Advertisement

Help
You are here: Rediff Home » India » Business » Personal Finance » Manage your Money
Search:  Rediff.com The Web
Advertisement
  Discuss this Article   |      Email this Article   |      Print this Article

Investing? Systematic investment plans are the best
 
 · My Portfolio  · Live market report  · MF Selector  · Broker tips
Get Business updates:What's this?
Advertisement
April 17, 2006 12:17 IST

This may have been one of the more abbreviated weeks on the stock markets, but there was plenty of action nonetheless. After moving northwards for seven weeks in a row, equity markets finally lost steam and closed in negative terrain.

The BSE Sensex posted a loss of 3.04% to close at 11,237 points, while the S&P CNX Nifty shed 3.15% to end at 3,346 points. The CNX Midcap closed at 4,764 points (down by 3.74%).

The sharp fall over the last two days of the week had many Personalfn clients calling in/writing in to elicit our views on the stock markets. Over the short-term, our view is that it would be hazardous to predict stock market movements with any degree of accuracy.

The only assertion we can make is that investors can expect above-average volatility. Over the long term, our view remains unchanged -- we continue to be positive over a 3-5 year time horizon.

Furthermore, we reiterate our view that investors should refrain from making lump sum investments at this stage and instead resort to the systematic investment plan (SIP) route.

Leading Diversified Equity Funds
Diversified Equity FundsNAV (Rs)1-Wk1-Mth1-year3-yearSDSR
DEUTSCHE ALPHA EQUITY46.950.11%14.57%81.91%70.68%6.95%0.41%
MAGNUM COMMA14.970.00%13.67%--5.53%0.93%
MAGNUM CONTRA25.2-0.87%10.75%108.15%101.90%4.39%1.43%
QUANTUM LONG-TERM EQUITY10.26-1.06%1.58%--NANA
MAGNUM MIDCAP19.78-1.54%4.82%98.40%-4.70%1.19%
(Source: Credence Analytics. NAV data as on April 13, 2006. Growth over 1-year is compounded annualised)
(The Sharpe Ratio is a measure of the returns offered by the fund vis-�-vis those offered by a risk-free instrument) (Standard deviation highlights the element of risk associated with the fund.)

Expectedly, this was a subdued week for diversified equity funds segment. Deutsche Alpha Equity (0.11%) took the first spot. Magnum Comma's performance remained unchanged over the last week, while Magnum Contra (-0.87%) and Quantum Long Term Equity (-1.06%) took third and fourth positions, respectively

The last few weeks have been rather interesting for equity fund investors. With the markets being volatile, they have experienced both euphoria and agony in a matter of a few weeks.

We believe this is a good time for investors to take a reality check of their true risk appetite. It is common for investors to get carried away in a rising market and take on unwarranted risk. More than ever, it is critical in these markets that investors stay faithful to their risk profile and investment objectives while making investments.

Leading Debt Funds
Debt FundsNAV (Rs)1-Wk1-Mth6-Mth1-yearSDSR
BIRLA SUN LIFE INCOME 24.050.23%0.69%1.69%4.04%0.70%-0.55%
TEMPLETON INC24.620.22%0.88%0.53%3.00%0.60%-0.71%
TATA DYNAMIC BOND FUND10.230.22%0.24%1.66%5.56%0.42%-0.64%
PRINCIPAL PNB DEBT 19.800.22%0.60%1.45%4.52%1.17%-0.50%
TATA INCOME PLUS R111.950.21%0.45%1.85%6.32%0.54%-0.60%
(Source: Credence Analytics. NAV data as on April 13, 2006. Growth over 1-year is compounded annualised)

Birla Sun Life Income (0.23%) was the leading debt fund over the week. Templeton Income and Tata Dynamic Bond Fund both charted similar growth paths (0.22%) to take the joint-second position.

The yield on the 10-year benchmark 7.38% GOI paper appreciated to 7.44% (up 0.02% or 2 basis points). Yields share an inverse relationship with bond prices. Higher yields translate into a decline in bond prices and with it a fall in bond fund NAVs (net asset values).

Leading Balanced Funds
Balanced FundsNAV (Rs) 1-Wk1-Mth1-year3-yearSDSR
UTI VARIABLE INVEST ILP G 15.34 -0.66%1.32%24.95%25.15%2.23%0.31%
UTI BALANCED FUND 51.29 -2.19%2.97%43.55%40.50%3.71%0.44%
SUNDARAM BAL G 30.46 -2.22%4.49%48.72%43.45%3.71%0.50%
HDFC [Get Quote] PRUDENCE G 94.84 -2.27%1.86%56.54%55.61%4.07%0.58%
CANBALANCE G 27.70 -2.46%2.86%32.03%27.00%3.53%0.23%
(Source: Credence Analytics. NAV data as on April 13, 2006. Growth over 1-year is compounded annualised)

Balanced funds from UTI Mutual Fund dominated the rankings this week. Although all balanced funds were in negative territory, UTI Variable Investment (-0.66%) and UTI Balanced Fund (-2.19%) curtailed losses a lot more effectively than the competition. One reason for this is that these funds maintain conservative equity allocations.

As far as SIP investing goes, we have always advocated it as a far more efficient and convenient form of investing. Its biggest advantage is that it can help reduce the average cost of investments over a period of time.

By getting invested across time horizons and market cycles, investors stand a better chance of lowering their investment cost vis-�-vis a lump sum investment. In fact, if you have ongoing SIP investments, the present downturn in stock markets is an opportunity for you.

More importantly, SIP investing does away with the need to time markets -- something most retail investors are incapable of doing and shouldn't indulge in anyway.

Also, SIP investing is lighter on the wallet. It enables retail investors to access markets with smaller investments, thereby making the investment process more feasible.

With stock markets showing high turbulence, investors are sure to be exposed to a number of 'tips' and 'sure-fire' money making opportunities.

Our advice to investors -- block all the noise. Instead, stick to your financial plan, get invested for the long haul and continue to make investments using the SIP route.

For a Free download of the latest issue of Money Simplified - Retirement Planning & YOU, click here!

Want to invest in Mutual Funds? Get good advice, join the Mutual Funds Discussion Group



More Personal Finance
 Email this Article      Print this Article

© 2008 Rediff.com India Limited. All Rights Reserved. Disclaimer | Feedback