Mutual Fund Advise

An Investor asked me :

"Dear Mr. Srikanth

I am a small investor, age 43. I want to reshuffle my portfolio.
I want to switch in the following fund due to laggard of the fund performance, Pl. advice me or give your valuable suggestion for the following fund. All the below fund I want to switch in or switch out in one time in during April & May'08. I am hold the fund 3 to 5years.


From Sundaram Select Midcap to Select Focus (Rs.80,000)
From Magnum Global – switch out to Birla Midcap (Rs.80000)
HSBC Adv. India Fund –switch out to Birla Frontline Equity (Rs.20000)
Magnum Multiplier Plus to Magnum Contra (Rs.113000)
DSP ML Equity to DSP ML Top 100 (Rs.65000)
HDFC Equity to HDFC Top 200 (Rs.55000)
Fidelity Equity Fund – switch out to HDFC Top 200 (Rs.20000)
Franklin Prima Plus – switch out to HDFC Top200(Rs.20000)

All the above fund I invested before eight months now loss by 5% to 10% approx.

Expecting your best advice / suggestions.


Best regards,

Prithwis"




My Reply was :
Dear PritwisDear sir,
Your investment is above 4 lakhs and so investment is not small. You has said you want to hold for 3 - 5 years which is good and I dont think if your time horizon is that long, you need to make such major changes.
However, you has asked for my suggestion and here goes.
1. Switching from Sundaram Select Midcap to Select Focus., definitely good and recommended.
2. SBI Magnum Global to Birla Midcap switch is not fully agreed upon. Even though Birla Midcap has performed well, I would rather have Reliance Growth Fund which has a better track record.
3. HSBC Adv India Fund to Birla Frontline Equity switch is a must and should be done at the earliest.
4. I recommend some changes with your switch from Magnum Multiplier Plus to Magnum Contra. First of all, Divide your amount in Multiplier Plus equally and invest in Sbi Comma Fund and Sbi Balanced Fund equally. Sbi Comma Fund should be an outperformer going forward due to booming Commodities Market and Sbi Balanced Fund will give a bit of downward protection to your portfolio in weak markets.
5. DSPML Top 100 Fund has become a favourite of mine in recent times and a switch to it is always welcome.
6. And HDFC Top 200 Fund is my evergreen favourite, and I always recommend in every portfolio and should form a core of your portfolio.
7. Switching from Fidelity Equity Fund to HDFC Top 200 Fund could be avoided because you already have a exposure to HDFC Top 200 Fund and also Fidelity Equity Fund (though a underperformer recently) has beaten the Benchmark consistently since inception.
8. Finally your switch from Franklin Prima Plus to HDFC Top 200 Fund need to be reconsidered and instead you can look at Templeton India Equity Income Fund which invests in High Dividend Yield Securities in India and abroad. It has given a return of above 22% since launch and has beaten the Benchmark comfortably.
I feel you are shaken by the recent market volatility and are considering switching to Large Cap Funds. Well, it is a good thing but if you are here for long term you need not worry, mutual funds are best avenue for high returns. And please invest through Sip in future.
Thank you,
Best of luck.

Say NO to ULIP

Basically, ULIPs are expensive and opaque mutual funds disguised as insurance. This permits the so-called insurance companies to circumvent the strict transparency, expense, and commission-related laws that govern mutual funds. It also enables them to escape the scrutiny of SEBI, which has historically been a tougher regulator than IRDA. Will the new regulations stop these abuses? No way. All I'm hopeful of is that a handful of alert and aware investors will read this new document and ask some tough questions. Anyhow, the realistic situation is that there's almost no chance that anyone will step forward and fix things. As someone responsible for your money, you need to be sensible yourself. Insurance is a great idea and most of us need it. But we need real insurance, which is to say term insurance. Here's what you should do. Make a liberal estimate of how much money your family will need if you die suddenly. Shop around and buy the cheapest term insurance you can find. You'll be stunned at how cheap term insurance is and also at how difficult it is to buy (The quickest way to get rid of an insurance agent is to say that you're interested only in term insurance). You probably won't be able to think logically about insurance as long as you don't realise that it's an expense. It's a necessary expense, like buying a helmet or going to a doctor, but it's not an investment. You need both insurance and investment. To get the best deal in both, don't mix them up.

Courtesy :Dhirendra Kumar, Value Research

Thanks to Mr. Dhirendra Kumar editor of Mutual Fund Insight magazine & CEO of Value Research website - he opened my eyes. Now I am a staunch believer of TERM INSURANCE. If you really think hard about Insurance - you will realise the importance of TERM INSURANCE. My experience was that I felt enlightened. Insurance is for your dependants or nominees. It is for reducing financial loss suffered by them. IT IS NOT AN INVESTMENT OR ONLY A TAX SAVING AVENUE. Do not look at maturity value of insurance policies - the moment you do that you are looking at your own benefit - then you lose focus - . Always look
for policies which give maximum INSURANCE COVER for the least premium. Look at the ratio between annual premium and SUM INSURED. The one with the least ratio is the best for you.

Templeton India Equity Income Fund

Dear Arin,
Your choice of investing in Templeton India Equity Income Fund is a good choice. This Fund invests with a focus on stocks offering high dividend yield in India and abroad. So, this fund gives you dual advantage of not only Dividend yield focus but also diversification by investing in foreign securities.

The Fund has given a return of 22% Compounded annually since launch and has comfortably outperformed its Benchmark. Most importantly, the Fund has fared particularly well during the recent crash outperforming the index.
So, all in all, A Good diversification. Go ahead an invest.
Best of luck.

Mutual Fund Advisor

I recently read a letter by a reader in a personal finance magazine which was a really hard hitting and I am reproducing the same here for the benefit of all :
"The author while welcoming the move which does away with the need of an mutual fund agent says 'why pay the agent just because he gets me a form while it is I who decides on the funds to buy"., It's like saying why pay the doctor just because he writes a prescription for my headache. Just like the doctor, who does more than writing prescriptions, an agent does more than just getting a form. "

Now I would be very happy if you can give your opinion on this.
Thank you.

Mutual Fund Advise

Like Ranjan, I too am against mixing investment with insurance. For insurance there are separate avenues avaialable. So, just for the sake of Insurance I would not recommend DWS Tax Saver.
Now, coming to your investments you seem to have too much exposure to SBI Mutual Fund. So, instead of Sbi magnum balanced fund you can consider DSPML Balanced Fund.
Discontinuing with HDFC Tax Saver may not be such a good idea. Even though the fund's performance has not been upto mark recently, you should that the Fund has always outperformed the Benchmark over longer periods which inspires confidence. And moreover, HDFC as a Fund House position themselves as "No Surprise Fund House" which explains their performance during Bull Market. It is when the market is Bearish or Sideways that the Funds of HDFC give better returns than thier peers.
Regarding your other choice of investments they are really good and to compliment these investments and balance your portfolio, I feel you should add a Large Cap Fund like Birla Sunlife Frontline Equity Fund or DSPML Top 100 Fund to your portfolio.
Regarding your choice for 2 more Diversified Funds to add to your Portfolio my choice for the same would among the following:-
Birla Sunlife Equity Fund
Fidelity Equity Fund
Reliance Growth Fund
HDFC top 200 fund
Best of luck.

Mutual Fund Advise

One invester asked "I have invested Rs40000 & Rs 60000 inFidelity Equity & FR. Prima Plus for the last 2-3 years. Now I want to go fora redemption and reinvest the same amount in Kotak Oppertunity and Sundaram Focous respectively. Is the selection of funds and timing is right ?"

MY REPLY ::
Dear Guest,
Selection of funds is secondary for you. Firstly why do you want to switch?. If it is because of laggard performance, then you are 50% not right. I said 50% because Fidelity Equity Fund may have been underperformer in recent times but they have outperformed the Benchmark since inception and more importantly they have a solid reputation and will in all probability give you above average returns.
As for Franklin Prima Plus, not just this fund almost all funds from the Franklin Templeton Fund House have been laggard and underperformed and you would do well to switch partly or in fact fully. And you would better off if you can split the amount and invest equally in Sundaram Select Focus and preferably DSPML Top 100 Fund.
I would like to add one more thing., it is always risky to have too much exposure to one particular Fund House. In your case your investment is spread over just 2 Fund House. Kindly try to spread your investments
And next time try to invest through SIPs to ride out the market volatility and earn above average returns. You could also consider investing in funds like
Birla Sunlife Equity Fund
DSPML Tiger fund
HDFC Top 200 Fund
Kotak 30 Fund
Reliance Growth Fund
SBI MAgnum Comma fund

Best of luck.

NFOs are not bad

In the 9 April 2008 issue of the Outlook Money magazine, the article "Why have NFOs lost their lustre"? made interesting reading. However I beg with the author with some issues. Avoiding all NFOs would not be a very wise thing to do. You have to invest in some NFOs which are exceptions to the existing schemes like DSPML World Gold Fund, Lotus Agile Fund, etc and exotic funds like JM Core 11, especially if they are Close-ended funds because you may not be able to invest in the fund for another 3 years.
Also, the author says that some fund houses give even upto 8.5 percent commission to distributors. I myself being a distributor have never come any fund house giving even 5%!!!! He should be careful before writing such non factual informations. And for ongoing schemes I get only 2%.

Thanking you,
Srikanth Matrubai
sharesher@indiatimes.com