JM BASIC FUND - A DISASTER

JM basic fund SIP

Dear Sir
My sip for jm basic fund(G)expires on 25 jan,it was from last one year.Should i continue or not.I have 8 diff. sip of 1000/pm and plannig for 10 year.Others are sbi Contra,hdfc prudence,hsbc equity,Magnum global,diversi power reliance,rel vision and growth,icici infra.All r growth option.I have to re-arrange portfolio,pl advice.
uday1972

SRIKANTH SHANKAR MATRUBAI replied
Dear Uday,
JM Basic Fund has been one of the Disasters of 2008. In fact, the JM Fund House itself has had a Disasterous Year in 2008. Almost all their Funds lost heavily, in fact more than the Benchmark and some Funds lost even 80%.

Their investment
approach too seems to be losing focus looking at thier portfolio. You are advised to STOP your sip in this Fund and Discontinue the same.
Regarding your other Funds, here is my take on each of them :
SBI Contra - Continue
HDFC Prudence — Continue
HSBC Equity — Continue
Magnum Global - Discontinue and switch to Birla Sunlife Equity Fund
Reliance Divesified Power - Discontinue and Switch your SIP to Fidelity Equity Fund
Reliance Vision - Continue
Reliance Growth - continue
ICICI Infra - Stop and Switch your SIP to ICICI Dynamic Fund

And your JM Basic SIP can be routed to a Better Looking and much more promising Sundaram Select Focus Fund.
BEst of luck,
Srikanth Shankar Matrubai,

Visit http://goodfundsadvisor.blogspot.com for Mutual funds
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Advise on My Portfolio...

My old friend Akhil sharma wrote :


Hi Sir,

Hope you are doing really well and your Family and loved ones are in the Pink of Health.
I've finally thought of starting a new SIP in Fidelity Equity Fund.

As of now i'm invested in the following funds:
Sundaram Capex Opportunities - Rs.5500 ( Latest Value :Rs. 3156 )

Reliance RSF Equity - Rs.5000 ( Latest Value :Rs. 2753 )

Reliance Diversified Power - Rs.5000 ( Latest Value :Rs. 2434 )

Kotak Indo World(Closed Ended)- Rs.5000 ( Latest Value :Rs. 1982 )

ICICI Pru Infrastructure Fund -Rs.5000 ( Latest Value :Rs. 2407 )


This is as per My Portfolio On MoneyControl Website.

My question is should i redeem from all of these Funds and invest at a single place or should i stay Invested in them and wait for recoveries.

The thing i'm thinking here is even these funds will have to come to that NAV on which i invested(which have actually fallen by 50%) to give me a NO Profit- No Loss situation.Then my Funds will start giving me returns.That may take a lot of time.Although i have long term horizon of minimum 3-4 years but still should i redeem from these funds and invest the whole lumpsum amount(whatever i finally get!) in a good fund like DSP BR TOP 100 Fund.

NOTE: It has been 14 months approximately that i have invested in these funds.


SRIKANTH SHANKAR MATRUBAI replied :

Dear Akhil,


Well Akhil, better late than never. It is indeed good news that you have thought of starting a SIP in Fidelity Equity fund. This Fund has been a favourite since its launch and it has not disppointed me.
I am surprised by your existing investment. Inspite of being in touch with me, I wonder why you have had so much exposure to One Sector (Infra)???. In fact, expect for Reliance RSF Equity, all your other investments is in those Funds which are directly investing in Infrastructure related stocks. You need to diversify and diversify soon. Thankfully, all your investments have around 5000 and not more.
I will analyse each of them one by one :
Sundaram Capex Opportunities Fund : Even at loss, prefer switching to better performing Sundaram Select Focus Fund.

Reliance RSF Equity : Continue for now

Reliance Diversified Power : Again a Sector Fund. Consider Switching to Reliance Growth Fund

Kotak Indo World : Being Close ended, no option but to continue your investment. Take a call when the Fund becomes Open Ended.

ICICI Pru Infrastructure Fund : Among the Better Performing Infrastructure Funds. I would have had no hestitation in suggesting you to switch to ICICI Dynamic Fund, but for your Age profile (24) and Risk Profile, I suggest you to Continue your holding in the same for the time being.

No need to take hasty decision like Selling all the Funds at one go and investing the whole proceeds into other funds (your choice DSPBR Top 100 fund, by the way, is good), would not be such a Bright Idea.
Instead, consider the above switches and wait for better times. In future, invest only in Well Diversified Equity Funds and preferably invest through SIPS.
Best of luck,
Srikanth Shankar Matrubai.


Visit my blog
http://goodfundsadvisor.blogspot.com


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- Retirement Planning and Son's education

Neha Agarwal wrote :
Dear Sir,
I Just came across your blog and read few suggestions and i really want to say thank you for all your valuable advise to the investors.
I am 32 years old and I have invested in mutual fund by starting from Rs. 500/- from one fund in 2005 and increased year by year. All the funds are having growth option. My investment horizon is +15 years.
I am having 3 year old son and I am investing for retirement and son’s education.
I am the only earning member of my family having 5 members including me.
I am having a housing loan of Rs. 12 lakhs outstanding as on today. I am repaying the principal of housing loan as an when possible.
Please analyse my portfolio and give me the feedback on the funds which I am having and suggest me if I am able to meet my goal.
I am having Life Insurance of Rs. 14, 00,000/-.
I am having following SIP.
The bold ones are the core portfolio as per my views.
Reliance Equity saving – Rs.500/- from 2008
Reliance Growth – Rs.1500/- from 2008 and Rs 500/- from 2006 to 2008
Reliance Vision – Rs.1000/- from 2008 and Rs.500/- from 2006 to 2008
Reliance Diversified Power – Rs.500/- from 2007
Sundaram Select Midcap – Rs.1000/- from 2008 and Rs 500/- from 2006 to 2008 Sundaram India Leadership – Rs.500/- from 2006
Sundaram Select Focus – Rs.1000/- from 2008
Sundaram Capex – Rs.1000/- from 2008 and Rs 500/- from 2006 to 2008
SBI Contra – Rs.500/- from 2005
DSPML tax saver – Rs.1000/- from 2008 and will discontinue as I don’t require any ELSS.
DSPML top 100 – Rs.1000/- from 2008
Kotak Tax Saver – Rs.500/- from 2007 to 2008
HDFC top 200 – Rs. 1000/- from 2008
ICICI Infrastructure Rs. 1000/- from 2007.


I had also invested in following NFO

Reliance Long Term Advantage – Rs. 5000/-
Reliance Natural Resources – Rs. 5000/-
DSPML Mid and Small Cap – Rs. 5000/-
Sundaram Select thematic Energy – Rs. 5000/-
Sundaram Equity – Rs. 5000/-
Sundaram Small Cap – Rs. 5000/-
J M Contra – Rs. 5000/-
Birla Long Term Advantage Fund – Rs. 5000/-
HDFC Midcap – Rs. 5000/-
SBI Tax saver series I – Rs. 15000/-
SBI Blue Chip – Rs. 5000/-
UTI Contra – Rs. 5000/-
UTI Infrastructure Series I – Rs. 5000/-
My question is am i too much betting on Sundaram BNP Paribas</span>?The core portfolio which i indiacted in Bold is it correct ?
I am planning to shift my equity MF investment to balance fund at the age of 45. if this is correct ?
Regards
Amit & Neha





SRIKANTH SHANKAR MATRUBAI advised :

Dear Amit and Neha,

First of all, I thank you for your kind words on my blog.
It is good to see that your faith in Mutual Funds has not diminished even after the mauling the Stock Markets has received in 2008.
Before analysing and commenting on your portfolio, I take pleasure in appreciating on your foresight for creating a Buffer for your Retirement and Son's education.

ANALYSIS AND COMMENTS:
Shockingly, you have got 27 funds in your portfolio. You seem to have become a "collector" of funds. Your portfolio needs a complete overhaul. Some funds are outright sell, even at a loss.
I will go through each fund one by one.
1. Reliance Equity Saving (Sip 500 from 2008) :
Probably you mean to say Reliance Regular Savings Fund (Equity). This fund has had a terrific 2007-08 and since then like other funds, has taken a big beating. This fund focusses on Mid-caps and Samll Caps. I advise you to STOP your SIP in this fund immediately.

2. Reliance Growth :
This fund has been a Star Performer since inception. Though it faltered in 2008, looking at its portfolio, I continue to maintain a positive view on the Fund. CONTINUE.

3. Reliance Vision :
This Fund has been living on Past Glory. STOP YOUR SIP.

4. Reliance Diversified Power :
I am never in favour of Theme/Sector Funds. STOP YOUR SIP.

5. Sundaram Select Midcap :
A Great Performer which has gone off-track of late. AVOID. STOP YOUR SIP.

6. Sundaram India Leadership :
CONTINUE.

7. Sundaram Select Focus Fund :
A Truly Quality Performer and Must Have in everyone's portfolio. CONTINUE.

8. Sundaram Capex Fund :
Could struggle going forward. Best to Avoid and STOP YOUR SIP.

9. SBI Contra :
Not a Contra Fund in True Sense. More of a Diversified Fund with a Large Cap Bias. CONTINUE YOUR SIP.

10. DSPBR TAX SAVER :
As you do not require any ELSS, it is good that you are discontinuing.

11. DSPBR TOP 100 :
Excellent Performer in Both Bull and Bear Markets. CONTINUE.

12. KOTAK TAX SAVER :
Has been an average performer. Switch to K30 fund on completion of Lock-in period.

13. HDFC TOP 200 Fund :
One of my favourites. Has been a very very consistent performer. CONTINUE YOUR SIP AND ADD MORE IF POSSIBLE.

14. ICICI INFRASTURCTURE :
One of the best Infra Funds. But does not deserve to be a part of Core Holdings, especially since you are the sole earner. STOP YOUR SIP and switch to other funds suggested below. Under the Same Fund House, you can switch to ICICI Growth fund.

NFO :

Reliance Long Term Advantage – Rs. 5000/- (After Lock-in Period is over, switch to Reliance Growth)
Reliance Natural Resources – Rs. 5000/- (Retain your holdings. The fund should start delivering as it still holds significant cash and has invested in Quality Stocks)
DSPML Mid and Small Cap – Rs. 5000/- (Even at a loss switch to DSPBR Top 100 Fund)
Sundaram Select thematic Energy – Rs. 5000/- (Take a decision when the Lock-in Period ends.. which is still 2 years away)
Sundaram Equity – Rs. 5000/- (Continue to hold as the Fund has performed better than its Benchmark and has good holdings in Large Cap Blue Chips)
Sundaram Small Cap – Rs. 5000/- (Holds nearly 93% in Small and Mid Caps which do not promise a bright future. Better to switch even at a loss to SUNDARAM SELECT FOCUS).
J M Contra – Rs. 5000/- (Has a taken a huge beating. No Other option but to wait and pray for better times. )
Birla Long Term Advantage Fund – Rs. 5000/- (Close-ended. Take a call when the Fund becomes Open ended).
HDFC Midcap – Rs. 5000/- (Close-ended. Take a call when the Fund becomes Open ended).
SBI Tax saver series I – Rs. 15000/- (Close-ended. No other option to stay invested)
SBI Blue Chip – Rs. 5000/- (Even though invests in Blue Chip, has not had a great run. But its holdings do inspire some confidence. Continue to hold and take a call after a year)
UTI Contra – Rs. 5000/- (Even at a loss switch to UTI Dividend Yield Fund)

UTI Infrastructure Series I – Rs. 5000/-(Even at a loss switch to UTI Dividend Yield Fund)

Out of your existing ongoing SIP of Rs.11500, I have suggested you to stop Rs.5000 and Rs.1000 will be stopped from DSPBR Tax Saver.

For this 6000, I suggest you to invest in the following funds
HDFC PRUDENCE FUND (1000 * 2 sips at different dates)
FIDELITY EQUITY FUND (500 * 4 sips at different dates)
BIRLA SUNLIFE EQUITY FUND (1000 * 2 sips at different dates)

so, ultimately your CORE portfolio will look like this....


RELIANCE GROWTH FUND
SUNDARAM SELECT FOCUS FUND
SUNDARAM INDIA LEADERSHIP FUND
SBI CONTRA
DSPBR TOP 100 FUND
HDFC TOP 200
HDFC PRUDENCE FUND
FIDELITY EQUITY FUND
BIRLA SUNLIFE EQUITY FUND

If you observe, I have added a Balanced Fund HDFC Prudence Fund to your Core portfolio and your portfolio now looks tilted towards Large Caps, which is how it should be.

Continue to retain your existing holdings in the Funds where I have suggested to STOP YOUR SIP. Do try to reduce/sell out when the situation improves and shift to Quality Funds as suggested.

Your Life Insurance Coverage of 14Lakhs looks inadequate to me, especially when seen in the backdrop of you being the only earning member in a Family of 5.

Try to get a Term Insurance, as this is the Cheapest Form of Insurance.

Also while investing in Reliance Growth and Birla Funds, there is Free Life Insurance available, get the details about the same from your Mutual Fund Advisor and invest through them, which will also increase your Life cover.

Rebalance your portfolio periodically, ideally, every two years. Make a gradual shift from Equity Heavy to Balanced and then to Debt Heavy, without compromising on returns/risks.

Do consult your Financial Advisor before taking action on my suggestions.
Best of luck,
Srikanth Shankar Matrubai




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SAFE DEBT FUNDS FOR AN NRI

Mr.Tyagi wrote :
HI, Mr.Srikanth,



First of all I cannot fin dout any space in your blog where I can ask questions. Can u educate me where am I suppose totype in my question?



My actual question is I'm a NRI and woul dlike to park my money in safe Debt funds. Can you suggest some safe Debt funds that I can invest in? Also let me know is it safer to invest in Long term debt funds or short term debt funds?



REgards

Thyagi

SRIKANTH SHANKAR MATRUBAI replied:

Mr.Tyagi,
I am not a Technical Person, hence there is no provision to type your question in my blog. My email is the only solution.
Your idea of investing in Debt Funds is very good considering the State of Equity Markets today. And moreover, Indian Debt Securities offer Higher Interest Rates compared to Developed Markets making the Debt Funds an attractive Option.
While investing in Debt funds, please note that the Currency Rate Fluctuations could also affect your returns. Another Caveat is that Debt Funds are not risk-free like Bank Fixed Deposits. However, an Appreciating Rupee would obviously work in your favour.
Considering the Falling Interest Rates, you would be better off investing in Long Term Debt Funds rather than Short Term as these would not yield much.
My Top Picks would be
ICICI Prudential Income Opportunities Fund
Birla Sunlife Income Plus
Canara Robecco Income(Growth) Fund
and my all time Favourite
HDFC Income Plan

You could also consider investing in TATA Capital NCD which is giving Attractive Rate of 12%. You can see more details about the same in my blog http://goodfundadvisor.blogspot.com
Best of luck,
Srikanth shankar Matrubai



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SUGGEST BEST TAX SAVING FUNDS

Mr.Sumit Gupta wrote :
Hi,

I am looking to invest around 35-40k in MF to avail the tax saving as well.
searching the option around about now, i got SBI Magnum Tax Gain (Dividend), i can go with now.
could you please suggest some good investment now, looking the market scenario




Thanks & Regards
Sumit Gupta

SRIKANTH SHANKAR MATRUBAI replied :
Dear Sumit,
Mutual Funds are the best avenue for Tax Savings.
The Best ELSS/Tax Saving Fund is that which is not Baised towards any Sector or Theme and my Pick would be :
1. Birla Sunlife Tax Relief 96 Fund
2. DWS Tax Saving Fund
3. Fidelity Tax Advantage Fund
4. Franklin Tax Shield fund
5. Principal Personal Tax Saver
6. Sundaram Tax Saver
I am not in favour of SBI Magnum Tax Gain 93, which is everyone's favourite, mainly because of its bloated fund size.
My favourite in recent past has been DWS Tax Saving Fund, not only because of good performance since its inception but also because it offers Free Life Insurance upto 5 times your investment.

HDFC Tax Saver is also a good choice but keep in mind that it is a Mid-Cap Oriented Fund.
Franklin Tax Shield has not been performing very well since the last 2-3 years but due to its Focus on Large Caps, it should be a Good Performer going forward.

Best of luck,
Srikanth shankar matrubai,




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SUGGEST ME GOOD TAX SAVING FUNDS

Mr.Naveen Ekbote Wrote :
Hi Srikanth,

Nice to know you work on mutual fund investments.

I have made two SIP investments of Rs.1000 each in HDFC Tax saver and Franklin templeton Tax saver from last 1 1/2 year. Unfortunately I have lost heavily due to fall in the stock market. Almost to the tune of 50%. Do you suggest to hold on for lock in period of 3 years? What is your suggestion.

I also want to take one Mutual fund SIP in my wifes name which gives tax benefit. Pls suggest.

Thanks

Naveen

SRIKANTH SHANKAR MATRUBAI replied :
Dear Naveen Ekbote,
Thank you for you nice words.

Both of your SIP investments, HDFC Tax Saver and Franklin Templeton Tax Saver are going into good funds. Though I am not so pleased with the performance of Franklin Templeton Tax Fund.
This Market Meltdown has not spared anyone and you are no exception. My sympathies are with you. You have got no other option but to stay invested till the lock-in period of 3 years. Unlike other Tax Saving Tools, Mutual Fund Equity Linked does not allow you prematural withdrawal. In a way, this is good as Equities tend to deliver better returns over longer periods of time.
Consider stopping your existing SIP in Franklin and starting a SIP in Sundaram Tax Saver which has been a very consistent performer.
To invest in your wife's name, I would have been happy if you have given your goal, term for the investment. If you wife does not have any Insurance and is under insured, start with investment in DWS Tax Saving Fund (offers Free Life Insurance 5 times your investment amount) or Birla Sunlife Tax Relief 96 (which too offers Free Life Insurance)

For details on the above schemes/offers, you visit my site http://goodfundsadvisor.blogspot.com

If Insurance is not an issue, but Returns are, then you should consider investing in Fidelity Tax Advantage Fund or Principal Personal Tax Saver or Sundaram Tax Saver Fund among others.
Best of luck,
Srikanth Shankar Matrubai,
Bangalore

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Best Tax Saving Instruments

This letter by me was published in Financial chronicle on January 27, 2009
Tax-saving tools ¦
DHIRENDRA Kumar’s article Here’s why you should invest in tax-saving mutual funds made very interesting reading.
People tend to ignore investing in tax schemes until the last minute and then rush in to invest in whatever instruments they can without analysing the pros and cons. Equities are the best avenue to invest your hard earned money.
ELSS not only saves taxes but also give consistent returns. The icing on the cake is the very short lockin period of only three years. The biggest advantage of investing in ELSS is that mutual funds are that rare investment avenue, where not only your investment but also your returns as well as principal are all exempted from tax.

Srikanth Matrubai Bangalore

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INCOME FUNDS' NAV TOO COULD FALL.....

INCOME FUNDS' NAV TOO COULD FALL.....

A Guest asked,
"Can you pl enlighten me on what`s happening to the Income Funds ? It was considered a safe haven and I moved some of my Equity Funds into Income Funds last week. Now, to my dissappointment, the Income Fund NAVs have started falling especially in the last week and have given negative returns last week.

How do you see returns from Income Funds developing / unravelling going forward ? "

Srikanth shankar Matrubai's REPLY :

Many income fund investors were surprised to see falling NAVs in income and Gilt funds last week and the reason was
After bond yields continued to touch new lows for more than a month following monetary easing by RBI, there was a sudden turn in yield movements over the past few days after the announcement of the revised schedule for government borrowing last week. Under the revised schedule, the actual quantity of issuances for the rest of the fiscal year overshoots the government’s initial plan.

When bond supplies are tipped to rise, yields usually fall. However, despite the government’s increased borrowing intention, yields shot up this time around as the bond market had discounted further borrowings with the Fiscal Responsibility and Budget Management Act, which stipulates fiscal restrain on part of the government, having already been put on the backburner.
The yield on the 10-year benchmark paper, had risen to 9.55% in July last year. With RBI progressively cutting rates, yields started falling, hitting a low of 4.86% early last week, only to rise to 6.19% in subsequent sessions. When bond yields rise, prices fall and vice versa. This rise in bond yields have caused NAVs to drop.

Income funds hold either gilts(govt bonds) and/or other co. papers with a fixed int coupon. Dep. on the interest rate swings,likelyhood of extra bond issue by Govt (and hence fiscal rating of Govt) and liq.position the price of these papers(or bonds) vary on daily basis as they r actively traded in money mkt by inst players.So the NAV of the M.fund scheme varies.Hence its a 2 way street for the NAV of these schemes.and there there can be depreciation of original invested amt !!

Best Managed Income Funds may Grow @ 10-12% Per year by Investing in Govt.Securities & Corporate Bonds as well as FD in case Interest Rates are Falling.

In case Interest Rate start going up, these Funds may give 4-5% Returns.

In short Term these Funds may be Volatile.

In 2004 most of Funds Generated Almost ZERO or slightly negetive returns.

In 2009, one can Expect 10-15% Returns from Efficiently Managed( not all ) Income Funds. Follwing Income Funds are better Performer.

Birla Sunlife Income PLUS Fund
Canara Robeco Income Fund
HDFC High Interest Fund
ICICI Income Fund
IDFC Super Saver Investment Fund
Reliance Income Fund
UTI Gilt Advantage Fund

But with Interest Rates already fallen too much, too fast, there is very little scope for returns as specatular as seen in the last six months.
You may as well consider Arbitrage Funds.
Best of luck,
Srikanth Shankar Matrubai


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POST SATYAM FIASCO, CONTINUE WITH SUNDARAM SELECT FOCUS??

One Guest by name RR asked,

Hi,

I would like to have views about Sundaram Select Focus after Satyam fiasco. The MF has an exposure of 25.38 crores(abt 3.26%) investments in Satyam. How much do u think MF would be affected by the downfall in Satyam price?
I have a SIP of 2k per month on it. Do you all think i should continue with the SIP?

Srikanth Shankar Matrubai advised ;

Dear RR,
Sundaram Select Focus has been a consistent performer both during Bull Runs as well as Bear Runs. The Satyam Shockers has left many Fund Managers stumped and Sundaram was not alone. And even prudent Fund House like HDFC, Big DII like LIC too had a Bigger exposure than Sundaram. However, note that nowhere is any information available to the latest holding. Everyone is relying on Dec 2008 holding. Many Fund Houses would/could have already sold as some Funds like ICICI have clarified.

The break up of Sund. select Focus`s portfolio `ll be available at the end of this month & u can check the same from fund`s as well as other websites

Almost all the MFs have dumped Satyam shares from their portfolio, yes due to sudden price erosion some effect on NAV is there but after exit from satyam, the MFs r redeploying the money in other stocks, which `ll help u to recover ur losses on account of value erosion in satyam. .

Also note, even if the Fund house has had an exposure to Satyam after the fiasco, its NAV would have already reflected the same and there is no use selling the Fund after the NAV has already gone down.
Above all this, you are investing through SIP, which will protect from the downside More than a LUmpsum investor.
My sincere advise would be that you should continue your SIP investment in the Fund, as Sundaram Select Focus Fund has been a Better Performer than most Diversified Funds at any Given time.
Best of luck,
Srikanth Shankar Matrubai,

Visit http://goodfundsadvisor.blogspot.com for Mutual funds

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Formula for Calculating SIP Return

Here is the formula for SIPs return calculation.

A = S*R*(R Power n -1)/(R-1)
In the above formula -
A = maturity amount
S = SIP amount (plz. note in case of multiple monthly SIPs it`s advisable to clubbed all SIPs considering a big single SIP)
n = Time duration of SIPs
R = 1 + r/100 (where r is mly. rate of return)

Plz. note if the SIP frequency is qtly. adjust the rate of return to it`s frequency.

The above formula is some what complicated to calculate manually so it`s advisable to use EXL sheet.


Thanks to Ashal for valuable inputs

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MY TARGET -- 1 CRORE IN 10 YEARS

Mr.Prakash Punekar wrote :
Hi Srikanth,

I visited your blog(goodfundadvisor.blogspot.com). I appreciate your good work.
I am new to mutual funds and want to seek advise from you.

I have started SIP since jan 06, 2009 (actually, I was about to buy satyam shares but did't) :
1. UTI Dividend Yield Fund - Growth (UT189) - 1500/month for 5 years.

I am planning to have 3000-4000 rs per month in couple of more funds for 5-10 years of horizons.
Right now I am in USA.
I would appreciate your advise on selection of funds. plan to am expect good returns in next 10-12 years through these investments.

Thanks for your time and efforts.
Prakash Punekar.

SRIKANTH SHANKAR MATRUBAI replied
Dear Prakash Punekar,
Thank you for your kind words.
It is really a matter of Great Luck that you didn't buy Satyam Shares. Just see what a Bad turnaround it had. My God, such a Big Fraud, and no one had even a Clue to it.
Anyway, coming to your investments. Right now your money is going into a Right kind of Fund for this Market, continue with your investment in UTI dividend Yield Fund.
But do keep a track on the same and reconsider if there are any significant changes in the market scene or the portfolio composition.
For your further investment plan of 3k-4k, I would suggest 5 funds, out of which you can choose as per your convenience. The fact that you investment horizon is more than 5 years makes my job easy and you too will have a fairly good chance of earning Better Than Markets Returns.

My picks are :

1. Birla sunlife Equity Fund

2. DSPBR Top 100 Fund

3. Fidelity Equity fund

4. HDFC Prudence Fund

5. Sundaram Select Focus Fund.

Out of the above Funds, Fidelity (500) and Sundaram (250) have Minimum Sip Investment of less than 1000, and therefore, in these funds you can also consider investing at different Dates to maximise returns making use of NAV Volatility.

However, your Target Return Expectation of 1 Crores in 10 years out of these investments look Overoptimistic. Assuming a Realistic Return of 18%, you need to invest Rs.32354 monthly to get your target return of 1 crores.
However, if a assume a slightly Higher Return of 20% compounded, even then you need to invest monthly Rs.29044!!!

With this investment of Rs.5500/- per month for a period of 10 years, at a Return of 20%, The End value of your investment would be only 18,93,711 on an Amount Actually Paid by you of Rs.6,60,000.

For this 5500monthly to grow into 1 crore at 20% return, you need to wait for 18.5years.
The best option is to increase your Sip input value, if not now, as and when it is possible.

Best of luck,
Srikanth Shankar Matrubai,


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Are my SIPs into Good funds??

Mr.Rakesh wrote :
Hi Srikant,
My name is rakesh, came acorss your blog. Its amazing, very hepful and has very good articles, keep up the good work. I just wanted ur opionion on my MF investments. At present i have started sip in foll. funds from sept'08 -

Reliance Growth - 500 * 4 = 2000
HDFC Top 200 - 1000 * 1 = 1000
DSPML Top 100 - 2000 * 1 = 2000
Sundaram Select focus 500 *4 = 2000

Please advise if these funds are safe and good for longterm. I also have a host of other funds both diversified and ELSS which i have bene investing since last 3 years, i will send u that info soon.
Thanks in advance for ur time and advance.

Regards,
rakesh

SRIKANTH SHANKAR MATRUBAI replied :

Dear Rakesh,
Thank you for your kind words.
Your ongoing SIPs are going into absolutely Top Class Funds.
Do continue the same. It is a rare sight indeed and pleasantly surprising to
see such Excellent Funds in any investors's portfolio. Do continue your sips
and enjoy the fruits and benefits of SIP Investment.
By the way, it would have better if you had also sent me your exising Fund
Holdings.
Best of luck,
srikanth Shankar Matrubai,


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"Charges in ULIPs & Mutual Funds"

My friend Ashal's answered this query recd from a guest. I found it very very interesting and thought you may like the same.


Mr.Vivek asked :
My insurance agent told me that There are many internal charges in MF which are charged by MF companies but these charges are not visible to Normal investor.

He suggested : In case of ULIP, there are 2 things :

- charges are completely transparent then MFs
- And in long Term (10-15 yrs), ULIPs are cheaper than MFs in terms of charges.

Please suggest and draw some clear picture about charges.

-vivek


Dear vivek, there is totally opposite picture what ur Insurance agent had advised u. Let me explain.
In case of MFs there r only 3 types of charges applicable -
1. Entry Load - It can be avoided if u invest directly to ur MF bypassing ur MF agent.
2. Exit Load - It can also be avoided by remaining invested for certain time period in that particular plan.
3. Fund Management Charge - It`s charged as a %age of total assets under the plan. Normally it varies from 0.25% to 2.5% depending upon type of funds (Debt to Eq.) as well as expertise of fund co. for a same set of MF plans, lower FMC Plan is always advisable for investment.

In case of ULIP following 4 types of charges r applicable.
1. Prem. allocation Charge - It may vary from as low as 1% to as high as 65-70% of ur first year prem. & reduced year after year or may remain same at a constant level say 4% or 5%.
2. Mortality Charges = It`s the basic cost of insurance & again it varies among Ins. cos.
3. Policy admin charges - Some ULIPs charge as low as 20 Rs. per month where as some charge as high as 200-300 Rs. per month. Again not constant among Ins. cos.
4. Fund Management charges - From 0.5% to 2.5% depending upon the type of Fund (debt to Equity).

From the above list u can judge urself that in case of MFs there is only 1 charge FMC, which u `ll have to pay but in case of ULIPs there r several charges & no common benchmark is there to see the impact of these charges. I do hope the message is clear to u.



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Is my portfolio correct??

Lalitesh wrote back,
Thanks a ton, for your kind suggestion on my prvious mail. sorry that i didn't reply on that ealier.

As i have said that i do have started some other portfolio after long discussioin/analysis with you guys.
First of all i have started portfolio of 8k whose time horizon is upto 4-5 yrs (it may vary too, infact its for the vehcile purpose , and as per me this is not basic requirement so time horizon may vary).
Time Horizon : 3-4 yrs
Portfolio size : 8K/month
Port2(8k)
DWS Inv. Opp N/A 1,000

HDFC Top 200 N/A 1,000

UTI Spread Fund 1,000 N/A 1,000

Kotak Floater LTP(G) 1,000 1,000 1,000

DWS Alpha Equity Fund 1000

Next folio is of 6k, its for the purpose of child's education, time horizon has not been decided but definately it will be for long term (ll be continuing for more than 10yrs) so have all the equity funds here.
Time Horizon : >10yrs
Portfolio size : 6k/month
Port3(6k)
Sundaram Sel Foc 1,000.00 N/A 1,000.00

DSPMLT100 1,000.00 N/A 1,000.00

Reliance Growth N/A 1,000.00

DSPML Equity N/A 1,000


Next and the last one is for childs marriage, since its having long time to invest (infact we have'nt planned for kid itself yet :) , but good to start saving for any reason )

Time Horizon : > 20 yrs
Portfolio size : 1k/month
Port4(1k)
HDFC T200 N/A 1,000.00

Since i do have time for the last portfolio (for child's marriage , 1k/month) so will be adding some more fund into this.may be once i will close the portfolio for house down payment.

Freind, now its time for your deep analysis and expert commnet, is this portfolio looks fine of it needs change. i have enrolled for all the above funds with one year of SIP and will be re-shuffling them at that time (if required).

I could understand that you would be held up with lot's of work, please reply at your own ease.

Best Regards.
Lalit.


SRIKANTH SHANKAR MATRUBAI replied :
Port2(8k)
DWS Inv. Opp N/A 1,000

HDFC Top 200 N/A 1,000

UTI Spread Fund 1,000 N/A 1,000

Kotak Floater LTP(G) 1,000 1,000 1,000

DWS Alpha Equity Fund 1000

This portfolio looks quite good though I wish you swap the fund investment in UTI Spread Fund and Kotak Floater fund.



Next folio is of 6k, its for the purpose of child's education, time horizon has not been decided but definately it will be for long term (ll be continuing for more than 10yrs) so have all the equity funds here.
Time Horizon : >10yrs
Portfolio size : 6k/month
Port3(6k)
Sundaram Sel Foc 1,000.00 N/A 1,000.00

DSPMLT100 1,000.00 N/A 1,000.00

Reliance Growth N/A 1,000.00

DSPML Equity N/A 1,000

As explained in earlier mails to you, always spread your investments across fund HOuses rather having a concentrated amount in one Fund House. So, here, you can consider switching your investment from DSPBR EQuity fund to fidelity Equity Fund.

Next and the last one is for childs marriage, since its having long time to invest (infact we have'nt planned for kid itself yet :) , but good to start saving for any reason )

Time Horizon : > 20 yrs
Portfolio size : 1k/month
Port4(1k)
HDFC T200 N/A 1,000.00

For this, you couldn't have chosen a Better Fund. Well done, stick to it.
You are doing a great job Lalitesh. I wish at least 10% of my investors plan like you, my job will become much much easier. Hats off to you.
Best of luck,
Srikanth shankar Matrubai,
Bangalore
http://goodfundadvisor.blogspot.com





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Tax Saving Schemes (ELSS) doubts clarified

Q Can I change the option chosen in an ELSS investment?
A A change between the growth and dividend option amounts to a redemption and then re-investment as the NAVs are different for each of the options. Since there is a lock-in on the investment, redemption is not possible and as such a switch between the growth and dividend option is not permitted. However, you can change the option chosen between the dividend and the dividend re-investment since the NAVs for both the options are the same and the switch has no financial implications.

Q I have invested in an ELSS through an SIP. Will the lock-in apply from the date of the first instalment?
A No. Each instalment of the SIP would have a lock-in of three years from the date on which the investment was made. So if you start a monthly SIP on 5th Jan, 2008 for 12 months, the first instalment will be locked-in till 4th Jan 2011, the second till 4th February 2011 and the last instalment till 4th December 2011.

Q I have invested in an ELSS jointly with my husband. Can both of us claim sec 80(c) benefits for the investment made?

A The benefit of Sec 80(c) for investments made in an ELSS is available only to the first holder. Both the holders cannot claim the benefit. When investments are being made jointly, the investor who wants to claim tax deduction must be designated as the first holder.

Q What will be the tax on the redemption of units in an ELSS ?
A ELSS units can be redeemed only on completion of the lock-in period of three years. The redemption amount will include the principal invested and capital appreciation/loss. While the principle is exempt from tax, long-term capital gain tax will apply on the component of capital appreciation. Currently, long-term capital gains from equity funds (including ELSS) are exempt from tax. Therefore no tax is payable on redemption of units.

Q Can I continue to be remained invested in an ELSS even after the lock- in of three years is over or should I compulsorily redeem the units?
A You can continue to hold the investment in ELSS even after the lock-in of three years from the date of investment is over. Investments held beyond this period will not be locked-in and investors can redeem units at any time.

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Seek your suggestion

Hi srikant,

Lalitesh here (hope u still remember me ) ...First of all let me wish Belated Merry Christmas and Happy new year in Advance !!!!

I understand that you would be too loaded with work ..but still I seek your kind help (suggestion) regarding the investment I had discussed with you and Aslanshu, because I have registered for the funds and its almost started working.

You might remember the mail I have sent you for the investment
regarding the home down payment which i need after 3 yrs and the fund i need is around 10L (atleast), and as per your valuable suggestion i have enrolled for the below funds :


Port1 (24k)
Amt
Name Date1 Date2 Date3
HDFC T200 N/A N/A 1,000
Sundaram Sel Foc N/A N/A 1,000
DSPMLT100 N/A N/A 1,000
UTI Spread LTP(G)2,000 1000 1000
HSBC MIP -RP(G) 2,000 2000 2000
DSPML Balanced 2,000 1000 2000
Kotal Floater LTP(G)2,000 1000 2000
Investment Amount
:: 24,000/months

Time Horizon
:: 3 yrs

As of now i have selected to invest for next 1 yrs only.

Objective
:: to acheive >10L corpus by next 3 yr.

I had submitted the form of UTI Mahila fund also for 7k/month but as per my agent, it was rejected becuase only females can only invest in this fund. so will be choosing some other fund soon and register for the same . Final plan is to have 31k/month plan.

Could you please suggest me if this portfolio looks fine of it need any modification. Similarly i have created few other portfolio for my future needs but since its still under registration so haven't share the same here.

I'll be seeking your expertise to comment on those portfolio as well, once i send you the details. Finally, can i have your suggestion on my this 24k portfolio.



Regards.

Lalitesh.

SRIKANTH SHANKAR MATRUBAI Replies :
Dear Lalitesh Kumar,
I am happy to see your mail again. And I am particularly more happy
to see that you have not ignored my suggestion and have avoided All your
investment into Debt Fund and have also considered Equity Funds.
You seem to have chosen your funds well, going by the fact that a good number of them have a solid performance track record.
However, I have concern that you seem to have invested just a bit on the higher side in DSPML Balanced Fund. Given the nature of your goal and time limit, you can consider switching to DSPML Savings Plan (Moderate) with a Equity Exposure of 20% (compared to 65% equity exposure in DSPML Balanced Fund).
DSPML Balanced Fund has had a good track record but the current market appreas to continue remain volatile and may not the recent highs in a hurry, and moreover the Debt Funds due to Falling Interest Rates should easily give you upwards of 12% return in next 6-9 months.
Your agent is ignorant. Any person (male or female) can invest in UTI Mahila Fund. Only the name is Mahila. Sure, go ahead and invest. Its small Corpus is 82.46 makes it manageable. The Fund is rated 5 Star by ValueResearch.
Though the Fund has had a bad 2008 with a return of negative 8%, the 3 years return continue to impress at above 20%. And the Fact that the Fund has only 12% in equity and with falling interest rates, the Fund should give you good returns.

Even as recently as Novermber 2008, the Hindu Businessline had given a "Invest" Recommendation on the fund. You can find the same in the link

http://www.thehindubusinessline.com/iw/2008/11/23/stories/2008112350591000.htm
You can also consider investing the additional 7k in UTI Spread itself.

NOTE : AS YOU INTEND TO WITHDRAW WITHIN 1 YEAR, YOU WILL BE CHARGED WITH EXIT LOAD IN SOME SCHEMES, ENQUIRE ABOUT THE SAME BEFORE INVESTING.

Best of luck,
Srikanth shankar Matrubai

See the earlier query by Lalitesh Kumar on

http://goodfundadvisor.blogspot.com/2008/08/10-lakhs-in-3-years.html




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Student's dilemma on Diversified Funds or Balanced Funds?

From: Akhil Sharma

Hi! Mr.Advisor

hi.
I'm a student.My age is 23.i love to save my money.it's been a year that i've invested in various equity diversified funds like
ICICI pru infra
Reliiance diversified power

Sundaram capex
Reliance RSF equity
Kotak indo world infra
I've invested Rs.5000 in each of them.As the last year has been bad for the markets...i've lost 50% of my investment.Now i want to invest again but not in diversified as i now want to have different type of funds in my portfolio.

I wanted to know if DSP black rock balanced fund,UTI mahila unit scheme and Reliance banking fund would be a good deal to invest or not and should i go for lumpsum or i should go for SIPs!
Any of your suggestions for me are welcome.

Thank you!
You're doing a great job!.....cheers to ur blog!!
Akhil sharma


SRIKANTH SHANKAR MATRUBAI replied :
Dear Akhil sharma,
First of all, thank you for your kind words on my blog.
You have started your invested at the peak of the Bull Market and hence it is no surprise that your investment value is down by 50%.
Alas, your investment has all been in Infrastructure Funds which only adds to the downswing of your investment value.
Thankfully, I am happy to note that you have not lost your heart and ready to invest again. Yes, as you yourself have admitted, you need to diversify your investment horizon. The funds you have selected for investment are all Balanced Fund. And at your age, you can go for Diversified Funds as these funds typically give you more return than Balanced Funds over a longer periods of time.
you can consider one among the following funds for your future investments.
Birla sunlife Equity fund
Fidelity Equity Fund
HDFC Top 200 fund
Reliance Growth Fund
Sundaram Select Focus Fund.

If you are still considering Balanced funds, you can think of HDFC Prudence Fund which has an excellent Track Record since its inception.
Preferably, go for SIPS.
Best of luck,
Srikanth Shankar Matrubai,
Bangalore



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EXTRAORDINARY OUTLOOK FOR GOLD

Dear All,
I received an interesting article on Gold today morning from Kotak Mutual Fund and you have to read it. It is very very interesting.
The damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.



This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.



Find below an extremely interesting link which details why gold prices have been depressed and why dollar has been outwardly biddish despite deteriorating fundamentals. All along the article are very interesting snippets from industry veterans and analysts on their outlook on the current happenings and its impact on gold going forward..

The link is :
https://www.golddrivers.com/dispatches/tgdrall/ShowArticle.aspx?id=b0c7762f-5e47-4e99-b621-5581b484c167

So a good moment to get in gold stocks now?

According to Frank Veneroso, a well known gold market strategist, yes, he recently said:

I think gold might have a very explosive upside in the current environment. Gold stocks are now extremely cheap relative to the price of gold with the commodity bust, gold mining costs are falling. I think money managers should now be buying gold stocks.

So, dear investors,, can you ignore investing in DSPBR World Gold Fund or AIG World Gold Fund?. Obviously not.
Think again and invest at least a portion of your investible surplus is Gold Funds.
Best of luck,
Srikanth Shankar Matrubai


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DBS CHOLA TAX ADVANTAGE FUND - AVOID

DBS Chola Mutual Fund has launched DBS Chola Tax Advantage Fund – Series 1. The fund is a 10 - year close ended equity linked
saving scheme, subject to a lock in for a period of three years from date of allotment.

The fund which opened December 19, will close on March 19. The objective of the scheme is to seek to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities and also enabling investors to get income tax rebate as per the prevailing Tax Laws and subject to applicable conditions. The fund, benchmarked against BSE 200 Index would invest between 80- 100% in Indian equities and equity related securities and 0% to 20% in money market instruments / debt securities instruments.

Sanjay Sinha, chief executive officer, DBS Cholamandalam Asset Management said, "this fund will follow 'value investing strategy'. Current market conditions favour this strategy as it limits the downside potential of these stocks. In addition to the tax benefit, a 3 year lock-in allows investors to realise a better potential for their investment."

The minimum amount for application during the new fund offering period will be Rs. 500 and in multiples of Rs. 500 thereafter.

MY TAKE :
Though the Fund House has been in existence for quite some time, it has just been an also ran with none of its schemes ranking among the Top 10. Sure, it has Sanjay Sinha in its rank who joined recently, but he will have a tough job ahead to prove himself in these volative times.
The Fact that your fund is locked in for 10 years also goes against this fund. You are better off by investing in Existing Proven funds rather than Putting in an Unknown Specie yet to prove itself. It is like a Known Devil is Better than an Unknown Angel.
AVOID.

Best of luck,
Srikanth shankar Matrubai
Bangalore


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I WANT RETURN ABOVE SAVINGS RATE.......

One Guest wrote,

want to park some of my money into liquid funds.
Are "ICICI Pru Gilt - Investment Plan - PF Option" and "Canara Robeco Income (G)" are liquid funds? Can I put my money in these funds? I only know that liquid funds are similar to Savings Account but with more % returns.
These above 2 funds have 5 stars in MC and they have given nearly 25-30% return in a year.
some of my other queries regarding liquid funds are as below:
+ What are tax implications on liquid funds?
+ Difference between liquid and liquid plus funds
+ If I have parked my money in liquid plus and due to some emergency I need some money how can I get it? I mean do I have to fill some form to redeem and submit at AMC? And when will I get the money in my hands?
Please help me in this.

SRIKANTH SHANKAR MATRUBAI replied :
Canara Robeco Income (G) fund is a Bond fund & ICICI Pru Gilt - Investment Plan - PF Option is a Gilt fund.
anyone of above fund is not a liquid or liquid plus fund. ur understanding regarding returns of Liquid funds is right.
+ What are tax implications on liquid funds? - Growth option treated as debt fund, so STCG & LTCG r taxed accordingly. Dividend option- div. option in ur hand is tax free but DDT is 28.325%. From taxation point of view, the DDT (div. distribution Tax) is higher in Liquid funds & at the same time due to higher maturity period of underlying securities of Liquid plus funds`, returns r on higher side in Liq. + funds, it make sense to park money in Liquid + funds.
+ Difference between liquid and liquid plus funds - The maturity period of underlying securities is slightly higher in plus funds & also the DDT is 14.15% only in case of plus funds.

U can get money on T+1 day basis. If u have opted direct trasnfer to ur acct. option while investing, the money `ll be credited to ur acct. directly. As there is no entry or Exit load in case of Liq.. & Liq. + funds, it`s better to invest in these funds thru ur online broker acct. - like Icici direct, Sharekhan, Indiabulls, .....


Selection of Growth & Div. option `ll depend upon 2 things -
1. Ur current Tax slab - as in all probability there `ll be STCG on investment in these funds which `ll be added to ur income & `ll be taxed at ur slab rate.
2. Ur time duration - if u r using these funds either to park surplus money for some better earning on ur liquid cash or u r using these funds as transfer vehicle for investing in Eq. funds under STP mode.

In case of Liq. + funds & `ll use for parking of surplus funds as well as emergency funds, the DDT `ll be 14.15% only, so if u r in 20.6% & higher Tax slab it makes sense to invest in Div. option to minimise Tax outgo.

In case u r using it for STP in Eq. funds, it`s better to invest in Growth option for easy calculation of STCG Tax.

The reason to get the nearly 25-30% return in last 1 year was due to the an inverse relationship between interest rate and prices of securities. And this gets reflected in government bonds first, so if the interest rate goes down, the prices of bonds rises and vice-versa.
On any fixed income investment, whether it’s a gilt or a corporate bond or even a fixed deposit in a bank, there are three types of risk. These are credit risk, liquidity risk and interest rate risk. A high credit risk means that a borrower wouldn’t be able to pay back an investment at all. In government securities, this risk is generally considered to be zero. In other types of f ixed income investments, this risk is higher. In any economy, government securities are considered to be of the lowest risk. Therefore Gilt fund has stood as a far safer investment avenue than others.

Gilt funds could be opportune investment for risk adverse investors particularly when interest rates are likely to go down. I think you can expect return between 8-11% on Gilt funds from now.

However, regarding the fund choice to invest, I would prefer
HDFC Income Fund and Birla Income Fund, especially the former. I have gone through the portfolio of the HDFC Income Fund throughly, and I can with some confidence, that the fund could give a return of at least 14% in the coming year inverse relationship between interest rate and prices of securities.
gilt Funds can give you somewhere between 7-9% and
debt funds should give above 12% comfortably.

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