At Personalfn, we have always (perhaps at the risk of sounding monotonous at times), exhorted investors, to stick to the basics like investing in line with their risk appetite and predetermined investment plans. We have repeatedly urged them to invest using the systematic investment plan route. We believe in the context of the market conditions, now is a good time to revisit that topic.
Experience suggests that in rising markets when the investment environment seems hunky dory, investors aren't too receptive to boring ideas like sticking to basics. Instead "hot tips" to make a quick buck is what most investors are interested in. In rising markets, it is not uncommon to see investors ignore their risk appetites and invest in avenues that are clearly unsuitable for them. Rising markets can have that effect on investors.
However, when the markets run into rough weather and despondency sets in, it's a different scenario. Investors are willing to listen to reason and sound advice has more takers. Hence this discussion on going back to basics.
Equity Funds: Biggest Losers
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| STANCHART PREMIER EQUITY | 11.82 | -4.37% | -9.29% | 22.74% | - | NA | NA |
| MAGNUM GLOBAL | 28.16 | -4.12% | -6.32% | 36.90% | 84.16% | 6.31% | 0.88% |
| CHOLA MID CAP | 22.52 | -4.01% | -10.28% | 12.55% | 44.96% | 5.39% | 0.60% |
| MAGNUM EMERGING BUS. | 26.18 | -3.86% | -9.97% | 15.79% | 58.28% | 7.25% | 0.61% |
| UTI VALUE FUND | 28.36 | -3.08% | -8.96% | 12.85% | 40.19% | 5.15% | 0.53% |
Stanchart Premier Equity (-4.37 per cent) was the week's biggest loser in the diversified equity funds segment. Funds from SBI Mutual Fund i.e. Magnum Global (-4.12 per cent) and Magnum Emerging Business (-3.86 per cent) also featured in the losers list.
Leading Debt Funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| DEUTSCHE PREM. BOND | 11.79 | 0.22% | 0.24% | 0.07% | 3.91% | 0.61% | -0.46% |
| PRUICICI LONGTERM | 14.74 | 0.15% | 0.61% | 2.49% | 5.66% | 0.85% | 0.20% |
| PRUICICI FLEXIBLE INC. | 12.91 | 0.14% | 0.60% | 2.02% | 5.23% | 0.39% | -0.58% |
| CHOLA FREEDOM INC. | 11.17 | 0.14% | 0.37% | 2.09% | 4.85% | 0.10% | -2.01% |
| KOTAK FLEXI DEBT | 10.94 | 0.14% | 0.59% | 3.12% | 6.18% | 0.06% | -0.75% |
The 7.38 per cent 2015 GOI yield closed at 7.54 per cent (May 26, 2006), 1 basis point or 0.01 per cent below the previous weekly close. Bond yields and prices are inversely related with falling yields translating into higher bond prices and net asset values for debt fund investors.
Deutsche Premier Bond (0.22 per cent) surfaced as top performer in the debt funds segment. PruICICI Long Term (0.15%) and PruICICI Flexible Income (0.14 per cent) occupied second and third positions respectively.
Balanced Funds: Biggest Losers
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| SUNDARAM BAL | 28.87 | -3.23% | -7.22% | 38.83% | 37.56% | 3.50% | 0.57% |
| FT INDIA BALANCED | 27.45 | -1.68% | -7.33% | 40.19% | 41.25% | 3.91% | 0.50% |
| ING BALANCE | 16.68 | -1.48% | -5.60% | 38.31% | 38.64% | 3.84% | 0.58% |
| HDFC PRUDENCE | 92.21 | -1.31% | -4.59% | 42.96% | 48.09% | 3.85% | 0.69% |
| DSP ML BAL | 32.75 | -1.00% | -7.49% | 44.53% | 42.58% | 3.84% | 0.57% |
Sundaram Balanced (-3.23 per cent) did its reputation no good. Similarly funds like HDFC Prudence (-1.31 per cent) and DSP ML Balanced (-1.00 per cent) were also caught on the wrong foot.
Now that markets are significantly down from the record highs, a question that needs to be asked is "should you still be investing in the markets?". In our view, the long term investment opportunity presented by the Indian stock markets remains unchanged. The fundamentals of the economy and well-managed companies continue to be generally robust; we expect a 15 per cent growth in earnings over the 3-5 year period.
So how do investors benefit from this plausible opportunity? We maintain that mutual funds are investors' best bets. The opportunity to access the markets using the fund manager's expertise and at a nominal cost makes them a "must have" proposition for retail investors.
And now for the choice of funds. Getting invested in a mutual fund scheme that is right for you is vital. A "one size fits all" approach doesn't work while investing. If you can take on only a moderate degree of risk, then perhaps a hybrid like monthly income plans is your calling. If you can take on a greater degree of risk, then a well-diversified equity fund should find place in your portfolio. Sector funds and thematic funds which intend to capitalise on the next big investment opportunity should be steered clear of.
Investing at its core is a rather serious, yet simple activity. It's about setting goals, getting invested in the right avenues to achieve those goals and staying invested in a disciplined manner for the entire tenure without getting distracted by extraneous short-term occurrences.
As we have always maintained, stick to the basics and you will have a much better chance of achieving your financial goals.
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