Friday, August 19, 2011

Prajna Capital

Prajna Capital

Mutual Fund Review: UTI Opportunities Fund

Posted: 19 Aug 2011 05:12 AM PDT

Type: Open Ended Equity Diversified
Fund Manager: Siddharth Dembi
Inception Date: 20-Jul-2005
 
UTI opportunities fund was launched in July last year and has completed one year of operation in Indian markets. The scheme seeks to generate capital appreciation and/or income distribution by investing the fund of the scheme in equity and equity related instruments. The main focus of the scheme is to capitalize on opportunities arising in the market by responding to the dynamically changing Indian economy by moving its investment amongst different sectors as prevailing trends change.

As of July 2006 the scheme has Rs 548.77 crores worth of assets under management, and the scheme has deployed 88.82% of its assets in equities and 11.18% in cash and equivalents. The fund manager has been quite aggressive in the past and the equity allocation has gone as high as 99.10% in the month of April06.
 
Although UTI Opportunities fund has been in operations only for a year the performance record so far has not been very encouraging. The scheme has generated negative returns in the last six months period, whereas its benchmark index BSE 100 has appreciated by 9.7% in the same period. In the one-year time frame even the scheme is ranked at 91st place.
 

The scheme has a diversified portfolio of 27 stocks, which is quite good for a scheme having a fund size of Rs 548.78 crores. Top 10 holdings accounted for 59.13% of its equity portfolio. Auto & Auto Ancilliaries sector receives the highest weightage in this month's portfolio, followed by Diversified and Entertainment sector. Top 3 sectors constitute around 44% its total equity portfolio, which shows the fund manager is not hesitant on taking calls on few sectors which he find attractive in the long term.Top 5 holdings are Reliance Industries Ltd, BHEL, ITC, TVS Motor Company and Bajaj Auto Ltd which account for 33.68% of the net assets. The portfolio is spread across stocks with varying market capitalisation and allocation to large cap stocks is around 55%, which is understandable given the investment mandate of the scheme to invest in upcoming companies.Maruti Udyog Ltd was the only stock which was added to this month's portfolio while the scheme exited from ONGC.

 

Normally investors in these kinds of funds have a longer investment horizon as the theme of investing in new and upcoming businesses generally take 3-5 years to fully reap the advantages of its investments. The scheme seems to apply buy and hold strategy to good use, but the results have not been very encouraging till now. The scheme's returns have taken a severe beating in the recent crash and are still struggling to recover from it. Investors may find other schemes from various fund houses based on the same objectives more attractive at this juncture.
 

Mutual Fund Review: Kotak 30

Posted: 19 Aug 2011 04:46 AM PDT

Name: - Kotak 30 -Growth
Type: Open-Ended equity diversified
Fund Manager: Mr. Anand Shah
Inception Date: December 29, 1998
 
Kotak 30 as the name implies seeks to generate capital appreciation from a portfolio predominantly of equity and equity related securities with investment in, generally, not more than 30 stocks. It is a basically a large cap diversified scheme with some flavour of midcap stocks.
 
The scheme figures among top performing funds in the diversified equity fund's space, has been a steady performer and boasts of the best five year returns at 38.59%. Its one year and three year returns have been higher than what peers and benchmark indices notched up over the same period. The actively managed portfolio of largecap stocks and select momentum picks appear to explain this performance. Its corpus at Rs 282 crore as on May 2006 has witnessed a growth of 58.4% over last one year and imparts it enough flexibility for management.
 
The scheme as per stated guidelines could invest 60-100% in equities and 0-40% in Debt and Money market instruments. As on May 2006 it has invested 86.77% of its assets in equities, 5.68% in debt and rest in cash and equivalent. Average equity allocation for the scheme has been at 91.2% past one year and since last two month it has significant allocation to cash in excess of 7%.
 
Its equity portfolio as on May end is spread across 27 stocks with Infosys Technologies in top spot. The fund has stick to its investment objective and has never invested in more than 30 stocks in last one year and that's why top 10 holdings account for half of equity portfolio. Besides Infosys Technologies other top holdings are M&M, SAIL, PNB and Sterlite industries. This month it added NALCO, HLL and Patel Engineering in its portfolio while exited Bajaj Auto, Reliance Energy and HDFC.
 
The fund has increased exposure in Computers, Pharma and Diversified sector while substantially reduced in banking sector in last one year. Top 5 sectors account for more than half of equity portfolio and Diversified sector alone accounts for 21% of the portfolio .The fund has cling to some stocks while actively replaced others. The scheme follows a bottom-up approach to stock selection and the investment strategy is to take balanced exposure across sectors while maintaining less than 30% exposure to mid-cap stocks. Not only frontline stocks BHEL, Siemens, L&T but stocks like EID Parry and Deccan Chronicle Holdings has gained substantially in last one year. Its stock calls and rally in large cap stocks has been the driving force behind spectacular performance.
 

Minimum investment required to enter the scheme is Rs 5000 and offers both dividend and growth options .It charges an entry load of 2.25% for investments less than Rs 5 crore and nil for investments of Rs 5 crore and above. While no exit load is levied. The scheme is benchmarked against BSE Sensex and S&P Nifty. Expense Ratio of the scheme as on April 30, 06 is 2.5% and is higher than the category average of 2.20%.

 

The fund has a large cap focus and looking at the current state of the market seems an appropriate investment option for conservative investors.
 

Don't overstretch your budget for dream home

Posted: 19 Aug 2011 04:10 AM PDT

 

Buyers run the risk of not being able to pay the EMIs on time LISTING the priorities while buying a home helps in selecting the right one


How big a house can you afford? It is very important to answer this critical question before you proceed to buy a home. Experts point out if you overstretch your budget to buy a house you want, you are at a risk of not being able to pay the EMIs on time.
This can then lead to a whole lot of other issues.

If one has clear ideas about the facilities they would like to have for the home, list them down with a clear levels of priority.


When outdoors in search of the house, this list will help you to sacrifice small things as you have the big picture in mind. Your real estate agent or broker will also show you the appropriate places.

The composition of your house will also make a difference in your wants and needs. Do you have small children? Parents? A domestic help living with you? The needs will vary in each case.


Down-payment tool: In the current scenario, the Indian residential property market is sluggish because property prices have gone through the roof in cities like Mumbai, while there has been an increasingly slower-selling build-up of residential property developers' inventories in Delhi NCR, Pune and other cities.

Another reason is the recent hike in lending rates. This has made it harder for intending home buyers to acquire property. In this scenario, purchases on the residential property market have to be looked at with more care.

When you buy a house, you need to make down payment that typically starts from a minimum 20 per cent. Naturally, any down payment, which is based on your savings and existing assets, would not allow you to over-buy. Once you answer how much cash can I afford for down payment, chances of over-buying will minimise.


Follow 20-28-36 rule: One can also follow the 20-28-36 rule for making your home loan calculations. According to this popular formula, the down payment should be 20 per cent, the monthly home loan payments (EMI) should not be over 28 per cent of the household gross annual income and the total monthly payments for all debts including the home loan payments should not exceed 36 per cent of annual income.


In our country presently, while evaluating home loan proposals, lenders have slightly relaxed rules. They offer EMIs up to 35-40 per cent of the gross monthly salary and EMI up to 40-45 per cent of the gross monthly salary for home loan plus other debts.

The lender will be happy if you take a bigger loan within their prescribed limits. So, the onus is on you to be within limits. A bigger house is always attractive. The premise that most borrowers will earn higher incomes and so outgo as a percentage of salary will never be out of sync has its pitfalls. With rising interest rates and inflation, the disposable portion of salary has become smaller,

 

Hallmarks of a good Financial Planner - Truth, Integrity

Posted: 19 Aug 2011 01:36 AM PDT



Truth and integrity are words we hear a lot, but hardly find in real life. Politicians talk a lot about it and almost have nothing to show for it. Their oath of allegiance when they assume office is hollow, as politics today is a game of private enrichment at public cost.


It is surprising that people have this conviction that integrity and truthfulness do not have a place in the present-day world. In fact, integrity does have a place in today's world and those who are practising it know it and are doing extremely well. There are many who practise the highest levels of integrity in their personal lives and in their corporate avatars.


Infosys, Wipro, Tatas, Godrej, and the TVS group are some of the well known companies/groups, which come to mind when we are on the subject of integrity. For some of them, it is their calling card. For Tatas, apart from their management acumen, they are sought after by any company looking for an India entry, due to their impeccable credentials.


Integrity can be an actual differentiator. In the finance field, which deals with people's money, it is even more important. The field has received a severe battering in the past three years and the integrity of this industry is in tatters. To this day, we read stories of deceit and wanton misleading of various participants.
Integrity is at the heart of building longstanding relationships. Integrity is difficult to maintain at all points. It is easier to bend the rules a bit, to suit one's convenience. But that would bring down the moral stature a person has and their all weather dependability. Trust is built over time. One wrong move and their integrity is compromised.


Trust is a word that is often used by many in business. It is used even more in the world of finance — to allow another person to handle your money and with it your future requires quite a leap of faith. Hence, trust and integrity have even more relevance in the financial space.


Come to think of it, this can be one's calling card. It will be an effective one at that. Each one of us operating anyway require something to distinguish us from the rest. Why not integrity? Why not actually take the moral high ground and stay there, where the clients like us to be?


Think of this as a long-term strategy. An insurance agent might lose some potential income by foregoing on the opportunity to push a product with juicy commissions — especially to a client who anyway does not know much about insurance. That is where integrity comes in. Integrity is what you do when no one is looking. What does the agent gain by doing the right thing? On an immediate basis, nothing. But the agent can always communicate to the clients all the options available to them and educate the client why, from among the various options, he is suggesting a particular product. This willingness to spend time to engage and do the right thing will certainly be appreciated and remembered. These are the agents who will go on to become the star agents of the branch, region, company, because a happy client recommending the agent to 10 others.

It works. Not just in insurance. It will work everywhere. It is even more fundamental in the financial planning profession, where I come from. Integrity is the backbone of this profession. Financial planners get to handle complete client information, unlike any other who may only get to see bits and pieces. Hence, integrity needs to be of the highest order here — not just beyond reproach. Trust is the currency here. And trust needs to be earned.


Earning trust is a relentless, dogmatic pursuit. Talking the truth all the time is immensely tough. But it needs to be done, because that is the highroad that one needs to take if success of the highest order needs to be achieved.


Quite simply, it is in our own self interest – enlightened self-interest. Doctors take the Hippocratic Oath to always act in their patients' interest. A similar oath is what we all require. Both professions have a fiduciary responsibility. Done right, finance is as much a noble profession as medicine is – for one treats the body and the other takes care of the other most important part – money.


We all need to think about it. Each of us has to attest to the highest standards of honesty, integrity and truthfulness. This is not some utopia that I'm talking about. It's what regulators are trying to create. It is what we can create ourselves and reap the benefits, too. And be counted as some of the best professionals there are. The choice is ours.

Mutual Fund Review: LIC Nomura MF Dhanasamriddhi

Posted: 19 Aug 2011 12:22 AM PDT

Objectives:
An open ended pure Growth scheme seeking to provide capital growth by investing mainly in a mix of equity instruments.

Issue Price:
Sales will be at NAV related prices
Liquidity:
The scheme has no lock-in period. Units for sale will be available on an ongoing basis on all business days.

Entry/Exit Load:
The scheme has an entry load of 1% and no exit load at present.

Options:
The Scheme is totally growth oriented .

Flexibility:
The Scheme offers the flexibility to switch among the various other schemes and options offered by LIC Mutual Fund keeping in mind the changing investment needs.

Minimum Investment:
Minimum investment Rs. 5000/-
 

 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

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Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

 

Investing for your children future needs

Posted: 18 Aug 2011 07:45 PM PDT

The arrival of a baby is probably the best thing that can happen to a family. The initial euphoria, however, wanes as the parents start pondering on issues like financing the child's education and marriage when she grows up. This is especially true for Indian middle class families struggling to cope with soaring costs. Investing for a child's future is, therefore, an issue that parents should devote a lot of time and effort towards. The following is a list of six financial instruments which parents can consider for building enough financial resources to take care of their child's future.

Savings account: This is the most used and least effective way of investing for a child's future. Savings account offers the lowest return among all financial instruments. In fact the return is so low that it cannot even offset the erosion in value caused by inflation, let alone generate a real return.

Stock market: The Indian economy is the fifth largest (in PPP terms i.e Purchasing Power Parity) in the world.  There is consensus among analysts regarding the strong positive medium and long term outlook of the Indian economy. The Sensex has grown from a base of 100 in 1979 to 18,000 in 2010, translating to an annualized return of 18% over the past 31 years. Investing in index funds is an option that is expected to generate handsome returns while mitigating the risk arising out of investing in individual stocks. Additionally, stock market investments are highly liquid and have low transaction cost. However, to succeed in this investment, extensive knowledge of financial markets is necessary. Parents not possessing that knowledge can still invest in them, via the financial instrument illustrated next.

Mutual fund: A child plan mutual fund usually has both stocks and bonds in the portfolio. When the stock market goes up, the equity (stock) portion of the fund generates returns. When the stock market goes down, there is the debt portion which generates assured (assuming the debt issuer doesn't default) returns. There is also tax advantage associated with investing in mutual funds which are taxed only at maturity.

Insurance: The market is flooded with a number of child insurance plans offered by firms like LIC, Metlife, AVIVA and HDFC, among others. Besides providing risk cover that is the core requirement of a long term financial plan, the child insurance plans also provide tax advantage. The risk cover in these policies is on the earning parent(s) and not on the child. The plans work on the beneficiary concept, where the beneficiary is the sole person to receive the benefit (usually the child). The fixed term payment and maturity benefits continue irrespective of the death of the life insured. Additionally, many insurance companies offer the advantage of customizing the policy to the requirements of the child.

ULIPs: Unit Linked Insurance Policy (ULIP) provides the dual benefit of life insurance solution as well as investment of the policyholder's fund in the equity market, thus generating good returns at reduced risk. When the stock market moves northward, the value of the policyholder's investment fund increases, while during a downturn, he has the insurance in hand. Policyholders can choose from different types of funds like equity funds, fixed interest funds, cash funds and balanced funds, depending on their financial goals. They have the option to switch funds in a policy for a limited number of times. There are, however, high upfront charges including fund management fees, cost of insurance coverage, commission expenses and premium allocation charges. This is where mutual funds score over ULIPs. Currently ULIP products are undergoing a revamp of sorts post regulations introduced by IRDA and is expected to be better and more transparent.

Commodities: Investing in commodities is done by some families, especially for a girl child. It is a good idea because of two reasons. One, returns generated by commodities in the current scenario is higher than the inflation rate. Two, commodity based funds are on the anvil and is set to add another dimension to investors' portfolios. However, care should be taken to ensure that there are no conversion costs. For example, investors should buy gold coins and biscuits and not gold ornaments.

How much to invest for a child? Parents can ascertain the amount they are saving every month and based on that they can determine the quantum of monthly investment to put in. Alternatively, parents can estimate the total amount of money required for their child when she grows up, and then back calculate the monthly installment. A combination of the two approaches is also used. Once the amount of monthly investment is determined, parents can decide on the type of financial instrument(s) they want to use.

 
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