New fund offers, which seemed to have slipped into oblivion have staged a comeback of sorts. As many as 5 NFOs, spanning various categories like tax-saving funds, mid cap funds and thematic funds are currently doing the rounds.
Given that equity markets are on the upswing and touching record highs with alarming regularity, we won't be surprised if the NFOs are well received. But that does not mean that all NFOs are worth investing.
In midst of the market euphoria, investors would do well not to lose sight of their financial objectives and risk profiles. An NFO should find a place in the portfolio only by virtue of the value that it can add, and not for reasons like the "Rs 10" NAV (net asset value).
Furthermore, if investors have the option of investing in an existing well-managed fund, which offers a similar proposition, they should not hesitate from doing so. The existing fund has an edge over the NFO in terms of a track record.
This week Personalfn's Research Team profiled the Reliance Long Term Equity Fund (RLTEF) NFO. The fund shall primarily focus on the small and mid cap stocks. We believe that investors will be better served by investing in well-established mid cap funds like Sundaram Select Midcap and Franklin India Prima Fund. Meanwhile, they can track RLTEF's performance over the 3-Yr period and then take a revised view on the fund.
Click here to read our research note on the Reliance Long Term Equity Fund NFO
The NFOs also include some tax-saving funds, which isn't surprising considering that the tax-planning season is approaching. We believe that investors should ideally commence their investments in tax-saving funds at the start of the financial year using the systematic investment plan route. Not only is this lighter on the wallet, the staggered investments can also aid investors to gain from the volatility in equity markets by reducing the average cost of purchase.
The BSE Sensex rose by 2.04 per cent during the week to close at 13,703 points; the S&P CNX Nifty appreciated by 2.54 per cent and ended at 3,951 points. The CNX Midcap posted a gain of 1.71 per cent and closed at 5,053 points.
Leading open-ended diversified equity funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| UTI Dynamic Equity | 34.86 | 5.93% | 8.60% | 3.78% | 23.66% | 7.94% | 0.28% |
| Franklin Opportunities | 26.53 | 5.66% | 11.38% | 27.30% | 66.96% | 7.82% | 0.45% |
| UTI Thematic Mid Cap | 22.61 | 5.26% | 7.16% | -2.29% | 24.78% | 7.91% | 0.33% |
| Canemerging Equities | 15.65 | 4.33% | 6.39% | 6.17% | 28.81% | 7.91% | 0.27% |
| ABN AMRO Opportunities | 20.40 | 4.08% | 11.64% | 19.11% | 48.78% | 8.36% | 0.40% |
(The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument) (Standard deviation highlights the element of risk associated with the fund.)
Funds from the "opportunities" segment i.e. ones with a fluid investment style dominated proceedings in the diversified equity funds segment. UTI Dynamic Equity (5.93 per cent) topped the diversified equity funds segment, followed by Franklin Opportunities (5.66 per cent). ABN AMRO Opportunities (4.08 per cent) also featured among the weekly top performers.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| DWS Premier Bond | 12.25 | 0.62% | 1.54% | 3.89% | 3.97% | 0.70% | -0.16% |
| Birla Sun Life Income | 25.56 | 0.48% | 1.97% | 5.35% | 7.38% | 0.38% | -0.13% |
| Tata Income | 24.79 | 0.44% | 0.83% | 3.12% | 2.61% | 1.67% | 0.02% |
| Tata Income Plus | 12.40 | 0.39% | 0.85% | 3.17% | 5.11% | 0.35% | -0.27% |
| Grindlays Dynamic Bond | 13.38 | 0.39% | 1.18% | 4.71% | 6.24% | 0.27% | -0.38% |
The 10-Yr 7.59 per cent GOI yield closed at 7.43 per cent (November 24, 2006), 10 basis points below the previous weekly close. Bond prices and yields are inversely related, with falling yields translating into higher bond prices and net asset values for debt fund investors.
DWS Premier Bond (0.62 per cent) emerged as the top performer in the long-term debt funds segment. Birla Sun Life Income (0.48 per cent) and Tata Income (0.44 per cent) occupied second and third positions respectively.
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| JM Balanced | 22.96 | 3.28% | 6.05% | 15.38% | 46.99% | 5.01% | 0.44% |
| Magnum Balanced | 25.76 | 3.21% | 7.07% | 14.80% | 39.17% | 4.99% | 0.50% |
| Canbalance | 28.03 | 2.79% | 4.90% | 6.82% | 22.72% | 4.53% | 0.20% |
| Escorts Balanced | 46.29 | 2.47% | 5.72% | 11.58% | 36.89% | 4.78% | 0.48% |
| PruICICI Balanced | 33.99 | 2.44% | 4.49% | 12.14% | 35.04% | 4.43% | 0.51% |
Balanced funds drew from the rising equity markets. JM Balanced (3.28 per cent) led the pack, followed by Magnum Balanced (3.21 per cent).
Personalfn's team of financial planners recently met up with a client whose portfolio was the ideal candidate for a makeover. The seemingly well-placed client was invested in 3 properties accounting for 83 per cent of his asset portfolio. And the lop-sided portfolio was the least of his worries. He had not yet set any financial goals for himself and was underinsured despite being the sole earning member in his family, among others.
Case Study: Financial planning interrupted!
The above case only underscores the importance of having access to professional advice while planning one's finances. A seemingly picture-perfect situation can be anything but perfect in reality. Investors should engage the services of a competent and experienced financial planner while planning their finances. Missing out on quality advice could well mean that one is headed for a financial disaster.
For a Free download of the latest issue of Money Simplified The 2007 Guide to Tax Planning, Click here!
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