Prajna Capital |
- Religare Banking Fund
- Use asset allocation and diversify portfolio to beat inflation
- Aegon Religare Endowment Plan
| Posted: 08 Jan 2013 04:20 AM PST Call 0 94 8300 8300 (India)
One of the main purposes of investing in mutual funds is that they reduce risk through diversification in their portfolio. However sector funds defeat this purpose by investing in only one particular sector, thereby exposing investors to a greater level of risk. Furthermore, sector funds are normally high risk - high return investment propositions that may not adequately compensate investors for the risk that they have undertaken.
Equity Portfolio
RBF is benchmarked against the CNX Bank Index. The fund holds 22 stocks as on August 31, 2011 and top-10 stocks accounted for 82.27% of its portfolio.
How Banking funds fared vis-à-vis BSE 200 & CNX Bank Index
The above table shows that RBF has performed decently on the returns front. It has underperformed its benchmark over the 3-Yr period by clocking returns of 20.7% CAGR (against the 21.1% generated by CNX Bank Index). However, it has arrested the losses by falling lesser than the CNX Banks during last one year.
Fund Manager Profile
The above analysis reveals that RBF's performance is quite appealing. While we are not undermining the potentials of the Indian banking and financial services sector; the fortune of RBF will be closely linked with the fortune of banking and financial services sector and thus we believe it exposes investors to the sector specific risk.
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| Use asset allocation and diversify portfolio to beat inflation Posted: 08 Jan 2013 12:32 AM PST Call 0 94 8300 8300 (India)
WE work very hard — almost 24X7, 365 days — to create wealth. However, we spend little time on managing it well. We disrespect wealth when we speculate on tips in the stock market or invest out of greed in Ponzi schemes. The other extreme is finding solace in the safety of debt, bank deposits, gold and/or keep it idle in a savings account. Most are obsessed with the risk of losing money while investing, but few look at inflation as a wealth destroyer. For instance, if a watch was available for `1,000 in 1991 and prices were to rise by 20 per cent annually, the same watch would cost `38,338 now. Instead of buying the watch, if you had invested the same money in a bank deposit offering 10 per cent returns, the nominal returns would have been positive. But the real returns would have been negative. In fact, today you would not have been able to purchase the same watch, as in 20 years, it has become six times more expensive than the fixed deposit value. Let me recount another scenario. Say, in the 90s, two salaried people — Deshpande and Patel — in their late-50s, were working in a bank. When the bamk declared an early retirement scheme, both accepted the same. Let us assume both retired with `30 lakh each. Since interest rates on bond and debentures of seven-year maturity were as high as 16 per cent in those days, Patel invested in those. His annual income of `4.8 lakh (pre-tax) was good enough to support his lifestyle. Deshpande, on the other hand, decided to diversify through equities, bonds, debt and equity mutual funds. He also decided to monitor his portfolio on a regular basis. Till 1999, while Patel was enjoying regular and guaranteed income, Deshpande was doing the same because of his exposure to debt funds. However, the volatility of his portfolio was high. But Deshpande's luck changed during the tech boom of 1999-2000 when his equity did very well. But he kept on shifting from equity to debt in order to maintain his asset allocation. So, he booked his profit bit early, but did not lose his discipline. He did not worry about the rise in the stock prices. When the tech boom busted and the markets fell sharply, he survived the fall because of the discipline. During the fall, he invested some more money in equities to balance his equity portfolio. On the other hand, Patel's debt portfolio matured in mid2000. Reinvestment was no longer possible at 16 per cent, as interest rates had slipped to seven per cent. He was unwilling to play the equity market as he did not believe in stocks. Consequently, he invested in bonds at seven per cent. His income dropped immediately to `2.1 lakh annually (from 4.8 lakh earlier). Meanwhile, prices had gone up significantly high, forcing Patel to reduce his living standards. Worse still, he had to look for a part-time job to supplement his income. On the other hand, Despande continued his retired life peacefully. True, he had his anxious moments. But his policy of asset allocation helped to beat inflation. MORAL OF THE STORY If you are working six days a week to generate income, spend at least half-a-day to manage wealth. Focus on real rate of return, that is, over and above the inflation rate.
Happy Investing!!
We can help. Call 0 94 8300 8300 (India)
Leave your comment with mail ID and we will answer them
OR
You can write back to us at PrajnaCapital [at] Gmail [dot] Com
---------------------------------------------
Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs
Download Mutual Fund Application Forms
Best Performing Mutual Funds
| ||||||||
| Posted: 07 Jan 2013 11:09 PM PST Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
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Happy Investing!!
We can help. Call 0 94 8300 8300 (India)
Leave your comment with mail ID and we will answer them
OR
You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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