Tuesday, September 23, 2008

Birla Sunlife Dividend Yield fund

Mr.SINHA asked :
Can you tell me something about Birla Sunlife Dividend Yield Fund?

Dear Sinha,
Dividend Funds, as a norm, invest in High Dividend Yielding Stocks. Which means, they invest in Fundamentally Strong companies. However, they will be unable to invest in BlueChips, as BlueChips do not have a High Dividend payout Ratio, which makes these companies unattractive to this fund.
High Dividend Yielding Stocks tend to fall slower and lower than the rest of the market and likewise, tend to rise slower and lower than the rest of the market. Thus, the Dividend Funds will underperform in a Rising Market and Underperform in a Falling Market.
So, this fund is neither suitable to a Aggresssive Investor nor a Passive Investor. Dividend Funds were introduced to cater to investors who looked at protecting their Capital as a priority and Appreciation only as Secondary.
Rather, one can look at investing in Large Cap Funds. Large Cap Funds like Dividend Funds fall less than the Rest of Market, but the difference here is, Large Cap Funds rise Faster than the Dividend Fund in a Rising Market.
Thus even for a Risk-Averse Investor, it is advised to invest in Large Cap funds rather than a Dividend Funds.
Regarding Birla Sunlife dividend Fund, The Fund has been an underperformer over a period of 1, 3, 5 years. So, clearly an Underperformer. The only good point is, that the fund fell less than its peers. So, Mr.Sinha, better look to invest in Diversified Equity Funds with a Large Cap Focus like Birla sunlife Frontline Equity Fund
DSPML Top 200 fund
HDFC Top 200 Fund
Kotak K30 fund
Sundaram Select Focus fund

Srikanth Shankar Maturbai

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