Thursday, January 10, 2013

The "TRAP" of going Direct

SEBI has allowed Mutual Funds to have a Separate NAV for investors investing Directly. This Separate NAV will have a lower expense ratio and is expected to benefit for "very long term " investors.

As usual, the "experts" have started advocating of going direct to Mutual Funds bypassing the Advisors.
 Was in ICICI AMC office the other day regarding a query.
A walk in customer comes in and asks for "Direct Plan Details".
The clerk at the Reception said "yes sir, Direct is good, NAV is very cheap and you will make huge profit".
Customer : "I want to invest in International Fund, which is the Best"?
The Clerk "sir, ICICI is the BEST in the industry. You can blindly go for the same. Come sir, I will help you fill the application".
I could only laugh at the ignorance of both the clerk and the customer.
ICICI Indo Asia Fund which the clerk was referring not even in the list of Top International funds according to Valueresearch list and the Fund has been, in fact, listed under EQUITY - LARGE CAP and the clerk had the audacity to recommend this Fund as a International Fund.
Of course, the Clerk obviously will not recommend his rivals fund such as L&T Global Real Assets fund or the DSP BLACKROCK Natural Resources and New Energy Fund.
Expect more of such Non-sense recommendations when you go DIRECT!!
 you should avail of the Direct Plan only if you have the expertise to choose the best funds for your portfolio. The difference between the best and worst performing funds in India can be quite large.
Therefore, it would be quite unwise to avoid an advisor just to cut corners on expenses. This could you cost you quite a bit in terms of sacrifice on long-term returns. 
 After a deluge of statements, scattered investments, and ad-hoc decisions later, investors will realize that going cheap was not worth it.

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Wednesday, January 2, 2013

Timing the Market

Recently I came across this honest confession from a Expert in Mutual Funds.
Yes, I repeat, this person is a "Expert" and this was what he had to confess........
 """I know it is impossible to time the market.Last year when the sensex was around 20500 I made lumpsum investments in HDFC Equity Fund,HDFC Top 200 Fund,Birla Sunlife Frontline Equity Fund and UTI Opportunities Fund.My returns from these funds are still negative.On the other hand I am getting decent returns from my investments in Kotak Mutual Fund and ICICI Prrudential Fund where I am investing through monthly SIPs for the last three years.The lesson which I have learnt is that long term monthly SIPs even in average funds are much better than lumpsum investments even in the best performing funds."""
 SIP is the best route for investment in mutual funds to meet your long term goals.
The greatest advantage is that once you start a SIP you can remain invested for a long time without bothering about the short term ups and downs of the market.
The greatest disadvantage of lump sum investment is that you become a hostage of market timing.While it will be foolish to invest lump sum when the sensex is at around 22000,it makes sense to invest at a level of around 17000.You can always invest some lump sum whenever there is a sharp correction in the market.
All mutual fund investments are subject to market risks.
In the short term you may see a lot of volatility and returns from your investments may even be negative. But if you remain invested for a longer period of more than five years in equity mutual funds, there is a potential of creating wealth.
SIP is the best mode of investment as you don’t have to bother about market timing.In lump sum investments you become a hostage of market timing.Yes, you can do some lump sum investment when you see the market correcting substantially.You can combine both modes of investment.
You can select any tenure for your SIP and you can increase or decrease it as per your requirement.You can also redeem whenever you need money.You have to only see exit load and tax implications.

My take is :

Srikanth Shankar Matrubai

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