The trouble with rising markets is that confidence levels among investors rise disproportionately and the investment sentiment turns a bit too euphoric.
Investors tend to become careless and often overlook some of the basic tenets of investing; in particular - a review of their investment portfolio.
Conducive market conditions have the ability to mask a poor investment decision or even make it seem like a good one. But the fact remains, that a wrong investment stays that way.
Sure, investors could well clock attractive returns, but then that is a factor of the rising markets, not something that the investment should be credited for. Over a longer time frame, when the markets witness a cycle (upswing and downturn), a poor investment inevitably stands exposed.
Which brings us to the question -- what constitutes a wrong investment? In the domain of investments, the concept of "one size fits all" doesn't work. What could be the right investment for one investor might be grossly inappropriate for another.
Hence, broadly speaking, an investment that doesn't match the investor's risk profile and fails to contribute towards achieving the latter's financial goals and objectives is a wrong one.
For example, for a retired individual who has a low risk appetite and depends on investments to provide for his regular needs, investing in a sector fund would be a wrong investment.
Fortunately, for investors, rising markets offer the opportunity to exit the wrong investments, that too at a profit. Instead of becoming greedy and taking on higher risk by investing in ill-advised investment avenues, now is the time to conduct a thorough review of your portfolio and get rid of the "deadwood."
Don't get carried away by rising markets, instead, use them to your advantage!
The BSE Sensex appreciated by 1.89% during the week to close at 12,237 points, while the S&P CNX Nifty ended at 3,544 points (up by 1.87%). Conversely, the CNX Midcap shed 0.22% to close at 4,512 points.
Leading open-ended diversified equity funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Sahara Growth | 43.97 | 1.96% | 6.26% | 4.02% | 40.36% | 6.36% | 0.43% |
| GIC Growth | 36.87 | 1.85% | 8.03% | -1.23% | 30.19% | 7.22% | 0.39% |
| Birla Sun Life Equity | 155.61 | 1.83% | 8.30% | 3.07% | 41.10% | 7.21% | 0.49% |
| Reliance Growth | 228.49 | 1.80% | 5.83% | 3.03% | 40.18% | 7.18% | 0.51% |
| ABN AMRO Equity Opp. | 17.45 | 1.77% | 7.30% | -1.11% | 37.12% | 6.69% | 0.46% |
(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.)
Sahara Growth (1.96%) surfaced as the top performer in the diversified equity funds segment followed by GIC Growth (1.85%). Birla Sun Life Equity (1.83%) and Reliance Growth (1.80%) also featured in the list.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| PruICICI Income | 21.09 | 0.67% | 1.33% | 3.62% | 4.30% | 0.45% | -0.43% |
| Tata Dynamic Bond | 11.72 | 0.45% | 0.82% | 2.89% | 5.23% | 0.33% | -0.33% |
| Templeton Inc. Builder | 24.47 | 0.43% | 0.97% | 2.53% | 2.30% | 0.45% | -0.67% |
| Reliance Income | 22.70 | 0.39% | 1.00% | 3.08% | 4.61% | 0.38% | -0.32% |
| Grindlays Dynamic Bond | 13.15 | 0.37% | 0.94% | 3.62% | 5.19% | 0.45% | -0.43% |
The 10-year 7.59% GOI yield closed at 7.62% (September 22, 2006), 21 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.
Powered by a superlative performance, PruICICI Income (0.67%) emerged as the best performer in the debt funds segment. Tata Dynamic Bond (0.45%) and Templeton Income Builder (0.43%) occupied second and third positions respectively.
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Birla Sun Life 95 | 160.49 | 2.93% | 7.09% | 6.77% | 28.38% | 4.54% | 0.48% |
| Escorts Balance | 43.12 | 2.02% | 5.99% | 2.50% | 32.63% | 4.49% | 0.49% |
| Birla Balance | 25.78 | 0.98% | 6.27% | 4.80% | 28.39% | 4.03% | 0.41% |
| HDFC Balance | 29.76 | 0.93% | 5.32% | 4.47% | 27.18% | 4.47% | 0.39% |
| LIC Balance | 41.64 | 0.92% | 4.44% | -1.40% | 32.38% | 5.21% | 0.33% |
Balanced funds drew from the conducive conditions in the equity markets. Funds from Birla Sun Life Mutual Fund dominated proceedings; Birla Sun Life 95 (2.93%) topped the balanced funds segment and Birla Balance (0.98%) made it to the top performers' list. Escorts Balance (2.02%) also featured in the list at second position.
This week Personalfn's research team profiled the UTI - Wealth Builder Fund NFO (new fund offer). A close-ended diversified equity fund with a 5-year lock-in, the fund will invest in stocks across sectors and market segments.
It is also mandated to use derivatives to hedge its equity portfolio against short-term volatility in markets. We believe that the fund can add little value to investors' portfolios and investors should give it a miss.
With the impending tax-planning season, a number of tax-saving fund NFOs are expected to be launched soon. Watch this space to know more about the same and to find out if they should find a place in your tax-planning kitty.
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