Advice for Short Term Debt Funds

From: shalini
To: kentshershare@gmail.com
Sent: Sun, 17 Aug 2008 19:08:24 +0530 (IST)
Subject: Advice for short term debt funds

Hi Mr. Shrikanth,

First of all, I would like to praise you for your noble service to investors. Its great to see that still we have some people who work for others benefit without any crease.

Now my query,

1. I want to invest 50k in some short term debt mutual fund. My time horizon is 3-6 months. While researching, I came to know of some funds like Canara Robeco Income (G), ABN Amro Flexi Debt - RP (G), HDFC High Interest - STP (G) etc. But I can not figure out which fund to choose. Canara's fund has a very low asset size and HDFC's fund is having very large assets. Though return wise Canara's non ranked fund is best in last 6 months.

If you can suggest any other avenue, I'm open to that also.

For your information, i would like to tell you, we plan to buy a car in next year and this money is for that purpose.

2. I want to start an investment of Rs. 20000 per annum in ICICI prudential life stage regular premium plan (not for insurance) for long term. Is it a good decision or I should defer it.

Thanks in advance.
Shalini.


SRIKANTH SHANKAR MATRUBAI ' S REPLY ::::

At the outset, I must thank you for your kind words.
You have done a good job by doing some research before investing, which is a sign of a mature investor.

Canara Rebocco have given very good returns for the last year or so. The rising interest rates have been obviously helping them. The main reason for this could be that they have been deploying their money more in Call Markets and Money Markets rather than investing in Fixed Debt Instruments. This could be because of their low AUM. So, when the interest rates start reversing, they will underperform the Average Benchmark returns. So, I would rather avoid investing in the fund. And, as you have rightly pointed out, their low AUM also does not inspire confidence.

I would go for HDFC High Interest STP, as they have a pretty decent track record for a long time. Their AUM is not too large. In fact, some funds have 5 times to 10 times the AUM which HDFC has right now. Do consider investing in HDFC High Interest.

About your planned investment in ICICI Prudential Life Stage Regular Premium Plan.
My advise is a firm "NO". Because this investment is an ULIP. and an ULIP is strict "NO-NO" for me. ULIPs are very costly affair, they are forcefully sold by agents because the agents get Maximum Commission from these ULIPs. Either way you are not investing for Insurance, which obviously means that you are investing for "Returns". Then why do you want to go for ULIP when the charges are very high, not only the first time you invest but also on annual premium.
Another drawback, withdrawal charges are very high and also you are struck for 3 years.

You are better off investing in Good Diversified Mutual Funds. They are cheap, transparent, easy and offer good diversification.

10 lakhs in 3 years

From: lalitesh kumar
To: sharesher@indiatimes.com
Sent: Sun, 17 Aug 2008 09:46:46 +0530 (IST)
Subject: Please suggest me .

Hi Srikant,

This is lalitesh here aged 30yrs and currently i dont have any laibility (loans) to me , but i am planning to book a flat by next 3 yrs. And the budget is around 60L , out of which 10L i will be paying as down payment and rest 50L will get though any bank as Loan.

Now i need your suggestion to accumulate those 10L in next 3 yrs, what i hav planned ,i'll investing around 24-25k /month in any of the debt /hybrid fund from Jan 2009. so could you please suggest me if my planning looks fine.

Or pls suggest me how shall i plan to collect these 10L, and also suggest me about the funds where shall i invest.

Your help will be appreciable as always. Looking forward for ur reply.

Best Regards.

Laitesh



SRIKANTH SHANKAR MATRUBAI' reply :::::
Dear Lalitesh,
Hi, nice to see your mail again.
Actually, with your savings of 24-25k per month, it should not be very difficult to achieve 10L by end of 3 years.
Let's calculate
24000 * 12 = 2,88.000
2,88.000 * 3years = 8,64,000
Even if you keep in FD@ 8%, your investment will get you 9.75.000. so, you will have absoultely no problem in achieving your 10Lakhs.
If you invest in "SAFE" Funds, like Arbitrage Fund, MIP funds, you will get (on an average) around 10% post tax, so your investment of 24000 for 36 months, should get you about 1004000. which is your target amount.
I would suggest you to invest in FMPs, a bit, (FMPs nowadays assure you 10.5%), but go for Arbitrage funds, you will achieve your target very easily. I would have preferred you to invest in Large Cap Funds and also Balanced Funds, but maybe you prefer "safe", so I am going for Arbitrage Funds. Otherwise, you could go for Large Cap Funds (Birla Sunlife Frontline Equity / HDFC Top 200 / Sundaram Select Focus / DSPML Top 100), with Dividend Payout Option, And whatever Dividend you get, you could shift to Arbitrage Funds and also keep booking Profit at regular intervals and shift the amount to Arbitrage Funds.



Regards,
Srikanth

Financial Planning Advice

Mr. Ritesh Shah wrote :::
"Hello

I need your help to plan my investments. The background....

I am 32 and I started investing regularly since this year. I invested through
SIP on a monthly basis.

Please advise if I need to stop any of these SIPs / switch to other funds.

Kotak Opportunities - Growth - Rs 5000 Per Month
Birla Sun Life Frontline Equity Fund-Growth - Rs 5000 Per Month
DSP India T.I.G.E.R. Fund - Growth - Rs 5000 Per Month
Prudential Infrastructure Fund - Growth - Rs 5000 Per Month
Reliance Vision Fund - Growth - Rs 5000 Per Month
Reliance Growth Fund - Growth - Rs 5000 Per Month

Ritesh Shah"


SRIKANTH SHANKAR MATRUBAI 's reply ::::
"Dear Ritesh,
Your portfolio is neat, compact and nearly perfect for your age. There is very little change required, in fact, if any.
But still, you could switchover from Prudential Infrastructure Fund to ICICI Infrastructure or DSPML Tiger Fund, in the infrastructure Space.
Also, you could stop your sip in Reliance Vision Fund, for now as it's performance has been below average recently. You could invest in HDFC Top 200 fund or Sundaram Select Focus fund. This will not only maintain your large cap bais, but also reduce your slight overexposure to Reliance Mutual Fund House.

And, one more thing, split your 5000 into 2000 (2) and 1000 (1) sip over three different dates to maximise the advantage of volatility in the movement of NAVs.
Other than the above, I would like you to take a small exposure (say 1000 per month) into an International Fund (Templeton India Equity Income Fund/Birla Sunlife Intl fund) and also into a Commodity Fund like (DSPML World Gold fund / Mirae Asset Global Commodities Stock Fund).
These would compliment your portfolio perfectly.
After 5 years or so, gradually shift away from Sector/Commodity Funds into Diversified Equity Funds.
Best of luck.
Regards,
Srikanth'

Please Advise on my investments

Mr. S Reddy wrote ::::

Hi Srikanth,

I came to know about you from moneycontrol.com and thereafter through your blog goodfundadvisor. Thanks for maintaining such a blog. You are doing a great job by helping people make money the right way!

I need your help to plan my investments. The background....

I am 24 and I started investing regularly since last year. I invested through
SIP on a monthly basis. The SIPs started last year got expired in May

this year. My portfolio (2.5 Lakhs) break-up resultant of my investments for
the past 1 year and other Lump sum investments (LS) made before start
of SIP looks as follows:

DSPML Technology.com (SIP) (G) - 5.6%

DSPML Tax Saver (LS) (G) - 4%
Franklin India Tax Shield (LS) (G) - 4%
ICICI Pru Infrastructure (SIP) (G) - 11%
JM Basic (SIP) (G) - 5.6%
Principal Tax Savings (SIP) (Div) - 12%
Reliance Div. Power (SIP) (G) - 12%

Reliance Growth (LS) (G) - 4%
SBI Infrastructure (LS) (G) - 12%
Magnum Contra (SIP) (G) - 5.6%
Magnum Global (LS) (G) - 4%
Magnum Tax Gain (LS) (Div Reinvest) - 12%
Sundaram Capex Oppourtunities (SIP) (G) - 8 %

Sundaram Energy Oppourtunities (LS) (G) - 4 %

Additionally, I'm having a 30000 P.A ULIP with Aviva and 10000 P.A
Pure insurance.

My portfolio is down 11% as on today from 35% up in Jan. From my previous investments and the current Bear rally I understood that my portfolio is kind of too agressive and lacks proper diversification, which is very well evident from the 11% negative returns


I plan to invest Rs 10000 every month through SIP from Aug. Through this I plan to bring diversity that would hold my portfolio retuns from falling more than beanchmark during the fall.

The planned breakup looks as follows:

Templeton India Equity Income (2000) - Mainly for International
Diversification
Reliance Banking (2000) - To take advantage of Banking sector Growth
Sundaram Tax Saver (3000) - To take advantage of Tax exemption & good

diversification
Sundaram Select Focus (2000) - To take advantage of growth in Largecaps
DSPML World Gold Fund (1000) - For Diversification

Whatever I am investing since last year is for long term (5-10 Years

Horizon). That is the reason why I took little risk of investing in
sector funds - which I feel give very good returns over long term (Esp
Power, Infra - Huge investments in which started to flow since last
year and to get the returns out of these huge investments it taken

approx 4-5 years).

Please advise of any restructuring needed in my existing portfolio.
Also please advise on my plan to invest 10000 every month through SIP.
Is the fund selection and allocation good ? Please advise of any

changes required in fund selection / allocation for SIP to start next
month. From the current bear rally I'm maily looking to invest in
stable diversified funds without compromising too much on growth so
that the portfolio doesnt go too much into Red during a bear rally at

the same time it beats the benchmark with good returns during Bull
run. If required I can invest additional 2-3000 (May be JM Moving
Sector Fund ? Because of excellent track record of star fund manager
Sandip Sabharwal and advantage of sector + Diversification). Please

advise.

Thanks a lot in advance.

Sincerely,
S Reddy

SRIKANTH SHANKAR MATRUBAI' s Reply ::::


Dear S Reddy,
First of all, I must thank you for your kind words. They are a great fillip to me. Thank you once again.

There is no need to worry about your investment being down by 11%. It is natural to have a loss in a Bear Market especially when you have invested during the end of the Bull Period and also the fact that you have too many sector funds.

Regarding your investments, it is shocking to note that you have more than 30% in one Single Fund House, SBI Mutual Fund. Do reduce the same by following what I have advised.
DSPML Technology Fund : Even at a loss, I recommend a switch to DSPML Equity Fund, a more diversified fund. I know that you are willing to stick with the fund for another 5/6 years, but still it is in your benefit to switch out at the earliest.

DSPML Tax Saver Fund ::: A good performance in its history. Continue.

Franklin Tax Shield Fund :::: Has been an underperformer. Infact, the whole universe of funds from the Franklin stable has been underperforming. Take a call as soon as your lock-in period in the fund ends.

JM Basic Fund ::: Continue your hold. You can expect the fund to outperform the markets in the medium to long term.

Principal Tax Savings :::: Continue and take a call when your lock-in period ends.

Reliance Diversified Power Sector Fund ::::: I am never in favour of Sector Funds. And with your exposure of 12%, it is a definite a Switch Call from me. Atleast, switch 50% of your holdings immediately to Reliance Growth Fund. Either way, Reliance Growth Fund will hold stocks that Reliance Diversified Power Fund holds. You can just check the portfolio of both the funds.

Reliance Growth Fund ::::: One of the most consistent performers in the Indian Mutual Fund industry. continue and can add the switch from Reliance Diversified power Sector Fund.

SBI Infrastructure Fund ::::: A close ended fund. Take a call when the fund becomes open ended.

SBI Magnum Contra ::::: A more of Diversified than a Contra Fund now. Continue to hold the same.

SBI Global fund ::::: Switch to better performer like SBI Magnum Balanced Fund. Will also bring some stablility to your fund.

Sundaram Capex Fund ::::: A good fund. But as already hold Infrastructure Fund like SBI Infra and proxy Infra like Reliance Diversified Power Fund, a switch is recommended to Sundaram Select Focus Fund.

Sundaram Energy Opportunities Fund ::::: A close ended fund. Take a call when the fund becomes open ended.

You have age on your side, so you can afford to make mistakes. But please ensure that you avoid as much as possible your investments in Sector funds.
You are planning to invest in
Templeton India Equity Income (2000) - Mainly for International
Diversification
Reliance Banking (2000) - To take advantage of Banking sector Growth
Sundaram Tax Saver (3000) - To take advantage of Tax exemption & good
diversification
Sundaram Select Focus (2000) - To take advantage of growth in Largecaps
DSPML World Gold Fund (1000) - For Diversification

Here, I would like you to make some modifications. Reduce your exposure to funds like Reliance, Sundaram, SBI, as you already have high exposure to them. Also, you have already too many sector funds, so please avoid investing in Reliance Banking Fund.

Your exposure to Large Caps is very little, inspite of switch from Sundaram Capex to Sundaram Select Focus. So, my recommendations would be:
Templeton India Equity Income fund :: 2000
Sundaram Tax Saver :: 1500
DWS Tax Saving Fund :: 1500 (Fund has had a great performance. Free Life Insurance is an added bonus)
DSPML World Gold Fund :: 1000
Birla Sunlife Equity Fund :: 2000 (This too had a terrific past and a promising future. Free Life Insurance is an added bonus)
Fidelity Equity Fund ::::: 1000 (A Go-Anywhere Fund. Stable performer)
HDFC Top 200 Fund ::::: 1000 ( A Large Cap Fund with a great past and stable performance)

Final word, you can go for JM Multi Strategy Fund through Sip.

Regards,
Best of luck,
Srikanth Shankar Matrubai