Case Studies Example On Mutal Funds

Q1.
Im a Non-resident Indian from Qatar, and intend to start SIPs (Systematic Investment Plans) in
the
following
mutual
fund
schemes:
Name of Mutual Fund Scheme

HDFC Top-200 Fund
HDFC Equity Fund
Birla Sunlife Dividend Yield Plus Fund
UTI Dividend Yield Funds
I plan to make a monthly investment of 2,000 (through the SIP route) for a period of 10 years.
Can you please let me know whether my mutual fund scheme selection is fine, or do I require to
make any changes?
Answer: Primarily let us apprise you that the mutual schemes selected by you are large cap oriented,
wherein
they
follow
the
under-mentioned
style
of
investing:
Name of mutual fund scheme
Style of
investing
HDFC Top-200 Fund
Blend
HDFC Equity Fund
Flexi
Birla Sunlife Dividend Yield Plus

Fund
Value
UTI Dividend Yield Funds
Value
Being large cap oriented funds they would infuse in stability in your portfolio as their portfolio holdings
constitute to be of large cap stocks (having a high market capitalisation), which would help you from being
exposed to violent downside risk during turbulence of the equity markets. Moreover, another noteworthy
point about them is that they enjoy an edge over their mid-sized peers due to the following reasons:
Being well established

Stable earnings stream
Well researched
Hence given the aforementioned attributes of large cap funds as well their performance track record
(which has been quite appealing so far) we recommend you no change in the mutual fund schemes
selected by you. Moreover, given the present turbulence of the Indian equity markets they would be a
perfect fit for your portfolio, and your sum of 2,000 invested per month for a period 10 years will yield
you approximately 4.64 lakh (assuming rate of return of 12% p.a.).
Q2. At present I have been investing in Reliance Growth Fund and Reliance Regular Savings
Equity Fund through a monthly SIP route, but they arent performing too well since last 1 year.
Hence in such a case, should I continue my SIP installments or discontinue further SIP
installments?
Answer:
Report card
6Mth
(%)
1-Yr 3-Yr 5-Yr
Reliance Growth-Ret
(G)
-2.9
Reliance Reg SavingsEquity (G)

BSE-100
Scheme Name
SI
(%)
Std.
Dev
(%)
Sharpe
Ratio
PersonalFN
Ranking
-2.5 13.0 19.3
27.0
9.12
0.11
PFN - R2
-2.3
0.8
16.1 22.2
20.0
9.76
0.14
PFN - R4
-1.9
1.1
9.2
9.56
0.08
(%) (%)
(%)
12.7
(NAV data is as on July 26, 2011. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)
*Expressed as Compounded Average Growth Rate (CAGR)
(Source: ACE MF, PersonalFN Research)
Assessing the returns generating by the fund over the long-term, we do not see a reason as to why you
should discontinue with your further SIP instalments in the aforementioned funds.
Over the 3-Yr and 5-Yr time frame the said funds have delivered luring returns (as revealed by the table
above) thereby even outperforming their benchmark index BSE-100 by a considerable margin. Even the
since inception returns have been quite starry and outstanding against their benchmark.
In fact as per our present (PERSONALFNs) ranking process, the funds have obtained a hold status.
Yes, we agree that the last 1-Yr returns certainly look dismaying, but you shouldnt get discouraged by
that. It is noteworthy that while you invest in equity mutual fund schemes you need to have a long-term
time horizon of at least 3 years. Moreover, since you have adopted the SIP route of investment in the said
funds you need not worry about the turbulence of the equity markets, as this will be well managed due to
the rupee-cost averaging benefit provided by SIPs along with the compounding benefit.
Q3. Recently I did my first investment in a mutual fund scheme namely HDFC Equity Fund
(Growth Option). I think I invested rather in an aggressive manner by deploying a sum of 50,000
through my bank. I intend holding the investment for a period of 1 Yr.
Can you please advise whether I have made a prudent decision and what documents can I
demand from the bank in support of investments?
Answer: Well, your investment in HDFC Equity Fund (HEF) is certainly a prudent one
(PersonalFN Ranking => PFN-R1), as the fund is consistent performer across time frames, wherein it
has sailed well even during turbulence of the Indian equity markets. Over a 3-Yr and 5-Yr time frame the
fund has clocked a return of 22.4% CAGR and 19.9% respectively, thereby even outperforming its
benchmark S&P CNX 500 (which has clocked a return of 9.3% CAGR and 12.3% CAGR during the
respective
frames).
Also when assessed on a risk-return basis, HEF is a low risk-high return investment proposition, thus
making it an appropriate fit in a beginners portfolio. Moreover, since the fund follows flexi style of
investing, it is well positioned to take the opportunities across market cap segments, which also is of help
for accentuating its returns. A vital point is that HEF comes from a stable of a fund house which follows
strong
investment
processes
and
systems.
But while your fund selection is good, we recommend that you elevate your time horizon, since investing
in equity mutual funds requires a long-term time horizon (of at least 3 years).
As a supporting document to your investments made, you need to obtain an account statement from
HDFC Mutual Fund, or from your bank (who may be corporate agents to HDFC Mutual Fund). The
account
statement
will
have
your
following
details:
Your name
Folio number
Name of the fund invested in (along with the option)
Name of the nominee
Units allotted to you
Price (i.e. NAV Net Asset Value) at which units were bought
Q4. While investing in mutual fund schemes is it possible to invest directly i.e. without involving
any agent; or is it compulsory to route the transaction through an agent? Also, what are the
documents required while investing in a mutual fund scheme.
Answer: While investing in a mutual fund scheme you can certainly approach the mutual fund house
directly, and invest in the respective mutual fund scheme(s). You need not go through mutual fund agents
who fill their pockets (with luring commissions) and mis-sell you mutual fund schemes.
But while you do invest directly in respective schemes mutual fund schemes, it is imperative to have
a research oriented approach to select winning mutual fund schemes (for your portfolio) and also
recognise the fact that there is more to selecting winning mutual funds than mere past performance.
In order to invest in a mutual fund scheme you need to provide following documents to the respective
mutual
fund
house.
PAN Card copy (Self attested)

Address proof (Self attested)
However, w.e.f January 2011 you need to fill in a Know Your Client (KYC) form by furnishing the
aforementioned documents to CDSL Ventures, so that while investing in mutual funds you can simply
attach a copy of the KYC certificate.
Q5. I have investments in SBI Magnum Tax Gain, and in January 2011 I requested for a change in
option from growth to dividend (which is done!). But this fund has not been performing too well
for quite some time now, thus can you please advise what should be done?
Answer: Yes, the performance of SBI Magnum Tax Gain (SMTG) had faltered in the last couple of years,
but at present the satisfying performance displayed by it, gives it a hold status (PERSONALFN Ranking
->
PFN-R4)
as
per
our
ranking
process.
However, if you have completed 3 Yrs (which is the lock-in period in tax saving mutual funds) in the
scheme, we recommend that you exit rather than receiving lagging performance by staying invested in it.
Q6. I have invested in the under-mentioned mutual fund schemes in the last 4 years in the
following
manner:
Report card
Sr.
No.
1.
DSPBR T.I.G.E.R Fund
2.
Date of
investment
Mode
Investment (in
)
September 2007
Lump
sum
40,000
Tata Indo Global Infra Fund
October 2007
Lump
sum
45,000
3.
Sundaram Capex Fund
October 2007
Lump
sum
45,000
4.
ICICI Pru Infra Fund
January 2008
SIP
5,000
5.
Birla Sunlife Midcap
January 2008
SIP
5,000
6.
Sundaram Select Focus Fund
March 2008
SIP
5,000
7.
HDFC Top-200 Fund
June 2010
SIP
5,000
8..
Reliance Regular Saving (Debt)

Fund
July 2010
SIP
5,000
Can you please advise whether should I continue to hold or sell the aforementioned schemes, and
also should I make any fresh investments in any star rated funds?
Answer: In order to provide a view on your aforementioned mutual fund portfolio, we recommend that
you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s) to
be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would
help you assess the following:
Risk-Return
Fund category [on the basis of type of schemes held by you (i.e. whether equity, debt or gold) as
well as the style of investing followed by them (i.e. whether growth, value and blend) and the market
cap bias followed i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.]
Sector(s) you are exposed to
Top-10 stock holdings of your total mutual fund portfolio
In our opinion while adding new and promising mutual funds may suit your portfolio, selecting mutual
funds on the basis of star ratings, would not always be the right way, and to know as to why so, you
must read our article "Twinkle twinkle little star, how I wonder what you are?". We believe if you select
your mutual funds in the right manner by taking into account the host of factors, you would get appealing
returns on your investments.
Q1. Im aged 50 years, presently a Government employee (State Government organisation) and
would be retiring in another 10 years. I have my savings invested in the under-mentioned manner:
LIFE INSURANCE
Name of the Policies
Insurance cover (in )
Bhima Sandesh Policy
6,50,000
Pension Plan (Annuity)
2,00,000
Postal life insurance
1,00,000
MEDICLAIM
Premium paid (in )
Apollo Health Munich Policy
16,000
PUBLIC PROVIDENT FUND

Current balance of 10 lakh + annual contribution of 70,000
POSTAL SAVINGS SCHEMES
(in )
National Savings Certificate
3,00,000
MUTUAL FUNDS
(in )
Fidelity Equity Fund (lump sum)
40,000
Tata Infrastructure Fund (lump sum)
10,000
Sundaram Midcap Fund (lump sum)
20,000
Franklin India Flexi Cap Fund (lump sum)
20,000
UTI Dividend Yield Fund (lump sum)
65,000
UTI Dividend Yield Fund ( monthly SIP)
3,000
Reliance Equity Opportunities Fund
10,000
I request you to please suggest me if suitable modifications are required in the existing
investments made by me?
Answer: The Bima Sandesh policy mentioned held by you has a return of premium option, where the
premium paid by you is almost double than that under non-return of premium plans. A return of premium
policy for term plans should not be opted for insuring your life, but considering your age we suggest that
you may continue with the same. Commenting on pension plan will not be possible as details are not
provided. But remember while indemnifying the risk to your life, you need to focus only on pure term
insurance plans, thereby separating your insurance and investment risks. While taking care of your life
insurance needs you need to assess your "Human Life Value" (HLV), whereby factors such as expenses,
existing investments, future financial goals, liabilities and contingency fund amongst others are taken into
account. Hence given that, ideally you need only a pure term insurance plan wherein for a reasonable
premium youll get a substantial life cover (as per your HLV).
Postal life insurance is extended to you by the virtue of you being a State Government employee, hence
in that too you may stay invested in wherein youll enjoy a maximum risk cover of 1 lakh.
As far as your health insurance is concerned, we suggest that you may continue with them as the policy
offers
attractive
features.
We believe that since PPF and NSC mainly constitute essential investments of your tax saving portfolio,
you need not modify them. However, you may not beat the increasing cost of living (i.e. inflation) with
such
investments
if
inflation
continues
to
sail
over
the
8.00%
mark.
In order to provide a view on your aforementioned mutual fund portfolio, we recommend that you avail of
our "mutual fund portfolio review service", which will provide you an appropriate action(s) to be taken,
along with the reason for the same. Its an effectively drawn mutual fund portfolio which would help you
assess the following:
Risk-Return
cap bias followed- i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.]
Q2. I wish to create a retirement corpus for two granddaughters - aged 2 and 4. I have thought of
investing 4,000 to 5,000 per month through Systematic Investment Plans (SIPs) offered by
mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68.
Answer: We appreciate your idea of building a corpus for your two granddaughters. Yes, indeed for them
investing in equity mutual funds through the SIP route would be appropriate. But while selecting suitable
mutual fund schemes for them their age of 2 & 4 respectively need to be taken into account rather than
yours; as wealth creation idea is envisioned for them. Considering their age, you can divide the SIP
amount of 5,000 as under:
Monthly SIP in
equity mutual fund
schemes (in )
Following
investment style
as
Market cap
orientation
2,000
Growth
Mid cap
2,000
Opportunities
Multi cap
1,000
Value
Large cap
While being invested in such funds you need to stay invested for a long-term (at least for 3 to 5 years) whereby the intended corpus can be used for their higher education or marriage. While selecting
appropriate mutual funds following the aforementioned style, it is imperative to have a research oriented
approach to select winning mutual fund schemesand also recognise the fact that there is more to
selecting winning mutual funds than mere past performance. Always remember to select a mutual
fund scheme with a consistent track record and always prefer fund houses following strong investment
processes and systems.
Q3. My daughter would like to invest a sum of 70,000 in a suitable tax saving mutual fund
scheme in order to obtain a tax benefit; and of course followed by capital appreciation in long run.
Assessing the present meltdown of the Indian equity markets please reply:
Which funds are good?

Whether to opt for SIP mode or invest the said amount in lump sum?
Answer: Even though the Indian equity markets have reacted rather sharply to the nervous global
economic sentiments, the current levels of the Indian equity markets look attractive to buy. Since the last
peak of the 21,004.96 (on the BSE Sensex) made on November 5, 2010, the markets have corrected by
good
-24.6%.
Yes markets are expected to display some turbulent times going forward but in order to manage this
volatility, while investing into a tax saving mutual funds (also known as Equity Linked Saving Schemes or
ELSS) intended to obtain a tax benefit (under section 80C of the Income-Tax Act, 1961) you may invest
through the SIP route, which will provide you the benefit of rupee-cost averaging as well as compounding.
But while you opt for the same, it should be noted that your every sum SIP amount will be locked-in for a
period of 3-Yrs as mandated by the product per se. Hence even if you opt for lump sum investing, the 3Yr
lockperiod
in
applies.
While selecting a winning ELSS for your portfolio it is vital that you consider mutual schemes with a
consistent track record, and prefer fund houses following strong investment processes and systems.
Q4. I invested in Birla Sun Life Insurances Titanium Plan last year, and now would like to seek
your opinion on whether it is prudent to stay invested in the same. Also, can you please suggest
some mutual fund schemes which will help me build wealth in the long run considering my
appetite for being medium?
Answer: The life insurance scheme held by you is a unit-linked one, which attempts to offer optimal
participation in capital market growth while safeguarding your returns. Moreover, the plan promises to
offer the highest of prevailing NAV or "guaranteed unit price at re-investment", at the time of maturity.
The plan offer several options such as - Income Advantage, Assure, Protector, Builder, Enhancer, Creator,
Magnifier, Maximiser, Multiplier and Super 20; but since the details of the options are not provided in your
query, evaluation would not be possible. We believe that it is imperative to keep your investment and
insurance needs separate. In order to indemnify the risk to your life, you need to focus only on pure term
insurance plans. While taking care of your life insurance needs you need to assess your "Human Life
Value" (HLV), wherein you take into account factors such as expenses, existing investments, future
financial goals, liabilities and contingency fund amongst others. Hence given that ideally you need only a
pure term insurance plan where in for a reasonable premium youll get a substantial life cover (as per your
HLV).
For investing in mutual funds, considering your appetite for risk being medium it would be wise that you
invest in large cap oriented diversified equity funds, and also hold balanced funds in your portfolio.
However, while winning mutual fund schemes for your portfolio it is vital that you consider schemes with a
consistent track record, and prefer fund houses following strong investment processes and systems.
Moreover, having selected them it is imperative that you have an investment horizon of at least 3 to 5
years.
Q5. I wish to invest in 3 mutual fund schemes through the SIP route. My present age is 38, and
currently can contribute a sum of 5,000 in total towards all the respective mutual fund schemes.
I request you to please advise me by providing reasons.
Answer: Considering your age, you can divide the SIP amount of
5,000 as under:
Monthly SIP in
equity mutual
fund schemes
(in )
Following
investment
style as
Market cap
orientation
2,000
Growth
Mid cap
This will help you entice returns on your

portfolio, due to accelerating growth offered by
robust mid cap cos, which hold good chances
of emerging into tomorrows large caps
2,000
Value
Large cap
This will safeguard your portfolio during

turbulent times by taking a defensive stance by
betting on large caps
1,000
Opportunities
Multi cap
This will help you to take opportunities across

market caps and sectors thus again fueling
returns on your portfolio.
Reason
But having allocated your total SIP amount in the aforementioned manner, you need to select fund
schemes (in the respective styles) which have a consistent track record and prefer funds from fund
houses which follow strong investment processes and systems. Moreover, continue with your SIP
investments for a longer time frame (until retirement), so that it will enable you to manage the volatility of
the Indian equity markets better (through rupee-cost averaging) and also power your portfolio with the
compounding. So say, you decide to retire at your age of 60 (i.e. 22 years from now), your monthly SIP
amount will yield a sum of 64.79 lakh (approx.) assuming a rate of return of 12% p.a. Remember, in
order to create wealth always stay invested for the long-term as it results in effective power of
compounding.
Q1. Im at present 39 years of age and would like to invest a sum of 10,000 in mutual funds
through the SIP (Systematic Investment Plan) mode of investing, aiming to build a corpus for my
retirement. I intend retiring at my age of 58, and have also opened a PPF account recently where I
would
invest
a
sum
of 70,000
annually.
My monthly expenses are 20,000, and have no other liability. I have also insured myself for
40,00,000
under
a
term
insurance
plan.
How should I invest monthly in various mutual fund schemes or investment instruments? Also
please note that Im willing to increase my monthly SIP amount if required.
Answer:Well, enrolling for the SIP (Systematic Investment Plan) mode of investing in mutual funds is
best way of creating a corpus over the long-term. It helps you to manage the volatility of the equity
markets well (through rupee-cost averaging) and powers your portfolio with the benefit of compounding.
In your case since youve not provided your monthly income, ascertaining the optimal monthly
contribution would not be possible. But nonetheless going by the amount of 10,000 you wish to allocate
for SIP contribution (monthly), you would build a corpus of around 87.53 lakh (assuming a rate of return
of 12% p.a. on an average - conservatively). Hence if the equity markets amplify returns, the retirement
corpus
would
also
balloon.
Moreover, if you staunchly contribute a sum of 70,000 annually towards PPF (Public Provident Fund) for
the complete term of 15 years, you would get another 11.08 lakh at your age of 54. Now considering
that you are still 4 years away from your retirement, we suggest that you may also extend your PPF
account for another 5 years (but contribute annually 70,000 only for next 4 years), which would thereby
yield you another 2.85 lakh, thus making a corpus of around 14.29 lakh from your PPF investments at
your
age
of
59.
Thus now if you club the two i.e. corpus built through SIP investment + corpus built through PPF
investment, you would yield a sum of 98.61 lakh at age your age of 58 (or 1.02 crore at your age of 59
i.e.
if
PPF
term
is
extended
by
5
years
as
explained
above).
However it is noteworthy that, while selecting mutual funds, it is imperative to have a research oriented
approach to select winning mutual fund schemes, select funds which have completed over 3 years of
existence and also recognise the fact that there is more to selecting winning mutual funds than mere past
performance. Always remember to select a mutual fund scheme with a consistent track record and always
prefer fund houses following strong investment processes and systems. Given the present turbulence in
the Indian equity markets (steered by global as well as domestic cues) it would be prudent to invest in the
large cap funds (as a defensive consideration) and avoid mutual funds which have exposure to developed
nations. From a style perspective, you may choose value style funds, as these corrected levels of the
Indian equity markets may provide fund managers of such funds to value pick some good stocks.
Commenting on your insurance coverage, we like to appreciate that you have taken prudent decision of
investing in pure term insurance plan. Always remember, it is vital to deal with your investment and
insurance needs separately, as insurance is purely for indemnifying risk, while investments are for wealth
creation and building a corpus for a specific purpose - like in your case retirement need. But its
noteworthy that while taking care of your life insurance needs you need to assess your Human Life
Value (HLV), whereby factors such as expenses, existing investments, future financial goals, liabilities
and contingency fund amongst others are taken into account. The coverage in our opinion appears quite
sufficing, but the factors mentioned herein need to be evaluated to obtain optimal life insurance
coverage.
Q2. Im retired individual in receipt of pension, and I would like to invest in debt mutual funds for a
period of 3 to 5 years. Can you please recommend me appropriate debt mutual funds?
Answer: While you would like to invest in debt mutual funds, let us apprise you that investments in debt
mutual funds are sensitive to interest rates, inflation and fiscal deficit. Hence an investment in debt mutual
funds
cannot
be
construed
to
be
safe.
Ascertaining the interest rates scenario, lets us acquaint you that in order to tame the inflation bug, the
RBI has persistently increased interest rates right since March 2010. In the month gone by too as inflation
continued to sail over the central banks comfort level (August 2011 WPI inflation at 9.78%), they
increased policy rates - both on the repo rate as well as the repo rate by 25 basis points (bps), taking
them to 8.25% and 7.25% respectively. Hence thus far since March 2010 the increase has been as under:
Policy rate tracker
Increase / (Decrease) since

March 2010
At
present
Repo Rate
350 bps
8.25%
Reverse Repo Rate
400 bps
7.25%
Cash Reserve Ratio
100 bps
6.00%
Statutory Liquidity
Ratio
(100 bps)
24.00%
Unchanged
6.00%
Bank Rate
(Source: RBI website, PERSONALFN Research)
Given the fact petrol prices have been increased last month to correct the under-recoveries of oil
marketing companies, we believe that chances of inflation ascending further are elevated. Also the recent
depreciation in the Indian Rupee may also have adverse implications for inflation. Hence we believe that
anti-inflationary stance maintained by the RBI would continue even in its 2nd quarter review of monetary
policy 2011-12 (scheduled on October 25, 2011), where they may hike policy rates by another 25 bps. But
going forward, with downbeat global economic sentiments shivering the Indian markets the RBI may
preclude
from
raising
interest
rates
thereafter.
Thus taking into account the fact that interest rates are at elevated levels and almost nearing their peak,
we recommend that you gradually take exposure to pure income and short-term Government securities
funds. Since longer tenor papers will become attractive, longer duration funds (preferably through
dynamic bond / flexi-debt funds) can be considered, for an investment horizon of say 2 to 3 years. For
over 2 to 3 years you may invest in longer duration funds, but in the near term you may be exposed to
volatility, as there is always an interest rate risk associated with the longer maturity instruments. Also
considering the fact that Bank FDs are offering good interest rates, you may also consider investing some
money in FDs as well.
Q3. Im 38 years of age, and right now can allocate a sum of 5,000 per month via SIPs in mutual
funds. Can you please recommend me 3 good mutual funds for SIP investing, along with the
reasons?
Answer:SIPs (Systematic Investment Plans) plans in mutual funds enable you to create wealth over the
long-term as they infuse in regular savings habit. Moreover, even when the Indian equity markets turn
turbulent they help you to manage the volatility of the equity markets well (through rupee-cost averaging)
and
power
your
portfolio
with
the
benefit
of
compounding.
If you invest a sum of 5,000 monthly vide the SIP route, until your retirement (assuming at 60 years of
age); you would build a corpus of around 64.79 lakh (assuming a rate of return of 12% p.a. on an
average - conservatively). Hence if the equity markets amplify returns, the corpus would also balloon.
However it is noteworthy that, while selecting mutual funds, it is imperative to have a research oriented
approach to select winning mutual fund schemes, select funds which have completed over 3 years of
existence and also recognise the fact that there is more to selecting winning mutual funds than mere
past performance. Always remember to select a mutual fund scheme with a consistent track record and
always prefer fund houses following strong investment processes and systems. Given the present
turbulence in the Indian equity markets (steered by global as well as domestic cues) it would be prudent
to invest in the large cap funds (as a defensive consideration) and avoid mutual funds which have
exposure to developed nations. From a style perspective, you may choose value style funds, as these
corrected levels of the Indian equity markets may provide fund managers of such funds to value pick
some good stocks.
Q4. Im 52 years of age, and over the year have invested in under-mentioned mutual fund schemes
to
build
a
retirement
corpus.
Sr.
No.
Name of mutual fund

Mode
scheme
Whether SIP
continuing or not
SIP amount Amount invested

(in )
so far (in )
1.
Fidelity Equity Fund
SIP
Stopped
1,55,000
2.
Franklin India Flexicap Fund
SIP
Stopped
3.
HDFC Equity Fund
SIP
Stopped
4.
Kotak Opportunities
Fund
SIP
Stopped
75,000
5.
Reliance Growth Fund
SIP
Stopped
75,000
6.
Sundaram Paribas
Select Focus
SIP
Stopped
75,000
7.
Birla Frontline Equity

Fund
SIP
Continuing
3,000
77,000
8.
Birla Mid Cap Fund
SIP
Continuing
3,000
65,000
9.
Fidility Spl Situations

Fund
SIP
Continuing
3,000
78,000
10.
ICICI Pru Dynamic

Fund
SIP
Continuing
3,000
45,000
11.
ICICI Infrastructure
Fund
SIP
Continuing
3,000
45,000
12.
Reliance Diver Power

Sector Fund
SIP
Continuing
3,000
45,000
13.
SBI Magnum Contra

Fund
SIP
Continuing
3,000
24,000
14.
DSPBR Top-100
SIP
Continuing
4,000
158,000
15.
IDFC Premier Equity-
SIP
Continuing
6,000
50,000
A
Kindly suggest which of the above funds I should continue to hold, stop or switch to an
appropriate mutual fund scheme, considering the overall portfolio.
you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s)
to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would
Risk-Return
cap bias followed- i.e. large cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.]
Q1. I had invested in the HDFC TaxSaver fund, but the value of the same is very low due to the
market conditions. Hence, I was wondering whether I should redeem the same before the Direct
Tax
Code
comes
into
effect
from
April
1,
2012.
Can you please guide me?
Answer: All tax saving mutual fund schemes (also known as Equity Linked Saving Schemes or ELSS)
have generally a lock-in period of 3 years, which thus refrain you from exiting the schemes unless you
have
completed
your
holding
period
3
years.
As far as HDFC TaxSaver is concerned the scheme has shown consistently good performance across
time frames, by exposing its investors to low, thus resulting in it clocking superior risk-adjusted returns.
Hence even if the DTC comes into effect from April 1, 2012, we believe that you can continue to stay
invested in the said scheme.
Q2. Im curious to know what will be the effect on the Equity Linked Saving Schemes (ELSS) once
the Direct Tax Code (DTC) comes into effect. Also can you recommend me some good ELSS
funds?
Answer: At present investments in ELSS funds make an investor eligible for tax deduction as per the
provisions of section 80C of the Income Tax Act, 1961. But whenever the DTC comes into effect, ELSS
funds would cease to exist in the respective financial year (relevant to an Assessment Year). Despite the
maximum deduction amount under the section being increased to Rs 3 lakh (as proposed) from the
present Rs 1 lakh ELSS funds do not find a place to the tax saving instrument list.
However, if you invest prior to March 31, 2012 in an ELSS fund you will continue to enjoy tax benefits as
per the current provisions. However, while investing ELSS funds care should be taken to select those
with a consistent performance track record, and one must also focus on the investment processes and
systems followed by the respective fund(s). Fidelity Tax Advantage and HDFC TaxSaver are some of the
good consistently performing ELSS funds.
Q3. Im 25 years of age, and working as an IT professional in a multinational company

headquartered in the U.S. I draw a monthly salary of Rs 24,000 (post tax) and have my Systematic
Investment Plans (SIPs) on-going every month in the following mutual fund schemes since the
last
one
year.
Sr. No.
SIP Amount (in Rs )
1.
Reliance Vision Fund
2,000
2.
HDFC Top 200
2,000
TOTAL
4,000
However, in the last one year both the aforementioned mutual fund schemes have not posted
significant returns. Hence, I would like to seek your advice whether I should stop my SIP, and later
withdraw my money when equity markets improve, or just continue with my SIPs and stay
invested?
Answer: Primarily let us apprise you that while investing in equity mutual funds, one needs to have an
investment horizon of 3 to 5 years. Hence, we think that you are judging the performance of the mutual
fund
schemes
held
by
you
too
early.
But having said that, let us apprise you that our current ranking process reveals that Reliance Vision
(which is a large cap bias diversified equity fund) can be held by you even though it is an average riskaverage return investment proposition. Similarly, HDFC Top-200 Fund (which is a large cap bias
diversified equity fund) too can be help by you as it has shown a consistently good performance across
time
frames,
by
clocking
high
returns
at
a
low
risk
level.
Hence we recommend that you need not worry with the present volatility of the equity market with your
present holding, as the SIP route adopted by you will enable in managing the volatility of the equity
markets well (through rupee-cost averaging), and power your portfolio with the benefit of compounding.
Q4. At present I invest regularly in Public Provident Fund (PPF); which I believe is quite safe. On
March 12, 2012 I will be completing the maximum term of 15 years term in PPF, and thereafter
would like to invest the accumulated sum of Rs 1.75 lakh in a mutual fund scheme which carries
no
risk.
What would you recommend me a suitable mutual fund scheme for this purpose?
Answer: Well, primarily let us apprise you that mutual fund are not always safe as they carry with them
market risk, due to their mark-to-market basis of valuation. If you are looking at absolutely no risk
investment options you may invest the accumulated sum of money on your PPF account, in a bank fixed
deposit suiting your investment horizon, since at present the interest offered by them are quite luring and
nearing
the
peak.
Alternatively if you are willing to take low to moderate risk, you may look at investing in debt mutual fund
schemes which suit your investment horizon. Liquid funds can be considered for a horizon less than 3
months, liquid plus (also known as ultra-short-term funds) for 3 to 6 months, floating rate funds for to 12
months, Short Term Income funds for 1 to 1 years, and Long Term Income funds for 1 years and
above.
But while investing in any of the aforementioned debt mutual fund category(s), please remember to select
debt mutual fund schemes with a consistent track record and from a fund house which follows strong
investment processes and systems to invest in debt papers.
Q5. At present I have being holding the following mutual fund schemes for the respective time
horizons
mentioned
below:
Sr. No.
Time horizon completed in years
1.
SBI Magnum Tax Gain
2.
SBI Magnum COMMA Fund
3.
Reliance Growth Fund
4.
Kotak Opportunities Fund
5.
Reliance Diversified Power Sector Fund
6.
Tata Infrastructure Fund
Since these respective funds havent performing too well, can you please advise me what should
be my line of action on the portfolio?
you avail of our "mutual fund portfolio review service", which will provide you an appropriate action(s)
to be taken, along with the reason for the same. Its an effectively drawn mutual fund portfolio which would
Risk-Return
well as the style of investing
followed by them (i.e. whether growth, value and blend) and the market cap bias followed i.e. large
cap, mid cap, small cap, micro cap, flexi cap, multi-cap etc.]
Q1. Can you please suggest me some good mutual fund schemes under the diversified equity
fund category, balanced funds and debt category; taking into my investment horizon of 5 to 10
years.
Im 46 years of age, and can invest Rs 1.2 lakh per month.
Answer: To advise you on investing your hard earned money in diversified equity funds, balanced
funds and debt mutual funds; sharing information on your investment objective, along with your income,
expenses and nearness tofinancial goals would have been better to form an ideal allocation between
various
categories
of
mutual
funds.
But considering your present age of 46, and assuming you are risk averse we recommend you to park a
dominant portion of your money towards equity balanced funds following strong investment processes
and systems. One such fund is "DSP BlackRock Balanced Fund", which has delivered consistent
performance across time frames by having robust underlying portfolio of equity and debt instruments.
Moreover, the fund has delivered appealing risk-adjusted returns, thus rewarding its investors well for the
risk taken. Similarly, you can select other such balanced funds, but prefer to select those which have a 3Yr performance track record and which are from a fund house which follows strong investment processes
and
systems.
For investing diversified equity fund category, we recommend you to opt for the large cap funds and those
which follow "value" style of investing, since large cap and value style funds generally tend to be
defensive, and dont plunge much as the mid cap ones during the turbulent phases of the Indian equity
markets. Over here too you got to be careful, and select a mutual fund which follows strong investment
processes and systems. "Franklin India Bluechip Fund" is one such fund which has delivered consistent
performance across time frames by having robust underlying portfolio of equity instruments in the large
cap domain. This in turn has also led to its investors get appealing risk-adjusted returns, thereby
rewarding them well. You may also select other such large cap equity funds, but prefer to select those
which have a 3-Yr performance track record and which are from a fund house which follows strong
investment
processes
and
systems.
While investing in equity mutual funds adopt the SIP (Systematic Investment Plan) mode of investing,
as this will help you to even out the present volatility of equity markets (through rupee-cost averaging) and
power your portfolio with compounding effect. So, say you invest a sum of Rs 1.2 lakh every month for a
period of 10 years assuming a return on investment of 12% conservatively on an average, you will yield a
sum
of
Rs
2.76
crore
at
your
age
of
56.
While investing in debt mutual funds you got to be aware of the interest rate scenario. Taking into account
the fact that interest rates are likely to consolidate at these higher levels before they start going down, you
can gradually take exposure to pure income and short-term Government securities funds.
Since longer tenor papers will become attractive, longer duration funds (preferably through dynamic
bond / flexi-debt funds) can be also considered, if you have a longer investment horizon (of say 2 to 3
years). However, you may witness some volatility in the near term as there is always an interest rate risk
associated
with
the
longer
maturity
instruments.
With liquidity in the system being tight, yield on the short term instruments is expected to remain high thus
making short-term papers attractive. Hence, if you have a short-term time horizon (of less than 3 months)
you would be better-off investing in liquid funds for the next 1 month or liquid plus funds for next 3 to 6
months horizon. However if you have a medium term investment horizon (of over 6 months), then
allocation towards floating rate funds can be made. Short term income funds should be held strictly with a
1
year
time
horizon.
Fixed Maturity Plans (FMPs) of 3 months to 1 year will yield appealing returns and can also be considered
as an option to bank FDs only if you are willing to hold it till maturity, but you may not have a very
attractive post tax benefit, as indexation benefit will not be available on FMPs maturing within 3 months.
You can consider investing your money in Fixed Deposits (FDs) as well; at present 1 year FDs are
offering interest in the range of 7.25% - 9.40% p.a.
Q2. I wish to create a corpus for my two granddaughters - aged 2 and 4. I have thought of
investing Rs 4,000 to Rs 5,000 per month through Systematic Investment Plans (SIPs) offered by
mutual funds. Can you suggest an appropriate mutual fund scheme considering my age of 68.
Monthly SIP in equity mutual fund

schemes (in Rs )
Following investment
style as
Market cap
orientation
2,000
Growth
Mid cap
2,000
Opportunities
Multi cap
1,000
Value
Large cap
Answer: We appreciate your idea of building a corpus for your two granddaughters. Yes, indeed for them
investing in equity mutual funds through the SIP route would be appropriate. But while selecting suitable
mutual fund schemes for them, their age of 2 & 4 respectively need to be taken into account rather than
yours; as wealth creation idea is envisioned for them. Considering their age, you can divide the SIP
amount
of
Rs
5,000
as
under:
Amongst the growth style funds, you may consider a mutual fund scheme such as "HDFC Mid-Cap
Opportunities Fund". While for the opportunities and value style, scheme such as "DSP BlackRock
Opportunities
Fund"
and
"HDFC
Capital
Builder
Fund "
can
be
considered.
It is noteworthy that all these mutual fund schemes have been successful in clocking appealing riskadjusted returns across time frames, and has thus rewarded its investors well. However, when you invest
in such funds you need to stay invested for a long-term (at least for 3 to 5 years) - whereby the intended
corpus
can
be
used
for
their
higher
education
or
marriage.
You may also select any other mutual fund schemes following respective styles of fund management, but
it is imperative for you to have a research oriented approach to select winning mutual fund
schemes and also recognise the fact that there is more to selecting winning mutual funds than mere
past performance. Always remember to select a mutual fund scheme with a consistent track record and
always prefer fund houses following strong investment processes and systems.
Q1. We (me and my wife) are investing a sum of Rs 20,000 every month through the Systematic
Investment
Plan
(SIP)
mode
in
the
following
mutual
fund
schemes:
Sr. No.
Investing since
SIP amount (in Rs)
1.
UTI Mahilla Unit Scheme
07 Sept, 2010
5,000
2.
HDFC Prudence Fund
25 July, 2010
2,500
3.
ICICI Prudential Infrastructure Fund
31 May, 2010
3,000
4.
HDFC Top 200
10 July, 2010
4,000
5.
Reliance Diversified Power Sector Fund
10 July, 2010
3,000
6.
DSP BlackRock T.I.G.E.R.
21 Aug, 2010
2,500
TOTAL
20,000
Could you please guide us on which one to hold or sell?
Answer: Primarily let us apprise you, that by enrolling for the SIP mode of investing you have done the
most appropriate thing, as it helps you to manage the volatility of the markets well (through rupee-cost
averaging)
and
also
powers
your
portfolio
with
the
benefit
of
compounding.
Having said that, the analysis of your holding reveals that the SIPs amounting to Rs 20,000 are held in
the
following
category(s)
of
mutual
funds:
Sr. No.
1.
UTI Mahila Unit Scheme
2.
HDFC Prudence Fund
3.
ICICI Prudential Infrastructure Fund
4.
HDFC Top 200
5.
Reliance Diversified Power Sector

Fund
6.
DSP BlackRock T.I.G.E.R.
Category of mutual fund

Hybrid Debt Oriented
Hybrid Equity Oriented
Thematic (infrastructure) Equity Oriented
Large cap oriented diversified equity fund
Thematic (power & energy) Equity
Oriented
Thematic (infrastructure) Equity Oriented
Thus it depicts that a dominant portion (i.e. 75%) of your portfolio is held towards equity oriented funds,
while the rest i.e. 25% is held in debt oriented funds. Among the equity oriented funds too, 43% is
held in thematic funds, which are rather risky and we recommend that you discontinue your SIP in them
and redeem, since the returns so far delivered by them do not justify the risk taken by them. Please note
the thematic funds, especially in the infrastructure and power & energy sub-category have faltered due
to:
Anti-inflationary monetary policy stance maintained by RBI (dampening mood in infrastructure

sector); and
Project execution delay and stricter environmental norms hindering power and energy sector
As far as HDFC Prudence fund is concerned you can continue your SIP in it and stay invested for the
long-term. However, you ought to be ready for a slightly high risk as the equity portfolio of the
said balanced fundA is largely skewed towards stocks in the mid cap domain. Similarly, for HDFC Top
200 you may continue your SIP investment in it and stay invested for the long-term, as the fund has a
predominant large cap portfolio, thus being defensive in times when equity markets undergo turbulence.
Moreover, it is noteworthy that HDFC Mutual Fund as a fund house follows strong investment processes
and systems, which we believe are very important, while selecting winning mutual funds.
Q2.
Im
planning
Sr. No.
to
invest
in
the
following
mutual
fund
schemes.
1.
HDFC Top 200
2.
HDFC Prudence Fund
3.
Reliance Gold Fund
Could you please tell me about these funds?
Answer: The funds selected by you are worthy of investment, and follow the under mentioned style
and market
cap
bias
while
investing.
Sr.
No.
Name of mutual fund

scheme
Category & Investment style

followed
Market cap bias
1.
HDFC Top 200 Fund
Diversified equity Blend
Large cap
2.
HDFC Prudence Fund
Hybrid Balanced Blend
Multi-cap
3.
Reliance Gold Fund
Gold Fund of Fund
Invests in units of Reliance

Gold ETF
Thus from the table above youll have a well structure portfolio across equity and gold. However, while
investing in HDFC Prudence fund you ought to be ready to assume slightly high risk as the equity portfolio
of the said balanced fund is largely skewed towards stocks in the mid cap domain.
Adding Reliance gold fund would also do well to your portfolio, as it enables you to hedge your portfolio
well during economic uncertainties. This is because gold tends to get bold during turbulent times, as
smart investors prefer to take refuge under the precious yellow metal.
However while investing in the aforementioned mutual fund schemes, we recommend that you adopt the
SIP mode of investing, as this will enable you to manage the volatility of the markets well (through rupeecost averaging) and also power your portfolio with the benefit of compounding.
Q3. I would like know about the taxation of Fixed Maturity Plans (FMPs) for the dividend
reinvestment option for quarterly as well as yearly option. I have received dividend on FMP
(quarterly option) in my account without TDS in December 2011. Would this be taxable?
Also would there be a capital gain tax for FMP investment?
Answer: As you may be aware that an FMP is a close-ended fund that invests in debt and money market
instruments of similar maturity as the stated in the maturity of the plan. For example a 90 day FMP will
invests in debt and money market instruments which mature in 90 days such as 3-month Certificate of
Deposits (CDs), 3-month Commercial Papers (CPs) etc. An interesting point to be noted here is that
unlike an FD where your maturity amount is fixed, in a FMP only the period or time horizon of the fund is
fixed.
As
such
a
90-day
FMP
will
cease
to
exist
on
maturity.
The tax implication on FMPs depends on the investment option one chooses dividend or growth. In
case of dividend option youll have to bear the Dividend Distribution Tax (DDT) of 13.84%.
In case of growth option, returns generated are treated as capital gains and taxed accordingly. Thus, in
case of short-term capital gains (i.e. if investments are held for less than 365 days); the interest income is
added to the investors income and is taxed at the marginal rate of tax. And where investments are held
for more than 365 days (long-term capital gains) the tax liability is computed using two methods i.e. with
indexation (charged at 20% plus surcharge and cess) and without indexation (charged at 10% plus
surcharge and cess); the tax liability will be the lower of the two.
Q1. I would like to obtain your views on "Axis Triple Advantage Fund (G)" and Birla Sun Life
Dividend Yield Plus (G). Also would like to know, whether it would be right time to exit the two
funds held by me, namely: "Reliance Growth Fund (G)" and "Reliance Vision Fund" (G)?
Answer: Primarily speaking about "Axis Triple Advantage Fund (G)" (ATAF), it is an open-ended hybrid
fund (launched in August 23, 2010), which invests in 3 major asset classes - equity, debt and gold,
by allocating
the
assets in
them
as
under:
Allocation Range (% to
Total Assets)
Instruments
Risk Profile
Minimum
Maximum
High/Medium/Lo
w
30
40
Medium to High
Equity and Equity Related Instruments

(Including derivative instruments up to
80% of net assets)
Debt and Money Market Instruments
(Including securitised debt up to 40% of
net assets)
Low to Medium
30
40
Gold ETFs
Medium to High
20
30
Thus it has an investment objective to "generate long term capital appreciation by investing in a
diversified portfolio of equity and equity related instruments, fixed income instruments and gold
Exchange Traded Funds". Hence positioned as a multi-asset diversification hybrid fund, ATAF is well
placed to provide triple advantage by diversifying its investment portfolio across three major assets
classes
i.e.
equity,
debt
and
gold.
How has it fared?
Scheme Name
6Mth
(%)
Since
1-Yr 3-Yr 5-Yr
Inception
(%) (%) (%)
(%)
Std.
Dev
(%)
Sharpe
Ratio
Axis Triple Advt (G)
3.6
8.4
6.8
2.08
0.01
Crisil Composite Bond Fund

Index
4.4
7.6
6.0
6.7
0.60
0.11
Gold-India
9.5
36.8
23.1
4.49
0.30
S&P CNX Nifty
3.3
-9.7
18.5
6.4
7.63
0.20
(NAV data is as on March 29, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)
(Source: ACE MF, PERSONALFN Research)
But thus far the performance exhibited above, has been quite dismal despite a 51.1% increases in prices
of gold (since ATAFs inception) amid volatile equity markets. And interestingly, this dismal performance
has been steered despite ATAF holding, a major portion of its assets in gold ETFs. Therefore given this, in
our view we recommend that you avoid investing your hard earned money in ATAF as of now, and for
prudent asset allocation consider your age, risk appetite, risk tolerance and your nearness to goals
amongst others, before making appropriate allocation to equity, debt and gold. The allocation held by the
fund manager may not necessarily be suitable for you as the above mentioned factors might not be
considered by the fund manager while allocating his portfolio across asset classes.
As far as the other three mutual fund schemes are concerned, the table below reveals their traits.
Sr.
No.
Name of mutual fund

scheme
Category of
mutual fund
Subcategory
Investment style
followed
1.
Birla Sun Life Dividend

Yield Plus(G)
Diversified equity
fund
Dividend
Yield
Value
2.
Reliance Growth Fund (G)
Diversified equity
fund
Mid cap
Growth
3.
Reliance Vision Fund (G)
Diversified equity
fund
Large cap
Growth
The performance evaluation of these funds (as depicted by the table below) reveals that, Birla Sun Life
Dividend Yield Plus Fund (which follows a value style of investing), has been able to clock very luring
returns over a 3-Yr, 5-Yr and even on a since inception basis. Moreover, the luring returns have been
clocked by exposing its investors to low risk (as revealed by its Standard Deviation of 6.87%) thus making
it a low risk-high return investment proposition in the category, and a worthwhile investment.
Report card
6-Mth 1-Mth
(%)
(%)
3-Yr
(%)
5-Yr
(%)
Since
Inception
(%)
Std.
Dev
(%)
Sharpe
Ratio
Birla SL Dividend
Yield Plus(G)
3.6
1.7
32.9
16.2
26.4
6.87
0.32
Reliance Growth (G)
2.5
-5.8
26.5
10.6
25.2
8.10
0.24
Reliance Vision (G)
2.4
-7.2
21.7
8.1
21.5
7.70
0.21
BSE-100
2.7
-9.6
20.7
6.5
8.04
0.20
S&P CNX 500
2.5
-9.3
20.7
5.8
8.10
0.19
(NAV data is as on March 29, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period. Risk-free rate is assumed to be 6.37%)
(Source: ACE MF, PERSONALFN Research)
But as far as Reliance Growth Fund (RGF) and Reliance Vision Fund (RVF) is concerned despite a
tempting performance per se, (as depicted above) making them an average risk-average return
investment proposition (as revealed by their Sharpe Ratios); both these funds have shown inconsistent
performance and have underperformed when compared to its peers and the average category return.
Moreover, both of them have maintained a high composition in top-5 and top-10 stocks - making it risky,
and have also indulged in aggressive portfolio churning in aim to create alpha returns. Hence given this
evaluation we would not recommend you to invest your hard earned money or even stay invested in RGF
as
well
as
RVF.
Q2. Now that Fidelity has finally sold it mutual fund business to L&T Mutual Fund, could you
please guide whether it would be worthwhile holding onto any investments made in schemes
offered by Fidelity Mutual Fund?
Answer: We understand your concern about what should one do with the investment in schemes
of Fidelity Mutual Fund, as they have decided sell their asset management business to L&T Finance (a
subsidiary of L&T Finance Holdings Ltd. which is operating L&T Mutual Fund), which is yet subject to
regulatory
approvals.
It is noteworthy that with this acquisition, L&T MF intends to become one of the top players in the
6,82,000 crore Indian mutual fund industry, and after the deal goes through L&T MF will become the 13th
largest
fund
house
with
a
market
share
of
around
2%.
Is
the
deal
for
you
investors?
As a result of the deal while it is expected that the marketing and sales team of Fidelity Mutual Fund, may
be absorbed by L&T MF; the part of the deal which is not in best interest of its investors is that, its
equity fund management team will be retained by L&T MF only till the integration process is on - and not
permanently. Fidelity which has worldwide asset management business is keen to retain its equity fund
management team which is also engaged in research and fund management of Asia-Pacific region for its
parent
company.
As Fidelity MFs well experienced fund management team and strong investment systems and process
has been the key to success of Fidelitys performance so far; the benefit of Fidelity MFs stringent fund
management
may
not
be
available
to
its
mutual
fund
investors
in
future.
Fidelity seems to have parted with its Indian mutual fund investors to get rid of its accumulated losses (to
the tune of Rs 306.85 crore as per its annual report 2010-11) and has handed them over to a fund house
that is yet to prove its worth for the investors and has to stabilise on the performance front.
If you are among the investors who have invested in the brand Fidelity based on its past consistent track
record and its promising ability to create wealth for its investors; then you may not appreciate this deal as
you may not find the same flair in the new fund manager post integration. While this deal gives L&T an
opportunity to become the 13th largest fund house with a market share of around 2%, only time will tell if
this acquisition can bring turnaround in performance of L&T MF, as it does not have any lucrative track
record to show. It would be a challenge for L&T MF to retain investors who are focused more towards
investing in good funds managed by distinguished fund management. Also L&T MF will have to add new
fund managers to its role and will have to efficiently manage the high cost of employees it procures from
Fidelity
MF.
What
you
should
do
right
now?
First of all, with all the news around, you should not panic and may not rush to sell your
investments
in
Fidelity
schemes
With all the approvals yet to be taken, the integration process will take another 2 to 3 months
time. Till then your schemes will be managed by the fund management team at Fidelity MF
If you are satisfied with the performance of your Fidelity MF schemes, then you can continue to
hold
on
to
your
investments
for
some
more
time
But you may not commit any fresh investment in Fidelity MF schemes, i.e. you can discontinue
your further investments that you intend to make or are having through SIP / STP route
Rather choose an alternative scheme and re-invest in diversified equity schemes with a similar
objective, having consistent performance track record and being managed by a fund house following
strong
investment
systems
and
process
If you are not satisfied with this deal and are not looking for your money to be managed by L&T
MF, then you can opt to exit your fund when SEBI offers you an exit window at the finalisation stage
This exit window is generally open for a 30 day period where you can opt for an exit from your
investment
without
paying
any
exit
load
However if you have invested in the tax saving fund of Fidelity, then you will not be able to exit
until
your
statutory
lock-in
period
of
3
years
is
complete
Also any capital gains that you make may be taxable as per the tax rules for mutual fund
investments
For further analysis on what next for investors of Fidelity Mutual Fund Scheme please click here.
Disclaimer:
Answers to the queries are based on facts provided and PERSONALFN would have no
responsibility for the consequences of the outcome based on these solutions. For a detailed
analysis of your mutual fund portfolio, please consult a mutual fund advisor.
Q1. I have been investing in the markets since the last 3 to 4 years, and have investments in the
following
mutual
fund
schemes:
Sr. No.
1.
Sundaram BNP Paribas Energy Opportunities (G)
2.
SBI Infrastructure (G)
3.
Reliance Diversified Power Sector (G)
4.
HDFC Top 200 (G)
5.
SBI Magnum Equity (G)
6.
HSBC Equity Fund (G)
7.
Franklin India Flexi Cap (G)
8.
Franklin India Prima Plus (G)
9.
SBI Contra (G)
However, the aforementioned funds have performed quite badly. Hence could you please advice
as to what to do with these funds?
Answer: The analysis of your mutual fund portfolio reveals that your portfolio consists of all equity mutual
fund schemes, categorised below and adopting the following style of management:
Sr.
No.
Name of mutual fund

scheme
Category of mutual fund &

Market cap bias
Investment style
followed
1.
Sundaram BNP Paribas

Energy Oppor (G)
Thematic (power & energy )
Blend
2.
Thematic (infrastructure)
Blend
3.
Reliance Div Power Sector

(G)
Thematic (power & energy )
Blend
4.
HDFC Top 200 (G)
Diversified equity - Large cap

oriented
Blend
5.

oriented
Blend
6.
HSBC Equity Fund (G)

oriented
Blend
7.
Diversified equity - Flexi cap
Blend
8.
Franklin India Prima Plus (G) Diversified equity - Large cap

oriented
9.
SBI Contra (G)
Growth
Diversified equity - Contra
Value
Thus you have an exposure to both thematic funds as well as diversified equity mutual fund schemes.
Performance of funds in your portfolio
6-Mth
(%)
1-Yr
(%)
3-Yr
(%)
5-Yr
(%)
Std. Dev
(%)
Sharpe
Ratio
HDFC Top 200 (G)
9.0
0.8
32.8
13.1
7.58
0.28
8.9
2.3
31.5
8.6
7.84
0.25
8.4
3.5
30.3
8.9
7.59
0.25
Scheme Name
Diversified equity funds
Franklin India Prima Plus (G)
8.4
5.6
28.7
9.5
6.94
0.25
SBI Magnum Contra (G)
5.9
-0.6
23.0
6.3
7.92
0.18
HSBC Equity (G)
7.7
-0.8
18.7
6.74
5.94
0.17
Sundaram BNP Paribas Energy

Oppor (G)
0.6
1.2
19.7
8.70
0.14
-2.2
-10.3
14.8
8.49
0.10
Reliance Diver Power Sector

(G)
1.4
-15.2
14.2
9.5
8.93
0.10
BSE OIL & GAS
4.5
-10.8
11.4
5.3
8.26
0.07
BSE Power
1.7
-12.9
7.8
1.8
9.00
0.04
BSE-100
9.6
-1.1
26.3
6.0
8.14
0.20
BSE-200
8.7
-1.8
26.9
5.8
8.24
0.20
S&P CNX 500
8.1
-1.5
25.4
5.3
8.17
0.20
S&P CNX Nifty
11.2
-0.4
24.1
6.3
7.71
0.19
Thematic funds
BENCHMARK INDICES
(NAV data is as on February 27, 2012. Standard Deviation and Sharpe ratio is calculated over a 3-Yr period.
Risk-free rate is assumed to be 6.37%)
(Source: ACE MF, PersonalFN Research)
If we assess the performance of the funds held by you, thematic funds focusing on power & energy
sector andinfrastructure sector havent been able to clock very luring returns. It is noteworthy that their
lacklustre
performance
has
occurred
due
to:
Anti-inflationary monetary policy stance maintained by RBI (dampening mood in infrastructure

sector); and
Project execution delay and stricter environmental norms hindering power and energy sector
But having said that, thus far in the last three years these funds have exposed their investors to low risk
(as revealed the Standard Deviation of below 10%), and hence the risk-adjusted returns (as revealed by
the Sharpe Ratio) too clocked by them isnt very inspiring.
While interest rate sectors from hereon are expected to perform better, due to a descending trend in the
interest rate scenario expected from the next fiscal year (i.e. 2012-13), we recommend that you redeem
your investments in the aforementioned thematic funds and invest in "diversified opportunities style
funds", as they have the mandate of engulfing opportunities across themes and market capitalisations.
Thus by doing so, youll not only benefit from only infrastructure sector (which is an interest sensitive
sector),
but
also
other
interest
sensitive
sectors
such
as
autos,banking,
etc.
As far as your mutual fund holdings in diversified equity funds are concerned, they are fairly diversified
across mutual fund houses, and are skewed towards funds following the value style of investing. Barring
"SBI Magnum Contra" you may continue to hold all other diversified equity schemes as they have shown
a consistent performance track record across bull and bear phases of the Indian equity markets. We
recommend that you exit "SBI Magnum Contra", as the fund has lagged its peers in the " contrarian"
style
of
investing.
In order to obtain a more comprehensive detail review of your aforementioned portfolio, we recommend
that you avail of ourmutual fund portfolio review service, which can help you assess other vital details
such
as:
Risk-return
Composition of your portfolio between thematic and diversified equity schemes
Q2. Can you please write to me about top-5 mutual fund schemes for a Systematic Investment
Plan (SIP)?
Answer: Primarily let us tell you that there are no special mutual fund schemes for SIP investing. So,
selecting an appropriate mutual fund scheme for your SIPs is very crucial. With host of mutual fund
schemes available in the markets today, it is vital that you select winning mutual fund wisely, by taking into
account
the
following
points:
Performance: While assessing the performance of mutual fund scheme you need to analyse the
same in light of:
o
o
o
o
o
o
o
Peer comparison study

Time period
Return
Risk
Risk-adjusted returns
Portfolio characteristics
Portfolio turnover
But while doing so it is vital to remember that past performance is not everything.
Fund management: This is one of the qualitative parameter, while selecting funds for wealth
creation. The performance of a mutual fund is largely linked to the fund manager and his team. Hes
the guy whos managing your money invested in mutual funds, so knowing his experience in fund
management will be valuable.
Costs: Yes, it is vital to ascertain the costs associated with a mutual fund scheme as well. The
two main costs are expense ratio and exit load.
While star ratings is popular and many investors pick funds on ratings, you got to be aware about the fact
that these stars need not always shine, and thus investing in star rated schemes is not always a wise
idea. While selecting winning mutual fund schemes for your portfolio it is also important that one knows
his investment objective and appetite for risk as well, as that only can structure your portfolio with
appropriate
mutual
fund
schemes.
Disclaimer:
Answers to the queries are based on facts provided and PersonalFN would have no responsibility
for the consequences of the outcome based on these solutions. For a detailed analysis of your
mutual fund portfolio, please consult a mutual fund advisor.

Case Studies Example On Mutal Funds

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Case Studies Example On Mutal Funds

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Q1.

Name of Mutual Fund Scheme

Name of mutual fund scheme

HDFC Top-200 Fund

HDFC Equity Fund

Birla Sunlife Dividend Yield Plus

UTI Dividend Yield Funds

Being well established

1-Yr 3-Yr 5-Yr

Reliance Reg SavingsEquity (G)

-2.5 13.0 19.3

PAN Card copy (Self attested)

Name of mutual fund scheme

DSPBR T.I.G.E.R Fund

Tata Indo Global Infra Fund

Sundaram Capex Fund

ICICI Pru Infra Fund

Birla Sunlife Midcap

Sundaram Select Focus Fund

HDFC Top-200 Fund

Reliance Regular Saving (Debt)

Insurance cover (in )

Bhima Sandesh Policy

Pension Plan (Annuity)

Postal life insurance

Name of the Policies

Premium paid (in )

Apollo Health Munich Policy

PUBLIC PROVIDENT FUND

National Savings Certificate

Fidelity Equity Fund (lump sum)

Tata Infrastructure Fund (lump sum)

Sundaram Midcap Fund (lump sum)

Franklin India Flexi Cap Fund (lump sum)

UTI Dividend Yield Fund (lump sum)

UTI Dividend Yield Fund ( monthly SIP)

Reliance Equity Opportunities Fund

Which funds are good?

This will help you entice returns on your

This will safeguard your portfolio during

This will help you to take opportunities across

Increase / (Decrease) since

Reverse Repo Rate

Cash Reserve Ratio

(Source: RBI website, PERSONALFN Research)

Name of mutual fund

SIP amount Amount invested

Fidelity Equity Fund

Franklin India Flexicap Fund

HDFC Equity Fund

Reliance Growth Fund

Birla Frontline Equity

Birla Mid Cap Fund

Fidility Spl Situations

ICICI Pru Dynamic

Reliance Diver Power

SBI Magnum Contra

IDFC Premier Equity-

Q3. Im 25 years of age, and working as an IT professional in a multinational company

Name of mutual fund scheme

SIP Amount (in Rs )

Reliance Vision Fund

HDFC Top 200