Dec 11, 2006 01:07 PM
11362 Views
(Updated Dec 11, 2006 01:08 PM)
If yes, get Mutual with your carefully planned investments and take a ride on the Bull. Make sure that you are on the Cart with Bulls which can run faster & safer(Well invested funds) and good Balanced driver(Experienced and reliable Fund Manager) and with good cog wheels( Funds with good RAR-risk adjusted return during fallouts)
Mutual Funds-It’s a Many Bull-Cart Race
Imagine racing on one Bull all yourself. The Bull is at times fast, at times sluggish and not a stable animal to ride on. The ideal way to harvest money is to get onto a Strong Bullock Cart instead of putting money on a Horse & Jockey who don’t race for you.( There is no quick Money in this world and the best Money that grows with you is the long run stable Money).A Good Mutual Fund is the Cart which picks the right Bulls to race with and is managed by Professional Drivers(Fund Managers).Once your money is on the Cart, it is a Trust where many other investors like you have the benefit of reaping. The Driver picks the right Bulls(Securities) and stability and speed of the Cart depends on the speed of the Bulls put together. The speed of the Cart is determined by what is called Net Asset Value.(NAV) .Hence you can also pitchfork your money in many Bullock Carts in a judicious manner by spending lesser time and energy looking at each and every Bull in the race.(Market) .The overall condition of the race(Market) can also be judged by the growth of Indices-Sensex, BSE, Category Index etc.
How to put money?-Choosing the modes
You can choose two types of Vehicles-Equity Based direct Investment or Systematic Investment Plan. Suppose you want to invest on Equity/Debt Fund, all you need to do is call one of the consultants(Bajaj Capital etc) and ask for the form of the Fund you want to invest in. It is more prudent that you make the decision on the Cart than the Consultant even if you take his suggestions. Your investment can be in a new Fund or a running Fund. The advantage you have on a running Bull is that you already have the track record on your desk and it is easier to pick the toppers in Growth based on your time frame of investment. The advantage of a new fund is that you start with more Fund units for the money invested.
Typically, a new fund will be with a unit value of 10 in multiple units starting from 500.That means you make investment above Rs 5000/-.You feel this is on higher side; you can go for Systematic Investment Plan(SIP) where you can invest in far lesser amount on monthly payment basis on an auto mode. The units for each month will be as per existing NAV. Systematic planning and periodic investments are the best bets for boosting your economy if you are salaried class.
*Entry and Exit Loads-Burden to weigh on
*Normally most Funds have a tag of entry and or exit loads of 2.25% but the key is to pick funds which can over ride this factor and not go only by Funds which do not offer entry loads. Longevity is the key to avoid exit loads.
Where to invest-Put eggs in different baskets*
The Mutual Fund market offers plethora of funds from Companies to suit various demands and the key is to understand simple basics which primarily depends on your Goals-Short term Vs Long term,
Risk Vs Security,
Tax Saving Vs Personal Gains.
The funds that are on offer are Equity(Higher risk and Higher gains), Debt(Lower risk, lower gains) or Balanced Funds
Open ended(better liquidity, lesser risk) and Close ended(Tax gains, long term)
The next choice you have is Mid Cap or Large Cap based on the fund Managers goals of Investment. This year has seen a surge of Growth of Large Cap funds while Mid Cap funds normally see good growth options after long term because the Medium sized Companies show better growth after initial turbulence. You also have the option of Flexi Cap funds(Like Franklin India Flexicap) –across Market Caps with top to down stock investing which gives better stability. If you have moved to the next stage, you can go for Specialty Categories of Funds like Blue Chip, Lifestyle, Leadership, Infrastructure, Opportunities or even Contra Funds which require more dynamism as well as technical analysis of the Funds.
Simple rule of the thumb will be
Never put all the eggs in one basket.
Look at the Credibility of the Fund Manager and the Fund house
Read and analyse the Fund document carefully.
Go by the Funds which follow closely above the Market indices if you do not want to go by the Fund Manager’s reputation.
Diversify your funds across the Categories and do not go for too many eggs which you cannot manage.
How to track Funds-Follow the Bull Race
I think it is very easy to keep your eye on the Bullock Cart rather than individual Bulls and manage your Money with three fantastic tools-Mutualfunsindia.com, Valueresearchonline.com and my Money-the one and only Outlook Money as a guide. MFI offers a very convenient portfolio tracker with all the data and NAV comparison with category and market indices.
*When to exit from Fund-Billion dollar question
*A bitter lesson for many Mutual fund investors was between June-July when the Funds nose dived down. It was just not the Fund’s fall in performance, but the overall market’s. If you have just invested on a fund, give a longer breathing time, but keep track of the Fund with respect to the Category and Market and many look at the Bullock cart alone in isolation and loose the Big Picture of Market. The ideal time to take off is when you have realized that this is enough because many a times, ” What goes up also comes down”. The key also is to make sure that your Fund is in good shape-Corpus, Expense ratio, direction of investment as per portfolio and finally the Fund Manager.
So what are you waiting for?
The best part of MS is that there are so many aspiring dynamic young professionals who can make their money count by making the right investments.
The Best part of MF is that the Bulls are on the run and if properly managed, it can make millionaires out of you.
Thanks for reading and look forward to your views and suggestions.
