And his portfolio comprised of the following -- a close-ended mid cap fund, some thematic funds (of the infrastructure variety) and a couple of global funds. Apart from the fact that most of the funds were new fund offers (i.e. unproven entities), another striking feature was that the portfolio lacked even a single plain-vanilla offering like a diversified equity fund. While the individual in question can be excused, given that his lack of familiarity with mutual funds, this trend isn't entirely uncommon.
Investors' fascination for an 'out-of-the-ordinary' or 'fancy' investment avenue is baffling. There is an inexplicable urge in investors to add an unusual investment avenue to their portfolios. For example, a conventional diversified equity fund with an impressive long-term track record routinely gets the thumbs down. The reason being -- it's seen as a boring investment (whatever that means). On the other hand, thematic funds like infrastructure funds, service sector funds and micro cap funds are gleefully lapped up.
There is a dire need for investors to understand that successful investing has nothing to do with how fancy or interesting their investments sound. An investment avenue is required to help the investor achieve his financial goals, while exposing him to acceptable risk levels. And in the mutual funds segment, conventional plain-vanilla offerings deliver the goods better than most others. An investor building a mutual fund portfolio should stick to proven diversified equity funds, balanced funds and monthly income plans, among others depending on his risk profile and investment objective.
Holding a solid core portfolio comprised of aforementioned funds should be every investor's priority. Fancy offerings like thematic funds should ideally be given a miss. And if at all they are to be invested in, it should only be after a core portfolio is in place. Secondly, such funds should occupy a minor portion of the portfolio and only if the investor's risk profile permits the same. Keep it simple -- that could well be the mantra to financial success.
Equity markets shrugged off concerns about the P-Notes issue and staged a strong comeback this week. The BSE Sensex rose by 9.58% and closed at 19,243 points; the S&P CNX Nifty ended at 5,702 points (up by 9.34%). The CNX Midcap rose by 10.67%, before settling at 7,292 points.
Leading open-ended equity funds
|
Equity Funds |
NAV (Rs) |
1-Wk |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
LIC Equity Plan |
30.01 |
16.87% |
22.48% |
44.09% |
54.15% |
7.91% |
0.29% |
|
Taurus Starshare |
64.43 |
16.81% |
17.42% |
58.23% |
85.73% |
9.09% |
0.40% |
|
Bonanza Exclusive |
53.26 |
15.98% |
18.20% |
54.78% |
64.54% |
7.98% |
0.37% |
|
UTI Banking |
30.83 |
15.21% |
11.70% |
49.30% |
67.28% |
7.89% |
0.31% |
|
Tauras Discovery Stock |
23.09 |
14.59% |
8.35% |
47.54% |
63.07% |
9.58% |
0.23% |
(Source: Credence Analytics. NAV data as on October 26, 2007.)
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
Funds from Taurus Mutual Fund dominated the equity funds segment. LIC Equity (16.87%) led the pack, followed closely by Taurus Starshare (16.81%). Bonanza Exclusive (15.98%) and UTI Banking (15.21%) also featured among the top performers.
Leading open-ended long-term debt funds
|
Debt Funds |
NAV (Rs) |
1-Wk |
1-Mth |
6-Mth |
1-Yr |
SD |
SR |
|
Reliance Income |
24.67 |
1.19% |
2.12% |
6.12% |
7.76% |
0.67% |
-0.08% |
|
ICICI Pru. Income |
23.70 |
1.14% |
2.19% |
6.91% |
8.58% |
1.02% |
-0.04% |
|
HDFC Income |
17.65 |
0.93% |
2.12% |
6.16% |
6.43% |
0.86% |
-0.24% |
|
HDFC Gilt |
16.22 |
0.93% |
1.44% |
4.05% |
4.59% |
0.54% |
-0.52% |
|
Templeton GSec. |
17.16 |
0.91% |
1.34% |
3.63% |
5.61% |
0.80% |
-0.16% |
(Source: Credence Analytics. NAV data as on October 26, 2007.)
The 10-Yr 8.07% GOI yield closed at 7.95% (October 26, 2007, source: Reserve Bank of India website), 1 basis point 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.
Reliance Income (1.19%) emerged as the best performer in long-term debt funds segment; ICICI Prudential Income (1.14%) and HDFC Income (0.93%) 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 |
|
Escorts Balanced |
66.96 |
11.83% |
9.85% |
40.20% |
52.94% |
5.90% |
0.39% |
|
BOB Balanced |
31.84 |
10.06% |
17.36% |
36.59% |
40.70% |
5.90% |
0.28% |
|
HDFC Prudence |
147.05 |
9.50% |
9.49% |
27.39% |
39.16% |
4.38% |
0.46% |
|
LIC MF Balanced |
58.10 |
9.24% |
13.76% |
33.44% |
36.22% |
6.10% |
0.33% |
|
Tata Balanced |
69.09 |
8.77% |
11.71% |
33.68% |
51.19% |
5.72% |
0.42% |
(Source: Credence Analytics. NAV data as on October 26, 2007.)
Powered by a strong showing, Escorts Balanced (11.83%) occupied the top slot in the balanced funds segment. BOB Balanced (10.06%) and HDFC Prudence (9.50%) also featured in the top performers' list.
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