QATAR NEWSPAPER PUBLISHES MY VIEW ON DEBT FUNDS

Qatar's leading English Daily THE PENINSULA published my view on Debt Funds. The Newspaper carried a article on how the Indian Investors dumped most of their equity investments and how most investors were looking at the debt investments.
Further, the article wrote about which debt funds should be looked for investments and published my opinion on them.
This is what it had to say :
'Considering the falling interest rates, one would be better off investing in long term debt funds rather than short term as these would not yield much, says fund advisor Srikanth Shankar Matrubai. In his estimation, some good debt funds for an NRI to invest in would be ICICI Prudential Income Opportunities Fund, Birla Sunlife Income Plus, Canara Robecco Income(Growth) Fund and HDFC Income Plan. Then there is TATA Capital NCD which is giving attractive Rate of 12 per cent. "

One of my NRI client based in Qatar brought this to my notice.
Click on the link below to read the article.


THE ARTICLE

http://www.thepeninsulaqatar.com/Display_news.asp?section=business_news&month=march2009&file=business_news2009031581431.xml

Regards,
Srikanth Matrubai


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EVALUATE MY PORTFOLIO

CHANGE THE DEFENSIVE MINDSET

Mr. Brahmananda wrote :
Thank you for your informative blog. It has been very useful to small investors like me.
sir,
please evaluate and guide my portfolio.
At present I am investing in
bank R/Ds 15,000p/m,
Mutual Fund investments
Reliance Regularsavings Equity 1,500/m;
Sundaram Select focus 1,500/m;
Kotak Opprtunities 2,000/m;
Reliance Diversified Power Sector fund 5,000/m and
BirlaMidcap Fund 5,000/m,
I have 3yrs old daughter and I like to invest 5,000/m into gold, should i go for Gold ETF or Postoffice gold purchase and my investment horizon is 10-15yrs and after that to consolidate all investments.
I have term insurance for 35L;
Critical Illness 10L;
Mediclaim 5L(Family floater);
my annual takehome salary is 8-9L and
I have a own house and no major liabilites as of now.
Please guide me.
Is my investments are suffice and whether I am in right track?


SRIKANTH SHANKAR MATRUBAI advised :
Dear Brahmananda,
Thankfully, you have got your own house and have no major liabilities. This is a major plus point in favour of your finances.
I wonder why you need to invest 15000 per month (nearly 50% of your investment amount) in Bank RD where the interest rate barely covers the Inflation and leaves you with very little actual gains. Since, you have no major liabilities, you can afford to be a bit balanced, if not aggressive. Your investment in Bank RD is too defensive. You can as well consider investing in Balanced Funds or even Diversified Equity Funds, especially since your investment horizon is 10-15 years.
I feel you need to add another Rs.10 Lakhs to your Insurance Cover and increase your overall Cover to about 45Lakhs. You can consider taking a Top-up to your existing Term Insurance.


You need to make only some minor adjustments in your portfolio for a better returns. Otherwise your Fund selection is quite good.
Reliance Regular Saving Equity - 1500pm - continue
sundaram Select Focus - 1500pm - Continue
Kotak Opportunities - 2000pm - Switch to Kotak K30 Fund
Reliance Diversified Power Sector Fund - 5000pm - Stop immediately and invest 2000pm in Reliance Growth Fund
and the balance 3000pm in HDFC Prudence Fund
Birla Midcap Fund - 5000pm - Stop immediately and split the 5000 and invest 2000pm in Birla sunlife Equtiy Fund and 3000pm in DSPBR Top 100 Equity Fund

so, your Mutual Fund Sip investment will be like this

Reliance Regular Saving Fund(Equity) - 1500pm
Sundaram Select Focus Fund - 1500pm
Kotak K30 Fund - 2000pm
Reliance Growth Fund - 2000pm
HDFC Prudence fund - 3000pm
Birla Sunlife Equity Fund - 2000pm
DSPBR Top 100 Equity Fund - 3000pm

This Portfolio has the right mix of Large Cap and Diversified Equity funds with a Balanced Fund to complete the picture.

Investing in Gold is never a good idea. Buy Gold only when you want to use and not for investment purposes. And with your investment horizon of 10-15years, Gold may not serve the purposes. You may as well consider investing in a Good Diversified Fund. Except for the last two years, most of the time Gold has managed to deliver returns on par with Inflation. However, you may take a small exposure to Gold through Gold ETFs or better still through UTI Wealth Builder Fund - series II. This Fund invests in a mix of asset of Equity and Gold in the ratio of 65:35 in favour of Equities. If your mindset is aggressive you can take a small exposure to Gold Mining Funds like the DSPBR World Gold and AIG World Gold Fund, which, beware, more volative than Gold ETFs.


Best of luck,
Srikanth Matrubai


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SUNDARAM PSU OPPORTUNITIES FUND

RELIGARE PSU EQUITY IS A BETTER OPTION

Following the footsteps of the successful fund launch of Religare PSU Equity Fund, Sundaram too has joined the PSU bandwagon and has launched the Sundaram PSU Opportunities Fund, which seeks to invest in PSU companies across the market cap and sectors.
The fund has identified wealth creation triggers in the form of disinvestment process, growth, valuation re-rating and high-dividend payouts. Sundaram PSU fund will overlap its other Funds like the Energy Fund and Financial Opportunities Fund.

The Sundaram PSU Opportunities Fund was launched on November 25 and is schuduled to close on December 24, 2009.

As usual, the minimum lumpsum investment is Rs.5000, but, as with every Sundaram Scheme, this Fund's Minimum SIP instalment amount is Rs.250/-.

INVESTMENT ANALYSIS :
1)With a Stable Govt in place, one can expect quite a huge disinvestment programme which should keep the PSU stocks in limelight and this fund along with Religare PSU Equity Fund will be in good position to capture any upside.

2)Most PSUs are BIG companies and are Leaders in their industries, in fact, many are virtual Monopolies. Thus this Fund will be like a Large Cap Fund. This Fund will is recommended for Long Term Investors.
3)In the Last Year's Big Bear Crash, PSUs were the Least Affected thus giving a sort of comfort to investors.
4) PSUs are trading at a average discount of 40% discount to the Private Sector, even a 50% re-rating would immensely boost the stock prices of the PSUs and thus, the Sundaram PSU Opportunities Fund too.

Negatives :
1) The Fund is a thematic fund catering to the limited universe of public sector companies.


WHY RELIGARE SCORES OVER SUNDARAM :
While most analysts would blindly recommend Sundaram PSU Fund over Religare PSU Fund., I would take a contra view and say AVOID SUNDARAM PSU FUND AND INVEST IN RELIGARE PSU EQUITY FUND.
Here are the key reasons for the same :
1. Equities Outside PSUs :
While Sundaram has the mandate to invest upto 35% outside the PSU basket, Religare does not. While this may ensure diversification, this also means that the PSU THEME IS DILUTED IN SUNDARAM PSU FUND.
2. Overseas Investments :
Sundaram again can invest upto 35% in Overseas which is laughable considering that this is a Public Sector Fund. Religare will be 100% investing in India which ensures NO CURRENCY RISK, NO COUNTRY RISK, NO GEO-POLITICAL RISK.
3. Exposure to Banks in Benchmark :
Sundaram has CNX PSE as its Benchmark which has NIL Exposure to Banks, where as Religare has BSE PSU as its Benchmark which has around 20% exposure to Banks. It is shocking how Sundaram tripped on this. BANKING AS A SECTOR IS IGNORED IN SUNDARAM PSU FUND.

SPECIAL TIP
Religare has already invested its Assets. More buying in the PSU Stocks by the new Funds like Sundaram PSU Fund and SBI PSU Fund (which is in the process of being launched) will benefit Religare PSU Equity Fund which is already fully invested. The Scope for Value Unlocking of Public Sector Undertakings is huge and Religare and Sundaram both are poised to take advantage of these.

If you are convinced about the PSU story, then you know which fund is a better proxy to play on the theme.

Best of luck,
Srikanth

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ADVISE FOR A HOUSEWIFE

START WITH EVEN A RS.500/- SIP


A HouseWife Mrs.SA wrote :
Dear Sir,
You are doing a great job with your blog. I have learnt a lot from your blog. Even though I am afraid of Equities, your writing has given me confidence to invest in Mutual Funds, to be begin with.


I'm a home maker & can save Rs.500/- every month. I want to invest this amount
systematically every month for next one year & want good return after 5 years.
Now my question is which option is the best for my investment. I don't
want to take high risk.

Thanking You,

SA
KOLKATA

SRIKANTH SHANKAR MATRUBAI :
Dear Soma Madam,
I have stopped giving FREE advise both online and offline. I am charging a minimum of Rs.1000 for each advise. But I am making an exception in your case because of your status as a Housewife and also because of your small investment amount.
But note this is a one off exercise. Next time, you will have to pay me for any advise.

My Advise :
Being a Housewife with very little invesible amount and also with your low Risk taking ability, you are better off investing in Large Cap Funds and/or Balanced funds.
I feel 500 is too little. But something is better than nothing. Even with this 500, I will try to get you not only Good Low Risk Funds, but also good diversification.
My advise would be to split your 500 into 3 parts and invest as under :
250 * 1 in Sundaram Select Focus Fund
150 * 1 in Reliance Regular Savings Fund ( Balanced )
100 * 1 in SBI Magnum Balanced Fund

This way, 50% of your investment is going into Balanced Fund and the rest 50% into Large Cap Fund and you are getting into 3 different AMCs.
I encourage you to continue to use the SIP way as this is the BEST way to invest and also make maximum returns on your investment.

With you all the best.
Regards,
Srikanth Shankar Matrubai,
Bangalore






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DSPBR WORLD MINING FUND - UNIQUE THEME

FOR THE HIGH RISK APPETITE INVESTOR

DSP BlackRock World Mining Fund
After two sucessful Fund of Funds, in DSPBR World Gold Fund and DSPBR World Energy Fund, DSP BlackRock has come out with its 3rd Fund of Funds DSP BlackRock World Mining Fund.
The fund will invest in the BlackRock Global Funds’ World Mining Fund, which has a corpus of about Rs 51,000 crore and invests in mi

ning companies across the world, with operations in precio

us metals, coal, iron ore and copper among others.
The BGF World Mining Fund has been in existence for a period of more than 12 years and has a great performance track record.

The fund has outperformed its benchmark HSBC Global Mining Index over one and five-year periods. The Fund has given a return of 17.8%

CAGR compared to its Benchmark return of 12.7%.

The Fund has been awarded the maximum AAA ratings from both Standard & Poor’s and OBSR.

COMMENT AND SUGGESTION :

After the 2007 highs and the subsequent crash, commmodity prices are stablising and moving up steadily. Supply constraints and the Weak Dollar will make Commodities costlier and the Fund should benefit from this strong prices in commodities.

The Fund will give you both Sector diversification as well as Geographical diversification.
An investor interested in a concentrated portfolio of commodities and the mining sector in the medium to long term should consider investing in this fund.

Risks :

There is an exchange risk. If the rupee depreciates, it adds to the return of the fund since the investment is in a non-rupee asset. Likewise, if the rupee appreciates it would potentially reduce the return of this fund.
There is a Sector Risk with this Fund as the Fund will be fully exposed to the fortunes of the Mining Sector.

Suggestion :
The Fund has given excellent returns and has had a great trackrecord. Invest with a medium to long term view and do not have more than 5% exposure, depending on your risk appetite.

Note, the NFO does not have a SIP. If you want to invest through SIP, you have to wait for the Fund to reopen for regular purchase.

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FIDELITY INDIA VALUE FUND - AVOID

Fidelity has launched a New Fund Offer with a attractive name, Fidelity India Value Fund.
The fund will invest in Indian and international equities with a higher focus on undervalued securities to deliver long term capital appreciation. The Fidelity India Value Fund's new fund offer (NFO) will close on December 15, 2009.

Fidelity has built a strong reputation for giving more prominence to Fundamentals of Stocks it buys and thus has been a steady performer rather than being spectacular.


COMMENT AND RECOMMENDATION :
Value Funds tend to take a long time to give reasonable returns and Fidelity as a Fund House itself, is quite defensive in nature.
It is surprising that Fidelity has come with a Such a Fund at all. What do the other Fund Managers do??? Don't they see
'value' in the stocks they buy?.
And what these 'Contra' Funds do????., They too find 'value' and do Contra buying.

Indian Economy is in a Strong Growth Phase and Value Investing will work more in mature markets and thus Growth Funds will give more returns than Value Funds.

Go for Fidelity Equity Fund and avoid this NFO for now. If you are really keen on 'Value investing' go for existing funds like ICICI Discovery Fund, Birla Sunlife Dividend Yield Fund, UTI Dividend Yield Fund.

For your information, even their flagship, Fidelity Equity Fund, though consistent, has lagged behind its peers over 1 year, 3 year period.
Thus, This Fund is purely for a fan of Fidelity.






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AXIS EQUITY FUND - AVOID

The latest entrant to the Mutual Fund Industry is Axis Mutual fund which is promoted by Axis Bank.
It has launched Axis Equity Fund.
Axis Equity Fund is a plain vanilla Diversified Equity Fund and will be managed by Chandresh Nigam who was earlier with ICICI Prudential Mutual fund. The Fund is open for subscription from November 11 to December 8.
Axis Equity Fund would follow a bottom-up approach to choose its basket of 35-40 scrips, entirely comprising midcaps and large caps.


Axis Mutual Fund's maiden offering Axis Equity Fund New Fund Offer can be given a miss.


Not only the Fund is new, even the Fund House is new and yet to prove its worth.

The Fund is no different from the over 200 Diversified Equity Funds and does not merit attention. Let the Fund prove its worth before you commit your hard earned money to the fund.

Put your money to better use by investing in existing schemes which have proven their worth.

Best of luck,

Srikanth Matrubai
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SAVING TAXES??? - ELSS IS THE BEST OPTION

KILLING TWO BIRDS WITH ONE STONE!

You are sure to be bombarded with ads of Tax Schemes in the coming days as the 'Tax Season' draws near. ULIPs & ELSS will be the prominent ones who will be eyeing your wallet.
My advise, Go for Mutual Funds ELSS. Among all Tax Saving instruments, ELSS stands out. Not only your Investments into the ELSS is tax free, but also the dividends you earn and also the returns at maturity are also tax free.


It is proven beyond doubt that among all the Tax Saving Instruments, Equity Linked Savings Scheme, popularly known as ELSS, the returns from ELSS have been the highest.

What is ELSS?
ELSS is the acronym for Equity Linked Savings Scheme. It is basically a diversified equity scheme, which has a 3-year lock-in period. They are linked to Stock Market Returns, hence though volatile, the returns tend to be higher than traditional Tax Savings Scheme.



Why ELSS :
1. Investors in ELSS under Dividend Payout Option have the advantage of getting Tax Free gains even during the lock-in period of 3 years.
2. Lowest Lock-in period of just 3 years, comparing favourably with maturity period of NSC (6yrs) and PPF (15 years).
3. Minimum investment is only Rs.500., very low entry barrier.
4. Investors in ELSS have the advantage of investing through Systematic Investment Plan.
5. Some ELSS schemes offer Free Life Insurance Cover and also Personal Accident Death Cover and even Critical Illness cover!!!
6. Historically, provided better returns than both NSC, PPF and ULIPs.
7. Profits earned after the Lock-in Period is Competely Tax-Free.
8. Upto Rs.1Lakh is eligible for deductions under Section 80c compared to Rs.70000 in PPF.
9. Due to its 3 year lock-in period, the Fund Manager has the freedom to invest in Fundamentally Strong Shares with huge future potential and can afford to 'wait' to unlock the value. Thus, it has been observed that ELSS schemes do beat (in terms of returns) even Diversified Mutual Funds more often than not.



Why NOT other Tax Saving Instruments :
1. ULIPs or LIC Premium :
These Instruments are designed to provide you Cover, which invest only a PART of your invested amount. Moreover the Entry load in some of these can be as high as 40%., where as in ELSS , it is NIL!!!!!
2. PPF and NSC :
Not only the Lock-in period is high, but also the returns are very less, hitting you hard and sometimes not even covering Inflation.
3. Five Year Bank Fixed Deposits :
Very Low Returns, Low Liquidity and Interest IS Taxed on Maturity.

FREE INSURANCE COVER TOO :
Birla Sun Life Tax Relief and HSBC Tax Saver Equity are offering free critical illness cover, while DWS Tax Saving is giving free life insurance.
The Reliance Tax Saver and Kotak Tax Saver scheme comes with a free life insurance cover.
Taurus Tax Shield and Principal Personal Tax Saver and Prinicipal Tax Saving Fund offer Personal Accident Death Cover.

Apart from the ELSS Funds, there are Pension Funds namely, Templeton India Pension Plan and UTI Retirement Benefit Unit Plan, which invest a minimum of 60 per cent of their assets in fixed income instruments.

Systematic Investment Plan

Best way to invest in ELSS is through Systematic Investment Plan(SIP). With SIP you can invest a small amount every month for a specific time period. With SIP investor can take advantage of fluctuations in the stock market. So investor will get more units when the market is down and get less units when the market is up. For eg if you are investing Rs 1000 every month and you will get 100 units for when Net Asset Value (NAV) is 10 and will get 50 units when NAV is 20. So investing a fixed sum regularly helps to cover the market fluctuations by rupee costs averaging.
SIPs are a tried and tested method of minimizing risk and yet enjoying good returns,by regular,periodic investment,over a long horizon.


A FANTASTIC COMBINATION
SIPs along with the tax benefit that can be availed of by investing in ELSS,makes this investment option very attractive.Instead of simply putting in a chunk of Rs 1 lakh at the end of each fiscal year, if you develop a healthy saving habit,you could invest a fixed amount every month and benefit from the advantages of both SIPs and the tax rebate.
When you invest in ELSS, through the SIP route, you enjoy the multiple benefits of better market-linked returns in the long run, rupee cost averaging and a tax break. So, happy investing!



So........

ELSS give you the two-in-one advantage of saving tax and wealth-building. So, do not wait for the "March" last minute rush to save taxes and make a hasty decision.

Tax Exemption twice in 6 years!!!
You can withdraw your Tax Saver Funds at the end of the 3 years and when you reinvest the same, you get Tax Exemption TWICE in six years compared to just once in the case of NSC.



GO FOR DIVIDEND PLAN :
Almost all equity-linked saving schemes have two fund options — growth and dividend. Unlike a growth plan, an investor gets annual payouts from the dividend schemes before the final redemption of units.

The trick here is to invest in the dividend plan of an ELSS. For instance, if one invests Rs 1 lakh in an ELSS, one saves a tax outgo of Rs 33,990 (at the highest tax rate of 33.99 per cent) under section 80C.
Now consider this. An ELSS has announced a dividend of 50 per cent. The net asset value (NAV) per unit of the scheme is Rs 50. Suppose one invests Rs 1 lakh in the fund before the record date for the dividend. After the record date, the investor will get a dividend of Rs 10,000 at the rate of Rs 5 per unit for 2,000 units that have been bought. Therefore, effectively the individual invests Rs 90,000 (Rs 1,00,000 minus Rs 10,000) and saves Rs 33,990 in tax outgo.

In other words, on an investment of Rs 1,00,000 in the dividend plan of the ELSS, one gets a post-tax return of Rs 43,990 (Rs 33,990 plus Rs 10,000), or 43.99 per cent.



RECOMMENDED ELSS FUNDS :
Religare Tax Plan
Birla Sunlife Tax Relief 96 Fund
Sundaram Tax Saver
HDFC Tax Saver
Franklin India Tax Shield
CanRobecco Equity Tax Saver
Fidelity Tax Advantage
SBI Magnum Tax Gain

For more details on My Pick of the Best ELSS Funds, look out for my next article.

Best of luck,
Srikanth Matrubai




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Rs.100 SIP in SBI Magnum Contra

Mr.A asked :
Dear sir,

Thank you for your great advices.
Your blog http://goodfundsadviosr.blogspot.com is doing a great service to the Mutual Fund Investor Community.
Recently SBI Magnum Contra MF allows inverstor to invest in this fund through SIP of Rs. 100. Is it okay if I start investment Rs. 250 per month for next 10 years in this fund? If I opt for SIP of Rs. 100 or below Rs. 500, I will have to continue SIP to Magnum Contra for next 5 years. It is mandate from AMC. So I have no way to change my stand after one year if I invest Rs. 100 per month in Magnum Contra. I can reduce SIP tenure from 10 years to 5 years at best.

SRIKANTH SHANKAR MATRUBAI replied :
Dear A,
Yes, you are right. SBI has recently has launched a Micro SIP called Chota SIP for as low as Rs.100 per month and the investment period of SBI Chota SIP would be minimum of 5 years. Currently SBI Chota SIP allows to invest in SBI Mutual Fund’s Magnum Balanced Fund, MMPS 93, MSFU Contra Fund, and SBI Blue Chip Fund and later on this plan would be extended to other schemes as well.
There is nothing wrong in planning for SIP for a 10 year period but not in one fund. You might find later on say after a year or so that the performance of this fund is lagging compared to others and might want to invest through SIP in another fund. Initiate SIP for one year and review after that. If satisfied, u can go for a further one year SIP. In my view u should opt 3 SIPs of 100 Rs. each on 3 different dates in a month for ur investment in SBI Contra fund. The split SIP `ll provide better averaged cost to u. Note, that for a SIP of Rs.100, you need to invest for a minimum of 5 years. Also, there is no need for you to submit your PAN Details, just your ID proof is enough.

FUND ANALYSIS :
Do not let the name mislead you, SBI Magnum Contra is more of a Diversified Fund and is a good investment for a time horizon of 5 years or more.
Inspite of frequent changes in the Management Team of the Fund, the performance of SBI Contra has been impressive. The Fund has consistently beaten its Benchmark and Category Average handsomely.

You can consider investing in the Fund.



NOTE :
Even though the AMC states that you will have to invest for 5 years minimum, it is your will and wish to stop the sip anytime if you feel that the Fund`s performance is not upto your expectations. However, for redemption, admissible exit loads will be applicable. Do review the performance of all your funds every year or so.
Best of luck,
Srikanth Matrubai

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MUTUAL FUNDS BETTER THAN DIRECT EQUITY INVESTING

MUTUAL FUNDS - YOUR BEST TOOL FOR WEALTH CREATION

Most of the investors may not know which stocks to invest in and, once any rally starts, they jump on to the bandwagon and invest in some stocks which they feel will be next multibaggers. Their expectation either on the basis of mere hearsay or their own gut feeling. They neither have the expertise in selection of quality stocks, nor the time or the inclination to engage in painstaking research for picking up good stocks. Result: most of them end up with losses and dud stocks in their hands at the end of the rally.
So, what's the way out for these investors? The answer is simple: buy equity mutual funds. If you don't under-stand equities market, buying equity mutual funds is probably much better
than buying equities themselves.


Investing in a Mutual Fund rather than Direct Equity Investing is always better and more profitable. There are lots and lots of advantages by investing in a Mutual Fund instead of Direct Stock Investment. Some of the most prominent are :
1. Financial Expertise :
Investment in Stocks is a time-consuming afffair. And most importantly, you require expertise to analyse the Balance Sheet and ability to foresee the future scope of Companies. However, by investing in a Mutual Fund, you are hiring a Fund Manager for a ridiculous price. So, investing in Mutual Funds not only saves you time but also enables your money to be handled by a Equity Expert.

2. Diversification :
Investing a Mutual Fund gives you instand diversification. In fact, this is true for even a 'Sector' Fund. With just one fund, say "Religare PSU Equity Fund" you are getting exposure to a whole bunch of Public Sector Companies.

3. Low Risk :
By investing in a Equity Share directly, you are exposed to risk of the Company going bust (ex.Satyam), even if you had done through analysis. Mutual Funds, even if they have exposure to such stocks, the risk is mitigated by the other stocks the Fund holds.

4. Liquidity :
You get back your funds in under 2 working days (in liquid funds). Some Stocks might have liquidity problem, but Mutual Funds do not face this problem.

5. Flexibility :
You can invest in Mutual Funds with an amount as low as Rs.100 per month!!!!!! Thus, even with Rs.100 per month, you get an opportunity to invest in a Diversified Stocks and Sectors.
You can also "switch" from an equity to debt to balanced fund depending on your risk/asset allocation with "NIL" cost.

6. FOREIGN EXPOSURE :
With Direct Equity, you can't buy Foreign Stocks, which you can do with Mutual Funds. And all this at your convienience.
You can get the Sensex/Nifty exposure with just a single Fund.
Mutual Funds thus let you invest 'where you can't'

7. High Returns :
Most of the Funds are known to outperform the Nifty/Sensex by a wide margin regularly and consistently.

8. High Transperancy :
Mutual Funds are regulated very highly. In fact, SEBI has been more vigilant on Mutual Funds, than even insurance. Mutual Funds have to mandatorily disclose their NAVs daily.

8. Cheaper :
ULIPs are the closest to mutual Funds in terms of structure and fuctioning. However, your investment in Mutual Funds get 'fully' invested, whereas in ULIPs, nearly '40%' goes to the Insurance Agent.





CONCLUSION:
There is no other investment class which offers the wide cumulative advantage that the Mutual Fund investment offers.
With an investment in Mutual Funds, you get
Professional management
Instant Diversification
Flexibility
Liquidity
Returns comparable to any other investment class.

Even the latest issue of Dalal Street Journal has its Cover Story titled "Its time for Mutual Funds".

Best of luck,

Srikanth Matrubai

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GOLD - ADD THE 'SPARKLE' TO YOUR PORTFOLIO

BUY GOLD - SLEEP WELL

Dear All,

There has been so much said on Gold these days, investors are confused whether to buy or Sell Gold. I will try in my own way to confuse further!!!!

WHY GOLD???

Before trying to get to know what to do with Gold., lets try to find out WHY we should consider Gold as an investment class at all.

1). Its well known that Gold is a perfect hedge against Inflation. But. Period.
But, only if hold for a considerable period of time., say

at least 10 years. The fact that Gold has appreciated by 60% this year only makes it more obvious candidate for Long Term Investment only.
2) Gold is considered as a symbol of Wealth.

POINTS FAVOURING "BUY" :

1). With the US Dollar and other Major Currencies are in terribly fashion and do not paint a rosy future. The Weakening Currency is a sure sign of a Strong Gold. All Central Banks are thus leaning towards 'Gold' as an hedge against Sovereign Losses

.

2) Gold is a good Diversifier. Gold tends to go against Equities and Real Estate and acts as a good hedge.

3) Demand for Gold is rising rapidly. Gold ETFs in India has seen a rise of 1000% in just under 3 years. China which has a ban in place where its

public can't buy Gold, is considering lifting the ban. This move will make the Chinese Demand for Gold to go through the roof.

4) Gold Production is decreasing. Another reason for the Gold Prices to keep steady, if not go up.

Inspite of a rapid rise in Gold prices, the production of Gold has Declined by 9.8% since the peak production seen in 2001.
The mines in South Africa, USA and Australia are in matu

re market and the reserves are constantly declin

ing.

POINTS FAVOURING 'SELL'
1) There has been a sharp rise in supply of Scrap Gold which has had a 'soothing' effect on Gold price rise. The Scrap Gold supply is expected to rise further which will limit any rise in Gold prices.

2) Too much, too fast
The Price of Gold has risen too much and at much quicker speed than one expects from a 'lazy' asset. This could bring in not only 'profit booking' but also 'shorting' traders bringing the prices of Gold down.

3) Rise in other commodities could dampen the prices of Gold. Especially, any price rise in Crude will hasten the hedge funds and 'fence' investors to jump away from Gold.

HOW TO INVEST IN GOLD :

1) Gold Jewellery :
Indians are major believers in Gold Jewellery. Gold Jewellery also has an added cost with the 'making' charge added to your Gold cost. Gold Jewellery has a unprofitable resale value and if you buying Gold for investment, then this from of Investment is Best Avoided.

2) Gold ETFs :

Gold ETFs are Gold Exchange Traded Funds which are listed and traded on Stock Exchanges just like any other stock. This is the Most Convenient Form of buying Gold and with its Low Cost, one can buy even 1gm of Gold. Gold ETFs also ensure that you do not need to worry of Purity of Gold, Security, etc.
However, the disadvantage is that you have to pay B

rokerage Charges, Securities Transaction Taxes, Demat Charges which 'eats' into your profit. Gold ETFs are Tax-efficient.

3) Gold Physical :
The Traditional Way to buy Gold and store. The disadvant

ages with this form of buying gold is., not only the question over the purity of gold., but also the security of storage of Gold.

4) Gold Funds :
Other than Gold ETFs, there are funds like DSPBR World Gold Fund and AIG World Gold Fund. These Funds DO NOT invest in Gold directly like the Gold

ETFs., instead these Funds invest in Gold Mining Companies. These Stocks are very volatile, much more than Gold and tests your BP. If you stay rooted., then these two Funds give you MORE returns than the conventional Gold ETFs.
DSPBR World Gold Fund has given a return of 110% over 1 year period. AIG World Gold has given a return of 125% over 1 year period. Both have outp

erformed the FTSE Gold Mines Index which has given a return of 106%.
These Two Funds also provide you Geographical Diversification due to their investments in Gold Mining Stocks Worldwide. However, do note, that these Funds not only face Equity Markets Volatility Risk but also Currency Risk.

A Rash of Gold companies offered equities which had a sober effect on Gold Mining Stock Prices. This has now not only worn off but these Companies have outperformed the market by a Huge Margin.



WHAT TO DO NOW :
The RBI buying 200 tonnes of Gold has given

a shot in the arm to the 'bullish sentiment' towards Gold. Other Central Banks too are actively considering adding More Gold to their Kitty. Sri Lanka has already made an announcement to this effect. China has a 'measly' 2% Gold Reserves and is adding Gold quitely.

While it will definitely not be 'win-win' situation for Gold Buyers., Gold will make a Good Investment, if you are considering holding the same for a period of at least 10 years.
For now, you can use the Gold you have to take a "gold loan" to repair your house and any other expenditure as Banks will be falling over each other to offer you "gold Loan".

Buy Gold at every dip and the 'sparkle' in your Investment Portfolio. With Gold in your portfolio you will not only 'sleep' well, but buying now, you will have to 'sleep' over it.

Use Gold mainly as a diversification tool in your portfolio and NOT as a Core Investment.
Do note, that unlike Equities or Real Estate, Gold does not bring any Regular Income and your income is 'locked'.

SMART TIP :
Do NOT buy Gold from Bank. Not only the Cost of Gold you buy in Bank is higher, but the Bank only sells and does not buy back from you.

If you remember, I had a given a STRONG BUY Call on Gold when it was quoting at $958 on March 19, 2009. Click the link http://goodfundsadvisor.blogspot.com/2009/03/buy-gold-now-before-it-becomes.html" to see the article.

Best of luck,

Srikanth matrubai


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FD MATURING - WHERE TO INVEST NOW????

IDEAS FOR INVESTING LUMPSUM AMOUNT

I had given an advise to an NRI in the month of April. I thought there is something for you to learn from that advise. Here goes......






Mr.S Parekh asked :

Dear Sir,

I am a retired Gulf NRI aged 59 years.
A NRO deposit of 6L is maturing in the next month. Can any of you guide me as to where and how i should invest this as I am not interested in renewing this FD further due to TDS of 31%
I have following investments other than this.
NRO fix deposit 11L
Equity diversified funds 10L
Income, gilt, debt and arbitrage funds 32L
A flat in Mumbai worth 60L for personal use.
Monthly income is not required for another 2 years.
Thanks,
S Parekh


SRIKANTH SHANKAR MATRUBAI wrote :
Dear S Parekh,
as the money `ll come to u in the month of may, By that time, the NCD of recently closed TATA NCD issue `ll be listed on BSE. Thru ur Demat acct. u can purchase these NCDs from BSE. As ur time frame is limited to next 2 years, plz. purchase only cumulative option NCD. U can liquidate ur money from these NCDs any time by selling back on BSE. Even after 2 years, if u don`t need money, for taxation purpose, my advise is to liquidate these NCDs just 15 days before the completion of 3 years. the gains `ll be treated as LTCG & same `ll be taxed @ 10.3% without indexation or 20.6% with indexation. The coupon rate for these cumulative option NCDs is 12%, hence post tax ur returns `ll be around 10% (while selling ur NCDs on market, some discount `ll be there, that`s why the effective rate of return to u `ll be 10% post discount & post taxation).

Another option is to invest in Nabard Bhavishya Nirmaan Bonds (BNB) again these r also listed on BSE but here post tax yield `ll be around 7.5%.

However, the caveat is, that by May, it is expected that Interest Rates in the market would drop a lot. That means the market value of Bonds would have risen to effectively reduce the yield. In 2 years, if the interest Rates are back up, your Bonds will be worth much less. If so, you actually won`t get the 10% return calculated at coupon rates if you buy the Bonds from the market after further Interest Rate reductions.
At the same time, the Equity markets would also probably be at lower levels by then, and will hold a good prospect of giving good returns over the next 2 years as the global economy recovers (or at least as the panic gripping it now recedes).
Besides, your percentage investment in the Equities is quite low compared to Debt, even for your lifestage, under these market conditions and prospects.
So, you would be better off investing the lumpsum money arriving in May 09, into select equities or equity funds. Shares of essential goods/services suppliers, and infrastructure support companies should be pretty safe bets at those levels.

One more suggestion
ICICI bank has a new FD which takes into account the Double Taxation Avoidance Agreement and under this new NRO FD you pay 12.5% tax and not 31%. If you have ICICI NRE account, then simply go for this.
But the best option would be to invest at least 50% of your Deposit in a Debt Fund and go for a Systematic Transfer Plan into Good Large Cap Funds like HDFC Top 200 fund, DSPBR Top 100 Fund, etc.
Best of luck,
Srikanth Shankar Matrubai


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TATA INDO-GLOBAL INFRASTRUCTURE FUND - STAY INVESTED FOR NOW

Tata Indo-Global Infrastructure Fund has had a disastarous start and has ince inception given a Negative Return of Minus 13%. It has trailed its Benchmark both over a 1year Period and since its launch.
The Tata Indo Global Infrastructure Fund is a three year close ended equity scheme which will be automatically converted to an open ended scheme upon maturity.
The Fund invests between 65%-85% in Domestic Companies and between 15%-35% in Foreign Securities.

To reassure investors of this Fund, The Tata Mutual Fund recently sent this Letter to all its investors : -



Dear Investor,

At the outset, we wish to thank you for investing in the Tata Indo Global infrastructure Fund. As you are aware, the investment objective of Tata Indo Global Infrastructure Fund is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in infrastructure and infrastructure related sectors globally.

Stocks of infrastructure companies have underperformed significantly over the past few months due to a changing macroeconomic environment as well as the freeze on decisions on new projects due to the election code of conduct prior to the general elections. This led to some underperformance of the entire infrastructure sector. In the initial phase, Tata Indo Global Infrastructure Fund invested gradually in a rising market as it reached the peak. Hence the performance of the fund looks moderate.

One needs to judge the performance of this fund in light of one of the worst global economic meltdowns in recent history. India has been among the fortunate few countries which did not have to bear the full brunt of the meltdown. While leading economies of the world saw their economies shrink, the Indian economy merely witnessed a slow down.

Again in the economic recovery, the Indian economy would be among the first off the blocks. We have already started to see some of this play out. In this context if one were to study the performance of the Tata Indo Global Infrastructure Fund, it would get evident that the Indian portion of the scheme has outperformed the international portion.

It is getting evident from all the talks on �green shoots� that we are on the cusp of a global economic recovery as well. Therefore it is important for investors to wait as other global economies recover. As such the infrastructure sector holds tremendous potential not only in India but globally as well. Once global economies stabilize you would experience the benefits of diversification as well.

Thus the infrastructure story, and especially that of the Tata Indo-Global Infrastructure Fund (TIGIF), continues to look optimistic and one is advised to ride over the turbulent period by displaying patience and staying power.

Regards,
Tata Mutual Fund.





SRIKANTH MATRUBAI'S COMMENT :
While Infrastructure story still continues to remain attractive., the timing of the Fund was what made the Fund such a disaster.
Being a Close Ended Fund, it is better to stay invested. Moreover, the Infra story looks to see 'greener' day ahead.
Stay invested for now and take a call when the Fund becomes Open-ended.


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RELIGARE PSU EQUITY FUND - INVEST

RIDE ON THE PSU GAINTS

One can consider investing in the Religare PSU Equity Fund.

Religare Mutual Fund has come out with a New Fund Offer named Religare PSU Equity fund.
Religare AMC post its acquisition of Lotus AMC in Dec 2009, has seen its AUM grow 4 fold to Rs. 14,700 crores, over a 10 month period.

Fund Facts :
The fund seeks to invest in Companies where the Central / State Government(s) has majority shareholding or management control or has powers to appoint majority of directors.
Fund Manager Mr. Pradeep Kumar
Benchmark BSE PSU Index
The fund will invest 65 per cent of its assets in companies in the BSE PSU index and the remaining 35 per cent in other PSU companies. The fund will also participate in forthcoming IPOs of Government companies. In addition, the Fund mandate has been carefully thought through and provides the flexibility to hold up to 20% of the companies even after the Government exits or becomes a minority shareholder, past examples being Hindustan Zinc and Maruti.
The fund will adopt a bottom up & top down approach to create a diversified portfolio of stocks. The fund will have no capitalization bias and will be style neutral.
Religare PSU Equity New Fund Offer opened on Tuesday September 29th 2009 and will close on October 28 2009.

WHY INVEST :
Valuation wise PSU Companies are available at a discount of approx 25% to Sensex, giving adequate comfort in terms of safety.
Govt's disinvestment programme will be a good booster for PSU companies. The disinvestment will also improve the free float which will in turn improve their weightage in Nifty, forcing Funds across the World with India exposure to increase exposure to PSUs and giving their Stocks a boost.
Lesser Govt intervention is helping manage the PSUs more professionally thus attacting more FII interest.
All these measure are expected to re-rate PSUs on par with Private Companies in terms of PE, if not more thus giving Above Average Gains.

COMMENTS & RECOMMENDATION :
As you would have already guessed, my recommendation is INVEST. Most PSUs are BIG companies and are Leaders in their industries, in fact, many are virtual Monopolies. Thus this Fund will be like a Large Cap Fund. This Fund will is recommended for Long Term Investors.
In the Last Year's Big Bear Crash, PSUs were the Least Affected thus giving a sort of comfort to investors. This Fund being a Proxy to PSUs and a proxy to the India Growth Story and thus, should make it to every Investor's Portfolio.

BSE PSU Index has delivered 20% CAGR in the last 10 years and has outperformed the Sensex by 8%.

SPECIAL TIP :
Invest in small lump-sums instead of SIPs if you can track the sector and are prepared to book profits occasionally.

Best of luck,

Srikanth Matrubai

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FIRST JOB - FIRST INVESTMENT

HELP ME PLAN MY INVESTMENTS

S Chatterjee asking for MF Help wrote :
Hello Sir,


I need some suggestion and advice regarding MF'S. Before I
introduce myself, just a note of thanks for you!!


I have been reading your blogs on mutual funds and other personal finance related queries off late. Let me tell you, you are doing a
very good job and there are hundreds of people who are benefitted. Keep it up!!


I am 24 years old and I have joined my first job in Dec, 08 in an IT major. My annual Package is 2, 90,000/-. In this financial year I would
be taxable and hence want to invest in ELSS.


My previous investment details are as follows-


1)
Sundaram BNP Paribas Tax Saver (Mar,09)-10000/-


2)
SBI Magnum Tax Gain (Mar,09)-10000/-


3)
Fidelity Tax Advantage (Mar,09)-5000/-


4)
N.S.C (Mar,09)-25000/-


I had made all these investments (lump sum) for my mother's
Tax Savings purposes for 2008-2009 and have chosen the Dividend Payout option
for the 3 MF’s.


We also have a LIC money back (20 years) policy called Jeevan Surabhi done in Mar, 08 (which I
think was a bad investment but we were at a loss at that point of time after my
father’s demise in Feb, 08) in which we have to pay an annual premium of
6,350/- and we had invested 60,000/- in Principal
Personal Tax Saver Fund in Mar, 08 but as the stock markets have crashed,
its down. But I am not too bothered about it as it is locked for 3 years and I am
optimistic of the markets reviving.


I would also like to add that we have nearly 15, 00,000/- in
Bank FD's at 11.5% p.a and my mother draws a pension of 7000/- p.m.


My plan of investments is as follows-


·
I plan to invest via the SIP route (I read about
it everywhere and I think it’s a good way of making small investments every
month for tax saving purposes).


·
I want to invest for more than 3-5 years and in
any case ELSS has a lock-in of 3 years.


·
I am not
interested in LIC schemes at this point to time. I plan to have a pure term
insurance started after I get married (3 years later) for a period of
25 years or more (if possible).


·
I also plan to have a PPF.


·
I plan to have a 65:35 ratio towards Market Linked
Schemes and Fixed Returns Schemes.. And hence plan to invest 5500/- every month
via SIP.

Actually,my job is good,but i am also thinking of higher studies,MBA if i can get into some top grade B-schools.

This is also one reason why I wasn't too keen on Insurance right now.
Can u through some light on Ulips(I have no idea). I guess a Term insurance would be the right way forward.
What should ideally be my S.A ?

Regarding ELSS now,isnt HDFC Tax Saver inclined towards Mid-Cap Market?? Will it be a good idea to invest there considering elections and current volatility?
Tell me one thing,since i have already invested some money in most of those,should a good investor look at investing is BIRLA or DWS or HDFC (as i have no investments there) ? Or should he look at the performance and where the fund manager is investing the money.The second option seems correct to me.
Can you just give me a little
idea of the break-up i should have of the amount of SIP investment,if i were to invest 8000/- p.m.

After so many Questions that you would probably love to answer,one question that you would hate. Here it goes-
Can i expect 15-20% returns over 3-5 years Period from now on ?? (I know MF's are market dependent,i know there can be another Satyam,i know the recession can continue,but since you are an Expert and have a vast experience since 1991,i just need your views.)
Kindly suggest me some good Tax Saving Mutual Funds and also
let me know what you think of my plan and please give any suggestions/advice without hesitation. Please feel free to ask me any further questions which would be helpful in providing guidance and advice.

Looking forward for your opinion and help from which i can learn a lot !!

Thanks and Regards,
S. Chatterjee


SRIKANTH SHANKAR MATRUBAI advised :

Dear Suman,
First of all, thank you very much for your kind words on my blog.
It is always a pleasure to advise such interested and intelligent investors like you who have done their homework. I commend on your Previous Investments and your future plan of investments.
Yes, you are right, SIP is the best way of investing in the market as it automatically 'times' the Market.
I do not find any logic in not going for Insurance just because you want to do Higher Studies. Insurance does not stop you for studying!!! It is always better to have oneself adequately Insured and I am not so sure of you waiting to get married and then getting insured. The earlier you insure yourself the Cheaper it works out for you.
ULIPs are not a good avenue for investment, especially for educated investors like you. ULIPs are very costly as the Premium Allocation is high and there are lot of Hidden Charges. ULIPs work best only if your Investment Horizon is above 15 years. Mutual Funds are the best. Instead fo ULIPs go for a Pure Term Insurance and invest the Differencial Premium Saved in Mutual Funds, you will get MORE returns than what the ULIPs give you.
For your age and your family dependents, the Ideal Sum Assured should be between 15 - 20 Lakhs. A 30 Lakh SA should be More than Sufficient.

Yes, PPF is a good investment. It helps you build a Decent corpus while giving you Tax Benefits. And its Forced Lock-in will ensure that you will 'allow' the money to compound and give better returns.
However, your plan of having a 65:35 ratio towards Market Linked and Fixed Returns needs to reworked. Either way, you are having a Decent job and do not need any Monthly Income and moreover, your young age should allow the freedom to increase the ratio in favour of Equities to be in the region of at least 80%.
You can, however, consider including Balanced Funds in the 80% Equity Ratio.

ELSS :
Yes, HDFC Tax Saver is a Mid-Cap Oriented fund. but for your age, I am sure your Investment Horizon is more than 5 years at least, and with that in mind, I had recommended the HDFC Tax Saver Fund. And if you have noted the performance of this Fund, it has been a steady and consistent performer and should continue to remain so.

There is no need to invest in a Fund, just because you do not own them. Do not be a 'Collector' of Funds. Performance is what ultimately matters.
For your ELSS investments, you can consider investing in the following Funds, which should give you, good returns.
You can split your 8000pm investment into the following funds :
Birla Sunlife Tax Relief 96 fund - 1000pm(invest through Birla Century Sip)
DWS Tax Saving Fund - 1000pm (500*2sips)
Fidelity Tax Advantage Fund - 1000pm(500*2)
HDFC Tax Saver - 1000pm (500*2)
Prinicipal Personal Tax Saver - 1000(500*2)
Sundaram Tax Saver - 1000(500*2)

Non-ELSS :
HDFC Top 200 Fund - 1000pm
Mirae Asset India Opportunities Fund - 1000pm

Here I have given 6000pm into ELSS considering your Tax Outgo, though 8000pm would not be sufficient to cover the 1 lakh treshold under 80C. You can consider increasing the investment amount in any of the funds, or Better Still, invest the 24000p.a. into Term Insurance of say 8000per Annum and the balance 16000 or so into the PPF.

Note :
I have suggested DWS Tax Saving Fund not only because it offers Free Life Insurance Cover but because its Good Performance during the recent Market Meltdown and during the subsequent bounce.

Go for Dividend Payout or Growth option, but NEVER for Dividend Reinvestment option, as your Dividend Reinvestment will be further locked in for 3 more years.
Also consider investing in DWS Tax Saving Fund which offers Free Life Insurance cover of upto 5 times your investment. The Fund's performance has not been great but it has not been bad either. The Fund House has had a good Track Record which is a comforting factor.
After the Mandatory Lock in, review your investments and consider switching to a Balanced Fund for your "Conservative" Mind's Comfort.
Regarding the Return Expectation of 15-20%, it is entirely within possible limits and not unreasonable, especially after the Massive correction in the Markets by more than 50% in 2008.

The Indian Association of Investment Professionals (IAIP) recently conducted a survey of 530 financial professionals in India, majority of whom were employed in brokerages and mutual funds. They were asked their views on a number of diverse and interesting financial issues. What was interesting was that half of them (but certainly not all), felt that equities would be the best asset class to give the highest returns by 2010. And around 40 per cent felt that the Sensex would trade between 10,000 and 12,500 by the end of March 2010.(This survey was done when the Markets were trading at 8000 levels). What is believed to really give a boost to Indian equities was a mix of global (resolution of the financial crisis) and local (elections) triggers. And expecting 15% is not unreasonable.


Best of luck,
Srikanth Matrubai,
Bangalore



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MIRAE ASSET CHINA ADVANTAGE FUND

TAKE A RIDE ON THIS DRAGON

Mirae Asset Global Investments has come out with a New Fund Offer, Mirae Asset China Advantage Fund. This is a Fund of Fund scheme which will invest 80% in Mirae Asset China Sector Leader Equity Fund through a Feeder Fund named Mirae Asset Global Discovery Fund (MAGDF) operating in Luxembourg and balance 20% in DIRECT CHINESE STOCKS.






The Feeder Fund MAGDF is incorporated in Luxembourg to avoid Double Taxation.

Many financial experts have expressed doubts on Chinese numbers authentiacity. The Fund Manager Gopal Agarwal admits, "yes, there are doubts raised, but you should note that Reputed International agencies like the UN, IMF have endorsed these figures and we have no doubt that China is on the way to become a Global Economic Gaint. Our Fund, Mirae Asset China Advantage Fund is poised to take advantage of this growth and reward our investors".

I asked him why the fund has underperformed its Benchmark in the last 1 year. Mr.Gopal Agarwal said : "Actually, in Dollar terms, our Funds has outperformed its Benchmark, but because of massive depreciation in Koreon Won, this underperformance is reflected. We do not expect a repeat of this".


THUMBS UP :
1. China is on a High Growth trajectory and the macro risk associated with the Country is very low.
2. Provides Good Diversification and meet investor's asset allocation.
3. Mirae Asset Global Investments (HK), the investment manager to Mirae Asset China Sector Leader Fund, has a dedicated research team focusing on investing in the Chinese markets and currently manages over USD 8 billion** (approx Rs. 38400 crores) as on August’09 and has been in China since 2001.




THUMBS DOWN :
1. Investors in this Fund will have to bear with Currency Risk.
2. Being a Fund of Funds, there is a possibility of more expenses compared with a regular Diversified Fund.
3. The Fund will be treated as a Debt Fund due to its investment in Foreign Stocks.

COMMENTS & RECOMMENDATION :
Chinese Markets are quoting below their average at a PE of 12, whereas the average PE for the last 6 years has been 18. Moreover, the Chinese Corporate Growth is expected between 18-24 and shows that Chinese stocks are quoting at less than Fair Value. The Fund is timed right to take advantage of this.
The Fund is a good diversification provider.
Mirae Asset India's Funds have given good returns, especially their flagship fund, Mirae Asset India Opportunities Fund.
Invest with a 2-3 year perspective.




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ICICI RIGHT FUND - RIGHT OR WRONG??

FOR PASSIVE TAX SAVING INVESTORS

ICICI Prudential Right Fund is a 10 year Close Ended ELSS (Tax Saving ) Fund.
The Fund closed for subscription on 09 September.
I sent the following advise on the Fund to my clients.

Read on...........

ICICI Prudential Mutual Fund has lauched a New Fund ICICI Prudential Right Fund. The Fund is a 10 year Close ended ELSS that seeks to generate Long Term Capital Appreciaton.

The Minimum Subscription is Rs.500 and in multiples of Rs.500 thereof.
The scheme will charge an entry Load of 2.25%.
Prashant Kothari will be the fund manager of the scheme. Mr.Prashanth Kothari has over 5 years of experience as Equity analyst and Fund Manager. He is presently managing ICICI Equity & Derivative Fund, ICICI FMCG Fund, ICICI Focussed Equity Fund

ANALYSIS AND RECOMMENDATION :
What is this RIGHT Fund?. RIGHT is an acronym for 'Rewards of Investing and Generation of Healthy Tax Savings'.
The Fund seeks to invest a major part of its portfolio in Large Caps and is thus is 'Safer' compared to other ELSS funds. This is especially more pronounced when you consider that almost all Tax Saving Funds invest in 'Growth' Stocks which are mostly Mid-caps and thus volatile.

PROS :
1. With its Large Cap Focus, the Fund will have reduced volatilty.
2. Most Tax Funds have consistently delivered Better returns than both Nifty and Sensex.
3. The Fund aims to invest 85% in Top 100 Companies by Market Cap which should protect the Fund during Bear Markets.
4. Minimum Investment is only Rs.500.

CONS :
1. Since the Fund aims to invest mostly in Large Caps, the fund may fail to deliver superior returns during market rallies.
2. The Fund has an entry load of 2.25%.
3. Being a Close-ended Fund, you cannot take the 'SIP' route to investing in this fund.

If you are investing purely for Tax Saving purpose, then you need not look at this Fund. However, if you are looking both for Tax Saving as well as Long Term investment, then this Fund should be in your portfolio.

Best of luck,

Srikanth Shankar Matrubai

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HELP ME ACCUMULATE LONG TERM GAINS

Want to accumulate Long Term Gains???... Then read on..

Niranjan Kumar Boora wrote :

Hi,
I am considering to accumulate long term gains, I have started SIP in mutual funds. My question is did I selected the proper portfolio.
I happened to read your blog today.

I started investing in mutual fund through SIP route Rs2000pm for 1 year starting Nov 2008 in the following funds.

Can you please analyze my portfolio.

1. HSBC Equity Fund - Growth (You suggested to few people to buy Fidelity Equity, what to do?)
2. IDFC Premier Equity Fund - Growth
3. DWS Tax Saving Fund - Growth

Apart from these, I have investments in the following funds (planning to switch from these to some HSBC Equity or some other fund you suggest, should I do?)


4. Sundaram CAPEX Fund - Growth (20K)
5. SBI Multicap Fund - Growth (10K)
6 UTI Mahila Unit Scheme - Growth (20K)
7. SBI Infrastructure Fund (20K)

Thanks,
Niranjan


SRIKANTH SHANKAR MATRUBAI advised :
Dear Niranjan,
Your existing SIP are going into very Good Funds and I do not see the need for change in funds. Yes, I have been recommending Fidelity Equity, but HSBC Equity too has been performing well and should continue to do so. So, in conclusion, your existing sips need not be tinkered with.
However, your lumpsum investments do need a overhaul.
Sundaram CAPEX Fund - Growth (20K) - Switch to the more promising and better performing Sundaram Select Focus Fund

SBI Multicap Fund - Growth (10K) - Better redeem and invest in a Good Large Cap Fund like the HDFC Top 200 Fund

UTI Mahila Unit Scheme - Growth (20K) - continue

SBI Infrastructure Fund (20K) - Switch to SBI Bluechip fund.

If possible reduce the existing sip from 2000 to 1000 in each of the existing sips or increase the sip investments by another 3000 and invest in the following funds to give your fund a Balanced Look.
DSPBR Top 100 Fund
Fidelity Equity Fund
HDFC Prudence Fund

Regards,
Srikanth Shankar Matrubai

http://goodfundsadvisor.blogspot.com


Mr.Niranajan wrote back :
Thank you sir..
I will do what you have suggested for a balanced portfolio. I really thank you for taking time to analyze my portfolio and suggesting the changes.

Thanks
Niranjan


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L&T FINANCE NCD - INVEST

SAFE, SECURE AND LIQUID TOO

L&T Finance is offering its First Ever NCD.

Srikanth Shankar Matrubai

L&T Finance is a 100% subsidiary of L&T. The Company has a good Track record. The Company's Capital Adequacy is very good at 16%.
The NCD is secured and the Company is also setting up a Debenture Redemption Reserve by setting aside 50% of the Capital raised in the NCD.

Net NPA is only 2.04% as on 31/3/09 and that too due to Economic downturn and prudent Accounting norms.

L&T Finance has NEVER been downgraded!!.

COMMENTS AND RECOMMENDATION :
The better return is the biggest attraction. Banks like the SBI is offering around 8% return on a 5 year FD and here L&T Finance is offering 9.5% with a better liquidity.
Good Rating from both CARE and ICRA. CARE has given a AA+ and ICRA has rated the issue LAA+ indicating LOW RISK.

Definitely better than any Fixed Deposit because of its better liquidity and Tax Benefits.

There is even a chance of Capital Gain because of its listing in Stock Markets and the greater interest in Retail Bond Market growing everyday. Any major fall in yields of Debt instruments would present L&T NCD investor with an opportunity to Cash out by selling in the Stock Markets.
The Company has also indicated that it may consider Buyback of the NCD and also consider giving loans to the holders of the NCD, in future.
INVEST preferably in the 10 year option and lock in the higher interest rates offered.



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SHINSEI INDUSTRY LEADERS FUND - INVEST

Focusses on Quality Stocks


Srikanth Shankar Matrubai

One can consider investing in Shinsei Industry Leaders Fund.





Shinsei Mutual Fund promoted by Shinsei Bank, Japan and Rakesh Jhunjhunwala have come out with their First Equity NFO with the name of Shinsei Industry Leaders Fund.

WHERE WILL THE FUND INVEST ?
The Fund aims to invest in "Leaders" who not only have Largest Market Share but also includes companies who have Highest Growth in sales and Highest Profitabliity. While AMFi has classifed companies into 43 sectors, the Fund aims to identify about 3-5 companies in each sector and further filter them and ultimately aim to have a portfolio of 25-35 stocks.
The Fund aims to have 60-70% in large cap and about 30-40% in Mid cap.


FUND MANAGER :
David Pezarkar is the Fund Manager of this Scheme. He had earlier managed SBI Magnum Tax Gain 93 and had also worked with UTI Mutual Fund, Way2Wealth Brokers, and Bajaj Allianz Life Insurance as a Equity Head.

COMMENTS AND RECOMMENDATIONS :

Though a New Fund from a New AMC, the persons behind the AMC like Mr.Rakesh Jhunjhunwala and Shinsei Bank do inspire confidence. Also, note that the Fund's investment philosophy is a no-brainer and should form a part of all Risk Averse Investors.
Investors can hope to get a Portfolio comprising of Leading Companies giving Good Market Relative Returns. The portfolio of the scheme has the potential to offer steady relative returns to investors across various market conditions because of its focus on Quality Stocks.
Industry Leaders does not necessarily mean Large Cap Companies.
The Backtesting of the Model that Shinsei proposes to use has shown that the Fund has given an Alpha Return of 10% above its Benchmark of BSE-100 with a Sharpe Ratio of the Fund is 2.06%
the Fund will NOT invest in Small Caps and Micro Caps


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