Indian Advisor

  • Subscribe to our RSS feed.
  • Twitter
  • StumbleUpon
  • Reddit
  • Facebook
  • Digg

Monday, 23 March 2009

CASH COMPENENT IN FUNDS... IS A WORRY

Posted on 23:26 by Unknown
Going by the Fact Sheets of Most Mutual Funds these days, one thing is crystal clear. They are sitting on Huge Cash.
While Funds typically do have cash in hand at around 5%, it is susprising that across board, maximum Funds are not holding cash levels ranging anywhere between 10% to even 60% in some cases!!!. And, Some Funds like Reliance Natural Resources Fund has been sitting on Cash of upto 30% for more than a year now!!!

Why are funds sitting on cash, when they can buy shares cheaply and maximise returns for their investors?

A fund could be sitting on high cash levels for a variety of reasons, including waiting for the correct entry point to negative or range-bound market view. In case of NFOs, the fund may also be in the deployment mode. Fund Managers do not want to get caught with a Falling Knife. They seem to be waiting for the market to find some kind of support and then plunge in gradually. Moreover, sitting in cash in a falling market protects the NAV and ultimately, that's what the Fund Manager is paid for.

However, a note of caution is required in that, the extreme high cash element for a long period of time could work against the Fund's performance as the Fund Manager may miss out on any rally.
Also, if the fund does not invest at least 65% of its portfolio in stocks, (insteads keeps it in cash and debt), then the fund will not qualify for the long
term tax-free capital gains status.

However, upto 5% cash in hand is considered ideal by most Fund Managers and is in fact recommended. And in Bear or a Range-bound Market, 15-20% cash compotent is permissible.

Best of luck,
Srikanth Shankar Matrubai


Also visit http://equityadvise.blogspot.com for an indepth Equity Analysis
Email ThisBlogThis!Share to XShare to Facebook
Posted in MF Lessons, Opinion | No comments
Newer Post Older Post Home

0 comments:

Post a Comment

Subscribe to: Post Comments (Atom)

Popular Posts

  • HDFC Young Star Plus
    HDFC Young Star Plus The Young Star Plus (YSP) plan from HDFC Standard Life is another unit linked child plan, the earlier being Young Star...
  • 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...
  • SBI PSU FUND - ANALYSIS
    SBI Mutual Fund has launched a new scheme, SBI PSU Fund. It is an equity diversified fund that mainly invests in stocks of domestic pu...
  • Fidelity Equity Fund - HOLD
    Fidelity Equity Fund - HOLD Dear all, Fidelity Equity Fund is "go anywhere" fund. The scheme endeavours to invest across the marke...
  • DO NOT BUY GOLD THIS AKSHAYA TRITIYA!
        If Akshaya Tritiya is an auspicious day to buy GOLD, then, when, is an inauspicious day to Sell Gold? These "experts"(?) alw...
  • FT DYNAMIC FOF - AUTO TIMING THE MARKETS
    Want a Fund which automatically books profits when the markets are overvalued and enter the markets when they are cheap??? Then, the Frankl...
  • 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 e...
  • I need your advise
    Mr.Sunder requested for advise : Hello Mr Srikanth, I am planning to invest Rs 10000/- per month in Mutual Funds and was researching t...
  • The "TRAP" of going Direct
      SEBI has allowed Mutual Funds to have a Separate NAV for investors investing Directly. This Separate NAV will have a lower expense ratio a...
  • L&T takes over Fidelity....what should you do???
    You have Fidelity Funds....then read on...  L&T has taken over Fidelity Funds. The fund management team of fidelity will be there only ...

Categories

  • Awards
  • Best Fund to Invest
  • ELSS
  • FEES
  • Financial Planning
  • Fund Call
  • Gold ETFs
  • Gold/Silver
  • Insurance
  • Investment Advise
  • Learning
  • MF Lessons
  • Mutual Fund Advise
  • NFO
  • Opinion
  • Others
  • Seminar
  • SIP
  • Star performers
  • Tax Planning

Blog Archive

  • ►  2013 (14)
    • ►  December (1)
    • ►  November (1)
    • ►  October (1)
    • ►  September (1)
    • ►  July (2)
    • ►  June (1)
    • ►  May (1)
    • ►  April (2)
    • ►  March (1)
    • ►  February (1)
    • ►  January (2)
  • ►  2012 (13)
    • ►  December (1)
    • ►  November (1)
    • ►  August (1)
    • ►  June (4)
    • ►  May (1)
    • ►  April (1)
    • ►  March (2)
    • ►  January (2)
  • ►  2011 (20)
    • ►  December (1)
    • ►  October (3)
    • ►  September (1)
    • ►  August (3)
    • ►  June (1)
    • ►  May (2)
    • ►  April (2)
    • ►  March (1)
    • ►  February (3)
    • ►  January (3)
  • ►  2010 (30)
    • ►  November (1)
    • ►  September (1)
    • ►  August (1)
    • ►  July (1)
    • ►  June (6)
    • ►  May (5)
    • ►  April (3)
    • ►  March (7)
    • ►  February (2)
    • ►  January (3)
  • ▼  2009 (142)
    • ►  December (9)
    • ►  November (3)
    • ►  October (4)
    • ►  September (4)
    • ►  August (9)
    • ►  July (5)
    • ►  June (7)
    • ►  May (4)
    • ►  April (6)
    • ▼  March (54)
      • NEGATIVE RETURNS IN LIQUID FUND?????
      • CASH COMPENENT IN FUNDS... IS A WORRY
      • TOO MANY INFRA FUNDS.....
      • HDFC Young Star Plus
      • JM BASIC FUND - A DISASTER
      • TAURUS ETHICAL FUND - AVOIDABLE NFO
      • MY VIEW ON LIC'S JEEVAN ANAND
      • Advise on My Portfolio...
      • IDFC India GDP Growth Fund
      • Retirement Planning and Son's education
      • SAFE DEBT FUNDS FOR AN NRI
      • SHALL I INVEST IN TATA CAPITAL NCD?
      • ULIP/Mutual Fund, which is Preferable??
      • GOLD CONTINUES TO GLITTER...
      • SUGGEST BEST TAX SAVING FUNDS
      • SUGGEST ME GOOD TAX SAVING FUNDS
      • IS THE TATA MOTORS FD SECURED????
      • WHAT IS TERM INSURANCE??
      • Best Tax Saving Instruments
      • SHALL I INVEST IN TATA MOTORS FD?
      • REASONS FOR FAILURE OF LIC JEEVAN AASTHA
      • POST SATYAM FIASCO, CONTINUE WITH SUNDARAM SELECT ...
      • INCOME FUNDS' NAV TOO COULD FALL.....
      • SHORT TERM TAX DOUBTS CLARIFIED
      • Formula for Calculating SIP Return
      • ICICI PRU HEALTH SAVER There is a new plan "IC...
      • Are my SIPs into Good funds??
      • MY TARGET -- 1 CRORE IN 10 YEARS
      • "Charges in ULIPs & Mutual Funds"
      • Is my portfolio correct??
      • INDIA WILL BOUNCE BACK
      • Student's dilemma on Diversified Funds or Balanced...
      • Seek your suggestion
      • EXTRAORDINARY OUTLOOK FOR GOLD
      • KINGFISHER AIRLINES - PROMISING GOOD TIMES
      • BUY GOLD NOW BEFORE IT BECOMES EXPENSIVE
      • DBS CHOLA TAX ADVANTAGE FUND - AVOID
      • Invest in Kotak Short Term bond
      • I WANT RETURN ABOVE SAVINGS RATE.......
      • Shall I withdraw FD and invest in Debt fund?
      • JP MORGAN INDIA TAX ADVANTAGE FUND
      • BHARTI AXA TAX ADVANTAGE FUND
      • Can minors invest in Mutual Funds?
      • IDFC TAX FUND - AVOID
      • NEW LIC POLICY - JEEVAN AASTHA
      • Best Funds for A Cautious Investor
      • Fidelity Equity Fund - HOLD
      • Will things change for the Better?
      • Can I expect 100% return in 3 years?
      • Shall I exit Now?
      • Lesson learnt in this Market Meltdown
      • SIP to continue or NOT
      • UTI Gold-Equity Fund
      • IS IT THE RIGHT TIME TO INVEST???
    • ►  January (37)
Powered by Blogger.

About Me

Unknown
View my complete profile