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.






Also visit

http://equityadvise.blogspot.com

Read More

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
Also visit

http://equityadvise.blogspot.com

Read More

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




Also visit

http://equityadvise.blogspot.com

Read More

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

Also visit

http://equityadvise.blogspot.com

Read More

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

Also visit

http://equityadvise.blogspot.com

Read More

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


Also visit

http://equityadvise.blogspot.com

Read More

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


Also visit

http://equityadvise.blogspot.com

Read More