Category: Mutual Fund

What is Small Cap 250 Index and should we invest in this Fund?

The Small Cap 250 Index is From NIFTY 251 to NIFTY 500 stock. By nature these stocks are very small in market cap and less liquid stocks.

Index Re-Balancing: Index is re-balanced on semi-annual basis. The cut-off date is January 31 and July 31 of each year, i.e. For semi-annual review of indices, average data for six months ending the cut-off date is considered. Four weeks prior notice is given to market from the date of change.

Should you invest in this?

No if you just started MF investment journey

No if you have not completed minimum 5 years in any mid cap funds.

Yes If you have time at your side which should not be less than 12 years to be on safer side .

What funds should you invest?

Personally, my risk appetite does not allow me to invest in small cap and hence I do not invest.

If you want to invest, please make sure you hire an advisor or have an MFD to support you at mental level during crash.

You can invest in small cap 250-index fund

OR

Any Active small cap fund

That’s all from me for today, Thank you Abinash J

What is NIFTY150 and mid cap fund? and Should you invest in this?

NIFTY 150 starts from NIFTY101 stock and ends at NIFTY250 MCAP stock.

By SEBI definition this is mid cap funds .

These are more volatile than NIFTY50,NIFTY NEXT50 or NIFTY100.

Should you invest in this ?

Yes If you have already invested in NIFTY50 / NIFTY NEXT50 /NIFTY100/Large cap funds for minimum 5 year consecutively.

Yes , If you are starting and doing it by Advisor or by an MFD .

NO, If you are starting and doing it by yourself because in downfall , these category fall more than large-cap and you may get panicked . Also you may get blood pressure after looking volatility in NIFTY 150 mid cap index. As a result you may either STOP or REDEEM your investment .

In these case you will not be able to catch benefit of bigger return in this category.

Which NIFTY150 mid cap fund is good ?

Kindly check with your advisor on this .

I feel one NIFTY mid cap index fund

OR

One actively managed  mid cap fund as in majority case as of now Active funds are giving better return than index fund.

OR

All of the above (advise as per human psychology)

What is NIFTY50 , NIFTY NEXT50, NIFTY 100 and Large Cap Mutual Funds and Where to invest?

All NIFTY Funds has been categorises on the basis of Free Float Market Capitalization method.

Ex- RIL with highest MCAP is NIFTY1 company.

Like wise in NIFTY50 consist of NIFTY1 to NIFTY50 , in which India’s biggest companies are available.

Same way NIFTY NEXT50 consist of NIFTY51 to NIFTY100 companies.

NIFTY100 having stocks of NIFT50 and NIFTY100.

But NIFTY100 is not equals to NIFTY50 + NIFTY NEXT50

Ex- In NIFTY 50 RIL allocation is 12% where as in NIFTY100 RIL allocation is around 8%

Hence NIFTY100 return will differ from NIFTY50 + NIFTY NEXT50

Large cap fund by definition can have any stock from NIFTY100 with whatever allocation Fund Manager wants capped to maximum 10% for single stock.

Which one we should invest ?

You need to check with your Advisor or MFD

Else

I prefer one NIFTY50 FUND and one NIFTY Next50 fund in portfolio.

Or

One NIFTY100 fund also suitable.

Or

Mix of all of the above

Or

One Large cap fund after carefully chosen because majority funds are unable to beat bench mark .

How Franklin MF Debt scheme closure will affect your returns ?

Here I will try to give a perspective opinion of mine on this topic .
As you all know we have been going through an unprecedented situation of the century due to COVID19.Till couple of months back nobody have ever thought the world will stand still for so many days where the entire world will go back to decades economic wise and has to restart.
Now coming to Franklin , funds which got closed
1. Franklin Ultra Short Bond Fund – 0.62 years
2. Franklin Low Duration – 1.46 years
3. Franklin Income Opportunities – 2.55 years
4. Franklin Short Term Income – 2.75 years
5. Franklin Credit Risk Fund – 3.08 years
6. Franklin Dynamic Accrual Fund – 4.28 years
What is the implication of this ?
1. Your money is locked now until AMC will make the payments.
2. You can not Purchase,redeem , SWP and STP any longer
What is DEBT scheme ?
Debt scheme are the schemes where MF/NPS/PMS/ take investor money and buy corporate bond , NCD and papers with some maturity date . Here the word Maturity plays the game .
Different Categories of Debt Mutual Funds (India) 2020    (As per SEBI)
1. Overnight funds – holding portfolio with maturity of up to 1 day
2. Liquid funds – holding portfolio with maturity of up to 91 day
3. Ultra-Short Duration – holding portfolio with maturity 3-6 months
4. Low duration – holding portfolio with maturity 6-12 months
5. Money market – holding portfolio of money market instruments with a maturity of up to 1 year
6. Short duration – holding portfolio with maturity 1-3 years
7. Medium duration – holding portfolio with maturity 3-4 years
8. Medium to long-duration – holding portfolio with maturity 4-7 years
9. Long duration – holding portfolio with maturity more than 7 years
10. Dynamic bond – can invest across durations
11. Corporate bond – atleast 80% in highest rated corporate bonds
12. Credit risk fund – atleast 65% in corporate bonds below highest-rated bonds
13. Banking and PSU – atleast 80% in instruments issued by banks, PSU undertakings, municipal corporations, etc.
14. Gilt – atleast 80% in instruments issued by government across periods
15. Gilt with 10-year constant duration – atleast 80% in instruments issued by government across periods such that average maturity is 10 years
16. Floater – atleast 65% in floating rate instruments
So shorter the maturity period quicker is the paper to get matured and get the money back and vice – verse. Having said that there is no locking period for this . You can anytime enter and any time exit as they are open ended funds
Franklin is one of the best MF house which has a strong and successful history of debt fund returns .Till 6 months back if I would show the returns of Franklin Debt funds with other you would opt for Franklin for sure .
Generally Franklin was buying bad credit quality papers with higher returns and that is not wrong also. Because the same all do.
In the current situation when investors are asking for more sell/redemption Franklin each time going to corporate or selling the papers in the open market to someone else.
But in current situation due to heavy selling of MF, Franklin always go to corporate to sell the papers .
Here the problem is Franklin was getting money for all liquid good quality papers although at a discounted price which is loss but not getting buyer for bad credit quality papers .
Franklin has to sell good papers in order to return money to investors and unsold bad papers still in portfolio . So Franklin stopped these funds . If he continued redemption then once all good papers completed from MF, last leg investors would be in trouble sitting only on bad papers which could not be sold before maturity or for bad credit quality.
There is another option Franklin could do by borrowing money from RBI and give it to investors and later when it will get maturity , it can return to RBI. But even in such case maximum 20 percentage it can borrow . Still it can not fulfil selling pressure for the current situation.
Here I would say Franklin took a bold step in order to keep investors interest on top priority and keeping its own reputation second .
Franklin also announced  it wont charge any management charge from 23rd of April from these funds .
So your question
Q.Is all my money Lost ?
Ans – NO,Its just segregated in a separate portfolio till maturity of the papers
Q.Can I get get all my investment immediately ?
Ans – NO
Q. So When will I get my money back at current price ?
Ans – Now Franklin will wait until all those paper get matured . Once it will get mature , it will consolidate and start paying to investors slowly as per maturity duration mentioned at the starting of the blog.
Q.What will happen to other equity and debt funds of the Franklin AMC ?
Ans: That will continue as per process defined . So no worries .
Lesson Learned from this crisis :
1. Crisis will come suddenly and without any symptom and in the mid of a bull market . Same happened in 2008 and now. So we should make proper asset allocation to our portfolio .
2. Debt funds definitely less riskier than equity funds but not safe like bank FD .Before investing in such Debt funds one should look the paper quality and quantity that it has . For emergency you can consider liquid funds(Govt T bills) but not these funds .
3. If you are in Debt schemes better stick to large fund houses .
4. Don’t believe in star rating of the funds because all these Franklin funds are always in the top quartile in their respective category . Better seek a adviser help before entering into Mutual Funds .
5. Hope SEBI will do its homework and come with some strict regulation again.
Disclaimer :
I have never advised or asked any of my investors to invest in such funds .Even I personally stay away from these funds. Hence my writing might be biased .

Why our Mutual Fund Portfolio needs restructure now ?



Why Mutual Fund portfolio now require restructure …. It is just because of below 3 reasons

  • 1.    Introduction of LTCG
  • 2.    Categorization of Mutual Fund by SEBI
  • 3.    Introduction of TRI (Total Return Index)


Introduction of LTCG :

That means frequent buy and sell of funds will put you in the trap of taxation and on a long run basis your return will reduce. Because each time you redeem you will pay tax and while reinvesting you need to pay upfront expense (applicable in both regular and in direct).
Also we need to stop running behind those funds which are giving best return in recent times by churning your portfolio again and again may become fatal.
So now your responsibility becomes more to choose right fund and stick to it for a lengthy duration.

Categorization of Mutual Fund by SEBI :

After new guideline from SEBI , a large cap should only consist of large cap (no mid and small cap)
Similarly small cap should contain small cap fund (no large and mid cap)
Same with mid cap and multi-cap and hybrid fund.
Now fund manager has been restricted to choose a limited universe of stocks unlike before.
So historical fund return of the funds as of now may not be repeated going forward …
Suppose you bought a fund that earlier was a multi-cap fund. But after the re-categorization, it has become a mid-cap fund. So going forward, about 60% of your money would be invested in mid-caps

Introduction of TRI (Total Return Index):

TRI will consider both price movement and dividend payout going forward which will definitely throw a challenge to fund managers because now due to calculation of dividend the TRI return will be1-2 percent more . This means that the fund will have to work harder to beat the extra 150 basis points per annum. 

So categorization and TRI will make an heavy impact on investor considering for longer investment.
We can now start expecting that the investment industry will start embracing tougher benchmarks to evaluate their product’s performance. Over time, from two asset managers, this number will start spreading to many more asset managers, if not all. With TRI in mind, smarter products with lower costs can take shape in the form of exchange traded funds (ETFs). Many of these funds will find meaningful allocations in our financial journey, especially those whose milestones are many years farther .

This also means that there is a case for investing in index funds for a subset of investors now. Do you realize why this might make sense for you too?
It’s a thought provoking process, Isn’t it!!

I have restructured my mutual fund portfolio, Have you done this exercise, have you????

If you still don’t understand what’s app me or drop me for note at smartfinanceplanning@gmail.com
  

Why our Mutual Fund Portfolio needs restructure now ?



Why Mutual Fund portfolio now require restructure …. It is just because of below 3 reasons

  • 1.    Introduction of LTCG
  • 2.    Categorization of Mutual Fund by SEBI
  • 3.    Introduction of TRI (Total Return Index)


Introduction of LTCG :

That means frequent buy and sell of funds will put you in the trap of taxation and on a long run basis your return will reduce. Because each time you redeem you will pay tax and while reinvesting you need to pay upfront expense (applicable in both regular and in direct).
Also we need to stop running behind those funds which are giving best return in recent times by churning your portfolio again and again may become fatal.
So now your responsibility becomes more to choose right fund and stick to it for a lengthy duration.

Categorization of Mutual Fund by SEBI :

After new guideline from SEBI , a large cap should only consist of large cap (no mid and small cap)
Similarly small cap should contain small cap fund (no large and mid cap)
Same with mid cap and multi-cap and hybrid fund.
Now fund manager has been restricted to choose a limited universe of stocks unlike before.
So historical fund return of the funds as of now may not be repeated going forward …
Suppose you bought a fund that earlier was a multi-cap fund. But after the re-categorization, it has become a mid-cap fund. So going forward, about 60% of your money would be invested in mid-caps

Introduction of TRI (Total Return Index):

TRI will consider both price movement and dividend payout going forward which will definitely throw a challenge to fund managers because now due to calculation of dividend the TRI return will be1-2 percent more . This means that the fund will have to work harder to beat the extra 150 basis points per annum. 

So categorization and TRI will make an heavy impact on investor considering for longer investment.
We can now start expecting that the investment industry will start embracing tougher benchmarks to evaluate their product’s performance. Over time, from two asset managers, this number will start spreading to many more asset managers, if not all. With TRI in mind, smarter products with lower costs can take shape in the form of exchange traded funds (ETFs). Many of these funds will find meaningful allocations in our financial journey, especially those whose milestones are many years farther .

This also means that there is a case for investing in index funds for a subset of investors now. Do you realize why this might make sense for you too?
It’s a thought provoking process, Isn’t it!!

I have restructured my mutual fund portfolio, Have you done this exercise, have you????

If you still don’t understand what’s app me or drop me for note at smartfinanceplanning@gmail.com
  

What does CRISIL , ICRA and CARE ratings mean for bonds and treasury ?

Corporate fixed deposits and bonds are mandatorily required to get rated by a credit rating agency before going for a public issue. Credit rating signifies how risky or safe it is for you to invest in that financial instrument. CRISIL, CARE and ICRA are examples of some well known credit rating agencies. Following are some symbols that CRISIL gives to corporate bonds:-




What does CRISIL , ICRA and CARE ratings mean for bonds and treasury ?

Corporate fixed deposits and bonds are mandatorily required to get rated by a credit rating agency before going for a public issue. Credit rating signifies how risky or safe it is for you to invest in that financial instrument. CRISIL, CARE and ICRA are examples of some well known credit rating agencies. Following are some symbols that CRISIL gives to corporate bonds:-




Best Balanced Fund to Invest for 2014-15



Before investing in balanced fund we need to know what balanced fund is.
Balanced fund invests in both debt and equity (stocks).


What is debt?
In lay man words debt are fixed income instruments like bank FD, Government security bond etc.


Who should invest in Balanced Fund?
See there is no exact answer for this. However if you are risk averse and have fear for equity fund but still want to take a flavor of equity return in long run (more than 5 year) then probably this is a fund for you.
I would say this is the best way to outsource your asset allocation….By investing in balanced fund you are asking mutual fund to do asset allocation between equity and debt ..


Who decides how much of the fund should be in debt and how much on equity?
The respective fund manager decides this.
Example:
HDFC Balanced Fund invests 71 % in equity and 26 % in debt.

How Taxation works on this?

As per regulation it was defined that the fund which invest 65 % or more in equity is a equity fund.
  • If your balanced fund is investing 65% in equity then taxation will be as per equity rule. The short-term capital gains fall under the tax rate at 15%, while the long-term capital gains attract no tax.
  • If your balanced fund is investing less than 65% then taxation will be as per debt fund rule.For detail click here

Also consider entry and exit load as mentioned on form.

Let me directly jump to individual funds for comparisons:

Selected below funds for their consistency return over last 15-20 years. I considered the Regular, Growth mode for comparison.

  1. HDFC Balanced Fund
  2. HDFC Prudence Fund
  3. ICICI Prudential Balanced Fund
  4. Tata Balanced Fund

Comparison of Funds YoY basis



Return since Inspection and AUM

Almost all the funds are good .However if you see above analysis one thing is evident that HDFC Prudence Fund looks attractive for below reasons:

  1. It is giving at par return on YoY basis while comparing to best fund in that category.
  2. This fund has highest AUM.
  3. Oldest among all. It has 20 years of track record.
  4. Fund has seen all the political instability and 3 major market crashes of India and 1 global recession .
  5. Fund has highest return since inspection.

Disclaimer :
I am planning invested in below fund . Hence my analysis may be biased.Please do your homework before investing.This is my personal view from educational point of view and not a investment recommendation.

Best Balanced Fund to Invest for 2014-15



Before investing in balanced fund we need to know what balanced fund is.
Balanced fund invests in both debt and equity (stocks).


What is debt?
In lay man words debt are fixed income instruments like bank FD, Government security bond etc.


Who should invest in Balanced Fund?
See there is no exact answer for this. However if you are risk averse and have fear for equity fund but still want to take a flavor of equity return in long run (more than 5 year) then probably this is a fund for you.
I would say this is the best way to outsource your asset allocation….By investing in balanced fund you are asking mutual fund to do asset allocation between equity and debt ..


Who decides how much of the fund should be in debt and how much on equity?
The respective fund manager decides this.
Example:
HDFC Balanced Fund invests 71 % in equity and 26 % in debt.

How Taxation works on this?

As per regulation it was defined that the fund which invest 65 % or more in equity is a equity fund.
  • If your balanced fund is investing 65% in equity then taxation will be as per equity rule. The short-term capital gains fall under the tax rate at 15%, while the long-term capital gains attract no tax.
  • If your balanced fund is investing less than 65% then taxation will be as per debt fund rule.For detail click here

Also consider entry and exit load as mentioned on form.

Let me directly jump to individual funds for comparisons:

Selected below funds for their consistency return over last 15-20 years. I considered the Regular, Growth mode for comparison.

  1. HDFC Balanced Fund
  2. HDFC Prudence Fund
  3. ICICI Prudential Balanced Fund
  4. Tata Balanced Fund

Comparison of Funds YoY basis



Return since Inspection and AUM

Almost all the funds are good .However if you see above analysis one thing is evident that HDFC Prudence Fund looks attractive for below reasons:

  1. It is giving at par return on YoY basis while comparing to best fund in that category.
  2. This fund has highest AUM.
  3. Oldest among all. It has 20 years of track record.
  4. Fund has seen all the political instability and 3 major market crashes of India and 1 global recession .
  5. Fund has highest return since inspection.

Disclaimer :
I am planning invested in below fund . Hence my analysis may be biased.Please do your homework before investing.This is my personal view from educational point of view and not a investment recommendation.