CONCERNS over inflation and rising interest rates have made the short-term outlook for equity hazy. However, most experts still stand by the long-term growth drivers of Indian economy — making a case for long-term investments in equity. According to them, companies, especially the mid-sized ones, are expected to benefit from the high growth potential of the Indian economy in the next few years. Motilal Oswal Mutual Fund's Most Shares M100 offer investors exactly the same — an instrument to invest in the mid-sized companies.
Most Shares M100 is an open ended index exchange traded fund. The scheme aims to generate return that correspond to the performance of CNX Midcap index, subject to tracking error and before taking into account fees and expenses. For the beginners, an index fund is a fund that mimics the portfolio of a market index, by buying into all constituent stocks in the same proportion as they are in the index. This strategy is known as passive investing and the fund manager does not employ his judgement in picking up stocks. This does away the risks associated with an active fund manager and investors get to earn market returns. Absence of active fund management brings down the costs of the scheme.
The success of the scheme depends on keeping the cost low and keeping the tracking error — the deviation of the fund from the underlying index —minimum. The scheme though appears to be a simple tool to invest in the mid-cap space, the limited experience of the fund house in managing such products must be kept in mind before taking a decision.
The new fund offer for this scheme will close on January 24, 2011. The units will be listed on National Stock Exchange. You need a demat account to invest in this fund, since the units are issued in dematerialised form. You need minimum Rs 10,000 to invest in this fund in the new fund offer. The scheme will re-open for subscription on or before February 8, 2011 and you can then buy and sell units on the stock exchange. The scheme offers growth option to investors. There is no entry and exit load on this scheme.
Why invest?:
To get an exposure to promising mid-sized companies at a low cost
Why not invest?:
Mid-cap stocks are known for high volatility and are a risky investment proposition compared with large cap stocks.
