Skip to main content

Review investment if your fund is below peers consistently

 

Absolute returns may mislead as it captures point-to-point returns LOOK at different periods. If the performance is still bad, look at peer

DEPENDING on market conditions, new fund offers (NFOs) and existing schemes of mutual funds will throw up varied returns. As an investor, worst fears come true when your fund shows below-par returns or negative returns.

Should an investor react to point-to-point returns or should he/she wait to see regular performance to spot the dud fund?


Experts advise that there is no `magical' way to decide whether a fund is a lemon but ask investors to use different parameters to adjudge its success or failure.


Absolute figures may mislead: If your mid-cap fund is down 12 per cent in a one-year horizon that does not mean that the fund manager is fleecing you.


Comparing absolute returns may be misleading because they capture point to-point returns. The first step is to look at relevant index or benchmark, such as BSE Midcap.

But then, if the fund shows underperformance, don't give up fully on it.


Look at different periods: If the performance is still bad, look at peer performance. It may well be that the markets were soft during a single period due to which the fund's absolute performance for say 12 months looks poor. As an investor, if you see that the fund does not have sufficient historical data, you have two choices -stay or exit. Stay put or exit immediately? That is a timeless question. Research and different studies point out that investors attach emotion to their investments, even if it is a mutual fund. As a thumb rule, if your money in an NFO does not increase in three years, it could be time to review the investment.

You have to admit it was a bad investment for you as you could not make money. Take a hit and then take a fresh call

Admittedly, certain categories of funds like thematic funds or sector funds are riskier bets than a plain vanilla diversified fund that has no bias towards a particular sector or theme.
The possibility of disappointment is higher in the thematic/sector funds, experts pointed out.


Other factors: Due to fund manager change or takeover by another fund management company, investors should pay more attention. If the sole reason for your investing in a fund was due to star manager who has quit, any below-par performance in the fund would make an investor anxious.

It is very rare that a fund or a category of funds continue to perform badly over long stretches of time.
Do not take decisions based on six-month time periods.
One thing should be clear.
A mutual fund manager has to be given time to perform. But if he/she still can't, then investors have every reason to be angry
 

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Read more

WEALTH TAX

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 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...
Read more

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...
Read more

How to Pick Top Performing Mutual Fund Schemes

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   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...
Read more

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...
Read more
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