The best# three and the worst three schemes over the past three years, in different categories. We have only considered schemes having a corpus above Rs100 crore. The schemes are ranked by their quarterly rolling returns over the past three years
Our online survey on mutual fund investing shows that over 90% of Moneylife readers invest through mutual fund schemes and as many as 85% invest in equity diversified schemes. But there are very few takers for index schemes, the survey reveals
A survey conducted among Moneylife readers on mutual fund (MF) investing showed that over 90% of the 941 respondents use MF for investment. Most of the respondents seem to prefer diversified equity schemes (85%) while about half invest in equity-linked saving schemes. This shows that Moneylife respondents, who were equally distributed over all age groups from 20 years to 60 years, turn out to be investment savvy. As we mentioned in our Cover Story (Best Fund Houses for Equity Schemes), very few invest in index schemes, with just about 10% of the respondents having invested in such schemes. Similarly, very few have invested in multi-asset and hybrid schemes. Nearly 30% of the respondents invest in bond schemes and liquid schemes, while nearly one-third of the survey participants invest in gold exchange traded funds (ETFs).
Even though it is said that past performance is not an indicator of future results, it is the best way to judge the fund management of a scheme. Nearly 80% of the participants rate past performances as the most decisive factor for investing in a scheme. In the past, we have shown that schemes of the same fund house follow a similar investment strategy and thus display a similar performance. This survey showed that brand name of a fund house is fairly important to investors as well. Though, certain fund houses like HSBC MF and LIC MF are infamous for their poor performance. Expense ratio is an important factor to look at as well and a high expense could eat up the returns. Nearly 30% of the respondents felt that expense ratio is the most important factor to check before investment in a scheme. A significant majority feel that star ratings, research reports and studies by media houses are fairly important as well.
A large share (69%) of our respondents invest in equity schemes through a systematic investment plan, or simply SIP, which works on a rupee cost average plan. Here, the investors buy more stocks, when the prices are low and buy fewer stocks, when the prices are high. This reduces risk of large amount investing at a wrong time, at high prices. Nearly 70% of the respondents have invested in five or more mutual fund schemes, with over 15% investing in 10 schemes or more. Online investing has not caught on with investors. Majority prefer an electronic transfer through the bank or a cheque payment.
When it comes to selecting a scheme, majority of the participants rely on their own research before selecting a scheme. Nearly 40% of the participants take their advice from financial advisor or financial planners. Little over one-fourth of the participants go by media reports, while a marginally lower percentage of the respondents listen to the advice of the distributor.
Whom do investors consult while investing on mutual funds? What are key factors that influence their decision to invest in the mutual funds? We found that mutual fund distributors play a big role in creating awareness about mutual fund schemes and influencing individuals to invest in mutual funds. Probably, this is one of the main reasons fund houses pay huge upfront commissions. Nearly half the respondents were made aware of a scheme that they have invested in through a distributor. Media also plays an important role. Nearly 40% of the respondents gained knowledge about a scheme through television, print media and internet sites. Fund advertisements also have a significant influence in creating awareness among investors.
At present there are eight banking sector schemes. But more important than choosing the right scheme, an investor needs to be cautious about when to invest in a sector fund.
Birla Sun Life Mutual Fund plans to launch an open ended banking & financial services sector scheme. The scheme would invest over 70% of its portfolio predominantly in equity and equity related securities of companies engaged in banking and financial services. The balance of the assets would be invested in cash, money market and debt instruments. If you do not get your timing right, you may face a significant loss of capital or the opportunity of gaining substantial returns.
For example, if one had invested in a banking sector scheme at the beginning of the year, the investment would have gone down by over 20% by the end of September 2013. Below is the chart of the one-year and three-year and five-year rolling returns with quarterly frequency of the CNX Finance index, which is also the benchmark of the scheme.
The returns of banking schemes have also varied considerably. This makes the choice of choosing the right scheme crucial. Reliance Banking is one of the oldest scheme and has accumulated a corpus of Rs1,300 crore, surpassing all the other schemes in terms of assets under management. UTI Banking Sector which was launched in March 2004 has gathered a corpus of just Rs274 crore. From the list, ICICI Prudential Banking and Financial Services is the only scheme that has performed better that the rest in the periods mentioned. However, from the chart it can be seen that the volatility risk is still present.
Birla Sun Life Mutual Fund is one of the better managed fund house. There are 19 schemes of the mutual fund. Some of the equity schemes of the fund company have performed significantly well in the past. Below is the performance of the schemes.
Mahesh Patil would be the designated Fund Manager of the scheme. He has over 22 years experience in fund management, equity research and corporate finance. Prior to joining the fund house, he has worked with Reliance Infocom Ltd. in Business Strategy, and as a Sr. Research Analyst with Motilal Oswal Securities and Parag Parikh Financial Advisory Services. He currently manages four other schemes of Birla Sun Life Mutual Fund—BSL Frontline Equity, BSL Infrastructure, BSL Top 100 and BSL Long Term Advantage
Additional Scheme Details
Fresh Purchase (Incl. Switch-in): Minimum of Rs5,000/- and in multiples of Re1/- thereafter
Additional Purchase (Incl. Switch-in): Minimum of Rs1,000/- and in multiples of Re1/- thereafter
Repurchase for all Plans/Options: In multiples of Re1/- or 0.001 units
Benchmark Index CNX Finance
For redemption / switch-out of units within 365 days from the date of allotment: 1.00% of applicable NAV.
For redemption / switch-out of units after 365 days from the date of allotment: Nil.
Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a)—2.50%
Additional expenses under regulation 52 (6A) (c)* (more specifically elaborated below)—0.20%
Additional expenses for gross new inflows from specified cities* (more specifically elaborated below)—0.30%