Is it the right time to invest?

this is the most common question asked now. There were less people asking this question when the sensex was over 20,000. This is sad.

Equity is for the long term. Investment in equity/ equity funds depend only on 2 things -

1) Your asset allocation

2) Your age

3) Your horizon.

Once you have made an asset allocation according to your age & risk appetite -
you should start investing in equity/equity funds. So any time is right time. Please do not look at the sensex level. If the sensex is lower, it is better for you and there is a more compelling reason to start investing. Ideally you should invest only via SIP.
When you are entering a fund - you should not look at the NAV of the fund. You should look at only the performance of the fund in the last 3 to 5 years.
Similarly, do not look at the sensex levels. With inflation over 11% - equity is your best chance to beat it. If you are young - you can afford to be more aggressive.

One more thing I would like to add here is;;; …
While investing, never ever invest Borrowed Money, Always invest your own money and most importantly your spare money.
In fact, for some who crib that they have practically no saving and even 1000 saving is difficult, my answer is, would you have not adjusted the 1000 if you had to give as interest on a loan taken?
And don’t forget that there is even 100 sip available with Reliance Mutual Fund and Lotus Mutual Fund.
I don’t think any other investment will allow you such flexibility.
Go for Mutual funds and see your money prosper.
Best of luck.

Srikanth Shankar Matrubai

NRI asking for advise

Dear Srikanth,

We(me and my wife) are frequent visitors of your blog and find it an interesting read.

We need your advice and improvement suggestions for our investment strategy.

We, currently, live abroad and intend to live abroad for next 2 to 3 years. I am 30 years old and my wife is 29 years old. We both are working and planning for kids in near future. So, we may end up with a single salary, if required, on a temporary basis.


Our current investments are as follows :

1) Residential plot in India. (We do not have a residential house in India. We plan to construct in another 2 to 3 years)
2) Investments in direct equities (Not organised and hit by the current trend)

3) Some NSC, PPF and ULIP investments
4) Gold

To sum it up, we have not invested in a very organised way given that we are novice investors and lack knowledge. Currently, we are doing extensive research to put us back on track. Also, we would like to make use of the current market situation for good returns in a period of 2-3 years (mid-term for house, second property etc) and longer term investment for retirement, child etc.


Also, we have a loan of around Rs 10 lakhs at 6%. We can easily settle
it with the current liquid cash we have. However, given the low
interest rate of the loan we are unable to decide if it would be a good idea to settle the loan or make investments in India continuing with the EMIs.

Going forward, we could invest around Rs 1 lakh per month. We have shortlisted some of the investment avenues (please find attached file). Other than the SIPs(mid and long term) and FMPs, we would like to invest the balance amount in FDs or Gold. Your inputs would be highly appreciated and helpful.


Also, could you give us more insight of FMPs with current market scenario. We are apprehensive after the liquidity crunch and negative speculations from experts in various forums.

Best Wishes and Regards,

Name withheld on request....




SRIKANTH SHANKAR MATRUBAI advised .............

Dear S,
Thank you for your kind words.
Age is on your side, even then it is always a good idea to have a goal and plan your savings and investments accordingly. Thankfully, you have realised your lack of organised investments and looking for advise, which is a sure sign of mature heads working.

a). Residential Plot : You should consider constructing a house on the plot straightaway and give for rent till you actually decide on settling here. As and when your wife stops working (albeit temporarily), this rental income could supplement (at least partially) the salary she would have been earning.
b). Investment in Direct Equities : Not recommended. Unless you are buying for long long term and able to actively monitor your investments, you are better off investing through the Mutual Fund route for exposure to direce equities.
c). Sure go for NSC, PPF, ULIPs, but ensure they make just a token presence to your portfolio.
d). Gold. Gold is Gold. Invest. Preferably through ETFs as they are not only cost effective but also tax efficient. Make sure they do not make more than 10% of your overall portfolio.

Do continue your loan. At 6%, you are better off continuing and investing the liquid cash in other assets to earn more. I do hope your interest is a fixed one and not a floating one.

I went through your shortlisted Funds.

1. DWS Investment Opportunity Fund - Invest.
Has a good track record and is expected to be an outperformer.

2. DSPML Top 100 Equity Fund - Invest.
This too have very very good track record and has been very consistent in its performance. Expect it to be an outperformer.

3. ICICI Pru Infrastructure fund - Avoid.
This fund has had a great track record. But do avoid investing in Theme/Sector Fund. Going forward, I do not expect Infrastructure to outperform the Broader Markets. You are better off investing in some other Diversified Equity Funds.
You can consider
Birla sunlife Equity Fund
Fidelity Equity Fund
Reliance Growth Fund

4. Sundaram Select Focus Fund - Invest.
This fund is a "Must Have" in everyone's portfolio.


I also appreciate your pegging of growth expectation at 15% average. It is a definetly achievable target.

However, I am surprised at your Expected Growth of 15% to 20% in Debt and Gilt funds. Yes, surely, with the declining interest rates, these funds are expected to give returns in excess of 12% going forward. But, I do not expect them to maintain the same rate of returns for more than 2 years, maximum. You may scale down your expectation to a more realistic 10%.
Although I personally feel that the liquidity crunch will not affect the FMPs very much, and I also I do not approve the negative speculations from experts(?), I would rather have you invest in Long Term Income funds and also Arbitrage Funds (UTI Spread Fund) which do give returns in the range of 8-10%.

Best of luck,
Srikanth Shankar Matrubai

Recession for me

Dear all,
I found this very interesting article while browsing the net. Read and enjoy........




O n the day (October 17) Sensex lost 606.14 points or 5.73 per cent and closed at 9975.35, I met one of my friends in a birthday party. He loves giving advice on stocks.

He has been investing in stocks for the last seven years and believes that he understands the pulse of the market to perfection.

Unlike other days, he looked quite upset that day. He drank a lot in that party. When I asked him why was he looking so upset, he said that he had lost everything in the latest meltdown on the Dalal Street. As he is quite a fun-loving person, he related his saga of woes in a rather comic manner.

“I don’t know what to do now. Shall I consume poison or beg for food? After investing in stocks, today I am neither a bull nor a bear. In fact, I think I am a dog, who has no role to play in the market. Every day, my wife bursts out on me. I lost all her money and jewellery in the market, too. Leave alone the economy, I think my recession has already begun,” he said.

He said he had invested in many blue chip stocks, such as Pantaloon, Powergrid, Orbit, ITC, LIC Housing, Maruti, Reliance Communications, Ranbaxy, Reliance and Jet Airways, hoping that he might gain something somewhere in this volatile market. But everything went haywire.

True to his nature, he continued his sad tale in a comic vein. “I bought into Pantaloon, I lost my pants. I bought LIC Housing, I don’t have money to pay the EMI of my house. I invested in Maruti, I had to forego my car. I bought Jet Airways, now flying has become a dream for me, I bought ITC, I don’t have money to buy cigarettes.” Finally, he said, “I am still living, because I bought Ranbaxy, and am left with no money to buy poison.”

Need advise on my fund portfolio

Need advise on my fund portfolio
Mr.Sachin Dantulwar wrote :
Hi Srikanth,
I just gone through your blogs and thought of getting your expert advice.Please let me know if i need any change in my mutual fund portfolio. i started investing from dec 2007 and right now incurring loss of 60 k out of 143 k. i have SIP for SBI MAGNUM BALANCED FUND - GROWTH , HDFC EQUITY FUND - GROWTH PLAN & RELIANCE GROWTH FUND - GROWTH PLAN - GROWTH OPTION


Scheme Category Profit/ Loss %
HDFC PRUDENCE FUND - DIVIDEND PLAN Balanced -40.73
HDFC PRUDENCE FUND - GROWTH PLAN Balanced -42.93
SBI MAGNUM BALANCED FUND - GROWTH Balanced -32.76
DSP MERRILL LYNCH T.I.G.E.R FUND - GROWTH Equity Others -52.65
HDFC EQUITY FUND - GROWTH PLAN Equity Others -37.06
RELIANCE GROWTH FUND - GROWTH PLAN - GROWTH OPTION Equity Others -43.15
SBI MAGNUM GLOBAL FUND-GROWTH Equity Others -63.55
SBI MAGNUM TAX GAIN SCHEME - GROWTH$$ Equity Others -51.79
ICICI PRUDENTIAL INFRASTRUCTURE FUND - GROWTH Equity- Sectoral -51.23
SUNDARAM BNP PARIBAS CAPEX OPPORTUNITIES FUND - GROWTH Equity- Sectoral -56.54
--
Thanks & Regards,
Sachin Dantulwar


SRIKANTH SHANKAR MATRUBAI advised :

Dear Sachin,
You have started your investment right at the peak of the Bull Run, and it is no surprise that your investment is down by more than 50%.
This meltdown has left many investors scarred and your portfolio is no different. Your portfolio is a mix of good and bad funds. Continue with your good funds like HDFC Prudence Fund, HDFC equity, SBI Balanced, etc. And, even at a loss, switch from bad funds like Infrastructure funds. These are not bad funds, per se. But, in the foreseeable future, they may still continue to be underperformer. So, with this in mind, it is advisable to switch out even at a loss, as your recovery in the other funds will be faster than continuing with the existing funds.
HDFC PRUDENCE FUND - Continue
HDFC PRUDENCE FUND - Continue
SBI MAGNUM BALANCED FUND - Continue
DSP MERRILL LYNCH T.I.G.E.R FUND -
Switch to DSPML Equity Fund
HDFC EQUITY FUND - Continue
RELIANCE GROWTH FUND - Continue
SBI MAGNUM GLOBAL FUND-
Switch to SBI Bluechip Fund
SBI MAGNUM TAX GAIN SCHEME - Continue
ICICI PRUDENTIAL INFRASTRUCTURE FUND
Switch to ICICI Dynamic Fund
SUNDARAM BNP PARIBAS CAPEX OPPORTUNITIES FUND -
Switch from Sundaram Capex Fund to Sundaram Select Focus Fund.

Continue your existing sips, as they are all into good funds. As soon as your existing sip in HDFC Equity fund ends, add HDFC Top 200 fund. Also, As and when fianaces permits, add the following funds, either through lumpsum or sips, preferably through sips.
Birla Sunlife Equity fund
DWS Alpha Equity fund
Fidelity Equity fund
Templeton India Equity Income Fund
HSBC Equity Fund

for tax funds, invest in
DWS Tax Saving Fund (added bonus of Free Life Insurance 5 times your investment).
Sundaram Tax Saver

Do continue your sips and stay invested for at least another 2 years, when things will be difenitely better.
Best of luck,
Srikanth Shankar Matrubai