote: "Sir, Can you suggest any one fund which should be the 'ONE' every investor should have. I am a new investor to the Equity field itself. Which fund would suggest me.?"

Srikanth Matrubai answered : "It's good Munnawar, that you have chosen the Mutual Fund route to take exposure to the Equities.

Equities are the BEST asset class in the long term. While pinpointing any one single fund is very difficult, especially as not only the Markets are dynamic, even the changes in Fund attributes, Fund Manager, would all have bearing on the performance of a Fund.

Still, I would stick my neck out and, without any second thoughts, say if any investor has to a Fund compulsorily in his portfolio,it has to be HDFC PRUDENCE FUND.

HDFC PRUDENCE FUND was lauched on February 1, 1994 and is one of the oldest Balanced in India.

The Fund is managed by Mr.Prashant Jain.

HDFC PRUDENCE FUND is a Balanced Fund with a mandate to invest between 40-75% in equity and the balance in Debt instruments.

The Fund tends to be fully invested in Equity over all periods of time with a passive style of investment touching its peak of 75% most of time.

WORKING OF BALANCED FUND :

Due to their mandate, Balanced Funds have to maintain Asset Allocation in ratio of ,say, 70:30(Equity/Debt). This automatically ensures that whenever the Equity outperforms, the ratio raises in favour of Equity and the Fund Manager has to sell

Equity to maintain the Balance.

Likewise, when Equity markets tank, the equity ratio declines and Debt raises, and thus the Fund Manager has to sell Debt and more Equity to maintain the Balance.

This automatically ensures that the Fund Manager, invariably, is selling at higher rates and buying at lower rates.

This Asset Allocation automatically ensures superior returns over Long Term over even Pure Equity Funds.

FUND INVESTMENT PROFILE :

The Equity investment has tended to veer towards mid caps.

However, in Debt, it is quite aggressive on the lookout to take advantage of any volatility in Debt Market. It has of late started to invest more in Triple A instruments which gives more protection.

HDFC PRUDENCE FUND has been a boringly top quartile performer since a long long time. It has given Equity type returns and inspite of being a Balanced Fund, has fared better than majority of Pure Equity Funds over all all types of Market Conditions.

Its Mid cap bais in equity is offset by Debt investment and hence the volatility is not so much as to cause concern.

The returns of HDFC Prudence has been way ahead of its peers like Birla Sunlife 95, DSPBR Balanced Fund, etc.

In fact, the returns compares favourably with even Diversified Equity Funds, despite HDFC PRUDENCE FUND being a Balanced fund.

NEGATIVES :

Its huge huge Asset Size of 5800 crores could be a problem. But Prashant Jain, the Fund Manager, has shown his ability to manage such huge Asset Size even with the other funds he manages (HDFC Equity manages 8400 crores, HDFC Top 200 manages 9600 crores).

RECOMMENDATION :

HDFC PRUDENCE FUND is a "must" in any investor's core portfolio.

HDFC Prudence Fund will provide good hedge against sharp equity falls.

If any investor wants to invest in only ONE Mutual Fund, then THIS is the Fund, the HDFC PRUDENCE FUND.

Best of luck,

Srikanth Matrubai

http://goodfundsadvisor.blogspot.com

Also visit http://equityadvise.blogspot.com

SUNDARAM EQUITY PLUS FUND - A REVIEW AND ANALYSIS

2011-05-15T10:24:00.000-07:00

MORE STABLE, LESS RISKY

Aiming to get the best of Gold and Equity, Sundaram Equity Plus Fund follows successful UTI Wealth Builder Series II Fund.

UTI Wealth Builder Series II has been very successful. It has beaten its Benchmark both in Positive and Negative times.
It has risen more and fallen less.

Can we expect the same from Sundaram Equity Plus Fund.... well that depends on how well the Equity portion is managed as the Gold investment does not need the skill of the Fund Manager expect in the extent of exposure towards Gold.
The Sundaram Equity Plus Fund aims to invest around 65% in Equity and 35% in Gold ETFs.

Gold, as we know, has been a star performer for the past couple of years. Gold is a counter cyclical in nature and hence an ideal asset tool in diversification.
But, going forward, Gold is not expected to repeat its Extraordinary performance and hence this fund could struggle to give Alphe returns.

Now, since the Fund Manager has indicated that he will be tilted towards Large Caps, and with balance in Gold ETFs, the Fund will not be volatile and may at best give you Par returns. If you want Alpha returns, then this fund is NOT for you.

Tax Advantage :
Since more than 65% is intended to be invested in Equities, there will be No Long Term Capital Gains Tax.

RECOMMENDATION :
Sundaram Equity Plus Fund is suitable for conservative investors who are looking to hedge their equity portfolio with Gold.

Sundaram Mutual Fund fans can sure go for this fund, others are better off by separating their investment and themselves investing in a Diversified Equity Fund and taking a SIP in Reliance Gold Savings fund which in turn invests in Gold ETFs.

Also read....
http://goodfundsadvisor.blogspot.com/2011/04/invest-in-gold-best-way.html

Alternatively, investors can consider investing in

UTI Wealth Builder Fund Series II

Axis Triple Advantage Fund

Canara Robecco Indigo Fund

Best of luck,
Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

ING FINANCIAL PLANNING FUND - A REVIEW

2011-04-30T06:48:00.000-07:00

WANT INSTANT DIVERSIFICATION, THEN LOOK AT ING OPTIMIX FINANCIAL PLANNING FUND

ING has come out with a New Fund Offer ING Optimix Financial Planning Fund which is a Fund of Funds and aims to invest in mutual funds of AMCs other than ING.
This, according to ING people, is to help investors simplify their investment.
While on the face of it, the Fund offer and plans look confusing, the concept is good though not new.
The Fund aims to invest in carefully selected BEST OF BREED Funds from differennt AMCs and get the best returns for your investment.
The Fund will invest in Four Different Asset Classes - Liquid Funds, Debt Funds, Equity Funds and Gold ETFs.
And, yes, the Fund will also aim to give its investors flexibility to choose from four Convenient Plans catering to Different Risk Tolerance levels.

While this isn't the first multi-manager FoF from the AMC, it is unique given its strategy of investing across the equity, debt and gold asset classes. In contrast, FoFs from other fund houses typically invest in funds from their AMC only. Besides, this is the first FoF that has an option to add exposure to gold ETFs.

MY ANALYSIS :
PROS:
1. With hundreds of funds to choose from, this Fund ensures that your job is simplified. And monitoring/switching too is not your headache as the Fund Manager will do the same as and when required.
2. Since this fund will not invest in inhouse schemes of ING, you can be sure of having his investment into the Best of Funds as the selection of funds is done purely on merit.

CONS:

1. The entire performance is based on the funds selected and how they fare. Wrong selection of funds or delay in identifying laggard funds could affect the overall returns of the fund.
2. Similar products from the same Fund House, like the ING Optimix Multi Manager Equity Option has been very disappointing in their performance till now.
3. Additional Costs due to its Fund of funds approach.

RECOMMENDATION :
As with every fund, this fund too has its pros and cons, Passive Investors and First time investors wanting an exposure to equities, this is a Great Fund to take exposure in.
Others, your Fund Advisor could well do a better job.
Investors would however do better to 'PAY FOR QUALITY ADVISE" and invest in Different Funds of different AMCs based on their Asset Allocation, Risk Aversion which a Qualified Financial Advisor would be in a much better position to advise.

Best of luck,
Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

INVEST IN GOLD THE BEST WAY.....

2011-04-21T07:04:00.000-07:00

While there are many ways to invest in Gold, the Mutual Fund route is the best due to transparency, low cost, liquidity, tax benefits and more.

The Ever rising Gold and Silver prices has triggered a rush to invest in these commodities and let us see which is the best way to make maximum returns through the mutual fund route.
Before that, it would be worthwhile to note what experts have to say on the future Gold outlook.

While everyone knows about the Gold ETFs like Reliance Gold Fund, Gold Bees, etc.(Gold ETFs are funds which track the value of Gold by investing in Physical Gold), not many investors seem to be aware the difference that two Gold Funds have.
These two funds, namely AIG World Gold Fund and DSPBR World Gold Fund are actually Fund of Funds which invest in Gold Mining Companies Worldwide

The DSPBR World Gold Fund invests in the units of Black Rock world gold Fund whereas AIG World Gold fund invests in Falcon Gold Equity Fund.
The point to be noted here is, that Gold Experts are unanimous in their opinion that the mines in South Africa are saturated and over a period of two-five years, may lose their dominance due to high cost of production.
This point makes it clear that for a LONG term investor, AIG World Gold Fund may give better returns than DSPML World Gold Fund.
Note, the Falcon Gold Equity Fund has been awarded THE BEST FUND for the THIRD Consecutive year at the Lipper Fund Awards 2011.
Another very good way to get a Gold Exposure is through Reliance Gold Savings Fund.
For more details on this you can click here………
http://goodfundsadvisor.blogspot.com/2011/02/reliance-gold-savings-fund.html

The price correlation between the Gold prices and the NAVs of the AIG/DSP World Gold Fund is not direct and tend to vary.
This is because these Funds invests in Equities of Gold Mining Funds and tend to have a time lag between the Gold price variation and Stock price variation.
These stocks normally rise than Gold price rise and fall steeper than Gold price fall.
But, regarding their Gold Fund, the performance is linked to Falcon Gold Equity Fund which in turn invests in equities of Gold Mining companies.

The difference between the DSP Black Rock World Gold Fund and the AIG World Gold Fund is this.
AIG World Gold Fund typically invests in Gold Mining Companies based in Canada and prefers mid caps.
DSP World Gold Fund typically invests in Gold Mining Companies based in South Africa and prefers Large Caps.

So, obviously, a SIP investor would make more money in AIG World Gold Fund as its NAV is more volatile.
Finally, to sum up,
My vote for the BEST way to make gains through Gold investing is through a SIP investment in Reliance Gold Savings Fund.
Best of luck,
Srikanth Matrubai

GOOD TIME TO BUY SILVER

2011-03-18T08:07:00.000-07:00

Strong reason to buy Silver.

Silver has been a blockbuster for more than a year now. It has doubled in comparison to its more illustrious cousin, Gold.

My personal feeling that Silver will continue to outperform Gold and I have my reasons for the same.

11 important Reasons why Silver trade will out perform Gold

1) Shift in Monetary reserve policy to Gold & silver from Dollars

2) Commodities are in a secular long term bull market, More so Gold, Silver
Individuals, Central banks & governments across the globe are shifting their reserves in to tangible assets like Gold & Silver

3) Silver production deficit for straight 15 years now!
From last 15 years silver usage in Electronic & Electrical industry has hot up many fold & still the supplies are no where near demand

4) Gold demand almost near to its supply – Silver down from 2 billion ounces to 367 million ounces / annum
2 billion ounces in 1990 & still the same in 2010 – Silver 2 billion ounces in 1990 & 367 million ounces in 2010 in-spite of silver being mined 8 times more than gold !

5) Silver is severely under valued
Historically silver is greatly undervalued compared to gold, silver prices have not kept rising to their historic high’s of 52$/oZ even when adjusted against inflation for several decades now

6) Gold silver ratio is unrealistic & is set to rise
Current Gold silver ratio is @ 1/45 which experts like UBS, Berkshire Hathway, and David Morgan Etc believe in the next decade the ratio will come down to between 1/16-1/10 of the gold prices

7) Silvers real value is far more than what it really is today
Purchasing power of dollar through 1913-2010 has almost gone down 95% as a result dollar denominated ratio for gold & silver has disproportionately grown hence the rise in Gold & silver prices, but silver is far too behind even @ of $ 29/oZ

8) Silver yet to reach its peak price: Silver’s historic high was $ 52 / oZ during 1980, if this price were to be adjusted against inflation over these 30 years; silver price should be $ 153/ oZ ! @ $ 29 current market price, prices of silver has a long way to go!!

9) 51 country heads across Europe & South American counties have agreed to
Make silver as their Money: Economic crisis across Europe & USA has made several
Country heads Opt for time tested real money reserves in the form of Gold & Silver

10) Ratio of silver recycling is far too less compared to Gold: Digital technology is
Creating unprecedented demand for silver which cannot be recycled, almost all digital
Technology products use silver as one of the main component.

11) China factor: China is discreetly converting its several 100 billions of dollars
In to Gold & Silver & nearly 50% of silver is consumed by its industries

While there are very few opportunities to invest in Silver through mutual funds.

For Gold you have gold ETFs and also Funds like Reliance Gold Savings Fund, etc, but for silver there is virtually no option.

Birla Precious Metal Fund is one option where you can get a Silver Exposure.

More options are sure to come, especially in the wake of the sizzling rise in Silver price.

Regards,

Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

RELIANCE GOLD SAVINGS FUND

2011-02-27T05:30:00.000-08:00

NEW WINE IN NEW BOTTLE

Investing through SIP is advisable. Avoid LUMPSUM.

Reliance has come out with a New Fund Offer, Reliance Gold Savings Fund.
Should you invest??. Let us check it out...

Reliance Gold Savings Fund is a Fund of Funds., meaning your money in this Fund will actually be invested in another fund, namely Reliance Gold Exchange Traded Fund. And, this Fund in turn invests in Gold.

An Exchange Traded Fund (ETF) cant be invested through Sip., and so is Reliance Gold ETF., and here's where Reliance Gold Savings Fund steps in.
You can invest as little as Rs.100 per month!!!

Positives :
No Demat Account.
Can invest as little as Rs.100 per month.
Long Term Capital Gains after holding period of 1 year compared to 3 years holding period in Physical Gold.
Very Liquid compared to Physical Gold.

Negatives :
Being a Fund of Funds, charges could be higher. Gold ETF charges 0.75% whereas Reliance Gold Savings Fund could charge upto 1.5%.
Equity has and will continue to outperform Gold in the Long Run.

RECOMMENDATIONS:
While "experts" are shouting about Higher Expenses, one should not forget that the Expense is fixed at 1.5% by SEBI and moreover, your SIP investment would be working at Rupee Cost averaging and will actually help you gain more than Gold Returns. (Just like a equity sip would give you more returns than a Lumpsum investment).

Prudent Asset Allocation will tell you that you should have a 5-10% Gold exposure depending on your profile and based on this, you should decide how much you should invest in Reliance Gold Savings Fund (or whether you should invest at all).

People in India tend to invest in Gold not as an investment, but more for creating a corpus for their children's marriage, for them, this Fund is God send.
I would still stick my neck out and say that Equity is the Best Asset to Invest, especially if your Time frame is more than 5 years.

If you want to have a Gold Exposure, then investing through SIPs in Reliance Gold Savings Fund is the BEST way to do it.

Also visit
http://equityadvise.blogspot.com

IDFC INFRASTRUCTURE FUND - OLD WINE IN OLD BOTTLE!!

2011-02-26T03:39:00.000-08:00

There is nothing new on offer in the NFO of IDFC Infrastructure Fund.

IDFC has surprisingly launched an Infrastructure fund when the entire sector is avoided like plague by Fund Managers and Investor alike.

Do the IDFC people found something that many have not been able to???
Well, only time will tell the answer.

But, their guts has to be appreciated to have bought out such a Theme Fund in these difficult times.

I met Mr.Kenneth Andrade recently and he explained, "Infrastructure stocks are valued attractively and Cash Flow visibility is very strong and Investors will flock to these very same stocks sooner rather than later. We want to be there earlier than others and give alpha returns to our investors".

Mr.Kenneth Andrade reasoned that the Infrastructure Stocks were over-hyped during the 2008 highs and and under-performing due to over skepticism and is overdoing by investors on both fronts.
He expects Infra stocks to bounce sharply and lead the Next rally, especially now that many of these infra projects are getting executed and should be monetized sooner.

Infrastructure Sector as a whole has been going tough times and the future does not look too bright with high inflation and hardening interest times.

COMMENTS AND RECOMMENDATIONS:

A Sector Fund is a strict no-no, especially if you are investing in Lump-sum.
One bad policy decision, and lo, the entire sector looks down and out and you will be left holding a drowning boat.

And yes, there are more than a dozen infrastructure funds in the market today and there is no particular reason for you to pick this Fund over the others unless you have a leaning towards IDFC brand name or you love Mr.Kenneth Andrade.

However, to this Funds benefit, I must add here that Infrastructure Stocks constitute more than 50% of the Nifty, which makes this Fund more diversified than a pure play Theme/Sector Fund.

But,
but,
but,

I would still say...

Go for Diversified Funds as there is nothing that prevents a Fund Manager in investing in Infrastructure sector if he finds the sector attractively valued.

ONE FINAL THOUGHT.....

By the way, I had this thought, that probably the AMC guys at IDFC thought they could piggyride on the IDFC Bond Ad wave which has been doing the rounds for more than 6 months now and would be easy to suck in gullible investors.

Maybe it also is that IDFC people are following the classic saying 'Buy when others are selling"!! and launching Infra fund when other AMCs are wary of talking about their Infra funds performance.
Best of luck,

Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

INVESTOR AWARENESS SEMINAR

2011-02-14T06:35:00.000-08:00

Srikanth Matrubai recently arranged a Investor Awareness Seminar at KSCA Chinnaswamy Stadium.

The Presentation was by Srikanth Matrubai and NJ South Zone Mr.Tushar Bhajantri.

The Meet was primarily targetted towards newcomers to the Investment World and was aimed to dispel myths regarding Mutual Fund Investment.

To begin with, Srikanth Matrubai spoke on the importance of saving and ensuring returns being above Inflation Rate at the Least.

He also emphasised the virtues of "Systematic Investment Plan" and extolled the investors to invest through SIP to 'SLEEP IN PEACE'.

He warned investors not to fall in the mode of 'INVEST AND FORGET".

Regular review of a Portfolio is a must, even if the Fund has a 5 star rating.

Click here…

http://goodfundsadvisor.blogspot.com/2010/11/little-drops-of-water-make-mightly.html

Thereafter, Mr.Tushar took over and created a lasting impact with his interactive question and answer session. He emphasised that 'investors should have a Definite Goal and think only about Long Term".

To see the video click here…….

http://www.indyarocks.com/videos/Tushar-Sir-making-Presentation-2259135

This was followed by an interactive session on mutual funds, insurance, savings and other avenues.

The Experts, besides Mr.Srikanth Matrubai and Mr.Tushar, included representatives from Birla Mutual Fund, DSP Black Rock Fund, Religare Mutual Fund, Axis Mutual fund, Escorts Mutual fund, HDFC Mutual Fund, L&T Mutual Fund, DWS Mutual fund, etc.

The Event was a grand success with a Full House of over 75 attendees.

In between, in his true witty style, Srikanth Matrubai held a Quiz contest on general investment matters like Inflation, etc and "Prizes" were given to winners.

After the meet, investors enjoyed the Dinner.

Video link…

http://www.indyarocks.com/videos/Investors-enjoying-Lunch-2259123

Also visit
http://equityadvise.blogspot.com

FIDELITY INDIA CHILDREN'S PLAN

2011-01-23T09:58:00.000-08:00

FIDELITY INDIA CHILDREN'S PLAN

Also visit

http://equityadvise.blogspot.com

FIDELITY INDIA CHILDREN'S PLAN - A REVIEW

2011-01-23T09:29:00.000-08:00

It’s Different!

While most Child funds in the mutual funds are hybrid in nature with very little to differentiate each other, Fidelity has tried to create its own space by adding unique options hereto unavailable in child plan by Mutual funds.

The Fidelity India Children's Plan has provided investors with a good variety of unique investment options.

OPTIONS....

The Fidelity India Children’s Plan will have three sub Funds which you can choose…

Education Fund : Asset allocation under the Education Fund will comprise of 70 per cent equity and 30 per cent debt to provide funds over the long-term for children''s education.
Marriage Fund : The Marriage Fund will have asset allocation of 70 per cent equity, 20 per cent gold ETFs and 10 per cent in debt.
Saving Fund : The Savings Fund will have only Debt exposure and the asset allocation will be up to 100 per cent in debt and money market instruments to provide stability.

You can watch the Video of how the Fund works …………

Here..

http://www.indyarocks.com/videos/Fidelity--Cake-exhibition-053avi-2029858

Fidelity India Children’s Plan (FICP) is a hybrid fund which combines equity, fixed income instruments and gold ETFs. The fund offer three distinct funds under it viz. Education Fund, Marriage Fund and Savings Fund, where one can invest in, and each of them are intended to achieve their stated objective. Investors can opt for any of the funds for their investments, depending upon their financial goal – being children education, marriage or mere savings.

The FICP “Education Fund” exposes its investors to two asset classes – equity and debt, while the FICP “Marriage Fund” exposes its investors to three major asset classes – equity, debt and gold. The FICP “Savings Fund” on the other hand invests only in debt and money market instruments.

These Hybrid options give investors exposure to low co-related assets. So, when you feel that Gold is not looking attractive as investments, Equity will take care of your returns.

In contrast to most hybrid mutual funds in the market, Fidelity India Children's Plan will have dedicated fund managers for both the equity and debt portions of the portfolios. The Equity Portion will be managed by Nitin Bajaj who also has a good track record in managing Fidelity Special Situations Fund.

RECOMMENDATION :

Fidelity has understood the physic of Indian investors well and has included "Gold" also in its Marriage Fund. Gold has been long considered a natural hedge against inflation and Indian Marriages do have more than 20% of their expenses directed towards Gold.

The Fidelity India Children's Plan can be considered with a long term view. The Fund has all the potential to ensure good returns. Its Gold Exposure should ride out volatility and beat inflation over the long term. The auto balancing would ensure that downside is protected.

Savings Fund which invests predominantly in debt and money market instruments suitable for conservative investors and those nearing their financial goals and

Instead of looking at Child ULIPs, you should seriously consider investing in this Fund, as the costs are not only cheaper, but also the withdrawal are easy and returns should be far superior.

So, the vote is INVEST.

NOTE :

There will be no charge for switching between different options of the same fund or between funds within the plan and for transfers under STP.

Srikanth Matrubai

Also visit
http://equityadvise.blogspot.com

IFCI INFRA BONDS.... SHOULD YOU INVEST??

2011-01-07T02:56:00.000-08:00

Infrastructure Bonds are back as they allow you to claim extra 20000 as Deductible from your Income. But, are they worth it??

Hi,
As you are aware, the Finance Minister in the recent budget has announced a special Income Tax rebate, wherein investment made upto Rs.20,000/- in Bonds issued by Infrastructure Companies will be eligible for Income Tax benefit u/s 80-CCF.

Following this, IDFC, L&T had earlier come out with Infrastructure Bonds and now IFCI too has come with a public issue of such Tax Saving Bonds.

On an investment of Rs.20k, an individual in the Top Tax Bracket of 30% can make a saving of Rs.6000 and also earn an interest of 85 to 8.25%. However, for the Highest Bracket Tax Payer, the effective yield works out to 14.25%…..
These Bonds typically have a minimum tenure of 10 years and will be locked for 5 years. Since, the Bonds are expected to be listed on the Stock Markets, liquidity concerns are negated to some extent.

Those Tax payers who have exhausted their Exemption for Investments of Rs.1 lakhs in Sec 80c, 80ccc, 80ccd can look at these Infra Bonds.

HOW MUCH TO INVEST?

Even though there is no upper limit for investing in these bonds, since a maximum of Rs.20000 is deductible from your Taxable income, do NOT invest more than Rs.20000 in these Bonds.

Features of the present IFCI Bond open for subscription :

Face Value Rs. 5,000/- per bond
Issue Price At par (Rs. 5,000/- per bond)
Minimum Subscription 1 Bond and in multiples of 1 Bond thereafter,
Tenure 10 years, with or without buyback option after five years
Options for Subscription The Bonds are offered under the following 4 options-
• Option I – Non-cumulative and Buyback after 5 years
• Option II – Cumulative and Buyback after 5 years
• Option III – Non-cumulative and no Buyback
• Option IV – Cumulative and no Buyback
Redemption / Maturity At par at the end of 10 years from the deemed date of allotment. For Cumulative Option, at par with cumulated interest thereon.
Coupon rate • Option I & II – 8% p.a.
• Option III & IV – 8.25% p.a.
Option II and Option IV will have cumulative payment at the end of the Buyback period or 10 years, as per the option opted by the Investor.
Rating : BWR AA- by BRICKWORK RATINGS INDIA PVT LIMITED implying these Bonds carry high credit quality
Listing Proposed to be listed on BSE

Interest from IFCI BONDS are not subjected to TDS , but it is TAXABLE at the hands of investors.

The IFCI bonds are issued with section 80CCF benefits which means that they will get you a tax benefit of reducing your taxable income over and above the Rs. 100,000 under Section 80C with a cap of Rs.20,000.

These IFCI 80CCF bonds will not attract TDS, however the interest itself is taxable at your hands. So, the bonds don’t attract TDS, but it doesn’t mean they are tax free.

LET ME ALSO CLARIFY....
If you have already bought another infrastructure bond, and exhausted the limit of Rs. 20,000 then you won’t get any further tax benefit by buying this bond. There are also several banks that offer 8% interest for terms less than 5 years, so you won’t get much value out of locking your money in this instrument for 5 years.

ONE MORE IMPORTANT NOTE.....
LIC is also expected to come out with its Infra Bonds...
This bonds from LIC is expected to not only give MORE interest but also OFFER FREE TERM INSURANCE.
So, you can wait for some more time...

Regards,

Srikanth Matrubai
Also visit
http://equityadvise.blogspot.com

Little Drops of Water Make a Mightly Ocean

2010-11-19T10:13:00.000-08:00

Dear Srikanth sir,

I am in awe of your writings and would appreciate if you can guide a poor man like me. My earnings don’t leave with enough savings. Still, with great sacrifice on my part, I can invest 700rs per month. Is this too little? Should I consider investing in safe options like Bank FD; insurance, etc…Guide me to have some decent lump sum in around 20-25 years time. Please.

Thanks,

Nisarg

SRIKANTH MATRUBAI guides:

Dear Nisarg,

First of all, I appreciate your effort to save the money as "Money Saved is Money Earned"

Saving is nothing but “spending less than earned income”.

Rs.700 is not a small amount at all. Better late than never, better small than no investment at all.

Do you know that if you had invested just Rs.100 in Reliance Growth Fund for the last 181 months, your investment of Rs.18100 would now have gone to, hold your breath, Rs.3,26,888!!!!!

Yes, you read it right…your investment of a paltry of Rs.100 would have grown to more than 3 Lakhs of rupees….!!!!!!

So, if Rs.100 can achieve this much, your Rs.700 too could earn a lot and can easily make you a Crorepati..

Ignore people who tell you to invest in Recurring deposits or buy Gold or even consider Insurance.

Insurance is NOT AN INVESTMENT.

People do not advise you about Mutual Funds because they get ZERO Commission on Mutual Funds where as in Insurance they get about 40% (the recent IRDA has brought this down to about 10%, but still quite a deal) and in Post Office and other investment avenues, they get at the least 2%.

Gold at best gives a return on par with Inflation (even though the last few years have been an exception). With Recurring Deposit, you actually 'LOSE' your Capital when you consider Inflation and Taxes.

The Best option is 'MUTUAL FUNDS".

Reliance, SBI and Sundaram Mutual Funds have SIP for as low as Rs.100.

Sip investments allow you to start small and accumulate huge.

If possible, add another Rs.50 to your savings.

My advise for you is to split this Rs.700 into say about 4-5 Schemes and invest as advised below every month.

My preferred Funds would be

1.Reliance Growth Fund – Rs.100

2.Reliance Regular Savings Fund- Equity – Rs.100

3.SBI Magnum Contra Fund – Rs.100

4. Sundaram Mid Cap Fund – Rs.250

5. SBI Magnum Balanced Fund – Rs.100

6. Reliance Equity Opportunities Fund – Rs.100

These Funds are a Good mixture of Large Cap, Diversified and Balanced Funds with a bias towards Conservative investment.

Visit my blog http://goodfundsadvisor.blogspot.com for more ideas on investing.

Best of luck,

Srikanth matrubai.

Also visit
http://equityadvise.blogspot.com

RELIANCE SMALL CAP FUND - SIP WOULD DO WONDERS

2010-09-09T08:12:00.000-07:00

AGGRESSIVE FUND FOR HIGH RISK HIGH RETURN INVESTOR

Reliance Mutual Fund have launched an aggressive fund focussing purely on Small Caps aptly named "Reliance Small Cap Fund".

The Fund will be managed by Mr.Sunil Singhania who has had a great success with Reliance Growth Fund.

Small Caps are largely under-researched and the key is to identify companies which can become Large Caps.

Reliance Small Cap Fund will be investing in companies which have a market cap between Rs.170cr to Rs.2200cr.

The Fund will aim to invest in Entry Level Companies which however have a good quality Business Model and has the ability to scale up itself to become Large Cap.

The notable thing is that unlike with their NFOs, this time Reliance have had a low key exposure of this Reliance Small Cap Fund in terms of ads, hoardings. Mr.Shailesh Raj Bhan, Fund Manager of Reliance equity Opportunities Fund said, the low profile was intentional and they were looking at a size of around 500 crore for this fund.

Mr.Shailesh Raj Bhan also indicated they would be looking at a portfolio of around 50-60 companies.

INVESTMENT APPROACH :

The Fund would be doing following up a purely "Bottom Up" Approach and would be less likely to look at Macro View foccussing more on micro view.

COMMENTS & RECOMMENDATION :

Small Caps are very volatile., they tend to rise more than the rest of market in a bull market and likewise fall steeper than the rest in the Bear Market.

Timing your entry and exit from these small caps is imperative and essential to make maximum profit.

DSPBR Micro Cap Fund has done exceedingly well but most probably its close ended nature helped the fund hide the fact of the volatility it had to face.

Sister Reliance Regular Savings Fund-Equity has about 18% exposure to Small Caps and has done exceedingly well even in Bear Market of 2008.

The most notable thing about Small Caps is this, The BSE Small Cap fund has outperformed the Sensex and BSE Mid Cap by a wide margin of more than a huge huge 20% over a 6 year period. That sums up the issue. Yes, Small caps are volatile but they have the potential to become the next multi-baggers if you spot the right one. Who better than the Reliance Star Fund Manager, Mr.Sunil Singhania to do this for you??

Although, Small Caps tend to be very volatile, they can give your portfolio a much needed 'alpha' adding to the overall returns. The volatility associated with small caps tend to get evened out over a period of time. SIP Investment would be the BEST method to maximize your returns from this Fund.

DEFINITELY RECOMMENDED FOR THOSE WHO CAN DIGEST HIGH VOLATILITY.

RECOMMEND INVESTMENT THROUGH SIPS AND/OR INVESTING A SMALL SUM AT REGULAR INTERVALS.

Caveat : Have a minimum of 3 years time frame and Do not have more than 10% exposure to this Fund, even if you are an Aggressive Investor.

Note: Exit load is quite at 2% for redemption before one year., which however, is actually, is beneficial and motivates to stay invested for longer period.

Also visit
http://equityadvise.blogspot.com

BEST FUND FOR RETIREMENT

2010-08-19T10:38:00.000-07:00

Rajshekar asked :

Sir I have Index Funds and want to stay invested with them till retirement. What is your view on Franklin Dynamic FOF and UTI Retirement Benefit Fund? Is my decision right. If not, which is best retirement solution mutual fund?

SRIKANTH MATRUBAI says :

Dear Rajshekar,

At the outset, you have chosen the right asset class (mutual funds) for your retirement planning , and the not the mistake which most people do, by taking up Insurance as their Retirement Kitty.

Though Index Funds should have been the ideal solution for your retirement, the fact that in India, Diversified Equity Funds have more often than not, beaten the Index Funds handsomely makes them the obvious choice for you. Especially, the fact that you would stay invested for at least 15 years makes the case stronger.

But it is always a good idea to have a combination of assets to fund your Retirement rather than betting on just one particular kind of scheme to mitigate risks.

Diversification should be given the highest priority. Your Portfolio should have an ideal mix of Equity, Debt and other asset components. This will of course, be dynamic, and keep changing depending on your age, risk profile and time horizon of your retirement.

When in doubt, follow the golden rule, 100 minus your age should be your equity exposure. That is, if you are 30, then 100-30, i.e, 70 % should be equity exposure and this should gradually reduce as you age.

It is always advisable, to dispose off your equity funds/real estate(if invested for retirement) about 2-3 years before your actual retirement and switch this amount into Debt. This will not only ensure that you lock in the capital gains you would have made, but also protect your capital from volatility.

Just because you can stay invested for 20 years, does not mean "Invest and Forget". Keep reviewing your investments every 6 months or so to see any noticeable change in any fund's mandate/performance/attribute.

Slowly, as the years progress, switch out from Diversified Equity Fund to Large Cap Funds and then further to Balanced Funds to give better stability to your Portfolio.

While Franklin Dynamic FOF is good, no doubt, the minus point about this fund is that the Fund invests only in In-House Funds. You can know about this fund here_{……….http://goodfundsadvisor.blogspot.com/2010/05/ft-dynamic-fof-auto-timing-markets.html}

The Fund automatically times the market by booking profits when the markets are overvalued and entering the markets when they are cheap. While this strategy helps in locking your profits, it prevents you from reaping compound returns. This Fund is more suited to conservative investors and definitely not you since you already two ‘safety first’ funds.

You can consider UTI Retirement Benefit Fund at a later stage. This Fund is a Balanced Fund with a debt bias. The equity portion is passively managed and is being invested in large-cap stocks. Investors can only expect moderate returns from this segment. The Fund fails to ride the bull markets fully and hence you would lose the compound return equities are expected to provide. Read more about the fund here……http://goodfundadvisor.blogspot.com/2008/12/uti-retirement-benefit-pension-urbp.html

For now, you invest in Good Diversified Equity Funds and take the call to switch to safer large caps and balanced funds (HDFC Prudence, DSPBR Balanced Fund, etc) as you are near retirement.

Ultimately it all boils down to ideal asset allocation and clear planning. You need to revisit your planning regularly and make adequate changes, if necessary.

You are advised to read ……..^{http://goodfundsadvisor.blogspot.com/2010/02/retire-super-rich.html}

This article will help you on how you should go about planning your retirement.

Best of luck,

Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

DSP BLACKROCK MICRO CAP FUND

2010-07-07T10:24:00.000-07:00

CHOTA PATAKA BADA DHAMAKA

My recommendation and pick for this month is the DSP BlackRock Micro Cap Fund.

The Fund has been a clear out performer since its launch. In spite of the markets going into a tailspin immediately after the Fund's launch, the Fund has managed a impressive 15% absolute return. The Fund which was a close ended has become a open ended now and has been ranked NO.1 by money control in the Equity Diversified Category and has been rated 5 Star.

Now, as you can make out by its name itself, this Fund invests in Very Small Companies (by market capitalization). Even here DSP zeroes on a lot more 'micro'. And DSP has announced in clear terms that it will put a ceiling of 500 crores on this Fund, so that it can be managed easily. A Smaller size will enable the Fund house to be quick footed and will have little problem in entering/exiting a stock. A Bigger Fund size will require the fund to look beyond micro companies.

Micro caps are under-researched and if picked at the right price can be multi baggers. DSP Blackrock has a good pedigree and has proved its mettle before and has a high focus on investment processes and relatively lower dependence on any STAR manager.

DSP BlackRock Micro Cap Fund. has targeted to invest in Small Companies which are market leaders in that field which will not only reduce risks but bring in assured returns.

Typically Small Cap Fund will be highly volatile and hence works wonders when you invest through SIP.

The Fund is heavyweight on Industrial Capital Goods which account for about 14%. As you can expect, the Fund boasts of stocks which you rarely find in other funds. Some unusual stocks which the Fund holds are...Whirlpool, Jubilant, Zuari Inds, TRF, TTK Prestige, etc.

However, the Fund has restricted its investment to fewer than 40 stocks.

The Fund is managed by Apoorva Shah who has done wonders with DSPBR Top 100 Fund.

Micro cap stocks comprise a large pool of varied, uncorrelated stocks which are relatively unknown and under-researched. Building a portfolio of such companies requires proven expertise in equity fund management and stock-picking. DSP Merrill Lynch Fund Managers Ltd. have however done well in the 3 years since the Fund has been launched.

A major problem with these small caps is their liquidity especially when the markets are going downhill. Hence, it is essential that you have a long term vision when investing in this Fund and keep booking profit whenever you feel the time is right.

Those who wish to take advantage of the private-equity style of investing in which one enters companies with potential and exits after they have grown into winners, can look at this fund.

The Fund will be a good addition to aggressive investors who are willing to ride out volatility associated with small caps.

The Fund should do wonders for a SIP investor.

INVEST

Also visit
http://equityadvise.blogspot.com

All you wanted to know about Public Provident Fund

2010-06-29T11:18:00.000-07:00

A Guest asked :

Can i open a PPF account for me and my minor daughter (i will be the guardian) at the same time? This is just for investment purposes and not for any tax rebates.

REPLY :
Dear Friend, u can open PPF account for you as well as your Daughter. Even if you want to claim Tax benefit you can claim a maximum of Rs.70K between these 2 accounts.

In fact you can open total 3 PPF accounts.
1 for yourself
1 for your wife
1 for your Daughter
Try to Avoid Investment in PPF.

Start SIP of Rs.1000 P.M.or more in any Equity / Balance Fund like DSPBR Balance Fund/Religare Business Leaders Fund/HDFC Prudence Fund.

Best of luck,
Srikanth Matrubai

LET US STUDY IN DETAIL ABOUT PPF:

Conservative investor’s first choice has been the Bank Deposits and the Public Provident Fund (PPF). This is due to their guaranteed returns even though these are lower than Mutual funds.
PPF is the most risk free form of investment in

India

and is quite tax efficient too. And, so, it is not surprising that this is the most popular investment option across the earning class.
Self employed persons who are not covered by Employee Provident Fund should seriously look at PPF as a retirement planning option.

PPF can be opened in any Post Office or with any branch of the State Bank of India and its associates.

The Effective duration of a PPF account is 15 years plus the year of Account opening, so 16 years.

Tax Angle:
1)All investments in PPF (subject a ceiling of Rs.70000) is eligible for Tax Rebate under Sec80c
Contribution to non-earning spouse and/or minor child will be clubbed as your contribution under Sec 64.

2)Though the term of PPF account is 15 years, the contribution made in 16th year (even on the last day) also qualifies for section 80C tax benefit

3)The New Direct Tax Code has recommended that PPF withdrawal on maturity will attract Tax. Not sure, whether this will be recommended. If yes, returns will be drastically affected. But thankfully, the Tax Code has also clarified that only new contributions made on or after the commencement of the code will be subject to tax. So, those withdrawing before 31March 2011 stand to gain.
4) The interest earned in the PPF is exempt from Tax.

Who can invest?
PPF can be opened in your name, your spouse and even children. It can be opened by an individual on behalf of a HUF. Bachelor or married, dependent or otherwise. The only restriction is that total aggregate contribution in all the PPF accounts should not exceed Rs 70,000 in a financial year (i.e. 1st April to 31st March)(The limit of 70k is applicable to individual and minor combined together. Spouse and children who have attained majority are excluded from the 70k limit.

Non Resident Indians may also open a PPF account out of the funds in the applicant's non-resident account in

India

in banks subject to the following conditions -

The account is marked as non-resident account
All credits therein or debits thereto are made subject to the same regulations as are applicable to non-resident accoun

How to operate?

The maximum you can invest in the PPF in a financial year is fixed at Rs.70000/-. You can contribute as many times you want in a year. The minimum is Rs.500 and the amount need not be fixed and can vary. It must be ensured that your instalments does not exceed 12 in a year.

A minimum of Rs.500 must be compulsory be invested/contributed to keep the PPF account active.

ON MATURITY :
If you do NOT require the PPF money immediately after the mandatory 15 years, you have 3 options :
1)Close the PPF account and withdraw the entire amount
2)Continue the PPF account with fresh subscription. This however, compulsory extends the PPF for another 5 years. Note, you can still have access to 60% of the accout balance at the commencement of each year during this 5 years. And most importantly, you will continue to get 80c benefits.
3) Continue the PPF account without making any further contribution and continue to earn the same of interest. This can be carried for a indefinitely.
If you choose this option, you can withdraw the entire PPF amount either in a lump sum or in installments. However, you’re not allowed more than one withdrawal in a financial year and the balance will continue to earn interest.
4)At the time of withdrawal, if the PPF account holder has become a major, then the proceeds will be deemed as his income and taxed accordingly.

Points to Note :
1) Never forget to appoint a nominee. This applies to all your financial investments, let it be PPF, Mutual Funds, etc.

2).Invest regularly (if possible, monthly) and do not wait for the year end to invest in the PPF.

3) Invest before 5th of every month. Interest is calculated on the lowest balance between the close of the 5th day and the end of the month.

4) Let the money grow. Even though PPF allows Partial Withdrawal from the 7th year and also facility of loan from the 3rd-6th year, try to avoid this unless it is inevitable.

5) A monthly contribution of 5000 in the PPF account for the period of 35 years, will get you 1, 07, 87, 000. Yes, you will become a crorepati.

For calculation of interest and maturity value of PPF click here """""http://www.themoneyquest.com/2009/09/ppf-calculator-interest-maturity-value.html"""

6) PPF ACCOUNT CANNOT BE ATTACHED BY COURTS EVEN IN CASE OF DEFAULT/BANKRUPTCY. Your PPF is always for YOU.

7) Interest on the PPF is currently @ 8%. This is compounded annually. Interest is calculated on the Lowest Balance between the 5th day and the last day of the Calendar month and is credited on 31st March every day.

LOOK AT OTHER OPTIONS TOO:

But, whichever investor you are, if the real returns post inflation is a pittance than it makes little sense to invest in PPFs or FDs.Liquidity is severally affected in PPFs as your money is blocked virtually for 15 years.If you are very conservative investor and do not want even a iota of risk and prepared to forgo returns for sake of safety, you can also look at NSCs as NSCs have a lower lock in period(6 years) and interest is compounded half yearly increasing the effective yield. However, the BIG factor to note is that NSC returns are taxable. If you are in non-tax bracket and very conservative investor, you can go for NSC rather than PPF.
Also, the interest rate on the PPF is NOT FIXED.

Investing through the time tested way of SIP and being patient ensures you excellent real returns.

12% is a very realistic return that one can expect from Mutual Funds. So, if you instead of PPF invest in Safe/Conservative/Defensive Mutual Funds, then @12%, the difference of your PPF investment of Rs.6000pm,will give a huge positive difference of Rs.8,16,917!!!!!!.

PPF = 2,038,671

Mutual Funds = 2,855,588

Moreover, I have assumed Mutual Fund returns at a very conservative 12%.

The Choice is yours.

Regards,
srikanth matrubai
--

Also visit
http://equityadvise.blogspot.com

MIRAE ASSET EMERGING BLUECHIP FUND

2010-06-19T05:49:00.000-07:00

OLD WINE IN OLD BOTTLE:

Let us today analyze the investment rationale behind the Mirae Asset Emerging Bluechip Fund from the Mirae Asset Mutual Fund.
The fund is primarily a mid-cap fund that invests in Indian equities and equity-related securities of companies that are not a part of the top 100 stocks by market capitalisation, but have a market cap of at least Rs 100 crore at the time of investment.
The NFO is open for subscription and will close on 22 June.
The Fund House has positioned Mirae Asset Emerging Bluechip Fund as primarily a Mid-cap fund which gives investors the opportunity to participate in the growth story of today's relatively medium sized but emerging companies which have the potential to be well-established tomorrow. The Fund will be managed by Gopal Agarwal and Neelesh Surana.
As a Fund House, Mirae has done wonders with its only Domestic Fund offering, Mirae Asset India Opportunities fund which has beaten its Benchmark by a huge margin of 12.6% giving a return of 21.46% compared to 8.86% of BSE 200 since its inception.
The fund manager, Gopal Agarwal, intends to stay fully invested at all times. Gopal explains: “Over the past few years, we have seen that while mid-caps may be more volatile they tend to outperform the broader indices. In this context, a return of about 4-5% higher than broader indices and at around 20% is possible". Very aggressive indication that.
Though the Fund may look similar to Mirae Asset India Opportunities Fund, this Fund is different in the sense, this Fund is more biased towards mid-caps where India Opportunities Fund has a equal weight towards Mid-caps, Small Caps and Large caps.

COMMENTS AND RECOMMENDATION:

The Fund does not try to hide its Mid-cap bias and is very clear about where it will invest its money. There are innumerable mid-cap funds available in the market, so why should you consider Mirae Asset Emerging Bluechip Fund.
You need not.
However, two things are in the favour of those who are inclined towards investing in this Fund.
One, Mirae Asset's only other Domestic fund offering, Mirae Asset India Opportunities Fund has been very very impressive in its performance both during the Bear and Bull periods and thus offers comfort.
Two, Fund Manager Gopal Agarwal. He has been outstanding without being publicity crazy. He does his job quietly and does very well. He had a terrific run in SBI Contra and has been very consistent with Mirae Asset India Opportunities Fund. He has proved his stock picking skills, which is the pillar on which mid-cap funds stand on.
Investors who are willing to ride the volatility associated with mid-caps can consider taking a exposure to the fund. Preferably go for SIP investment. And, of course, those investing would do well to have a time horizon of at least 3 years.
Investors also would do well to have a look at some of the mid-cap funds which have been giving consistently impressive returns., like Reliance Regular Savings Fund - Equity, Birla Sunlife Mid cap Fund, Reliance Growth Fund, Sahara Mid-cap Fund, Sundaram Select Mid cap fund, Sundaram Smile fund.
By the way, I would also like to add here that I had a chat with Mr.Dhirendra Kumar , CEO of Valueresearchonline during the Fund’s launch. I asked him “You are openly against NFOs, so how come you are here speaking under the Mirae Asset Emerging Bluechip Fund NFO banner”?.
He laughed and explained, “I am not here to promote the Fund. But, yes, looking the Fund House’s flagship Mirae Asset India Opportunities Fund’s impressive performance, aggressive investors can look at this fund, if it fits into their risk profile”.

My view is the same. If you are not risk averse and would not mind short term volatility, the Fund can be a good addition to your portfolio if your overall asset allocation allows. Do not forget, SIP should be the route to invest in this Fund.

Regards,
Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

BIRLA SUN LIFE INDIA REFORMS FUND - AN ANALYSIS

2010-06-09T10:54:00.000-07:00

50% infra play, 50% PSU play

Birla Sun life Mutual Fund has launched India Reforms Fund which would primarily invest in companies expected to benefit from Reforms initiated by Govt. The scheme will invest across sectors without any market cap or sectoral bias; i.e., a mix of midcap and large-cap opportunities.

Since Reforms are actively interlinked with infrastructure growth, the Fund would act as a proxy to infrastructure play too. Only that this Fund would have more sectors than infrastructure fund would have. Ex: Infrastructure Funds do not buy Fertilizer stocks, this Birla sun life India Reforms Fund would.

Thus, this Fund is a 50% Infra proxy.

Since Reforms make maximum impact on PSUs and mostly initiated by PSU divestments, this Birla Sun life India Reforms Fund would also act as a proxy to PSU play too.

Thus, this Fund is a 50% PSU proxy.

COMMENTS AND RECOMMENDATION:

The reform story is a slow process which will take quite a long time to show results. Thus, this Fund is for investors who are willing to wait for the fruits.

The Fund is managed by Ankit Sancheti who has a good tract record in managing Birla Sunlife Divident Yield Plus Fund and Birla Sunlife Basic Industries Fund.

Though on the face of it, the Fund looks attractive, it should be noted it is always better to invest in a Diversified Fund which would reduce volatility and risk associated with a Thematic Fund like the Birla Sun life India Reforms Fund.

Moreover, it is no secret that a Fund Manager of a Diversified Fund would look at Reforms stocks too, if they look attractive, so a Diversified would always be a better option than a pure thematic fund like Birla sunlife India Reforms Fund because a downturn or negative news on reforms would be harsh on stocks associated with reforms and thus funds like these would fall the hardest.

Those who are brave enough to ride out the volatility associated with a Theme Fund and bullish on “Reforms” as a story, can look at the fund, preferably through SIPs.

Best of luck,

Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

SBI PSU FUND - ANALYSIS

2010-06-07T03:32:00.000-07:00

SBI Mutual Fund has launched a new scheme, SBI PSU Fund. It is an equity diversified fund that mainly invests in stocks of domestic public sector undertakings (PSUs).

The PSU investment theme looks quite promising as PSUs have strong fundamentals and are generally leading players in their industries. These companies also showed greater resilience than their private sector counterparts during the economic downturn.

Read http://goodfundsadvisor.blogspot.com/2010/06/why-psu-funds.html

While most analysts would blindly recommend SBIPSU Fund over Religare PSU Fund., I would take a contra view and say AVOID SBI PSU FUND AND INVEST IN RELIGARE PSU EQUITY FUND.

WHY RELIGARE SCORES OVER SBI

Here are the key reasons for the same :

1. Equities Outside PSUs :

While SBI has the mandate to invest upto 35% outside the PSU basket, Religare does not. While this may ensure diversification, this also means that the PSU THEME IS DILUTED IN SBI PSU FUND.

2. High Exit Load :

While Religare has an Exit Load of 1% only upto 1 year, as with most funds, shockingly, SBI has exit load for 3 years.

3. RELIGARE'S BETTER PERFORMANCE :

Religare has beaten SBI in almost all funds in terms of performance over 1,2,3 year period. It just shows Religare has performance to back up its claim of being a better fund to invest in.

SPECIAL TIP

Religare has already invested its Assets. More buying in the PSU Stocks by the new Funds like Sundaram PSU Fund and SBI PSU Fund will benefit Religare PSU Equity Fund which is already fully invested. The Scope for Value Unlocking of Public Sector Undertakings is huge and PSU funds are poised to take advantage of these.

If you are convinced about the PSU story, then you know which fund is a better proxy to play on the theme.

Best of luck,

Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

WHY PSU FUNDS????

2010-06-05T10:37:00.000-07:00

AMCs seem to have taken a liking for Public Sector Undertaking as a sector and on a NFO launching spree.
PSUs seem to be the flavour of the season. And with divestment inevitable, mutual funds are falling head over heels to launch NFOs to take advantage of the same.

PSUs are virtually in every sector except some select like Pharma, IT, FMCG thus one can be safe PSU funds are NOT Sector Funds in true sense. They are diversified.
And with PSUs being virtually Leaders in all the sectors they are present, you are virtually holding Gaint Cap, Large Cap and Larger Mid caps when you are investing in PSU funds.
PSUs provide both sector diversification as well as market cap diversification.
The Stable UPA Govt in centre is sure to go ahead with its huge disinvestment programme and PSU funds should be in a good position to capture any upside.
The resilience shown by these PSUs compared to their Private Sector counterparts during the recent economic recession also lends credibility to the addition of PSU fund to your portfolio.
ALSO READ :
http://goodfundsadvisor.blogspot.com/2009/12/sundaram-psu-opportunities-fund.html
http://goodfundsadvisor.blogspot.com/2009/10/ride-on-psu-gaints-one-can-consider.html
“PSU stocks are generally available at a discount as compared with other companies. So, there is clearly an opportunity for mutual fund investments,” said Dhirendra Kumar, CEO, Value Research India Pvt. Ltd, a New-Delhi based mutual fund tracking firm.
PSUs are best proxy play for the Indian Economic Growth story. PSU funds thus make a good addition to an aggressive long term investor's portfolio.
But, do remember, nothing prevents a Diversified Equity Fund to invest in PSUs and thus PSU funds are recommended only to those who are bitten by PSU bug and prefer Companies which are Large, low debt and are virtual monopolies in their field.
The Significant risk attached to these PSU funds are that PSUs are run by Govt policies and any negative Govt decision will affect them too.

Also visit http://equityadvise.blogspot.com

MUTUAL FUNDS FOR A PASSIVE INVESTOR

2010-06-02T03:18:00.000-07:00

From: Thamaraikannan

Subject: Pls suggest me: Mutual fund for long term investments

Sir,

I got your mail id from your blog http://goodfundadvisor.blogspot.com I have a query related to my MF investments. I am seeking some advice for creating my retirement corpus. I am 29 years old. I am planning to invest 5000/- per month for creating my retirement corpus.

Since I am a passive investor and the investment period is long, Could you please tell me which type of mutual fund will suite for me. Also please suggest me some funds where I can invest it through SIP.

Last year I started investing in MF through SIP for 1 year.

Following are the MFs I started with .

1. Birla Sun Life Equity Fund - Growth

2. HDFC Growth Fund - Growth

3. ICICI Prudential Infrastructure Fund - Growth

4. Kotak Opportunities - Growth

After 1 year completion, I have continued only the following two funds for next two years.

HDFC Growth Fund - Growth

ICICI Prudential Infrastructure Fund - Growth

I am planning to continue with these two funds for long term (5 - 8 years).

Could you please suggest me these two funds are good to have for long term investments?

Could you please tell, "Birla Sun Life Equity Fund - Growth" and "Kotak Opportunities - Growth" are good to invest further?

Thanks in advance,

Thamaraikannan

SRIKANTH MATRUBAI advised:

Dear Thamaraikannan,

Your Portfolio lacks a Good Large Cap Fund and is slightly biased towards Mid-caps.

While your decision to continue your sips is a good one, your choice of funds leaves a lot to be desired.

You should have sticked with Birla Sunlife Equity Fund rather than HDFC Growth Fund. Even though ICICI Infrastructure Fund is a Sector Fund, it has had a good past and continues to promise more with its good Stock Picking and sticking with them through market cycles.

However, you do need to review your investments every year at least. For a period of 5-8 years, it is always advisable to invest in a Diversified Fund rather than a Sector Fund, however promising it may be.

So, stop both the sips for now and instead invest in the following funds:

Birla Sunlife Equity fund

HDFC Top 200 fund

Birla Sunlife Equity Fund :

The Fund follows a Flexi-cap approach and has outperformed its Benchmark over 1, 3, 5 periods and has shown an amazing ability to protect itself even in Sharp Falls, like the one witnessed in 2008. Because of its extreme NAV volatility, the Fund works very well through SIP investment. Hold and continue to add more through SIPs

Kotak Opportunities Fund:

Very volatile and very inconsistent and thus is not for the weak hearted. Only investors with aggressive mind set should consider investing in this Fund. I suggest you to avoid further investment in this fund and Sell on market rises.

Actually, the two funds suggested by me viz.,

HDFC Top 200 fund

Birla Sunlife Equity Fund

are very good funds and you can consider these two funds for your Retirement. Since you are a passive investor, you can also go for Trigger Facility wherein whenever your investment gets you a predefined target of say 50% or 100%, the Profit is automatically is booked and switched into a Debt Fund. This way not only you will be booking regular profit but also protecting your profits by switching them into a Debt Fund. Birla Sun life Mutual Fund has this facility for its Birla Sunlife Frontline Equity Fund right now and very soon it is sure to offered to all its schemes and by all the AMCs for all their funds.

Regarding your retirement corpus, it depends on your lifestyle and other things. You can go to any financial website, and using their "retirement planner" calculator, you can decide your corpus.

Also read this http://goodfundsadvisor.blogspot.com/2009/09/help-me-accumulate-long-term-gains.html

For SIP investment, you can choose funds which have a Good Track record and have a Good Long Term Potential, my choice of funds would be

Birla Sunlife Equity Fund

DSPBR Top 100 Fund

Fidelity Equity Fund

Franklin Templeton PE Ratio Fund of funds

HDFC Prudence Fund

HDFC Top 200 Fund

ICICI Dynamic Fund

Mirae Asset India Opportunities fund

Religare Business Leaders Fund

Reliance Regular Savings Fund - Equity

SBI Magnum Contra Fund

Tata Equity PE Fund

Do review your portfolio and asset allocation at least once every year.

Best of luck,

Srikanth Matrubai

Also visit http://equityadvise.blogspot.com

SUBSTITE FOR TERM PLAN???

2010-05-27T09:38:00.000-07:00

INTELLIGENT(?) INSURANCE INVESTOR

One reader of my blog Raj sent me this letter
Hi Srikanth,

Can you guide me on this ULIP doubt. I am 35yrs of age and I have a ULIP from Metlife(Met Smart Premier) which covers me for 100 yrs with a sum assured of 20 Lacs. My annual premium is one Lac. Minumum premium payment period is 3 yrs as with most ULIP's.
Since the objective is to keep investment and insurance separate, I plan to make premium payments for the first 3 - 4 yrs and leave it to grow till the 5th year. At a very conservative rate I expect a return of 5% p.a at the end of 5 yrs. If I pull out my money leaving back one annualized premium (1 lac), I am still covered till 100 yrs of age without paying any more premium. I expect the amount that I have left behind to suffice the policy expenses till the age of 100. Net to net, what I spend for an insurance cover of 20 lacs till 100 yrs would be far far less than what it would be for a term policy. I guess Metlife has discontinued this policy and no more new policies are opened under this scheme. I am not sure if there are other ULIPS that give 20 times cover. If there are I would be interested in opening another one. How is my idea???

Raj

SRIKANTH MATRUBAI replies :

Dear Raj,
You are playing with fire. Already you are on the wrong side of the age. As the policy in question is Type - 1 ULIP, & as per your own admission, you are planning to withdraw money after completing 5Y up to the extent that fund value equal to 1Y premium remains there.
The basic problem is with your thinking................................................
The moment fund value decreases below the 1L figure, the policy will be terminated with immediate effect.
Now let us see how this will happen - As there is no more extra money so the sum at risk is always around 19L Rs. for the ins. co. (20L basic sum assured - 1L fund value) now as the person ages, his mortality charges 'll keep on increasing & in case the market is not favorable, the fund value 'll come down below the 1L figure very easily. Rest you can guess!!!!

From the query, it seems you want to run this policy as a substitute of Term plan. Well well well. Even in this case, there are too many problems. I don't see any merit to run a cover for age 100. While you are comparing the non productive term cover premium (as per your own admission) to your own calculation that keeping 1L fund value in this ULIP is a better option, you are missing the point, that you are paying upfront 1L Rs.

In my view if you are opting Aegon Religare I-term plan for maxium possible term of 25Y, the annual premium will be around 5K Rs. for 20L cover from now onwards & invest remaining 95K rupees in a good funds like HDFC top 200/DSP Eq., Reliance Growth Fund, etc (you can go through the list in other articles in this site) the final outcome will be far far better than what you are planning to opt for at present.

Regarding the non issue of new policies of this class, the same are banned due to IRDA's guidelines of capping of charges.

Regards,
Srikanth Matrubai

P.S.
Dear Raj,
You need to read your Policy Document, in the case of premium holiday.........
Premium Holiday
The Policyholder is however entitled to submit a written notice to the Company within the period allowed for the reinstatement of the Policy opting to continue the Policy provided 5 full years premiums have been paid. The Company will continue deduction of applicable Policy Charges and keep the Policy in force until the Fund Value does not fall below the amount equivalent to the Sum of 120% of Annualized Regular Premium of the Basic Plan and applicable Surrender Charge. Switches and Partial Withdrawals are allowed during this period, subject to satisfying the applicable criteria for the same.
Where the Fund Value falls to the level of an amount equal to the sum of the 120% of Annualized First Year Regular Premium of the Basic Plan and applicable Surrender Charge or the Fund Value is inadequate for the deduction of the applicable Policy Charges whichever is earlier, the Policy shall stand Terminated and the Surrender Value, if any, shall be paid.

Either you hasn't read your policy document or you are an another victim of MIS SELLING.

thanks to dear Ashalanshu for invaluable inputs.

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ONE STEP CLOSER TO KILL THE MUTUAL FUND INDUSTRY

2010-05-25T10:11:00.000-07:00

Dear Friends,

I am in receipt of the latest circular with regard to the Fee Structure for ARN registration and renewal. It is a shocker to the entire Mutual Fund distributor community.

Currently, individuals and corporate employees are required to pay Rs250 as renewal fees. AMFI has drastically increased it to Rs2,500, which is a hike of 900%. However, an individual seeking a new ARN number will now have to shell out Rs5,000 as registration fees.

After the recent changes brought out by SEBI the earning of the MF distributor has come down by more than 80% but the latest fee structure announced by AMFI is seeing an astronomical jump of 900%. I dont understand the logic behind this move. This apart the distributor has to pay for the exam fee too.

Till date I was of the opinion that AMFI is an association which represents the cause of the mutual fund Industry. I was also of the opinion that AMFI is a non-profitable institution but the latest circular on fee chargeable for ARN registration and renewal from Amfi disproves this status.

When the industry is reeling under lot of uncerternity in terms of present and future business the MF trade body instead of finding ways and means to save the industry and its partners is trying to make profit from fee payable by its partners. Is this justifiable?

Already 32 % of IFA s are already out of the business, we are sure that amfi doesnt want more IFA's to be out of business.

It appears that the AMFI and the AMCs are working in tandem to wipe of intermediaries from the business of selling investments.

So long, the AMFI and AMCs needed us and now that they believe that they have fairly established their business and created a vast data base of investors, they are confident of selling investments comfortably, sending mails and news letters.

The ARN issued to the examinees (in this case the MF advisors) should be for life time of the advisor, as in any case, the advisor will keep himself posted of the developments in investment sector, else, he loses his clientle.

Is AMFI working so naive that they dont appreciate the contribution by the advisors?

With the mutual fund (MF) industry bogged down by a number of problems, the decision of the AMFI to hike ARN renewal fee is likely to prevent new independent financial advisors (IFAs) from entering the market. Needless to say that for the Bank and Institutional Brokers paying Rs. 5000/- will be peanuts. Besides it serves the purpose of killing competition to an extent.

Everyone were of the opinion the new team under Mr. Sinor will do something for the MF Industry but now they have done something for safe guarding their bottom line. Nobody is bothered about the nascent industry called Mutual Fund. In a scenario where there is no proper incentive for the distributor to market Mutual Fund products this move of Amfi will further kill the industry.

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SUPER SIP FUNDS

2010-05-22T23:08:00.000-07:00

Here is a short list of some selected funds which have given excellent returns

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DSP BLACKROCK FOCUS 25 FUND - DOUBLE EDGED SWORD???

2010-05-19T23:22:00.000-07:00

FOCUSSING ON 'ALPHA'

FOCUSSING ON “ALPHA”

DSP BLACKROCK has come with a New Fund Offer (other than the FOFs) after nearly 4 years. And it has come out with a Exciting Fund called DSP BlackRock Focus 25 Fund.

Unlike DSPBR Top 100 Fund which is restricted top 100 companies by Market Cap., this Fund has the entire gamut of stocks to choose from and thus could provide an Alpha.

The Fund aims to invest the core of the portfolio in Large Caps and balance in multi caps in the Top 200 market cap companies. The Fund Manager has indicated that he intends to have largest exposure to Banking and Financial services as the outlook appears bright for the sector.

The new DSP Blackrock Focus 25 Fund aims to distill the best of the fund house's stock picks in a concentrated portfolio of high conviction bets.

And yes, being a concentrated portfolio, the Fund will have a potentially higher risk/return profile than a diversified fund.

Surprisingly, the Fund has chosen SENSEX as its Benchmark, whereas BSE200 would have been more appropriate.

The fund will be managed by Apoorva Shah who also manages two 5 Star Rated Fund, namely DSP BlackRock Equity Fund and DSPBR Top 100 Fund which has been a very consistent performer. A clear reflection of the stock picking ability of the Fund Manager.

The fund is positioned in between a pure thematic fund and a diversified fund.

It is a known fact that concentrated portfolio mutual fund schemes often produce outstanding results. These funds tend to raise and fall more than the market and other diversified equity funds.

RECOMMENDATION :

While on the face of it, the Fund looks to be a Double Edged Sword, the pedigree of the fund house gives comfort.

First Time Investors., this Fund is NOT for you. You have better options available.

Investors with reasonable risk appetite could look at taking a bet in this Fund. The fund has potential for high returns, albeit with high volatality due to its limited diversification and should be avoided by conservative investors. Investing through SIP is highly recommended to get advantage of the high volatility this Fund is expected to have. Avoid Lumpsum investment., unless you are following it up with SIP.

Ideal for long term rather than short term.

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FT DYNAMIC FOF - AUTO TIMING THE MARKETS

2010-05-06T10:21:00.000-07:00

Want a Fund which automatically books profits when the markets are overvalued and enter the markets when they are cheap???

Then, the Franklin Templeton Dynamic PE Ratio Fund of Funds is the fund for you.

Franklin Templeton Dynamic PE Ratio Fund of Funds is one of those rare funds which has an universal appeal and should be in portfolio of every investor.

This is a Hybrid fund which moves into equity and debt in a automated manner.
The Fund protects downside and behaves conservatively because of its mandate.
In another words, the fund automatically rebalances its asset allocation.

Its return since launch (October 2003) is 22.39% and 5 year returns is 22.19% comfortably beating its Category of 14.65%.

The most comforting factor is that the Fund fell by only 25.7% in 2008 when most funds were falling in the range of 70%-80%.

The returns have been on par with Equity Funds without giving you the jitters and volatility associated with Equity Funds.

The Fund, being a Fund of Funds invests in two of its in-house funds, Franklin India Blue chip fund, an Equity Diversified Fund and in Templeton India Income Fund, a Debt Fund.

ASSET ALLOCATION:
The Fund Manager, depending on the PE of the Nifty, increases/decreases his investments in these two funds.

The Fund increases its equity exposure as long as the PE of the Nifty is below 12% and gradually decreases as and when the PE of the Nifty rises and in a rare case, wherein the Nifty PE rises to above 28, the Fund acts like a Debt Fund with equity exposure being less than 10%!!!!!

The reverse happens, when the Nifty PE keeps falling, the Fund increases its Equity weight age gradually.

When the Nifty had plunged to 8000 levels (PE of 12) in March 2009, the Fund had an equity exposure of 91%!!!!

The Fund has beaten even the Balanced Funds comfortably across market cycles.

The only negative about the Fund is, it invests only in its in house funds. Also, if the markets remain bullish for a longer time, the Fund will fail to capture the gains, due to its PE strategy.

The Fund, which dynamically allocates between equity and debt, is apt choice for investors who want to have equity exposure but are shy of risks and volatility associated with it.

Those of you investors, who have no time for asset allocation, should seriously consider having this fund in your portfolio.

Regards,

Srikanth Matrubai
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RELIGARE MIP PLUS - GOLD IS THE DIFFERENCE!!

2010-04-20T10:30:00.000-07:00

Religare Mutual Fund which has been coming up with Innovative Funds has come out with another curious Fund, Religare Monthly Income Plan (MIP) Plus.

The fund is 'plus' in the sense that it will have an exposure to Gold through Gold ETF in addition to Fixed Income instruments and Equities.

GOLD impact :

Gold has negative correlation with Equities and is considered a good hedge against Inflation. In normal MIPs, the Fund Manager did not have the flexibility to tilt his allocation towards Gold, but the Religare MIP Plus has this option, which can be used by the Fund Manager to improve diversification and enhance performance.

Gold's inverse correlation will stabilize the risk/return profile of the Fund.

The Fund Manager indicated that he would ideally look at

70% Debt

15-20% Equity

10-15% Gold Etf

DEBT : The Fund would like to be more inclined towards 'short term' papers around 1 year maturity. The Fund would prefer to invest in Corporate Bonds rather than Govt Papers.

EQUITIES: The Equity portion would be tilted towards Large Cap, sources at the Religare MF said.

GOLD : Gold investment would be in the form of investment into the units of Religare Gold ETF. The Fund has an option to look at other ETFs as well.

COMMENT & RECOMMENDATION:

Pure Gold ETF is not an easy investment option due to the volatile currency situation which can test your skill.

Pure Equity will always carry the 'volatility risk' and test your patience as well.

Here's where a Fund Manager's skill will come into play. He will tilt his investment towards the Best Asset Class depending on the situation and with Gold too as an option, Religare MIP Plus is a "good investment choice" for the equity-averse investor, as this Fund has the potential to add value in varying market conditions.

The Fund is now open for subscription and will close on May 11, 2010.

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ULIPS CON JOB DAYS ARE NUMBERED

2010-04-18T02:21:00.000-07:00

SEBI has at last woken up to stop the DAY LOOT carried by Insurance Companies through ULIPs. They were literally looting the hard earned money of the gullible public by the open misselling.

Since the day I have started this blog, I have been telling, asking , requesting, begging people to avoid ULIPs and those who have taken my advise will be surely glad that they have followed my advise.

ULIP's real avatar :
ULIP is saving-cum-investment product that offers the option of life cover along with market liked returns.
Very few people know that ULIP is a long term product and gives decent return only if the holding period is a minimum of 10 years. However the sales persons were selling (mis-selling) ULIP as three year products (after October 2009 as 5 year products).
In a ULIP, the insurance component is very very low and does NOT serve the purpose of Family Protection. Due to the many hidden charges like Policy Admin Charges, Allocation Charges, Fund Management Charges, and all types of atrocious charges, ULIPs are designed to ensure maximum benefit for the Insurance Companies and Insurance Agents and NOT THE INVESTOR!!!! The commission is as high as 40%. This commission is paid by YOU and taken from YOUR pocket.

ULIPs are sold mostly as a 'only 3 year' premium paying product. Investors are not educated that the first three years are the costliest in terms of various charges that the investor pays. To cover this loss, the investor must remain invested for the full term of the ULIP. Calculations show that it is only after 10 years or so that this loss of income (by the way of high front end charges) is covered. The figure of 10 years also alignes well with the concept that any equity investment must be held for atleast a full equity cycle(typically 10 years).

You may also like read more insurance topics. Click here :

http://goodfundsadvisor.blogspot.com/search/label/Insurance

IRDA'S idiotic behaviour :
IRDA (Insurance Regulator Development Authority), instead of clearing the air has published idiotic advertisement inducing the Public to buy ULIPs and continue being conned.
IRDA's behaviour is so low, that people have started calling it as Indecent Regulator Disobeying Authority).
IRDA is functioning NOT as a Regulator with the interest of Investors in mind, but as a Front for the Insurance Companies.

SEBI needs to do more :
Firstly, SEBI needs to clarify what it was doing all these years. ULIPs are being mis-sold for more than a decade.
Why has the LIC ULIP not stopped by SEBI?. A clear case of double standards. Just like Mutual Funds, SEBI should remove the entire 'commission based structure' in the Insurance too and also allow investors to 'Directly' take the Insurance products themselves.

FINALLY,
Do you know that for a Cover of Rs.20 lakhs (for a 30 year old), the ULIP cost would come to Rs.2 Lakhs per year whereas a Pure Term Policy would cost him only Rs.5000/-!!!!!!!!!! You are saving Rs.1,95,000. You can easily invest this amount in Mutual Funds and earn much much higher returns.
This way he is adequately insured and most importantly, getting higher returns.

Take only Term Insurance. They are the cheapest and best way to insurance yourself.
Balance invest in Mutual Funds.

Let me be very clear here. I sell Insurance also. But I have never ever sold any ULIP and I also request you to avoid ULIPs at all costs.

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ADVISE ME ON ONE MORE SIP

2010-04-10T05:53:00.000-07:00

My First Follower Mr.Akhil sharma from Delhi wrote :
Hello Sir
I hope this mail finds you and your loved ones in the pink of health.
I have as promised earlier two ongoing SIPs in Fidelity Equity Fund and Sundaram Select Focus Fund.(Rs.500 each)

I am planning to start one more SIP for the amount of Rs.1000 per month.
I'm not so sure about the funds though.

I have in mind HDFC TOP 200 Fund and DSP Top 100 Fund.

Please advise where should i put my money.Suggest any other fund apart from these two if necessary.

P.S : I'm planning to invest for a long term.

SRIKANTH MATRUBAI replied :

Dear Akhil sharma,
Thank you for your kind words. I heartily reciprocate your feelings and hope the same there.
Do continue your Ongoing Sips in Fidelity Equity Fund and Sundaram Select Focus Fund.
I am very happy about you starting another sip of 1000pm.
Both the Funds you have selected i.e., HDFC Top 200 Fund and DSPBR Top 100 Fund are very good. You can choose any of them. Both these funds are a 'must have' in any portfolio.
Whereas your two existing Funds are both Diversified Funds with No Sector or Cap bais, it is prudent to have a Large Cap Fund and you are on the Right Track.
My Personal Choice among the two would be HDFC Top 200 Fund. The Fund is not very sexy in terms of its Presentation, but it does its job quitely and has been very very consistent since its inception and boasts of a Great Track Record.

Do evaluate your portfolio every 6 months or so and take appropriate action.

Read this http://goodfundsadvisor.blogspot.com/2010/03/use-8th-wonder-of-world.html

And also this post http://goodfundsadvisor.blogspot.com/2010/03/best-funds-for-new-investor.html

These two articles will help you in your decision making.

Regards,
Srikanth Matrubai,
Bangalore

P.S.:
If you are going for HDFC Top 200 fund, go for a Rs.500 sip on two Different Dates to take advantage of NAV Volatility and in the process earn more.

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INSURANCE FOR A 18 YEAR OLD

2010-03-29T09:57:00.000-07:00

Mr.Jagannath Surasgar asked : "i am looking for a pure term ins for my 18 year son. i dont see many companies offering term insurance for this age. most of them have min age at 21. does anyone know who would be doing cheapest term insurance at lowest age?. Shall I go for Free Insurance offered by some Mutual Funds?"

Srikanth Matrubai advises :

Thankfully, you are not thinking of taking a ULIP but a Term Plan. http://goodfundsadvisor.blogspot.com/2009/03/what-is-term-insurance.html

That's very knowledgable of you.

Yes, it is true that there are not many Insurance companies who provide Insurnace cover for a 18 year old. However, Aegon religare is offering the term plan for age 18. As per your requirement you can check the exact premiem from the company website.

However, since your son is not earning yet, I do not think it makes sense to go for Term Plan. All the Talks ( Insurance is cheaper at Early Age etc.) are misleading to TRAP the Customers.

You may Start Investing for him in any Mutual Fund ( Preferably) wth Free Life Insurance. Many AMCs offer Free Life Insurnace with NIL charges. These are Reliance, Kotak, Birla, DWS, LIC (MF) and UTI.

Among these DWS Tax Saving Fund offers a simple and uncomplicated Term Insurance cover of 5 times your Investment as Life Insurance, subject to a maximum of 5 lakhs.

Birla Century Sip gives you a cover which will be equivalent to your market value of the units you have or 100 times your monthly sip whichever is less.

Caveat : These Mutual Funds have the right to modify the terms of Insurance, especially after the most unethical modification done by DWS Mutual Fund, I have started to have second thoughts on recommending these combo products.

Also, liquidity becomes an issue when you go for these Free Insurance offered by Mutual Funds.

It is always preferable to keep your Insurance and Investments separate.

Don't buy any plan either MF or ULIP with insurance/risk cover attached even if they claim is "free"

http://www.insurancecomparison.net.in/insurancecomparison.aspx

Do consult your Financial Advisor before commiting your investment.

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DWS MUTUAL FUND'S ETHICAL KILL

2010-03-26T10:51:00.000-07:00

DWS Mutual Fund has murdered the business ethics right under the nose of SEBI and AMFI and no one seems to have taken note of it.

BACKGROUND : -
DWS Mutual Fund used to offer free life insurance to individual investors investing in DWS Tax Saving Scheme. In the unfortunate event of the demise of an investor an amount equivalent to five times the invested amount will be paid to the nominee. (i.e. Amount Invested X 5, subject to a maximum of Rs.5 lakhs per investor)

Example: An investor does a one time investment of Rs.50,000 in DWS Tax Saving Fund. If he dies after a period of 3 yrs, then his Sum Assured = Amount Invested X 5 = 50000 X 5 = Rs.2,50,000

This was the offer when you were investing in the DWS Tax Saving Fund. The DWS people changed the Insurance Limit to 2 times of your investment from the original 5 from January 2010.
And, now, in a swift move have KILLED the ethics of Mutual fund business by reducing the Insurnace Coverage from the original 60 years to just 50 years. And the most shocking part of the decision is that this will be applicable to even those investors who have ALREADY invested even before January 2010, citing the most crazy excuse of High Insurance Costs. Probably they are the feeling the pinch of the Zero Entry Load the most, mainly due to the Sky High Salaries and Bonuses they pay to their Mutual Fund people.

I myself have seen many new investors coming to Mutual Funds (instead of Insurance) purely on the basis of this FREE Insurance Coverage upto 60 years.

Yes, DWS People have the right to modify the Insurance part, but just spare a thought to the poor investor who would have NOT taken any Insurance on the basis of his investment in DWS Tax Saving Fund.

The least the DWS could have done was to CONTINUE the Insurance Coverage upto 60 years for EXISTING investors. But, they have gone right ahead and done the most unethical.

I hope, someone from the AMFI wakes up to this and directs DWS people to continue to extend Insurance Cover to at least existing investors upto 60 years.

The move by DWS only goes to further emphasise the point of NOT to combine investment with insurance which makes it a poor investment decision. It makes better sense to opt for pure term plans, which are low-cost insurance and invest the remaining amount in a good mutual fund scheme.
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USE THE 8TH WONDER OF THE WORLD

2010-03-18T10:23:00.000-07:00

A popular saying goes ‘one should save for the winter while some summer is still left.’ It is quite common for young people to postpone their savings blissfully ignoring the fact of the Fascinating effect of Compounding has on your investment. The World's greatest scientest Albert Einstein said "compound interest is the 8th Wonder of the World". There is no magic formula for this. Compounding is in simple terms, re-investment of income on the prinicipal amount. And again the income on the re-investment of income is also re-invested!!! And thus, the impact obviously will be massive and the more time your money has, the faster it multiplies.

But, the general public tend to ignore this and keep on postponing their investment. Let us take a practical example of my client.

Mr.Bharani Kanth asked :
Sir,

I happy to came across to very useful and informative site.

I am able to settle in my life at the age 30. I am not able make significant investments until now. I need your suggestions in selecting good schemes in the following methods of investment.

1. I want to insure my self upto 30 Lacs using Term Plans.
2. I want to invest in Tax saving mutual funds in SIP mode.
3. Where should I invest if I get any extra money if I get for medium and long term perspectives.

4. I want to save if there is any extra money for short term investments like liquid funds.

Thanks,
vbkanth

SRIKANTH MATRUBAI advised :
Dear Bharani Kanth,
At your age of 30, you should had some kind of investment, at least Term Insurance to start with. Sure, the temptation to postpone and enjoy the money NOW is irrestible, but just see the longer vision. You could have a Wealthy Retirement.
http://goodfundsadvisor.blogspot.com/2009/10/first-job-first-investment.html

You should start your investments as early as possible. The earlier the better. This gives you the advantage of 'compound effect', rightly described as the 8th Wonder of the World. There is no truth to statements like ‘I am too young to start saving’.

COST OF DELAY :

Do you know that if you intend to invest Rs.2000pm and delay the same by just one(1) month, you would be losing Rs.1,90,792!!!! (Calculated @20% for 25 years). And in today's worth of money, you are losing Rs.44,454. Yes, by delaying your Rs.2000 investment by 1 month, you are losing Rs.44,454 in today's worth
http://goodfundsadvisor.blogspot.com/2010/02/retire-super-rich.html

POWER OF TIME :

Do you know, that if you need Rs.1 Crore in say about 20 years, you need to invest Rs.7535 per month.
For the same Rs.1 crore, if you start investing 5 years earlier, you need to invest just Rs.3628 per month. A huge huge saving indeed.

You can use the following calculators ……………..

http://www.moneycontrol.com/planning_desk/magic.php

http://www.bankbazaar.com/finance-tools/compound-interest-calculator.html

WHAT YOU SHOULD DO.......

Apart from start saving now, , of course, he should be very regular in his saving and should have a definite goal.
To begin with, Take Term Insurance to adequately cover your self. An adequate Life Cover means a Minimum of 5 years of Annual Income and normally 10 years of your Annual Income. Suppose your Annual income is 2 lakhs, you should take a Minimum of 10 lakhs Insurance Cover and if possible, increase to 20 lakhs Insurance. It feels to notice that you are more inclined towards Term Insurance which is the Cheapest way of Insuring your life.

Your idea of investing in Tax Saving Mutual funds through sip mode is a very good one and you can find the best funds to invest in my blog posts.
Where you invest your extra money you get depends whether the money if short, medium or long term.
If it is short term, it is always wise to invest in Liquid Funds.
If it is medium term, it would be prudent to invest in Debt Funds or Balanced Funds.
If it is long term, of course, Diversified Equity Funds are the best avenue.

Best of luck ,
Srikanth Matrubai

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DSP BLACKROCK QUIZINDEX

2010-03-16T05:21:00.000-07:00

The DSP BLACKROCK Mutual Fund people recently organised a Get together for Independent Financial Advisors of Bangalore in a star hotel. The programme was well organised and was hosted by the ever smiling Harsha Bhogle.
Thankfully, the Quiz was not restricted to Mutual Funds but included topics ranging from Cricket, Movies to even Politics.
Harsha Bhogle ensured that there was never a dull moment.
Here are some photos of the event.

Harsha Bhogle was at his wittiest best. See the Video here..........

http://www.indyarocks.com/videos/Harsha-Bhogles-jokes-415794

Yours Truly answered quite a few of the questions posed and Harsha even pulled my leg saying "anyone can answer this question expect Mr.Srikanth".

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BEST TAX SAVING FUNDS

2010-03-08T03:32:00.000-08:00

Investing in Equity Linked Savings Scheme is the best way of saving tax, as it achieves the twin benefit of Tax Savings and providing benefits of Long Term Equity Investment. http://goodfundsadvisor.blogspot.com/2009/12/saving-taxes-elss-is-best-option.html

I keep getting hundreds of emails requesting me to recommend me the BEST ELSS fund. It is practically impossible to answer and satisfy each of them. http://goodfundsadvisor.blogspot.com/2009/12/saving-taxes-elss-is-best-option.html

So, I decided to write my best picks and post them on my blog here. I hope this will help you.

RECOMMENDED ELSS FUNDS :

Religare Tax Plan

An open-ended Equity Linked Savings Scheme (ELSS) with a lock-in period of 3 years, seeks to generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities. Its performance has been in the top quartile in the recent past. The scheme has generated a 1 year CAGR of 114.85% while the benchmark indices ‘BSE 100’ rose by 109% during the same period. The fund has outperformed its benchmark in 3 years, 2 years and 1 year period. Even in its short history, the fund has developed the good habit of liberal Dividend payout.

Birla Sunlife Tax Relief 96 Fund :

Has been a STAR performer since its launch. The Fund has been ranked THE WORLD'S BEST FUND by Lipper!!!!

The Fund has had a great Dividend History. Your Rs.1 Lakh investment in this Fund in 1996 would have yielded Rs.21 Lakhs by way of Dividend alone!!! (Add another 70% being paid out on 12th March). Has given an astonishing return of 32.69% CAGR since launch in March 1996.

Sundaram Tax Saver:

Has a portfolio with a mix of Large Cap and Mid cap and is this a bit more volatile than the rest. The Fund is actively managed and is very nimble and thus performed well in the Bear Market of 2008. Its High Sharpe Ratio shows that the Fund's active asset allocation has paid dividends.

HDFC Tax Saver :

The BEST ELSS Fund. Not only does the fund do well in a Bull Market but amazingly even protects your money better in a Down market. Steady and Convincing Long Term Track Record makes this a Must Have even for Non-Taxing Purposes. The First Choice for any Tax Saver wanting an ELSS exposure. Even though the Fund has a large cap bias, it has managed to consistently beat its Benchmark, year after year. In Valueresearch rankings, The Fund has never had a rating of less than 4 Stars since more than 7 years now!!!!!

CanRobecco Equity Tax Saver :

Has had a remarkable turnaround in its forutnes since Robecco's entry. Earlier it showed flashes of brilliance, but that's it. Since 2006 has the fund consistently started outperforming its category and its benchmark. The Fund has a amazing knack of quickly moving into cash in times of market crash and being fully invested during bull runs which makes the Fund very volatile but has good performance to show for the volatility. Aggressive ELSS investors could consider this Fund.

Fidelity Tax Advantage :

The Fidelity Tax Advantage Fund has been a consistent performer since it was launched in 2006. It recently won the ICRA 7-Star Gold Award 2009 in the ELSS category for its 3 year performance till December 31, 2009. Its "value" approach makes it a good fund for all types of investors.

Also read http://goodfundsadvisor.blogspot.com/2009/03/suggest-me-good-tax-saving-funds.html

THOSE WHO DID NOT MAKE IT TO LIST :

There are some funds which have given good returns and you could see them recommended by some experts, but I refrained from recommending them. I have given the names and reason for NOT recommending them.

SBI Magnum Tax Gain :

Has had a power packed past, but has been struggling for the past two years. Frequent change in the Fund Manager has had its impact. The Fund has lately increased its exposure to Large Caps and is thus suited for low-risk investors. Its huge bloated Fund corpus could be a big drag on the performance.

Franklin India Tax Shield :

Has been a steady performer since its launch. The Fund's 'safety first' makes it suitable for conservative investors. Definitely not the most exciting ELSS Fund, but it protects your money well.

Taurus Tax Shield :

The Fund has had two very good years and should have straightaway made it to the list of recommended funds, but .....BUT its volatile past and relatively high exposure to mid-caps make this fund a High Risk High Return Fund and could be avoided.

Sahara Tax Gain :

Has been very impressive both in the short term as well as the long term. But its tiny AUM should be a cause for concern and you can avoid at this point till there is some semblence of inflows into the fund to give comfort in terms of AUM.

OPT FOR DIVIDEND PAYOUT :

Never go for Dividend Reinvestment Plan in ELSS because by this The Fund assumes you are making a Fresh investment whenver your Dividend is reinvested and thus is locked for a further period of 3 years. Either opt for Growth or Dividend Payout.

For HNIs and those having liquidity constraints, it is wise to opt for Dividend payout option. Even though, Mutual Funds dividends (unlike Equity Share dividends) give back your own money to you, here, since your money is locked for 3 years, it would be prudent to get back some part of your capital. It would also ensure that you get Full Tax benefits without investing the full amount of Rs.1Lakh.

Ex:- Suppose you invest Rs.1 Lakh in Birla Sunlife tax Relief96 whose NAV is 80, you get 1250 units. Now since dividend is announced at 70% (7 per unit), you get back, Rs.8750/-. So, in effect, on a investment of Rs.91250, you still manage to claim Tax Rebate of Rs.33990. This is just an example, some funds even have a dividend yield of above 10% and some Tax Funds (Religare, Sundaram) even declare dividends more than once in a Financial Year.

ELSS & SIP - A FANTASTIC COMBINATION

Best way to invest in ELSS is through Systematic Investment Plan(SIP). With SIP you can invest a small amount every month for a specific time period. With SIP investor can take advantage of fluctuations in the stock market. So investor will get more units when the market is down and get less units when the market is up.

Instead of simply putting in a chunk of Rs 1 lakh at the end of each fiscal year, if you develop a healthy saving habit,you could invest a fixed amount every month and benefit from the advantages of both SIPs and the tax rebate.

When you invest in ELSS, through the SIP route, you enjoy the multiple benefits of better market-linked returns in the long run, rupee cost averaging and a tax break. So, happy investing!

For the other articles on ELSS funds, click here http://goodfundsadvisor.blogspot.com/search/label/ELSS and get all the details.

Regards,

Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

GOOD ELSS FUNDS FOR SIP

2010-03-07T09:40:00.000-08:00

sushant from Goa

Hi ,
I want to start SIP for some ELSS fund over the next 9-12 months. Please suggest me some good ones. I have my list. Please comment on any additions/deletion:
1) Sundaram Tax Saver
2) Principal Personal Tax Saver
3) Magnum Tax gain

SRIKANTH MATRUBAI replied :

Dear Sushant
It is always a great idea to invest through SIPS. SIP investing is a no-brainer. 9 out of 10 times, you make more money through a SIP investment than through a Lumpsum Invesment.
The next thing to consider is the Fund itself.
My personal favourite has been Religare Tax Plan and HDFC Tax Saver, especially for the fine ability with which both the funds have been able to outperform their peers even in a Bearish Markets.
HDFC Tax Saver has had a great history and a Fund Manager with the highest experience in the entire MF industry.
Sundaram Tax Saver and Fidelity Tax Advantage too are good and have a had a decent track record, but if it is only 1 Fund which I had to choose, then it would be HDFC Tax Saver.
Magnum Tax Gain, even though it has bounced from a disappointing performance in recent times the huge AUM makes me avoid the Fund for now.

Regards,
Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

BEST FUNDS FOR A NEW INVESTOR

2010-03-01T03:28:00.000-08:00

ALL WEATHER FUNDS

Jagdish Kumar asked :
Dear Sir,

I need suggestion for Below funds, i m planning to start sip for Rs. 8000-10000 in below 2 or 3 funds. Pls help in choosing the best performing funds in future.

Shortlisted Funds:
1) Reliance Growth Fund
2) Reliance Banking Fund
3) Pru. Icici Infra Fund
4) Icici Focused Equity Fund
5) Templeton India Enquity Fund
6) Franklin Asian Equity Fund
7) Franklin Bluechip Fund
8) DSP BR Top 100
9) HDFC Top 200
10) Reliance Vision Fund

Pls kind choose the best from these above 10, & kindly advice & help me for creating a good portfolio for Future. As i m looking at 2 yrs SIP for chosen funds once suggested from yourside.
I want the BEST fund to invest which will perform in all seasons and also tell WHEN is the Best time to invest. In short, is there any fund which any new investor can blindly invest???

Thks in advance and waiting for your comment on above investment.

Regds
JK

SRIKANTH MATRUBAI replied :

Dear JK, First of all please understand there is no such thing like THE BEST FUND TO INVEST.
One should try to invest in good funds not in the best fund of current time. Because leadership positions may be changed very quickly.

Today`s winners may become losers & today`s losers may become winners tomorrow. Fund performance keep fluctuating and other than Stock Performance, factors like change in Fund Manager too affect the performance of the Fund due to the Fund Manager`s change in strategy, etc. (Remember JM's super performance in 2007-08 and the super dud show thereafter??)
You may be surprised to know that the None of the Top 10 Funds of 2008 made it to the list in 2009!!
However, what I can suggest you is to invest in those fund which has been consistent in all Market Cycles and is more of `no surprise` fund rather than a spectacular performer in a Bull market and a Super Flop in a Bear market.

DREAM FUNDS........ THE BEST FUND FOR ALL SEASONS:
There are very very few funds which can fit into the category of a Dream Fund, the one which you can invest either in Peak of the Bull Run or the nadir of a Bear Market. Consistent above average performance across market cycles is the key here. Sure, there will be a few hiccups here and there even in the Best of Bests., buy you have to digest and let the fund perform to its maximum capability. My selection of 'All Weather Funds' are as follows:
HDFC Top 200 Fund
HDFC Prudence Fund
Reliance Growth Fund
Reliance Regular Savings Fund - equity
Sundaram Select Focus Fund
SBI Magnum Contra Fund (inspite of frequent change in Fund Managers, the fund has managed to carry on its good works)
DSPBR Equity Fund
Fidelity Equity Fund

See these links
http://goodfundsadvisor.blogspot.com/2009/03/best-funds-for-cautious-investor.html

http://goodfundsadvisor.blogspot.com/2009/01/portfolio-advise-needed.html

http://goodfundsadvisor.blogspot.com/search/label/Star%20performers

The funds I have shortlisted do have long history of picking long term winners and have earned consistent returns over time.
The above fund shortlisted is not the 'one size fits all'., but you can make these funds as 'core' of your portfolio and add further depending on your profile.

WHEN TO INVEST :
Without going through the routine of explaining, I will be straightforward and tell you in the face…………….Anytime is the BEST time to invest.
Surprised??. Yes, even if you started invested right at the peak Sensex levels of 21000, if you have had invested through SIPs, even now, when the Sensex is down by more than 20%, still you would be in PROFIT!!!! SIP investment ensures that you 'automatically' time the market and also gives the added advantage of Rupee Cost Averging.

You can invest in any above funds depending on your risk profile and objectives. For you Rs.8000-Rs.10000 investment, from your list of funds, I suggest you to consider
HDFC Top 200 fund
Reliance Growth Fund.

Outside of your list, you may consider
fidelity Equity fund
HDFC Prudence Fund
Mirae Asset India Opportunities Fund
Sundaram Select Focus Fund.

Do go for sip and invest in different dates to take advantage of volatility.
Best of luck,
Srikanth Shankar Matrubai

Also visit

http://equityadvise.blogspot.com

FUNDS FOR PERSON WITH UNSECURED JOB

2010-02-19T02:40:00.000-08:00

Mr.A Tripathi from Lucknow wrote :
Dear Sir,

I am an unsecured job profile 39 years old man with 2 sons. one is 14 years and second is 8 year old. Now days conditions permit me about sip investment Rs.5000/- per month for 3 years. please give me fund names with monthly investment amounts.
I do not mind being Aggressive Equity Funds.

thanks.

A Tripathi , Lucknow.

SRIKANTH MATRUBAI replied :
Dear Mr.Tripathi,
For your job profile, a Full Fledged Aggressive Equity Oriented Portfolio will not do. Aggressive Funds are very volatile and risky in nature. With an unsecured job, you may not only be in a position of not being able to fulfill your sip commitments but also need to withdraw your investments at a short notice. Such being the circumstances, Aggressive Funds are ruled out.
You need to strike a balance between safety, liquidity and returns. Hence, you are better off having some debt exposure to provide stability to overall portfolio. Balanced Funds would be the apt choice for you.
Before going for these investments, insure yourself adequately with Term Insurance. Then you need to protect your family from financial insecurity due to sudden illness and thus a Health Insurance becomes inevitable. I hope you also have provided adequately for the Education Expenses of your two sons. You need to consider all these things and only thereafter go for the Mutual Funds Investments.
Preferably go for Large Cap Funds and Balanced Funds.
You can consider investing in the following way.
Birla Sunlife Frontline Equity Fund = 1000 *1 per month
Fidelity Equity Fund = 500 * 1 per month
HDFC Prudence Fund = 500 * 2 sips per month
HDFC Top 200 fund = 500 * 1 sip per month
Religare Business Leaders Fund = 500 * 1 per month
Reliance Regular Saving Fund(Balanced) = 500 * 2 sip per month
Sundaram Select Focus Fund = 500 * 1 sip per month

In Reliance Regular Savings Fund, you are advised to go for 2 sips in 2 different dates.
The Above Funds will ensure that you have sufficient exposure to Large Caps, Diversified Funds and Balanced Funds. I have avoided Debt funds, since you seem to be aggressive. Balanced funds will lend enough stability to your overall portfolio.

In the above list, you go for Birla Sunlife Frontline Equity Fund, invest under Century SIP to take advantage of Free Life Insurace which is an added benefit, especially since you seem to be underinsured.

Best of luck,
Srikanth Matrubai
Bangalore

Also visit

http://equityadvise.blogspot.com

RETIRE SUPER RICH

2010-02-07T09:03:00.000-08:00

RETIRE SUPER RICH

"WHEN YOU HAVE SILVER IN YOUR HAIR, YOU SHOULD HAVE GOLD IN YOUR POCKET".

Retirement is a fact of life and is inevitable.

One day everyone needs to face the 'retirement' question. Are you ready for it?? Is your financial plan working towards it??.

It is equally essential that your Retirement planning not only factors in volatility and income shortages but also factors in Inflation and thus a plan should be such that your cash flow will support your retirement lifestyle.

THE BASICS FIRST :

The Basic Priority should be to have enough 'Emergency Cash' which will cover your immediate needs in case of job loss, etc. It is ideal that your 'Emergency Cash' covers between 3-6 months of your normal expenses.

You also need to plan for your children's education, marriage, home. All this will mean lesser and lesser amount for your retirement savings and that's precisely the reason for starting to save early.

Read this article, it may help you....

http://goodfundsadvisor.blogspot.com/2010/01/4-ways-to-become-wealthy.html

ENOUGH INSURANCE:

Next comes the insurance. Have you covered your life adequately??

Take the Human Life Value calculator to zero in How much Insurance you need.

The Thumb Rule says, if you have kids, you need to have 10 times of your Annual Income as your Insurance Cover.

Insurance is NOT Investment. Hence, avoid ULIPs and go for Term Insurance Policies. Use Insurance as a Security to cover the risk of Dying Young. Insurance is a tool which protects your dependants from financial ruin in your absence.

Along with Life Insurance, you need to have adequate Health Insurance. Your current income and savings may not be enough to sufficiently fund against Medical emergencies. This is where Health Insurance steps in.

HOW MUCH YOU NEED FOR RETIREMENT:

The basic thumb rule says that you need around 75% of your current expenses to maintain the same standard of living (adjusted to inflation). This is just half the picture. The picture is complete only when you guess(that's the only word I could zero in) how many years you will live after retirement.

Again Indian Life Expentancy average is about 75-80 years. So, now you can start planning.

You can also use the Human Life Value Calculator like the http://www.personalfn.com/calc/hlv.html to calculate how much Insurance you need.

You can also use the following Retirement Calculators

http://moneycentral.msn.com/retire/planner.aspx

http://www.bloomberg.com/invest/calculators/retire.html

START EARLY :

Starting saving early ensures that you have the time ti ride out the stock market volatility and thus you are in a position from the '8th Wonder of the World' the "Compound" effect. The younger you are, the fewer are your financial obligations, leaving you with higher surplus to invest.

Do you know, if you delay your SIP investment of Rs.5000/- by just 1 month, over a period of 25 years at 15%, it would cost you (hold your breath), Rs.1,64,595/-!!!!!!.

You would lose Rs.38,350/- in today's worth of money.

Investing for Retirement should start from the day you start earning.

RIGHT ASSET ALLOCATION :

Investing in the right Asset Allocation will also ensure the merits of diversification and mitigating risks but also beating Inflation. Remember there are so many investment avenues eyeing your money, it is sure to confuse even a well informed investor. Gold, Real Estate, Insurance, Mutual Funds, Equities, PPF, NPS the list goes on.

DO NOT KNOW WHAT 'NPS' IS...Click here http://goodfundsadvisor.blogspot.com/2009/05/new-pension-scheme-analysis.html

Indian mentality is swayed by words like 'GUARANTEE' AND 'PENSION'.

Don't Purchase any Pension Plan of any Insurance Company under any Circumstance!! WHY?? These Plans have High Allocation Charges, Admin Charges, Very LOW returns on Annuity. Your Pension is based on your Corpus. With Insurance Plans, your Corpus is limited.

Invest in Good Diversified Mutual Funds which are regularly recommended by me in this blog. With this, you will get a very high Corpus at the time of retirment. After Retirement, you can opt for Systematic Withdrawal Plan (SWP) and receive Pre-determined amount every month.

Equity does not mean just 'equity funds' per se. Invest in different investment style of equity funds which fit into your overall asset allocation strategy. The younger you are, the more equity oriented your investment should be.

You can choose to invest in the funds recommended in this blog regularly.

WATCH THIS VIDEO:

http://www.indyarocks.com/videos/Begging-for-Cake-435705

REVIEW AND RESET ASSET ALLOCATION:

At least once a year, religiously review your entire Investments and Re-balance. Moreover, your needs will change with time and the rebalancing will cover this aspect.

The Worst time for a Market to get into Downturn is when you are about to retire!!! As you near your retirement, it is prudent you change your portfolio from a equity-heavy to debt-heavy portfolio.

AFTER RETIREMENT :

Planning for retirement isn't just about how much money you can accumulate — it also looks at how you use those funds during your retirement.

The 'Accumulation' phase is over. The "Decumulation' phase starts.

Don't overinvest in Bonds and Debt, they may actually fail to beat inflation and your purchasing power erodes substantially in front of your eyes.

You should go for a combination of Balanced Funds, Monthly Income Plans, Fixed Maturity Plans, Arbritrage funds and Large Cap Funds and also look at investing in Senior Citizen Scheme (split them, to avoid penalty in case of early closure., as only will be closed at a time).

Also you could also decide how much cash flow you need now, how much you can postpone, how much you may need after 5, 10 years hence; this amount can be invested in MIPs and Conservative to Moderate Balanced Funds. Strike a balance between safety, liquidity and returns.

You can also look at Reverse Mortgage to augment your retirement income.

THE RIGHT PLAN :

Investing and financial planning needs a lot of time, attention to detail, research and paper work. For someone with a busy schedule, it’s too much trouble. Working with financial adviser is a great way to adequately plan for retirement. They can work with you to create a plan and build a portfolio that fits your needs and goals, and is designed to sustain you for the long haul.

What I have given is not a One size fits all Formula. But this is a starting map for you and your Financial Advisor can take it up from here.

Finally remember, if we fail to plan then we plan to fail

http://goodfundsadvisor.blogspot.com/2009/03/retirement-planning-and-sons-education.html

http://goodfundsadvisor.blogspot.com/2009/01/want-to-have-2-crores-in-10-years.html

Best of luck,

Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

FIDELITY GLOBAL REAL ASSETS FUND

2010-01-25T10:08:00.000-08:00

With Mr.Uday Puri, the National Sales Head of Fidelity India

AIMING TO BEAT INFLATION

Fidelity has come out with a New Fund Offer named Fidelity Global Real Assets Fund, an open ended Fund of Funds scheme. The Fund will invest about 65% in Fidelity Funds - Global Real Asset Securities Fund, an offshore fund launched by Fidelity Funds. The Parent Fund will in turn aim to invest in Companies which have exposure to physical assets like Gold, Copper, Minerals, Oil, Land, etc (That is why the name REAL ASSETS FUND).

In the Fund Managers' words, the Fund aims to invest in equities which have assets which are not easily replacable and are in short supply.

It is a known fact that investing in commodities, real estate ensures that you always make more money than inflation, as commody prices are known to harden.

POINTS IN FAVOUR OF THE FUND :

1. The fund can be a good geographical diversifier.

2. The Fund will benefit from Dynamic asset allocation across Real Assets.

3. Investing in this one fund will give you exposure to a wide range of commodities and real estate.

4. The Fund is well positioned to capture the growth in both Developed and developing world.

5. The biggest advantage of investing in this fund that the Fund will 'avoid' stocks which can be influenced by domestic economic pressures like telecom, financials, retail, pharma, etc. and thus give you a true Real Asset Exposure.

6. Even the currency risk is next to nil due to the fund's exposure to companies across geographies and across asset classes.

7. In its short history, the Fund has outperformed its benchmark by a massive 49% points. I would rank this fund higher than DSPBR World Mining Fund., as the DSP fund is more tilted towards Mining stocks only http://goodfundsadvisor.blogspot.com/2009/12/dspbr-world-mining-fund-unique-theme.html

NEGATIVE POINTS :

1. Of course, the biggest negative will be that the fund will not enjoy 'equity' tax status and is ineligible for tax concessions available to equity funds.

2. The Fund will rely heavily on commodity and they in turn are cyclical which could make the fund highly volatile. (However, the fund is fairly diversified as, besides commodities, the fund invests in Energy, utilities as well).

3. The Feeder Fund is not very old and thus has to prove itself during bearish times.

Still as the positives outweigh the negatives, I give a SUBSCRIBE call to the Fund, especially through SIPs.

Thankfully, SIP option is available to this NFO, take the SIP route to ride the volatility which is very likely with this fund.

Best of luck,

Srikanth Matrubai

Also visit http://goodfundsadvisor.blogspot.om

Also visit

http://equityadvise.blogspot.com

REARRANGEMENT OF PORTFOLIO

2010-01-14T07:11:00.000-08:00

My regular reader Sri Divate wrote again “Your advise is absolute top class, Mr.Srikanth”. Thanks for your previous advise. http://goodfundsadvisor.blogspot.com/2009/06/shall-i-continue-my-fixed-deposit.html

It was of immense help.

Kindly help me in rearranging my portfolio. As you know I am 50 yrs old and a Govt employee.
My present MF investment is ....
Units invest amt
Birla SL AAF -Aggrve (G)339.731 10,225
HDFC Prudence Fund (G) 83.937 10,357
HDFC Prudence Fund (G) 32.403 5,000
LIC MF Equity Fund (G)1170.026 25,000
LICMFFloMIP-PlanA(AD)2068.218 25,005
Reli Diver. Powe -RP(G) 165.751 11,000
Reli Growth Fund -RP(G) 36.108 15,000
Reli Growth Fund -RP(G) 35.648 12,000
Reli Natur Resoures (G) 977.995 10,005
Reli Vision Fund -RP(G) 93.150 17,000
SBI Mag Contra Fund (G) 400.834 25,000
SBI Mag Contra Fund (G) 438.745 25,000
SBI Mag Global Fund (D) 975.17 24,000
SBI Mag Global Fund (D)1360.750 45,000
SBI Mag Index Fund (G) 86.291 1,979
SBI Mag Insta Cash (C) 902.362 17,119
SBI Mag Tax Gain (D) 182.630 10,001
UTI VIS-Inde Linke (D)1759.201 25,000
Total 323,691

1. Whether is there any need of rearranging present folio to get better returns.
2. If some of the funds are to be rearranged then which funds.
3. I have kept about 20K in cash fund so that if market goes below NSE 3000 ? to switch to equity funds.
4. What is the Nifty target when to convert the equity funds to cash funds and vice versa.... if this has to be done.

With best wishes
anusridi

SRIKANTH SHANKAR MATRUBAI advises :
Dear Divate,
Shockingly, your portfolio is concentrated in SBI Mutual Fund which accounts for 50% of your portfolio. It is never a wise to have a concentration in one Single AMC. Ensure that all your future investments go to non-SBI amc to avoid over-exposure and ensure Diversification.

Out of your present MF Investment, you can continue holding the following Funds:
HDFC Prudence Fund
LICMF Monthly Income Plan
Reliance Growth fund
Reliance Natural Resources fund
SBI Magnum Contra fund
SBI Insta Cash Fund
SBI Magnum Index Fund

You should EXIT the following funds completely
LICMF Equity Fund
Reliance Diversified Power Sector Fund
SBI Magnum Global Fund
UTI VIS Index Linked fund

You also switch the following funds
Reliance Vision fund to Reliance Regular Savings Fund (Balanced) Fund.

From the Amount received from the Exit of Funds, you invest in a Debt Fund like Birla Income Plus or HDFC Income Fund and go for Systematic Transfer Plan in a Plain Diversified Fund and you can also look at investing HDFC FlexIndex
http://goodfundsadvisor.blogspot.com/2009/07/hdfc-flexindex-plan-for-cautious.html

which Transfers your Debt Fund Amount at Pre-assigned Index Levels.
Avoid Sector funds and also look at alternative assets like Corporate FDs, FMP, etc. to diversify your portfolio.
Keep a regular tab on your portfolio and make appropriate changes, if required.

Visit my blog for more details.
Best of luck,
Srikanth Shankar matrubai

http://goodfundsadvisor.blogspot.com

Also visit

http://equityadvise.blogspot.com

4 WAYS TO BECOME WEALTHY

2010-01-10T03:29:00.000-08:00

4 WAYS TO BECOME WEALTHY

Before going through the article, do some Financial Planning for yourself, assess your risk profile.

1. INVESTING WITH A SPECIFIC GOAL :
Most Investors invest without any specific Target/Goal in mind. They do invest in Quality Assets but sadly fail invest without any Clear Targets in Mind.
Clearly decide when and why you need the money., and how much will you need.
Prioritise your wants, needs, comforts, luxuries. Make a list of major goals which you visualise for the future, be it your car, home, child’s marriage, etc. Now, prioritise this list. Also read http://goodfundsadvisor.blogspot.com/2009/03/my-target-1-crore-in-10-years.html

It is easy for an Investment Advisor to show you the Right Assets if you specify your Target/Goal. Investing in Debt Funds for your Child’s Marriage is a foolish thing, but at the same time investing in Debt Funds for Next Year’s School Admission is a Wise Thing. Thus, it is imperative to invest with a Specific Target in Mind.
If you have more time to reach a target, then equities is the BEST avenue for you, as equities tend to give you higher retursn over the longer period
Also read http://goodfundsadvisor.blogspot.com/2009/03/retirement-planning-and-sons-education.html

2. INVESTING IN THE RIGHT ASSET CLASS :
Investing your hard money just to save taxes and making some smart investments in the right assets. It is to do more with the Asset Allocation.

It is always advisable to invest in a Mix of Varied Assets like PPF, Equities, Gold, Fixed Deposits, Property, Insurance, etc. Overexposure/Underexposure to Any and All Kinds of Assets should be Avoided. For Long Term, Equities are the best avenue of Investment.
Studies have shown that getting the Right Asset Allocation contributes more than 90% to the overall Performance of a Portfolio in the Long Run while Security(Equity) Selection contributes less than 10% !!!!.
The right mix of the assets will ensure that your money works hard for you and beats inflation hands down always!!
Asset Allocation is universally acknowledged method of creating Superior Returns over Long Term.
http://goodfundsadvisor.blogspot.com/2009/08/investment-portfolio-advise.html

3. AVOID MIXING INSURANCE WITH INVESTMENTS

Even Educated investors tend to invest in Insurance as their only source of Investments whereas it is well known Fact that Insurance is the Costliest way of Investment. Insurance is purely for sake of Protection if any untoward event happens to the Earning member of the Family.
The best Insurance is the Term Insurance. Agents avoid telling you about this because that Term Insurance gets them very very little Commission. ULIPs are a strict no-no. ULIPs leave you with insufficient cover and also give you below par returns. The best option would be to take a combination of Term Insurance and Mutual Funds.
Mutual Funds are the better option thatn ULIPs. Your Insurance Part should be taken care by Term Insurance and all the other features of ULIPs are taken care by the Mutual Funds which are very very cheap due to NO Entry Load., whereas ULIPs have a complex fee structure which could eat into your profits.
However, there are some ULIPs which can be looked into, but only if your investment horizon is over 15 years.
http://goodfundsadvisor.blogspot.com/search/label/Insurance

4. INVEST FOR LONG TERM
Almost Every Investor starts his Investment with Long Term Goal, but very soon as soon he sees the first profits, he becomes Greedy and forgets all about Long Term.
The problem comes when his Short Term Investment starts showing losses, the investor starts withdrawing his Long Term Investment to cover up for his Short Term Investment Losses and ends up failing to Accumulate a Sizeable Amount for his Long Term Goal.
Long Term Investment allows you the benefit of power of Compounding. Sensex, inspite 50% Drop in its value in 2008, has given a Compounded Return of 18% over a period of 30 years!!!! You would do well to read this post http://goodfundsadvisor.blogspot.com/2009/05/shall-i-switch-from-equity-to-debt.html

. Do not get swayed by the Market Movements and change your Investment.

Thus, in conclusion, when you start Investment, take your time, do consult a Good Financial Advisor and Invest in Diversified Assets and Stay Invested for Long Term, allowing your Assets to Perform.

Finally, do review your investments at least once every year.

Best of luck,
Srikanth Matrubai

QATAR NEWSPAPER PUBLISHES MY VIEW ON DEBT FUNDS

2009-12-30T02:45:00.000-08:00

Qatar's leading English Daily THE PENINSULA published my view on Debt Funds. The Newspaper carried a article on how the Indian Investors dumped most of their equity investments and how most investors were looking at the debt investments.
Further, the article wrote about which debt funds should be looked for investments and published my opinion on them.
This is what it had to say :
'Considering the falling interest rates, one would be better off investing in long term debt funds rather than short term as these would not yield much, says fund advisor Srikanth Shankar Matrubai. In his estimation, some good debt funds for an NRI to invest in would be ICICI Prudential Income Opportunities Fund, Birla Sunlife Income Plus, Canara Robecco Income(Growth) Fund and HDFC Income Plan. Then there is TATA Capital NCD which is giving attractive Rate of 12 per cent. "

One of my NRI client based in Qatar brought this to my notice.
Click on the link below to read the article.

THE ARTICLE

http://www.thepeninsulaqatar.com/Display_news.asp?section=business_news&month=march2009&file=business_news2009031581431.xml

Regards,
Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

EVALUATE MY PORTFOLIO

2009-12-24T22:05:00.000-08:00

CHANGE THE DEFENSIVE MINDSET

Mr. Brahmananda wrote :
Thank you for your informative blog. It has been very useful to small investors like me.
sir,
please evaluate and guide my portfolio.
At present I am investing in
bank R/Ds 15,000p/m,
Mutual Fund investments
Reliance Regularsavings Equity 1,500/m;
Sundaram Select focus 1,500/m;
Kotak Opprtunities 2,000/m;
Reliance Diversified Power Sector fund 5,000/m and
BirlaMidcap Fund 5,000/m,
I have 3yrs old daughter and I like to invest 5,000/m into gold, should i go for Gold ETF or Postoffice gold purchase and my investment horizon is 10-15yrs and after that to consolidate all investments.
I have term insurance for 35L;
Critical Illness 10L;
Mediclaim 5L(Family floater);
my annual takehome salary is 8-9L and
I have a own house and no major liabilites as of now.
Please guide me.
Is my investments are suffice and whether I am in right track?

SRIKANTH SHANKAR MATRUBAI advised :
Dear Brahmananda,
Thankfully, you have got your own house and have no major liabilities. This is a major plus point in favour of your finances.
I wonder why you need to invest 15000 per month (nearly 50% of your investment amount) in Bank RD where the interest rate barely covers the Inflation and leaves you with very little actual gains. Since, you have no major liabilities, you can afford to be a bit balanced, if not aggressive. Your investment in Bank RD is too defensive. You can as well consider investing in Balanced Funds or even Diversified Equity Funds, especially since your investment horizon is 10-15 years.
I feel you need to add another Rs.10 Lakhs to your Insurance Cover and increase your overall Cover to about 45Lakhs. You can consider taking a Top-up to your existing Term Insurance.

You need to make only some minor adjustments in your portfolio for a better returns. Otherwise your Fund selection is quite good.
Reliance Regular Saving Equity - 1500pm - continue
sundaram Select Focus - 1500pm - Continue
Kotak Opportunities - 2000pm - Switch to Kotak K30 Fund
Reliance Diversified Power Sector Fund - 5000pm - Stop immediately and invest 2000pm in Reliance Growth Fund
and the balance 3000pm in HDFC Prudence Fund
Birla Midcap Fund - 5000pm - Stop immediately and split the 5000 and invest 2000pm in Birla sunlife Equtiy Fund and 3000pm in DSPBR Top 100 Equity Fund

so, your Mutual Fund Sip investment will be like this

Reliance Regular Saving Fund(Equity) - 1500pm
Sundaram Select Focus Fund - 1500pm
Kotak K30 Fund - 2000pm
Reliance Growth Fund - 2000pm
HDFC Prudence fund - 3000pm
Birla Sunlife Equity Fund - 2000pm
DSPBR Top 100 Equity Fund - 3000pm

This Portfolio has the right mix of Large Cap and Diversified Equity funds with a Balanced Fund to complete the picture.

Investing in Gold is never a good idea. Buy Gold only when you want to use and not for investment purposes. And with your investment horizon of 10-15years, Gold may not serve the purposes. You may as well consider investing in a Good Diversified Fund. Except for the last two years, most of the time Gold has managed to deliver returns on par with Inflation. However, you may take a small exposure to Gold through Gold ETFs or better still through UTI Wealth Builder Fund - series II. This Fund invests in a mix of asset of Equity and Gold in the ratio of 65:35 in favour of Equities. If your mindset is aggressive you can take a small exposure to Gold Mining Funds like the DSPBR World Gold and AIG World Gold Fund, which, beware, more volative than Gold ETFs.

Best of luck,
Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com

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