Skip to main content

Tips for building a good fund portfolio

Tax Saving Mutual Funds Online

 

 

 So you have a financial goal and your adviser has told you how much you should save regularly. You have also agreed that you will invest in mutual funds in a systematic manner. Now comes the tough decision of selecting the funds. Should you trust the list given by the adviser? What should you look for? Let me provide six pointers. I will restrict myself to equity funds here and deal with debt funds at a later date.


   First, your requirement is to invest in the equity market. The mutual fund is only a tool to get there. It is fashionable to assume that you can pick a few winning stocks and do better than a fund manager. However, consider the time, effort, cost and, most importantly, your portfolio's performance record before you do it. If you are honest with your analysis, you are likely to find the mutual fund choice compelling.


   Second, the simplest and cheapest mutual fund product is an index fund or an ETF. It gives you the exposure to equity without any risk of selection. Funds routinely publish performance data, stating that they have beaten the benchmark by a good margin. This may be factually correct, but you will get returns only if you select the winning fund at the right time. Advisers earn the least commission on index funds, so don't wait for them to propose this product.


   Third, a new fund offer at 10 is not cheaper than an existing fund at, say, 100. An NFO is not cheaper than an existing fund; it just has a lower nominal value. It cannot generate a higher return than an existing fund just because it is priced at 10. But an existing fund has performance history, a track record. Unless it is an absolutely new idea, an NFO is an inferior choice to an existing fund.


   Fourth, you should refuse to make a choice without any clarity on how a fund will deliver returns. If a fund manager tells you that the fund 'uses a process-driven, bottom-up approach to select stocks across sectors, with a disciplined selling plan' he is describing his job. If the fund says it will hold largecap stocks, you know it will modify sector weightage and stock weightage compared to the Nifty index, to deliver a better return. If this fund delivers better returns by picking up a few mid-cap stocks, it will amount to dishonesty.


   Fifth, be clear about what you expect the fund to do and what you will do yourself. If you like to assemble your set of index, large-cap, mid-cap and sectoral funds, choose those that stick to such a definition. If you see the portfolio and performance at the fund website over 3-6 months, you will know. If you like the fund manager to do the juggling and like a loosely defined product, go for it, fully aware that you will not know what to expect. Investors like to give fund managers a long rope to do what they like as long as they deliver a return. This preference leads to more poorly defined products with fancy names.


   Sixth, do not rely on past winners. What is important is to hold a well-diversified portfolio. A portfolio suffers damage when you persistently hold laggards; it is all right to miss buying a few winners at the right time as long as you throw out the rotten apples.


   So, build a portfolio using a core and satellite approach. At the core of your equity portfolio should be index and large-cap funds, comprising at least 50% of your portfolio. The next layer should have funds whose specific focus can be rewarding—mid-cap funds, infra funds, small-cap funds, value funds, contra funds. About 35% of your portfolio could be invested here. The next layer should have funds that need an aggressive review. Sectoral funds, concentrated portfolios, specific strategies figure here. These will do well seasonally and need a close monitoring. This should comprise 15% of your portfolio and not over three to four funds.


   If your portfolio holds too many names, acquired at different times for different reasons, you are doing yourself more harm than good.

 
---------------------------------------------

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 )

  1. HDFC TaxSaver
  2. ICICI Prudential Tax Plan
  3. DSP BlackRock Tax Saver Fund
  4. Birla Sun Life Tax Relief '96
  5. Reliance Tax Saver (ELSS) Fund
  6. IDFC Tax Advantage (ELSS) Fund
  7. SBI Magnum Tax Gain Scheme 1993
  8. Sundaram Tax Saver

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now