A report on the 69th free seminar conducted by Moneylife Foundation in the past 14 months
Moneylife Foundation trustee, Debashis Basu today cautioned investors that they should study mutual funds properly before deciding to invest in any of them. Mr Basu said there were various pros and cons for these schemes and he dwelt on these aspects during an hour-long presentation at a workshop on "How to choose the right mutual fund scheme" at the Moneylife Knowledge Centre on Tuesday.
Mr Basu began by giving the participants an overview on mutual funds, explaining the different types of schemes available, like equity funds, ELSS (equity linked saving schemes), bond funds, liquid funds and SIP (systematic investment plan). He explained about the benefits and the risks associated with each of these plans and investment strategies.
ELSS is an investment option that is usually picked by investors for tax benefits in the last quarter of the financial year. In fact investors should invest in ELSS for the entire year to get its investment benefits too, Mr Basu pointed out.
While there are hundreds of bond funds, "bond funds are not for average savers", he said. They often give lower returns than bank fixed deposits (FDs) and have costs and volatility attached to them. Bonds usually come with the notion that they are risk free. But in fact they are not. Bonds come with an interest rate risk, whereby if the interest rate rises, the bond prices fall. No one can judge the rise and fall of interest rates, hence investing in bonds could be considered as speculative. Only those who have a thorough understanding of bonds should invest in these funds, else bank FDs would be better as there is no cost attached to it.
Hybrid funds, which invest certain portion of the portfolio in equity, debt and gold ETFs (exchange traded funds) are to be avoided too, as the performance of the fund is left to the mercy of the asset class in question and the fund manager's market-timing ability. These funds used to invest mostly in equity and debt and now they have added gold to the list. Mr Basu compared these funds to a ready cup of tea. But investors with some financial knowledge should do their own allocation and not opt for these funds.
SIPs (systematic investment plans) though a good option, are flawed if they are not adjusted for the growth option. Investors usually don't consider inflation and invest the same amount over the years. In fact, the value of money falls over the years, therefore, investors should incrementally increase their investment amount.
Mr Basu introduced the idea of value averaging, a better option compared to SIP. It is a strategy through which investors should buy more when the NAV is less and vice-versa, thus increasing returns.
Equity schemes help create long-term wealth. But care should be taken while choosing the right scheme, as less than half of the schemes outperform the benchmark and the difference between the best-performing fund and the worst is huge, Mr Basu pointed out.
On how to choose the best equity scheme, ideally returns over a five-year rolling period should be considered to analyse the performance of a fund. Moneylife regularly puts out such analysis. There are usually just four-five fund houses that register consistently good performance. A portfolio which is diversified across all sectors should be chosen; therefore sector funds should be avoided. Investors should avoid NFOs (new fund offerings) and funds with fancy names.
Investors, who don't have any experience about the markets and don't want to make any effort either, can still make money from the market through index funds.
This programme, hosted by Moneylife Foundation, is the latest in a series of programmes on real estate, credit cards, wills & nominations and a range of related subjects. This is the 69th such seminar conducted by Moneylife Foundation since March 2010. The programmes have been conducted at the Moneylife Knowledge Centre in Dadar, in central Mumbai, and in various cities across the country are free. Moneylife Foundation has more than 5,700 members. Membership is free. To register as a member click here.
The key issues on which differences remained even after the ninth and last meeting of the 10-member panel included bringing the prime minister, higher judiciary and acts of MPs inside Parliament within the purview of the Lokpal, the mode of selection and removal of its members
New Delhi: The civil society and the government today failed to arrive at a common draft on the Lokpal Bill over which there were major differences as the official version excluded the Prime Minister from its purview, reports PTI.
Maintaining that they "agreed to disagree", HRD minister Kapil Sibal told reporters after an hour-long meeting that differences could not be resolved on around eight key issues.
A draft bill, which could be a combination of views of both the sides or separate, will be taken up by the Union Cabinet before introduction in Parliament during the Monsoon session.
The key issues on which differences remained even after the ninth and last meeting of the 10-member panel included bringing the prime minister, higher judiciary and acts of MPs inside Parliament within the purview of the Lokpal, the mode of selection and removal of its members.
The government draft which was unveiled at the meeting excludes the prime minister, said activist Arvind Kejriwal.
Expressing 'deep disappointment' over the government draft, the Anna Hazare team said the model proposed by it was just a 'symbolic attempt' to install an authority in the name of Lokpal rather than a 'comprehensive, independent, empowered' institution to fight corruption.
"They gave their draft, we gave our draft and there was a short discussion...on important issues there was no agreement.
These are six issues (on which views have been sought from political parties) and one or two more issues," Mr Sibal told reporters after an hour-long meeting.
"We agreed to disagree," he said adding, the differences related to changing the existing system of governance.
"There are two-three days. If they (Hazare team) wish to give comments on our drafts, they can do so...we hope the differences are resolved," Mr Sibal said.
Both the drafts will be circulated among political parties in a meeting next month before being taken up by the Cabinet, he said.
The HRD minister, who was one of the five ministers in the joint committee, insisted that the government would bring a 'strong' anti-corruption bill as 'we had promised'.
Mr Hazare aides Prshant Bhushan and Mr Kejriwal said the government draft made it clear that the ruling party will have control over the Lokpal as five of the seven political members of the selection committee will be from the party in power.
"I must say I am deeply disappointed by the model of Lokpal that the government has proposed," Mr Bhushan said.
Criticising the government, Mr Kejriwal said that the earlier draft had at least proposed to bring the PM in the purview of Lokpal but the present one does not have this provision.
However, Mr Bhushan said "some gains" have been made in the long exercise.
A minor rally possible if Monday’s low holds and Nifty stays above 5,320
Recovering from the steep losses seen yesterday, the market opened higher tracking a firming trend in the exchanges across Asia, on easing of the Greece debt situation. The Sensex opened 67 points higher at 17,574 and the Nifty was at 5,281, up 23 points.
Investors resorted to bargain hunting, taking the indices higher, but news that state-owned explorer ONGC is looking to rope in a foreign partner in its eastern offshore gas block pulled the market lower. At the day's low, the Sensex fell below its previous close at 17,504 and the Nifty was at 5,257.
The market recouped its losses somewhat, as banking, oil & gas and metals helped the market climb to its intra-day high in noon trade. The Sensex gained 208 points at 17,715 and the Nifty added 64 points to 5,322. But selling took over again and the Sensex eventually closed up 54 points at 17,560 and the Nifty settled at 5,275, up 18 points.
We mentioned in Monday's closing report that the index should hold on to its Monday's low for some stability. The Nifty's intra-day high was close to its first support of 5,370. For a minor rally to happen, the Nifty has to remain above 5,320, from where it can target to reach 5,440.
The advance-decline ratio on the National Stock Exchange was 541:848.
The broader markets underperformed the Sensex today with the BSE Mid-cap index declining 0.21% and the BSE Small-cap index losing 0.43%.
In the sectoral space, BSE IT (up 1.16%), BSE Oil & Gas (up 0.90%) and BSE TECk (up 0.89%) were the noteworthy gainers. On the other hand, BSE Realty (down 1.78%), BSE Capital Goods (down 0.67%) and BSE Fast Moving Capital Goods (down 0.61%) settled at the bottom of the index.
Markets in Asia finished higher on the easing of Greece debt tensions, but investors were cautious ahead of the two-day Federal Open Market Committee meeting set to begin tonight. While the European Union and the International Monetary Fund will do their best to save the debt-ridden Mediterranean nation from default, the government also faces a crucial confidence vote today.
Meanwhile, the recent slowdown on account of the rate-tightening measures by the Chinese central bank is likely to put pressure on banks that provided loans as part of the stimulus programme, following the global economic crisis in 2008.
The Shanghai Composite advanced 1.01%, the Hang Seng surged 1.16%, the Jakarta Composite jumped 1.76%, the KLSE Composite added 0.10%, the Nikkei 225 climbed 1.13%, the Straits Times rose 1.32%, the Seoul Composite was up 1.41% and the Taiwan Weighted rose 0.78%.
Back home, foreign institutional investors were net sellers of stocks worth Rs512.57 crore on Monday, while domestic institutional investors were net buyers of equities worth Rs863.31 crore.
News reports suggest that ONGC is in talks with the BG Group and Italian petroleum major Eni for developing its gas block in the eastern offshore. The state-owned exploration major is likely to offer up to 30% stake in the block to the foreign partner. The company's stock fell to Rs255.75, down 0.14% on the Bombay Stock Exchange today.