Skip to main content

Choose MF with a mix of asset classes

 

 

THERE are a lot of mutual fund (MF) schemes that have a mixture of various asset classes. When choosing to invest in these MFs, certain factors have to be kept in mind.

In recent times, several funds have entered the market that invest in a mixture of debt, equity and gold.


These funds have several distinguishing features and hence the investors must be able to take a clear decision.


Here are a few factors that investors can consider while making a decision.
Nature of fund: The nature of the funds, which invest in debt, equity and gold, seeks to achieve several objectives for investors. Majority of the investments in these funds are in debt, which defines the basic nature of the fund to provide a steady stream of earnings for the investor. In addition, there is a small part that is allocated to equity for the purpose of increasing returns for the funds.


This is similar to several monthly income plans that are present, but the major distinguishing factor is that there is also a small allocation that is made for gold.
This adds a third dimension to the entire investment and hence, gives a different nature to the fund.


Manner of fund allocation: The first thing that an investor has to decide is the route that they take while making the investment. The first route involves putting money in a particular fund where the fund manager chooses asset allocation.

In this case, the investor relies on the manager for the purpose of making the call on the proportion in each asset class and also when to remain in cash and when a change is desired.

The other option is to decide on asset allocation themselves by choosing funds that invest in a single asset class. What the investor does is select pure equity or pure debt funds and then allocate the required percentage of their portfolio to these funds. So an investor who also wants gold exposure, will select a gold exchange-traded fund (ETF) for investment. The difference from the earlier case is that there is not a single fund where a mixture will be involved.


The benefit here is that the investor can select a specific nature of the fund for each asset class.


Investment objective: The investor also needs to be clear about what they actually want to achieve when they are investing in a fund that has several asset classes.

The nature in which the i e portfolio of the fund is constructed will determine the a returns generated. For ex. ample, when it comes to the e question of the fund with the three asset classes of r debt, equity and gold, there is a clear demarcation.
e The debt will provide stability, while equity will pro l vide higher returns and gold y will act as a hedge against inflation. However, one needs to look at the actual situation e and determine whether this is correct and if the objectives can be achieved.

A careful study will show A that in the past few years the behaviour of gold ha been different from what was witnessed earlier and due to this reason, there is varied manner in which the entire portfolio will behave This needs to be taken into consideration because this will be the determining factor about the nature o the investment. An investor who expects gold and equity to behave in an investment, might realise that they are actually moving similarly requiring them t change their decision.

Finally, the investor also has to realise that mixing far too many asset class together might result in difficulty in understanding f what is actually happening e Gold exposure: The working of monthly income plans and how equities and debt interact to provide re d turns is well known to investors due to their past experience with these funds.

n There are different type s of impact depending upon the nature of exposure of equity in the portfolio. The investor needs to look at the exposure that will be allowed to gold and then ask questions about its effectiveness.

Some of these would relate to the extent of gold exposure in the portfolio and then looking at whether this has a meaningful impact on overall returns. For example, what is the maximum exposure to gold that the fund will have is important.

A very low exposure might be insignificant in the overall scheme of things. In addition, the fact as to whether there will be a permanent exposure to gold or whether this will vary depending upon the viewpoint of the manager is important.

This happens because in the latter case, it could be that for a long time period there is no gold exposure whereby the scheme then resembles a monthly income plan that is what the investor might not have wanted in the first place.

 

Popular posts from this blog

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...

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...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

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 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 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 Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
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