ICICIdirect and NSE organize gold ETF awareness camps across India

ICICIdirect offers special Dhanteras discount of 50% on brokerage on gold ETFs investments

ICICIdirect.com in collaboration with National Stock Exchange announced a nation wide awareness camp for investors, which will be aimed at informing customers about the benefits of investing in gold ETF. The camp will be organized across 66 cities in India in 240 ICICIdirect centres. The programme is scheduled to be held on Saturday, October 22, 2011.

In the last few years, gold exchange-traded funds (ETFs) have gained popularity in India. Investors are becoming aware of the benefits of investing in gold paper as opposed to holding it as jewellery.

Each gold ETF unit is almost equal to a gram of gold. These units are traded on the exchange like a stock of a company. Gold ETFs can be purchased online and they are one of the cheapest form of purchasing gold as there is no premium or making charge like in purchase of jewellery. There are no quality issues as these are traded on exchange and a tax efficient way of investment as they don't attract STT or wealth tax. Further, there are no security issues of storage while purchasing online unlike in physical gold.

ICICIdirect.com facilitates seamless online investments in gold ETFs and also provides the option of investing regularly and systematically through SIP. Currently, 11 asset management companies offer 11 gold ETFs and three gold ‘fund of funds’ (FoFs) in India.

“Dhanteras is considered as an auspicious day for gold purchase. In the past few years we have observed an interesting trend of informed investors purchasing gold ETFs instead of physical gold on this day. With this view, ICICIdirect along with NSE has organized gold ETF awareness camps for its 2.2 million customers across 66 cities and inform them about the several benefits that gold ETFs offer,” said Mr. Vineet Arora, executive vice president and head – products and distribution, ICICI Securities Ltd. In addition to this, ICICIdirect.com has also launched a special Dhanteras discount offer of 50% on brokerage on any gold ETFs Investments and waiver on brokerage on gold ETF SIPs that would be started on Monday, October 24, 2011.

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Fund managers faithfully follow the benchmark stocks, making it hard to separate luck from skill

Even the best funds tie up the bulk of their money to the heavyweight stocks of the benchmark, making it hard for investors to separate market performance from stock-picking skill

The popular perception of fund management is that investment experts pick stocks that either reasonably valued or have strong earnings growth ahead of them or both. Some also believe that fund managers are experts at buying and selling. While all this is sometimes true, the fact is that most fund managers are happy to pick the heavyweights of the underlying benchmark indices and sit tight. This often leads to two results. One, the portfolios look similar and two, they perform in line with the overall market. In technical terms, they deliver a lot of beta (market returns) not much alpha (returns from specific stock picking).

Take the case of some of the largest and best performing funds. The recent portfolio of Birla Sun Life Frontline had Reliance Industries (5.2%); ITC (4.9%); ICICI Bank (4.4%); Bharti Airtel (4.2%); Infosys (4.2%); Tata Consultancy Services (3%); Larsen & Toubro (2.9%) and HDFC (2.5%) as the top holdings. Now, you don’t need anyone to tell you that these are blue-chip stocks to buy and would do well for the long term. But there is another reason these stocks find a place in the portfolio of this scheme. They are heavyweights in the BSE 200, which also happens to be the benchmark of Birla Sun Life Frontline. Now look at another portfolio: Reliance Industries (6.5%); ITC (5.2%); ICICI Bank (4.6%); HDFC Bank (4.37%); Infosys (4.17%); Tata Consultancy Services (3.2%) and HDFC (3%) as the top holdings. The stocks are almost identical to the Birla scheme. How and why? This is the recent portfolio of Fidelity Equity Fund. These stocks find a place in the Fidelity scheme for the same reason. Fidelity’s benchmark is also BSE 200, so the portfolio is remarkably similar. The difference in performance between one scheme and another lies in the fact that weightages and cash levels are different in different schemes.

We are neither for, nor against, this approach of tying up the fortunes of the fund to the benchmark stocks and sitting pretty—but this creates difficulties for investors to assess performance.

If superior performance is coming from changing the weightages (position-sizing) and varying the cash levels (market-timing), investors can never separate out these two factors and while assessing performance. Under the situation, the only approach for investors is to have faith—that funds that have a consistent record of beating the benchmarks must be doing something right.

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COMMENTS

Nagesh Kini FCA

5 years ago

A message that is very aptly conveyed.
More of luck and less of skill!

sudindra

5 years ago

Do we have option of Short position in Mutual fund for the period upto 1 year..??????

We dont need fund manager to invest in those company stocks. I believe fund manager has to concentrate on all types of stocks in portfolio.

Sundaram

5 years ago

One more thought-provoking write-up from Mr.Basu.Thanks.

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