Prajna Capital |
- Your debt portfolio plays a vital tole in over all strategy
- Reliance Regular Savings Equity
- Factors that affect the Gold price
| Your debt portfolio plays a vital tole in over all strategy Posted: 09 Jan 2013 03:23 AM PST Call 0 94 8300 8300 (India) FOR most investors, a major cause of worry is their equity fund portfolio. As the stock market is often volatile, investors find themselves on their toes and worried. Since the focus remains on equity, the debt part of the mutual fund portfolio usually gets neglected. Moreover, as debt and debt-related instruments are perceived to be 'safe', not many investors feel the need to monitor their debt fund portfolio regularly. By doing so, they not only expose themselves to the risks associated with the impact of interest rate movements on the portfolio, but also compromise in terms of returns that they may earn from it. As a debt fund investor, it is important for you to know that bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Since movements in interest rates can have a significant impact on a debt portfolio, there is a need to monitor it, not only to realign it in line with the changing interest rate scenario, but to protect gains and improve the overall performance. Remember, although monitoring is crucial, it is equally important to make the right investment decisions. The key is to manage credit and duration risk efficiently. Among debt funds, a major differentiator is the maturity duration of the portfolio. Each category of debt funds has a different risk profile and commensurate return potential. Longer the maturity duration of the portfolio, greater the impact of an interest rate change. Similarly, funds that have shorter maturity durations such as ultra short-term debt funds and short-term funds experience lesser impact of the interest rate movements than medium-term debt funds. Therefore, if you want to invest for a shorter duration, say more than three months, but less than six months, your focus should be on investing in ultra short-term category of funds. Similarly, if your time horizon is six-twelve months, short-term debt funds would be apt for you. In case you have a time horizon of one year or more, the toss up could be between medium-term debt or similar funds and debt-oriented hybrid funds. As is evident, if you are a debt fund investor, you need to tread carefully. Keep an eye on the emerging rate scenario, as it has a direct impact on the kind of returns you can get from these funds. For example, in a high or rising interest rate scenario, fixed maturity plans (FMPs) will give you better returns than medium term debt funds. FMPs aim to generate predictable returns and, at the same time, protect you from interest rate volatility. While structurally FMPs are akin to fixed deposits, the tax efficiency makes these abetter option for investors in higher tax brackets. If you have invested in FMPs over the last six months or so, you can expect much better returns as compared to other options in the debt fund category. On the other hand, in a falling interest rate scenario, medium-term debt and gilt funds perform better than FMPs. Apart from investing in the right funds and actively monitoring the portfolio, it is equally important to opt for an appropriate option, that is, dividend payout, dividend reinvestment and growth. For example, investors in a higher tax bracket can benefit from tax efficiency by opting for a dividend payout or dividend reinvestment, in case investments are to be made for a time horizon of less than 12 months and a 'growth' option for investments to be made for more than 12 months. Happy Investing!! We can help. Call 0 94 8300 8300 (India) 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 Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
|
| Reliance Regular Savings Equity Posted: 09 Jan 2013 02:47 AM PST Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Reliance Regular Savings Equity is a multi cap fund, which has not had a great run in the past 3-4 years, which, when seen in the context of the way the markets have performed is not bad. So far this year, the fund has outperformed the category. However in a 1-year and 3-year trailing return comparison the fund has underperformed the category average. This fund is a good investment for a 3-5 year time frame, when it beats the category average considerably.
Overall, a not-so-disappointing fund, in which you can continue investing through SIPs and regularly review the progress made by the investment to assess the progress. Happy Investing!!
We can help. Call 0 94 8300 8300 (India)
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 Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
|
| Factors that affect the Gold price Posted: 09 Jan 2013 01:38 AM PST Call 0 94 8300 8300 (India)
1. Since gold is an dollar denominated asset, any adverse price reaction to dollar can cause sudden reversal in the price of Gold. When the US Dollar decreases in value, the price of Gold increases. Conversely when the price of the Dollar increases, the value of Gold decreases dramatically. When the value of Gold decreases, it can buy less Gold there by decrease in the demand for Gold.
2. Almost all the countries park a part of their reserve in Gold. Due to any major internal or external factors, any country say like America, Japan, China, or India started selling Gold then the price of the Gold collapse. With the sudden rush, price erosion for Gold can happen.
3. Demand-Supply ratio. Till date demand for Gold increases slowly but steadily. But the increase in supply is not commensurate with the increase in demand. From exploration to end product for Gold takes many years. If there is possibility of more reserves in the earth being discovered any time which may outstrip demand, the price of Gold may come down.
4. India being one of the largest consumer of Gold jewelery, any cultural variation among Indians can drastically affect the price of Gold. If Indians started thinking about Silver or Platinum Jewelery and its demand outstrips that of Gold, then the price can come down. If any Government enforces a bill restricting the amount of gold that a person can hold and strongly enforces law, then there will drastic come down in the price of the Gold.
5. Volatility in price of Gold. When there is drastic volatility in the price of Gold then the safe and less volatile nature of Gold decrease gradually. Then the risk averse investors may drop Gold from their portfolio.
Considering these entire factors one can safely assume the importance of Gold in their Portfolio. But ideally the one should allot less than 20% of their savings into Gold. It gives a stabilizing factor for your investment portfolio. Don't expect more than 5% return on your Gold portfolio. Any thing more than that is really a bonus. Always think rationally. When the price reach abnormal rates think about it rationally. After all Gold is a metal. -------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
|
| You are subscribed to email updates from Prajna Capital - An Investment Guide To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment