Comparing Mutual Funds

Whenever we think about investing in mutual funds, the first question comes up - which fund? It requires a lot of study and comparison before you can pick up the right fund. Otherwise, you can take professional help to determine the best or best set of funds. But still the question remains, how do the professionals choose their funds.
The most popular method to choose a fund is to believe that past performance of a fund will repeat. So we study the past performance of lots of funds and find out the best risk adjusted returns. We do go to various sites to look for long term (3 yrs or 5 yrs) returns only to find various values in different websites. Oh yes! they handle the data in their own style and land up in a value which is far from understandable by a common man. The other method is to trust the star rating of the various evaluators and invest according to their suggestion - only to find the star rating has changed in next three to six months. So what do we do?

IT'S BETTER TO AVOID NEW FUND OFFERS
1. Follow star rating from a single source e.g. a single website for all Mutual Funds. This will give you at least a common approach.
2. Select first five from a category of funds, you wish to invest in. Like Equity type, Income / debt type or Balanced type etc.
3. Compare their investment focus viz, largecap / midcap / smallcap.
4. Compare their size. Avoid very small funds for example up to 300 crore.
5. Compare their beta, standard deviation and expense ratio. Choose the one having nearer to 1 beta, less standard deviation value and lowest expense ratio. Be prepared to trade off here - for example - better expense ratio for higher standard deviation.
6. Relative returns may also be considered.
7. Keep a vigil on the ranking,returns, expense ratio of the fund from the same source or website every three months. Switch funds if you find deterioration in consecutive two quarters.

Hope this help you to select the right funds. Happy investing!

Optimize Tax utilizing mutual funds

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FMP - Attractive offer now

Fixed maturity plans, or FMPs as they are popularly called, are close-ended funds with a fixed tenure and invest in a portfolio of debt products whose maturity coincides with the maturity of the product.

The primary objective of an FMP is to generate income while protecting the capital by investing in a portfolio of debt and money market securities. The tenure can be of different maturities, ranging from one month to five years. FMPs are effectively like bank fixed deposits, but one that has a lower tax incidence. This entails a good difference in net maturity value.

The advantage of investing in FMPs is that they have less risk of capital loss than equity funds due to their investment in debt and money market instruments. Apart from this, FMPs are not affected much by interest rate volatility when held till maturity. The return on these funds is indicated and is close to the actual returns. If you are not a risk-free investor and look for an assured income, this is the right option for you.

Gold as an investment

The value of gold, in terms of the real goods and services that it can buy, has remained largely stable for many years. In 1900, the gold price was $20.67/oz, which equates to about $503/oz in today's prices. In the two years to end-December 2006, the actual price of gold averaged $524. So the real price of gold changed very little over a century characterized by sweeping change and repeated geopolitical shocks.
In these days when the stock market has more than -30% of it's previous high, Fixed deposits in banks offer less than @10% taxable return - Gold can be a very good investment option.
It is interesting to note that Gold doesn't have a correlation with the other asset classes like bond, share or cash. So it can be a good tool for portfolio diversification. One can keep @5% assets in Gold. Invest in Gold in the form of bars, coins, Exchange Traded Fund etc.

SENSEX crashes further

Sensex crashes to 13461.60 (by -340.62) amid political uncertainty and rising crude oil price.

RBI hikes REPO rate and CRR

RBI has increased the Repo Rate ( a rate at which RBI lends money to the banks etc.) by 50 basis points to @8.5% with immediate effect and Cash Reserve Ratio (CRR) by 50 basis points to @8.75% in two stages from July5 and July 19, 2008.
T a recent Repo hike of 25 basis points on June 11, 2008. The last CRR hike was on May24, 2008.

The four major issues that influenced RBI:

1. Inflation has increased to a 13 year high to @11.05% YOY as on June7, 2008
2. Investment demand remained strong increase spit of earlier increases
3. Strong internal consumption. Non-oil item import has increased considerably
4. Higher supply of oil bonds and other liabilities increased pressure on Government

Expected impact on Market

Short term money market rates to move up

Investor's should:
Invest @50% in debt fund with at least six months horizon
Invest @50% of the investible fund in Equity based Mutual Fund for longer term ( 3 years)

New Scheme Calender

Fund	Scheme	Type	Objective	Face Value (Rs.)	Intial Offer Period
					From	To
Birla	Birla Fixed Term Plan - Series AW	Close	Debt	10	09-JUN-08	07-JUL-08
Chola	DBS Chola FMP Series - 9 - 13 Months	Close	Debt	10	18-JUN-08	26-JUN-08
Escorts	Escorts FMP - 13 Months	Close	Debt	10	23-JUN-08	30-JUN-08
HDFC	HDFC FMP - 370 D - June 2008 (2) - Series VIII	Close	Debt	10	20-JUN-08	26-JUN-08
JM Financial	JM Fixed Maturity Fund - Series X - Q5	Close	Debt	10	18-JUN-08	16-JUL-08
JM Financial	JM Fixed Maturity Fund - Series X - Q4	Close	Debt	10	18-JUN-08	09-JUL-08
JM Financial	JM Fixed Maturity Fund - Series X - Q3	Close	Debt	10	12-JUN-08	11-JUL-08
JM Financial	JM Fixed Maturity Fund - Series X - Q2	Close	Debt	10	03-JUN-08	02-JUL-08
Kotak	Kotak FMP 12M Series 7	Close	Debt	10	09-JUN-08	26-JUN-08
LIC	LICMF Fixed Maturity Plan - Series 42	Close	Debt	10	25-JUN-08	27-JUN-08