The month of September proved to be the most lucrative one in the calendar year so far, as equity markets set and breached record highs at alarming regularity. The BSE Sensex posted a gain of 12.87 per cent during the month and closed at 17,291 points; the S&P CNX Nifty appreciated by 12.48 per cent and ended at 5,021 points. The CNX Midcap rose by 13.62 per cent, before settling at 6,867 points.
During the month, foreign institutional investors were net buyers of equities with purchase of Rs 189,485 m (as on September 28, 2007). On the contrary, mutual funds were net sellers to the tune of Rs 7,618 m
Investing in mutual funds has gained immense popularity over a period of time. On the flipside, there are a large number of mutual funds myths doing the rounds as well. For example, investors widely believe that opting for the growth option is advisable, since it offers higher returns vis-à-vis the dividend option. Nothing could be farther from the truth. So long as both the options have the same portfolios, they offer the same returns i.e. the growth option isn't superior to the dividend option.
Investment decisions based on flawed information (read myths) could lead to incorrect and unsuitable investments being made. This month we put up a note, where we debunked the 5 most popular mutual fund myths.
|
Equity Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
JM Financial Services |
14.91 |
22.28% |
69.87% |
- |
- |
- |
|
UTI Thematic Banking |
28.49 |
21.18% |
53.83% |
58.10% |
8.40% |
0.27% |
|
Sundaram S.M.I.L.E |
24.51 |
20.95% |
49.32% |
44.73% |
8.14% |
0.28% |
|
Tauras Discovery Stock |
21.73 |
20.32% |
55.55% |
57.12% |
10.09% |
0.17% |
|
Sundaram Select Focus |
80.24 |
19.76% |
46.26% |
52.02% |
7.67% |
0.41% |
(Source: Credence Analytics. NAV data as on September 28, 2007.)
(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.)
JM Financial Services (22.28 per cent) occupied the top slot in the equity funds segment, followed by UTI Thematic Banking (21.18 per cent). Mid cap offerings i.e. Sundaram S.M.I.L.E (20.95 per cent) and Tauras Discovery Stock (20.32 per cent), also featured in the top performers' list.
|
Debt Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
UTI Bond |
22.69 |
1.73% |
4.75% |
6.63% |
0.54% |
-0.16% |
|
Birla Income Plus |
32.73 |
1.42% |
7.95% |
9.51% |
0.96% |
0.04% |
|
Birla Sun Life Income |
27.83 |
1.42% |
7.46% |
11.56% |
0.75% |
0.19% |
|
HDFC Income |
17.34 |
1.02% |
4.73% |
4.97% |
0.82% |
-0.29% |
|
Templeton India Income |
27.04 |
1.01% |
5.31% |
7.19% |
0.88% |
-0.14% |
(Source: Credence Analytics. NAV data as on September 28, 2007.)
Funds from Birla Sun Life Mutual Fund ruled the roost in the long-term debt funds segment. UTI Bond (1.73 per cent) emerged as the best performer followed by Birla Income Plus (1.42 per cent) and Birla Sun Life Income (1.42 per cent).
|
Balanced Funds |
NAV (Rs) |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Escorts Balanced |
61.28 |
14.20% |
43.49% |
42.09% |
5.97% |
0.36% |
|
LIC MF Balanced |
52.40 |
12.99% |
28.24% |
25.26% |
5.95% |
0.28% |
|
Sundaram Balanced |
40.13 |
12.68% |
33.37% |
35.81% |
5.46% |
0.33% |
|
Canbalanced II |
45.81 |
12.61% |
31.41% |
26.79% |
5.67% |
0.38% |
|
DSP ML Balanced |
48.13 |
11.68% |
32.66% |
37.74% |
5.39% |
0.38% |
(Source: Credence Analytics. NAV data as on September 28, 2007.)
Balanced funds drew from the rising equity markets. Escorts Balanced (14.20 per cent) topped the balanced funds segment. LIC MF Balanced (12.99 per cent) and Sundaram Balanced (12.68 per cent) occupied second and third positions respectively.
Tax-planning for most investors entails compulsory investments made to save tax. Therefore tax-planning is often considered as an 'end of the financial year' activity. At Personalfn, we have always maintained that tax-planning deserves greater thought and importance. Tax-planning is as much about contributing to your financial goals as it is about reducing the tax liability. Hence, investors should start tax-planning from day one of the financial year. To simplify the tax-planning exercise, we broke down the same into 3 steps.
With markets surging to record highs and acting at their volatile best, a question that many investors pose to us is -- what should I do now? Our advice is quite simple -- continue to invest in line with your risk profile and predetermined investment objectives. Market conditions might change, but your risk profile doesn't in line with the same. So curb the temptation to make a quick buck by taking on higher risk. Over the long-term, it is a disciplined investment approach that pays off as opposed to undue risk.
By Personalfn.com, a financial planning initiative
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