Choosing the best of MUTUAL FUNDS

One day, a close friend called me up from Bangalore and asked me " Yaar tax bahut kat raha hai koi tareeka bata jisse tax save ho jaye, koi achcha sa Mutual Fund wagarah.........", i gave him my fundas and satisfied him.

But after that I realised that most of the people like my friend invest in Mutual Funds with primary objective of Tax saving and not the Capital appreciation and in order to fulfill that objective we go for any MF without any deep analysis and giving it a thought. I have seen so many people buying a particular MF just because agent of that MF was easily reachable. Although primary objective of MFs should be Capital appreciation not the tax saving and in order to fulfill that a little research and knowledge is required.

I was going through performance of various MFs in recent times and i found that few of them have outstanding performance. Like SBI magnum, LIC, ICICI Prudential, UTI etc .... most of them outperformed the market in recent times and huge variety of funds are available to pick. Most of companies invest this money in various sectors like Telecom, Auto, Software, Construction, Banking etc in Stock markets and performance of these funds largely depends on performance of those sectors in Stocks but as these funds are handled and closely monitored by experts in the field so risk chances are less. There are above 1000 of MFs are available today and choosing one is tedious job. Here is a little exercise which can ease your job :-

• First of all you should carefully decide your financial objectives. How much returns you are expecting and how much risk you are willing to take ? Are you looking only for tax benefits ?
• Match each goal with appropriate MF category and diversify your investments. For example you should plan your investments with respect to growth, balanced or secured MFs.
• Look for diversification of investments and building a portfolio of 3 - 4 MFs.
• Keep an eye on your investments, have patience and review the performance of your MF portfolio.
• You should also keep the tax aspect in mind.
• And do the research in MFs.

Read the offer document carefully and ask your agent about entry and exit load. Few MFs have entry load as high as 20 % and as low as 2.5 % and exit load also varies from 0 % to 10 %. These are hidden costs which agents rarely disclose to customers.

Some sources from where you can get knowledge of various mutual funds and thier current performance:

www.licindia.com
www.sbimf.com
www.iciciprulife.com
www.utimf.com
www.moneycontrol.com


For any queries, regarding your investments mail me at - ankurchahal@gmail.com

Sachin vs SENSEX

It was a ODI match between India and Australia at Sharjah, India was in trouble and also weather was against but one man was there and India won the match, same thing happened after two days ,,,,again match was against Australia and it was final of Sharjah cup ...again it was one man show and India won the cup. The man was non other then God of Indian Cricket -- Sachin Ramesh Tendulkar

It was hot summer in India in July 1990 when SENSEX first time touched 1000 mark, it took around two years to make it to 2000 mark and 16 years to reach 10,000 in Feb'06 but just 1 and half year to reach 15000 in July'07.

Indian economy and sports changed a lot in last 15 years. We had several big deals on international level, be it TATA or BIRLA, our software companies went abroad, we had largest two wheeler manufacturing company and fastest growing Telecom sector in the world. We had world champion in Chess Mr. Anand, we reached to wimbledon III round( thanks to Sania Mirza ), and final of ICC Cricket world cup( thanks to Saurav Ganguly and the team ).

But in sports it was Sachin Tendulkar who redefined the rules of Cricket and in economy it was SENSEX who changed the way west looks east. Both moved the nation in last 15 years, and Indian economy and cricket both seen there Golden days in this era.

Today when both are at all time high, 15000 and going strong critics are shocked. Those who ruled out both, those who declared that game is over, now they are seeing both getting strong and mature day by day. Both gave some nice moments to Indians. Sometimes both made us sad and sometimes happy but it was the way they chaged India that matters more then anything else.

Today, being a big fan of Sachin and SENSEX i hope that both will give some more reasons for Indians to smile and some more reasons for others to feel "East or west, India is the best"

Cheers to both !!!

Mutual funds or stocks?

Some investors swear by picking stocks themselves and making big money. Some others feel their money is better managed by mutual fund houses. When an investor buys a stock, he owns a piece of the company along with thousands of others like him. On the other hand, when an investor purchases units of a fund, he owns a chunk of diversified securities and bonds. Is investing directly in stocks better or owning mutual fund units? It varies from investor to investor. Let us see why.

Investment amount

If you have a small amount money set aside for investment purposes, it is better to settle with mutual funds. This is because when you own fewer stocks adequate diversification is not possible. You'll be carrying unnecessary risks on your small stock selection for no additional returns. Mutual funds take care of diversification and mitigating risks.

Time and expertise

Some people have the expertise and time to research. They understand their risk appetite and know which stocks work best for them. For others, mutual funds mean sheer convenience. They leave the job of fund selection to the fund manager on whose expertise, they repose complete faith. The task of timing, placing a buy or sell, tracking transaction and market research is left to the fund managers.

Diversification

Individual investors cannot fully diversify as their investment ability is limited. Further, they need to put in effort daily on research and management. Fund houses are flush with cash and explore the numerous investment avenues to achieve ample diversification.

Small companies

Large fund houses cannot afford to put bulk of their money in small companies that hold lot of promise. It is an undeniable fact the large companies usually give lower returns as their performance has already peaked. However, small and mid-size companies have greater scope of giving better returns as they still have a huge potential to do better. As an individual investor, you can buy stocks of small companies and take risk that you can digest. A fund house may be unwilling to expose a considerable chunk of their portfolio to small companies.

Expenses

Mutual funds come with their own set of fees as entry and exit loads. You'll further be charged if you seek to make changes to your fund options. However, as a smart individual investor who invests with a long-term goal, you can save on transaction expenses and taxes.

Risk

The element of risk in investing directly in stocks is very high. What if the company whose stock you hold suddenly goes bankrupt? You'll have to bear the full brunt of this. On the contrary, since a fund house invests in many companies, the event of some company going bankrupt has minimal impact on the unit holders. Hence, the risk is lower. For those who do not want to relinquish control of their investment decisions and have time and expertise, investing directly in stocks may be advisable. For the rest, who want to benefit from the convenience, management and ample diversification, mutual funds may be the solution.

Source: Economic Times