Despite the festivities in the air, market seems to be the only one missing the party. Not surprisingly, the Indian mutual fund (MF) industry saw a dip 4%, for the quarter ended in September........
Despite the festivities in the air, market seems to be the only one missing the party. Not surprisingly, the Indian mutual fund (MF) industry saw a dip 4%, for the quarter ended in September.
As many as 22 out of 44 fund houses have witnessed a fall in average AUM, according to CRISIL Research.
Much to the rescue, Dr Renu Pothen, research manager at Fundsupermart.com reveals her expert tips on various queries posted on the MF world, through Moneycontrol.com's 'Know Your Investment' (KYI) initiative, to help you make your funds another reason to celebrate.
Below is the expert advice to all the questions you asked us on our Facebook page :
Krishna Prasad: How much of your MF portfolio should be invested in Gold Mutual Funds? Is the right time to enter Gold Mutual Funds?
Pothen: I would advise to have atleast 5%-10% of your portfolio to be concentrated in Gold Mutual Funds.
Currently, gold is in a bubble territory, and in the short-term gold is a preferred asset class due to the uncertainties in the global economies. Once the investor risk appetite increases for equities then they will look at the fundamentals of gold and will prefer other asset classes over gold.
However, I advise to invest in this commodity as a part of asset allocation. Gold will perform well when other asset classes underperform. In the mutual fund space, you can enter into gold either through ETFs or Gold Funds which invest in Gold ETFs. If you do not have a demat account, you should get into a Gold fund as it also allows you to do an SIP in the same, which will prove to be useful in a volatile environment.
Vikram Marya: I want to switch from Sundaram Tax Saver to a new fund. At present, I have Reliance RSF and HDFC Equity in my portfolio. What would you recommend?
Pothen: If you still need tax investments, then you can consider a better performing ELSS like HDFC Tax Saver Fund. If you don’t want the tax saver fund, then you can look at large cap funds like ICICI Prudential Focused Bluechip Equity Fund or Franklin India Bluechip Fund.
RSF-Equity and HDFC Equity are two multi-cap funds, which you can continue to hold.
Pushkar Maniyar: I have been investing Rs 500 a month in SIPs like HDFC Top200, Reliance Banking Fund, Reliance Regular Saving Fund and SBI Gold Fund. Are these good investments or if should switch to some other fund?
Pothen: All the equity funds are good performing ones in their respective categories. While SBI Gold Fund is a relatively new fund launched in September 2011, you can continue holding onto the current portfolio.
Chandrayee Sarkar: What about the performance of funds like IDFC Asset Allocation Fund & Canara Robeco Indigo Fund? Are these worth investing in?
Pothen: IDFC Asset Allocation is a fund which invests in three different asset classes — equity, debt and gold, with three different plans for investors (Conservative, Moderate and Aggressive) to choose from depending on their risk profile. This fund will invest in ETFs and domestic and offshore funds from the IDFC stable and other fund houses as well.
Similarly, Canara Robeco Indigo is also a hybrid fund which can invests 65%-90% into debt instruments and 10%-35% into Gold ETFs.
Since both these funds were launched in the first half of 2010, we will only be able to gauge the short-term performance which is not sufficient to make an entry call, considering the volatility in the different asset classes over the last 1 year.
However, my view on the same is that since both are hybrid funds, an investor who does not want to do asset allocation on his own, can go ahead with these funds. Otherwise the investor can himself design his portfolio with allocation to equity, debt and gold depending on his goals and need not have to go with fund manager discretion.
Sumit Gupta: Can you tell us more about ICICI focused blue-chip fund and HDFC Mid-cap Opportunities Fund Growth? Are these good investment ideas?
Pothen: ICICI Focused Bluechip Fund is a large cap fund launched in May 2008 and the investment strategy is to invest in the top 20 companies from top 200 stocks trading on NSE based on market capitalization. On the other hand HDFC Midcap Opportunities Fund was launched as a 3 year close-ended midcap fund in June 2007 and became open-ended in June 2010.Despite the fact that both these funds have been in existence only for a short period of time, yet they have become the best performers in their respective categories. Definitely, you can go ahead with these funds.
Kirti Aprajeeta Ahuja: If I invest in any Mutual Funds for a year, will I get my amount on maturity or will I have to sell my units?
Pothen: If you have invested in an open-ended fund, there is no maturity date on which you will get the invested amount. Whenever you want the money, you will have to redeem the units at the existing NAV through an online platform or offline channel.However, in the case of a close-ended fund, the amount can be redeemed once the scheme closes or in case if you want to sell during the tenure of the fund, then you will have to do it through a Stock Exchange, where the fund is listed.
Jaison Vallookaran: Is Axis Equity Fund (G) is a good investment?
Pothen: Axis Equity Fund is multi-cap fund launched in January 2010. Since it is a relatively new fund, I will not be able to say much on the performance. I advise you to get into some existing good multi-cap funds like HDFC Equity Fund/Fidelity Equity Fund, which have a proven track record.
Rohini Murthy: I have invested Rs 20,000 in Principal Tax Saver Fund three years back. The fund value today is just over Rs 7,000. Should I remain invested or exit this fund? If I exit, which one would you recommend?
Pothen: If your lock-in period is over, then consider exiting out of Principal Tax Saving Fund as its performance has not been impressive during a 3-5 year time horizon. The fund has delivered only 1.99% over 3 years and 1.50% over 5 years against a category average of 11.09% and 6.27% during the same time period respectively. If you still want tax concessions, then consider investing into HDFC Tax Saver Fund/Fidelity Tax Advantage Fund. Both these funds have a bias towards large cap stocks and are known to be consistent performers over a long time period.
Shilpa Sethi: Looking at long-term investment of about 15-20 years, are Mutual Funds aa good option? If yes, which one should I look at?
Pothen: Mutual Fund investments are always for the long-term and should not be considered only for a short time period and investors should not get worried if there are short-term fluctuations. You should choose the funds depending on your risk profile.
If you are a conservative investor then you can look at a large cap fund like ICICI Pru Focused Bluechip fund or even a dividend yield fund like UTI Dividend Yield Fund.
However, if you are ready to take risks then you can get into mid/multicap funds like HDFC Midcap Opportunities Fund/Fidelity Equity Fund or even go for some sectoral funds like Reliance Banking Fund/ICICI Infrastructure Fund.
Deepika Dutta Mishra: I want to start investing in mutual funds, what is the best MF scheme and also is it better to go for SIP?
Pothen: You should select mutual funds based on your risk profile.
As far as the question of SIP and lumpsum is concerned, I believe that investors should go for SIP as this takes away the headache of timing the markets. In the case of an SIP the investor needs to put a fixed amount on a regular basis in the mutual fund chosen and this will allow him to buy more when markets are down and less when markets are in an upward trajectory. As far as lumpsum investment is concerned, the investor need to make investments at regular dips which in short mean that he needs to track the market movements on a regular basis, which might not be possible on a daily basis.
Sri Dhar: How many funds should one have? What is the duration one should be stayed if one is looking for a long-term prospect?
Pothen: The number of schemes that you should have in your portfolio depends on your risk profile and the objective for which the portfolio is constructed. I wouldn’t like to put an ideal number to the funds that an investor should have but would prefer a maximum of 8 schemes which can be easily managed by the investor on a regular basis. The funds should be chosen in such a way that it is not only diversified across different categories but also among different asset classes and fund houses as well.
Long term duration varies from investor to investor, in this context I would like to quote a statement of John Maynard Keynes, the famous economist, “In the Long Run we are all dead”. My idea of long-term is 5-10 years; however, investors after making an investment for 10 years should not forget it but make it a point to review the portfolio every 2-3 years.
Despite the festivities in the air, market seems to be the only one missing the party. Not surprisingly, the Indian mutual fund (MF) industry saw a dip 4%, for the quarter ended in September.
As many as 22 out of 44 fund houses have witnessed a fall in average AUM, according to CRISIL Research.
Much to the rescue, Dr Renu Pothen, research manager at Fundsupermart.com reveals her expert tips on various queries posted on the MF world, through Moneycontrol.com's 'Know Your Investment' (KYI) initiative, to help you make your funds another reason to celebrate.
Below is the expert advice to all the questions you asked us on our Facebook page :
Krishna Prasad: How much of your MF portfolio should be invested in Gold Mutual Funds? Is the right time to enter Gold Mutual Funds?
Pothen: I would advise to have atleast 5%-10% of your portfolio to be concentrated in Gold Mutual Funds.
Currently, gold is in a bubble territory, and in the short-term gold is a preferred asset class due to the uncertainties in the global economies. Once the investor risk appetite increases for equities then they will look at the fundamentals of gold and will prefer other asset classes over gold.
However, I advise to invest in this commodity as a part of asset allocation. Gold will perform well when other asset classes underperform. In the mutual fund space, you can enter into gold either through ETFs or Gold Funds which invest in Gold ETFs. If you do not have a demat account, you should get into a Gold fund as it also allows you to do an SIP in the same, which will prove to be useful in a volatile environment.
Vikram Marya: I want to switch from Sundaram Tax Saver to a new fund. At present, I have Reliance RSF and HDFC Equity in my portfolio. What would you recommend?
Pothen: If you still need tax investments, then you can consider a better performing ELSS like HDFC Tax Saver Fund. If you don’t want the tax saver fund, then you can look at large cap funds like ICICI Prudential Focused Bluechip Equity Fund or Franklin India Bluechip Fund.
RSF-Equity and HDFC Equity are two multi-cap funds, which you can continue to hold.
Pushkar Maniyar: I have been investing Rs 500 a month in SIPs like HDFC Top200, Reliance Banking Fund, Reliance Regular Saving Fund and SBI Gold Fund. Are these good investments or if should switch to some other fund?
Pothen: All the equity funds are good performing ones in their respective categories. While SBI Gold Fund is a relatively new fund launched in September 2011, you can continue holding onto the current portfolio.
Chandrayee Sarkar: What about the performance of funds like IDFC Asset Allocation Fund & Canara Robeco Indigo Fund? Are these worth investing in?
Pothen: IDFC Asset Allocation is a fund which invests in three different asset classes — equity, debt and gold, with three different plans for investors (Conservative, Moderate and Aggressive) to choose from depending on their risk profile. This fund will invest in ETFs and domestic and offshore funds from the IDFC stable and other fund houses as well.
Similarly, Canara Robeco Indigo is also a hybrid fund which can invests 65%-90% into debt instruments and 10%-35% into Gold ETFs.
Since both these funds were launched in the first half of 2010, we will only be able to gauge the short-term performance which is not sufficient to make an entry call, considering the volatility in the different asset classes over the last 1 year.
However, my view on the same is that since both are hybrid funds, an investor who does not want to do asset allocation on his own, can go ahead with these funds. Otherwise the investor can himself design his portfolio with allocation to equity, debt and gold depending on his goals and need not have to go with fund manager discretion.
Sumit Gupta: Can you tell us more about ICICI focused blue-chip fund and HDFC Mid-cap Opportunities Fund Growth? Are these good investment ideas?
Pothen: ICICI Focused Bluechip Fund is a large cap fund launched in May 2008 and the investment strategy is to invest in the top 20 companies from top 200 stocks trading on NSE based on market capitalization. On the other hand HDFC Midcap Opportunities Fund was launched as a 3 year close-ended midcap fund in June 2007 and became open-ended in June 2010.Despite the fact that both these funds have been in existence only for a short period of time, yet they have become the best performers in their respective categories. Definitely, you can go ahead with these funds.
Kirti Aprajeeta Ahuja: If I invest in any Mutual Funds for a year, will I get my amount on maturity or will I have to sell my units?
Pothen: If you have invested in an open-ended fund, there is no maturity date on which you will get the invested amount. Whenever you want the money, you will have to redeem the units at the existing NAV through an online platform or offline channel.However, in the case of a close-ended fund, the amount can be redeemed once the scheme closes or in case if you want to sell during the tenure of the fund, then you will have to do it through a Stock Exchange, where the fund is listed.
Jaison Vallookaran: Is Axis Equity Fund (G) is a good investment?
Pothen: Axis Equity Fund is multi-cap fund launched in January 2010. Since it is a relatively new fund, I will not be able to say much on the performance. I advise you to get into some existing good multi-cap funds like HDFC Equity Fund/Fidelity Equity Fund, which have a proven track record.
Rohini Murthy: I have invested Rs 20,000 in Principal Tax Saver Fund three years back. The fund value today is just over Rs 7,000. Should I remain invested or exit this fund? If I exit, which one would you recommend?
Pothen: If your lock-in period is over, then consider exiting out of Principal Tax Saving Fund as its performance has not been impressive during a 3-5 year time horizon. The fund has delivered only 1.99% over 3 years and 1.50% over 5 years against a category average of 11.09% and 6.27% during the same time period respectively. If you still want tax concessions, then consider investing into HDFC Tax Saver Fund/Fidelity Tax Advantage Fund. Both these funds have a bias towards large cap stocks and are known to be consistent performers over a long time period.
Shilpa Sethi: Looking at long-term investment of about 15-20 years, are Mutual Funds aa good option? If yes, which one should I look at?
Pothen: Mutual Fund investments are always for the long-term and should not be considered only for a short time period and investors should not get worried if there are short-term fluctuations. You should choose the funds depending on your risk profile.
If you are a conservative investor then you can look at a large cap fund like ICICI Pru Focused Bluechip fund or even a dividend yield fund like UTI Dividend Yield Fund.
However, if you are ready to take risks then you can get into mid/multicap funds like HDFC Midcap Opportunities Fund/Fidelity Equity Fund or even go for some sectoral funds like Reliance Banking Fund/ICICI Infrastructure Fund.
Deepika Dutta Mishra: I want to start investing in mutual funds, what is the best MF scheme and also is it better to go for SIP?
Pothen: You should select mutual funds based on your risk profile.
As far as the question of SIP and lumpsum is concerned, I believe that investors should go for SIP as this takes away the headache of timing the markets. In the case of an SIP the investor needs to put a fixed amount on a regular basis in the mutual fund chosen and this will allow him to buy more when markets are down and less when markets are in an upward trajectory. As far as lumpsum investment is concerned, the investor need to make investments at regular dips which in short mean that he needs to track the market movements on a regular basis, which might not be possible on a daily basis.
Sri Dhar: How many funds should one have? What is the duration one should be stayed if one is looking for a long-term prospect?
Pothen: The number of schemes that you should have in your portfolio depends on your risk profile and the objective for which the portfolio is constructed. I wouldn’t like to put an ideal number to the funds that an investor should have but would prefer a maximum of 8 schemes which can be easily managed by the investor on a regular basis. The funds should be chosen in such a way that it is not only diversified across different categories but also among different asset classes and fund houses as well.
Long term duration varies from investor to investor, in this context I would like to quote a statement of John Maynard Keynes, the famous economist, “In the Long Run we are all dead”. My idea of long-term is 5-10 years; however, investors after making an investment for 10 years should not forget it but make it a point to review the portfolio every 2-3 years.