Thursday, July 30, 2009


HDFC FlexIndex Plan - Helps you overcome indecision of Investing

Srikanth Shankar Matrubai

HDFC Flexindex Plan is an unique Investment Idea which should serve Conservative and First Time Investors as a good base to enter Equities without the accompanying volatility.

HDFC Mutual Fund's "HDFC Flexindex Plan" allows you to manage your money between their funds based on how the Sensex is doing. The idea is that you associate various types of transactions with various ‘trigger levels’ of the Sensex and when the triggers are hit then those transactions are carried out. These triggers would then switch your money from debt funds to equity funds or back.

Suppose you invest Rs.50000 in a HDFC Liquid Fund and then you are required to give your Entry Triggers to switch from the Liquid Fund to a predetermined Equity Fund.

You can give 4 options adding upto 100% of your investment. The Default Option is 25% at each Entry level.
Suppose Index level is say, 15000 and you give Entry Level Trigger at 25% on every fall of 500 points, Then your 50000 will be split into 25% and invested at your preferred Equity Fund at every 500 point fall.
Yes, many would argue that this goes against the Basic Concept of Mutual Fund itself wherein instead of the Fund Manager, it is the Investor who decides, as to When the Fund gets invested in Equities!. However, what should be noted that this will attract those kind of investors who are attracted towards Equities but are apprehensive about investing at these levels. So, this concept will allow an Investor the Flexibility to invest at pre-determined Sensex levels, different percentage of amount. So, timinig is left to the Investor, while Stock Selection would continue to be the work of the Fund Manager.

A Switch Plan like the "HDFC Flexindex Plan" offers the opportunity to steadily increase your exposure to equities at Different Price levels.
I would advise investors that though the "HDFC Flexindex Plan" looks and sounds good, it would be more prudent idea to invest in a Debt Fund and go for a Systematic Transfer Plan which would "time" the Market in a Efficient and Tested Way.
Also, do remember, that HDFC Flexible Plan is not a substitute to SIPs. A SIP always works out better in the long run.

Srikanth Shankar Matrubai

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Wednesday, July 22, 2009



Srikanth Shankar Matrubai

DSP BlackRock World Energy Fund is a very interesting Fund.
DSP BlackRock's World Energy Fund opens for subscription on July 10 and closes on July 31. This feeder fund feeds onto two global funds. The Fund will invest in BlackRock Energy Fund and BlackRock New Energy Fund which have had a good track record for more than 9 years now.

It is widely accepted going forward, Crude prices will higher and higher because of the ever widening Demand-Supply Gap. Energy Stocks valuations are at multi year lows and the Fund is launched to seize on the Opportunity to acquire stocks at these low levels. This coupled with Crude upside linkage should prove to be a good bet for investors.
Oil was earlier available in Ground, but now only in High Seas, which is making Oil cost inch up higher and higher. The days of Cheap Oil is over.
The Feeder Fund seems to have a bias towards the Exploration and production side rather than the Refining and Marketing part, which is understandable given the low margins in Refining. The Feeder Fund has good exposure in Well known Large Caps like Exxon Mobil, Shell, Chevron, BP Cairn Plc (not Cairn India) and alternate Energy Stocks like Vestas, Suzlon.
Oil companies in India are governed by administered pricing, therefore they cannot benefit from rising oil prices. But global oil companies enjoy considerable pricing flexibility. This Fund aims to capture that.

Along with the Energy part, the Fund also seeks to invest in BlackRock New Energy Fund which is again quite a interesting theme. The New Energy which consists of Solar, Wind, etc is the only Sector in the World which has been mandated by Govt to GROW.
In 2008, for the First time in History, Installed Capacity for Alternate Energy was MORE than the Installed Capacity for Conventional Energy which shows the kind of Backing the Sector enjoys from Governments Worldwide. The most beautiful part of the Alternate Energy is it is FREE.

The Fund is exposed to Currency Risk.
Moreover, the investors in this Fund will not get the benefit of Zero Long Term Capital Gains Tax.

The Fund offers desirable diversification because the Fund gives Indian investors global access to the high growth renewable energy sector. The Fund has the entire World to choose from and not restricted to Indian companies who are disabled due to strict Govt interventations.
DSP BlackRock World Energy Fund will be a good Portfolio hedge against Rising Oil Prices and should form a definite part of any portfolio. The Fund will also give you both Sector Diversification as well as Geographical Diversification.
Do understand before investing that this Fund depends on Energy Sector and will thus be highly volatile.
The Fund does not offer SIP as of now. When it opens for continuous offer, it does offer SIP, conservative investors should invest preferably through SIP then.
High Risk appetite investors and those who have good knowledge of the Energy Sector should definitely Look at adding this Fund to their Portfolio.

Best of luck,

Srikanth shankar Matrubai

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Friday, July 17, 2009


Vishal Manakame wrote :

I accidentally came across your blog while researching for Children policy. I did spend some time reading the posts on your blog and found it really informative and hence this question. I look forward to seeing your advice on this.

I am 36 and am looking for a children policy for my 4 yr old son. My objective is to have sufficient funds by the time he finishes school and goes into higher education - so looking for a 15 yr time frame and generating about 20 lacs by that time.

Recently I was approached by HDFC for HDFC Unit Linked Young Star Plus II policy and have almost signed this for Rs 60,000 /- PA. But when signing I realized that their charges are very huge the first year - only 17,000 will be in my portfolio in the first year. Subsequent years it does tapers off significantly though. What I realized is that in 5 yrs I would have about 3 lacs (my actual outflow) in my portfolio assuming 10 % returns and that has worried me.

I realize from your blog that you do not like ULIPs, but my question is - given children's policy options would it still make sense for me to go with the above policy? if not would you suggest any alternative policies (traditional or other investments). My objective is more on generating a corpus rather than insurance, which I feel i can ans will need to buy some term policy.

Thanks much


Dear vishal,

Please remember that you are investing for your kid for future returns rather than Insurance. Right?

I always say ULIPs are expensive products with high initial charges. I am not in favour of any child plan . If one has enough term cover that will do. Child plans are long term gambles like ULIPs. How well an insurance company manages your investment part is a gamble. These are all ways to get more money from you. At maturity you will realise that the returns are not great. Better to keep INSURANCE & INVESMENT separate.
However, let me first tell you about Insurance Child Plans. Compared to Other Child Plans, your choice of HDFC seems okay especially because HDFC in addition to Death Benefit option also offers Critical Illness Benefit.
I however felt ICICI Smart Kid RICH fund is slightly better. You can compare it with HDFC Young Star Plus also, though ICICI Smart Kid scores over it in many aspects. For instance, HDFC has high allocation charges in first year (60%) compared to ICICI Smart Kid (18%) in a regular ULIP. So you will have lesser units in your coffers in early years, especially in times when sensex is reported at all time low. Please consider for all three important riders (I) Premium Benifit Rider (II) Disablity and Accidental Benifit Rider and (III) Income Benifit Rider. Do not discontinue paying premiums (in case you are opting for regular premium) after three years or so. ULIPs are long term products and prove fruitful only in long term.

Please try to compare Illustrations of following Child Plans & Term Plans from Same Insurance Company.

BIRLA SUNLIFE CHILD DREAM PLAN with MAX. COVER with Minmum GUARNTEED Benifit of Rs.75000/- & Minimum PREMIUM.

KOTAK HEAD Start Future Builder


AVOID those Plans which offer Lower Insurance Cover(10 Times of Annual Premium).
Pleas. If possible, try to get the Feb 2009 issue of Outlook Money. It is KIDS Special & Contains very Usefull Information about Future Secure of Children.

My take is, Go for Term Insurance. They are cheap and then invest in Good Diversified Mutual funds, especially those which offer Free Insurance Cover.I.e, if you really interested in this Insurance Combo offer.
Among the Funds that Offer Free Insurance Cover, DWS Tax Saving Fund is the best, as it offers 5 times your Investment as Insurance Cover with no Conditions or fine Print. And, after the Compulsory lock-in period of 3 years, there is no exit load too.
My Fund Picks for your son would be
Birla Sunlife Equity Fund
DWS Tax Saving Fund
Kotak K30 Fund
Reliance Growth Fund
Birla Offers 100 times your Monthly Payment as LIfe Insurance
DWS offers 5 times your invested amount as Life Insurance
Kotak and Reliance offer to pay your Balance SIP amount in case of your death.

Some Funds like Principal Personal Tax Saver and HDFC Children`s Gift Fund offer Accidental Insurance Cover too.

However, stick to the above funds for Good Gains and are definitely better than ULIPs. Child Plans are just Attractive Packages with nothing inside. Just buy Mutual Funds recommended by me and keep it aside as if you have invested in a Child Plan and do not have the right to withdraw till 18 years and see the magic of Compounding giving you absolutely stunning returns.
Best of luck,
Srikanth Shankar Matrubai

P.S. I have posted separately a Post on HDFC Young Star Plus on my blog. Please read it there. visit

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Thursday, July 9, 2009



Dr.Sundeep wrote :

"I am 40 years old goverment servant

As a middle class service man my source of income is only SALARY In last 3 years I have invested in equity diversified mutual funds and lost 50% of my money.As i am not a proffessional and no knowledge of market I was using this instrument ie diversified mutual fund as a long term investment Now I have lost around two laks of my money in MF WHAT should be my future plan I mean if i have to invest Rs 100 per month for long term how should I divide in different type of mutual funds ie equity diversified /DEBT etc for long term. By Rs 100 I mean what percentage of investment.
As far as my MF are concern I Have invested in
Reliance GrowthRs 40000,
ICICI infra structureGrowth Rs 40000,
Templeton India Equity income fund growth Rs35000,
Fidelity special situation Fund Rs 10000,
Reliance RSF EQUITY Rs 35000-GROWTH,
DSP BR TOP 200Rs 15000.
TATA infra struct growt Rs 10000,,
Reliance diversisified Power MUTUAL FUND GRowth Rs 40000,
Principal personal Tax saver Rs 5000,
Lotus India Tax plan groth Rs 5000.
These MF buyyed whem Sensex rages from 16000 to 20000.i have invested rs 3L plus mpney.I am ready to wait for 3-4 yrs."

You may be aware that none of us are spared in this economic crisis and that includes me too.
Just investing your savings without actually finding out your risk capacity and risk tolerance levels is not a very good way of going about investing your hard earned money.
For a Conservative Investor like you, it is sad that you have invested in Sector/Theme Funds which are the ones which FALL the most in any Bearish Markets.
Firstly, I would like you to switch from the following funds :
1. Fidelity Special Situation Fund (10000) to Fidelity Equity Fund
2. Tata Infrastructure Fund to Tata Pure Equity Fund
3. Reliance Diversified Power Fund to Reliance Regular Savings Fund - Balanced option
4. JM Basic Fund to JM Large Cap Fund
5. ICICI Infrastructure Fund to ICICI Dynamic Fund. (this is inspite of ICICI Infra's better than peer performance).
You can continue to stay invested in the other funds as they all have shown consitently better performance and looks assuringly to continue to do in future.

By the way, Lotus India Tax plan is now Religare Tax Plan.

Being a Govt Officer, with SALARY as the only source of Income, you are not in a position to take risks. You better avoid investing in Theme Funds and instead concentrate on Diversified Funds. You also need to add some Balanced Funds to your portfolio to protect volatility.
You should ideally invest 25% in Diversified Equity Funds, 25% in Large Cap Funds, 25% in Balanced Fund and 25% in Debt and Arbitrage Funds.
Slow and steadily, start shifting your investment amount from Equities to Balanced Funds and all apprecaition further to Debt and Arbitrage Funds.
Best of luck,
Srikanth shankar Matrubai

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Saturday, July 4, 2009


Mr.Exterminate wrote :

"Dear Srikanth,
My younger brother wants to start investing into Mutual funds. He is single and 24yrs old with no liabilities so far. He is willing to invest 20-25k per month in SIP.
Kindly suggest me some good Diversified and Debt funds to invest in.
My suggestion was to invest in Sundaram BNP Paribas TaxSaver as an ELSS for tax savings purpose as he needed that too.
And either Canara Robeco Income and/or Birla SunLife Income fund as debt component.
In Diversified Equity below were the funds I shortlisted.
1. DSPBR Top 100 Equity
2. DSPBR Equity
3. Birla SunLife FrontLine Equity
4. DWS Alpha Equity
5. Sundaram Select Focus
6. HDFC Top 200 Fund
7. ICICI Pru Infra
8. IDFC Imperial Equity
9. IDFC Premium Equity
10. Franklin India Prima Plus

But there are so many good funds to shortlist from. And for investment of 20000K per month I guess 4-5 funds are enough. I request you to help me out in choosing the good funds for investment. Because to many funds and over-diversification also does not make sense.

Thanks in advance for the help.

Dear Exterminate,
Your brother is young and with no liability, he can afford to have a higher exposure towards Equities.
Of course, the first thing he has to do is get himself covered adequately with Term Insurance, as this is the cheapest form of Insurance. Beware of ULIPs, they are very attractively packaged and tempt you, but you are a loser in that investment avenue. Though some of the ULIPs are good, you better avoid them.
And, he would do well to also get himself a Health Insurance too. At his age, Health Insurance will be very cheap.

Then, of course, he should consider investing in Mutual Funds.
To add to Term Insurance, your brother can consider investing in DWS Tax Saving Fund, which gives you free insurance cover upto 5 x your investment subject to limit of maximum 5 lakhs. This would also take care of his ELSS investments.
I do not think he needs to consider any Debt Funds as of now. I would advice him to split his 20000 sip into 10 sips of 2000 each and invest in the following funds.

1. Birla Sunlife equity Fund
2. DSPBR Top 100 Fund
3. DWS Tax Saving Fund
4. Fidelity Equity Fund
5. HDFC Top 200 fund
6. HDFC Prudence Fund
7. ICICI Pru Dynamic Fund
8. Sundaram Select Focus Fund
9. Tata Pure Equity Fund (superior long term track record makes this a good fund to have in a LONG TERM portfolio)
10. UTI Wealth Builder Fund - Series II

Though the Portfolio may appear conservative for a 24 year old with little or no liability, I feel the Fund will be able to give superior and consitent returns.

Do write back about if you need any more clarification and your Final Choice of funds.
Srikanth Shankar Matrubai

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