At Personalfn, we have on numerous occasions taken on the mutual fund industry and questioned practices therein when the investor's interest was being compromised with. Rest assured, given our unwavering commitment to the cause of investor empowerment, our stance on related matters will never change. And then there are instances when the mutual fund industry rises to the occasion and delivers in a manner that is worth mentioning.
In the recent past, we have on more than one occasion observed that innovation has emerged as a buzzword of sorts for the industry. Whether it is product launches or practices, the industry (well, at least some players) has displayed an innovative bent of mind that investors rightly expect from them.
For example, not too long ago, a risk-averse investor didn't seem to feature in the mutual fund industry's priority list. This scenario largely changed with the launch of fixed maturity plans (FMPs). Now fund houses have done their bit by launching 'interval funds'. Simply put, interval funds are FMPs with the facility for an automatic rollover i.e. reinvestment on maturity.
In other words, at the end of a stipulated tenure (say a month or a quarter), another similar-tenured FMP offering (which is part of the same series) is available for reinvestment. The new offering could carry a different yield (return). Hence risk-averse investors, who wish to stay invested in an FMP, are saved the bother of liquidating one investment and getting invested afresh.
Then there are fund houses which have chosen to attract investors by lowering the minimum subscription amount for systematic investment plan (SIP) investments, and have instead hiked the minimum number of instalments. In effect, investors can now invest a smaller amount every month (lighter on the wallet) and invest over longer time frames (a fillip to long-term investing).
Finally, funds of the 'liquid plus' variety have widened the investment universe for investors who wish to park surplus money in market-linked investment avenues. These funds maintain a higher maturity profile as compared to conventional liquid funds and thereby have the potential to offer a marginally higher return. For this investors should stay invested for a longer period than liquid funds. In our view, the benefits of such investments outweigh the higher risk associated with them. Also the lower Dividend Distribution Tax (DDT) on such funds vis-à-vis conventional liquid funds helps their cause.
The mutual fund industry's penchant for being innovative could mean that investors will be required to make more and complex choices, going forward. Investors on their part would do well to prepare for the scenario by engaging the services of a qualified and competent investment advisor. This will help them sift the grain from the chaff and concentrate on the relevant offerings.
It was a good week for investors as markets closed in positive terrain. The BSE Sensex posted a gain of 4.11% to close at 13,384 points; the S&P CNX Nifty rose by 4.40%, before settling at 3,917 points. The CNX Midcap closed at 5,024 points (up by 4.49%).
Leading open-ended equity funds
|
Equity Funds |
NAV (Rs) |
1-Wk |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
JM HI FI |
9.56 |
7.78% |
5.52% |
-6.55% |
-3.34% |
12.76% |
-0.06% |
|
JM Emerg. Leaders |
10.14 |
7.53% |
9.03% |
-2.22% |
-18.16% |
7.54% |
-0.08% |
|
CanFortune 94 |
32.75 |
7.41% |
10.46% |
4.17% |
4.70% |
6.87% |
0.25% |
|
JM Equity |
34.36 |
6.58% |
5.82% |
-2.99% |
4.82% |
8.37% |
0.24% |
|
ABN AMRO Equity |
20.55 |
6.44% |
9.37% |
12.57% |
14.22% |
8.64% |
0.28% |
(Source: Credence Analytics. NAV data as on Apr. 13, 2007. Growth over 1-Yr is compounded annualised)
(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 JM Financial Mutual Fund dominated proceedings in the equity funds segment. JM HI FI (7.78%), a thematic fund occupied the top position, followed by JM Emerging Leaders (7.53%). CanFortune 94 (7.41%) and JM Equity (6.58%) came in at third and fourth positions respectively.
Leading open-ended long-term debt funds
|
Debt Funds |
NAV (Rs) |
1-Wk |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Principal GSec IP |
16.04 |
0.78% |
0.25% |
0.17% |
3.66% |
0.83% |
-0.23% |
|
DSP ML GSec |
22.96 |
0.58% |
-0.21% |
0.56% |
3.30% |
0.77% |
-0.29% |
|
Templeton GSec LTP |
16.48 |
0.40% |
-0.46% |
1.76% |
4.60% |
0.78% |
-0.23% |
|
HDFC Gilt |
15.55 |
0.40% |
-0.41% |
0.46% |
1.81% |
0.54% |
-0.67% |
|
Reliance GSec |
12.73 |
0.39% |
-0.05% |
1.73% |
5.72% |
0.77% |
-0.12% |
(Source: Credence Analytics. NAV data as on Apr. 13, 2007. Growth over 1-Yr is compounded annualised)
The benchmark 8.07% 2017 GOI yield closed at 8.10% (April 13, 2007), 7 basis points below the previous weekly close. Bond yields and prices are inversely related with falling yields translating into higher bond prices and net asset value (NAV) for debt fund investors.
Gilt funds (also referred to as government securities funds) featured as top performers in the long-term debt funds segment. Principal GSec IP (0.78%) and DSP ML GSec (0.58%) occupied the first and second slots respectively. Templeton GSec LTP (0.40%) also featured in the list.
Leading open-ended balanced funds
|
Balanced Funds |
NAV (Rs) |
1-Wk |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
JM Balanced |
22.86 |
4.57% |
5.88% |
7.02% |
14.19% |
6.21% |
0.29% |
|
BOB Balanced |
22.59 |
3.91% |
7.32% |
0.85% |
-6.30% |
7.17% |
0.14% |
|
Tata Balanced |
50.08 |
3.85% |
6.87% |
10.48% |
11.20% |
6.13% |
0.27% |
|
HDFC Balanced |
30.10 |
3.80% |
6.14% |
-2.79% |
5.04% |
5.86% |
0.19% |
|
CanBalanced II |
36.43 |
3.76% |
4.53% |
-1.96% |
3.41% |
5.66% |
0.37% |
(Source: Credence Analytics. NAV data as on Apr. 13, 2007. Growth over 1-Yr is compounded annualised)
Balanced funds drew from the conducive conditions in the equity markets. JM Balanced (4.57%) surfaced as the top performer in the balanced funds segment. BOB Balanced (3.91%) and Tata Balanced (3.85%) occupied second and third positions respectively.
At Personalfn, we believe that investing at its core is a rather simple activity. If investors stick to the basics, they are likely to do well for themselves over longer time frames.
To that end, we put up a 5-step strategy to become a smart investor. We believe that adhering to this simple, yet effective, investment strategy can help transform 'regular' investors into 'smart' investors.
By Personalfn.com, a financial planning initiative. It can be reached at info@personalfn.com. Personalfn.com also publishes a free-to-download financial planning guide, Money Simplified. To get a copy of the latest issue - How ULIPs fit in - please click here.
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