SIP holds potential in volatile markets

Over the last couple of years, the support for systematic investment planning (SIP) has become louder with even mutual funds going all out to increase the investor base under this concept. In fact, figures of 50 lakh accounts within the next couple of years are being talked about in the mutual fund industry circles. With the average SIP value in India pegged at Rs 2,500, the corpus at stake is mind boggling.

Interestingly, the stock market is the perfect place for the success of SIP as the volatility is an integral part of the domestic markets. In the last few trading sessions, a day's trading has been through a wild range of 100-200 points and has been a trader's paradise. Even though the indices on the whole are moving in narrow range, the volatility on an hourly basis has been very sharp. That makes the task more challenging for an individual investor who can find it difficult to time the markets. Hence, individual investors are being increasingly pushed towards SIPs in recent times.

When the broader markets in general deliver returns, the choice of a fund for SIP is less significant. With the concept of SIP getting older and choice of funds for SIPs getting wider, the time has come to choose funds for a SIP a little carefully. Since SIP performance is all about the power of compounding over a long term, a difference of few percentage points in annual returns can make a big difference over a long term.

Here are some tips to choose funds for a SIP portfolio:

More volatility good

Normally, investors would hate to pick funds which are volatile. But for a SIP portfolio, this need not be a concern. On the contrary, it can be a blessing in disguise. Though one will have to be cautious with exits and book profits on a more frequent basis, funds which have high volatility can be good for SIPs.

So, a portion of the monthly savings can be in such funds to boost overall returns.

Vanilla funds are for all seasons

Analysts will always advise that every investor should commence his SIP journey with a diversified fund as they are for all seasons. While diversified funds invest across sectors and scale of companies, funds with a large-cap focus will require least monitoring and hence they should be the first choice and should also account for a minimum of 50 percent of you savings.

Keep it simple

When an investor signs up for a SIP, he is automatically lowering risk in his investment strategy. First, by taking the mutual fund route, which invests across a basket of stocks, and the SIP with its systematic nature ensures less risk.

Hence, there is no need for further simplification of strategy with a wide range of options. A small bouquet of schemes should do the job for a SIP portfolio.

Past performance holds key

Investors often tend to get swayed by the performance of funds on the day of investing but the strategy may backfire in the case of SIPs. Systematic investing is all about sustaining performance over a longer period of time, and hence, past performance holds the key in the choice of portfolio. Even if past performance may not be sustained, they surely provide comfort for a longterm portfolio.

Source: http://economictimes.indiatimes.com/features/financial-times/sip-holds-potential-in-volatile-markets/articleshow/7481103.cms

Sundaram MF Declares Dividend for Financial Services Opportunities Fund

Sundaram Mutual Fund has announced the declaration of dividend on the face value of Rs. 10 per unit under dividend option of Sundaram Select Thematic Funds Financial Services Opportunities. The record date for dividend has been fixed as 18 February 2011.

The quantum of dividend will be Rs. 3 per unit. The NAV of regular plan and institutional plan stood at Rs. 14.8076 per unit and Rs. 14.8367 per unit, respectively as on 11 February 2011.

Sundaram Select Thematic Funds Financial Services Opportunities is an open ended equity scheme which has the investment objective to seek long term capital appreciation by investing predominantly in equity and equity related securities of Indian companies engaged in banking and financial services.

Source: http://www.indiainfoline.com/Markets/News/Sundaram-MF-Declares-Dividend-for-Financial-Services-Opportunities-Fund/3552914673

HDFC best fund house for fourth consecutive quarter

The year gone by was a pretty lousy one for the Indian mutual fund (MF) industry as assets under management of the industry fell almost 12% in the year. Although the industry gained some lost ground in the debt fund category in December, thanks to corporate pay outs for advance tax, retail participation continued to fall with the markets being choppy. Against this backdrop, a large number of investors withdrew their investments from MFs, leaving fund houses battling to meet redemptions.

The top 10 fund houses, excluding a few such as DSP BlackRock MF and Franklin Templeton , reported a major drop in assets. The ET Mutual Fund Tracker, in line with what we have done over the past several quarters, provides you a performance update of MF schemes across five broad categories of equity diversified, equity tax saving (ELSS), monthly income plans (MIP), equity-oriented balanced and debt schemes.

THE PERFORMANCE REPORT

A total of 286 schemes were analysed this quarter across five broad categories, including equity diversified, ELSS, monthly income plans (MIP), balanced and debt, and graded according to their performances as Platinum, Gold, Silver, Bronze and Lead. Only those schemes, which have been on offer to investors for at least three years, were considered for the risk-return analysis. Unlike the previous quarters, the December 2010 quarter witnessed a lot of reshuffling in the ranking of schemes. In the tax-saving category (ELSS), Canara Robeco Equity Tax Saver and HDFC Tax Saver were the top quartile performers. This is the first quarter in which HDFC tax saving scheme rose to the platinum medallion.

However, a few schemes such as Sahara Tax Gain and Taurus Tax Shield which were ranked platinum in the last quarter slipped in their rankings. In the equity diversified category, popular schemes such as Reliance Regular Savings Equity and Sundaram BNP Paribas SMILE were unable to retain their platinum grades. Both schemes dropped to Silver ranking after figuring in the top quartile for over a year. Among the new entrants, we have two outstanding performers, namely DSP Micro cap Fund and Fidelity India growth, which directly debuted in the Platinum category. However, performance of Reliance NRI Equity (G), Religare Equity, JPMorgan India Smaller Cos and HSBC Progressive Themes was average.

BEST FUND HOUSE

HDFC was the top fund house for the fourth consecutive quarter, followed by IDFC , which managed to come back to this position after three quarters. Reliance AMC, which was among the top three fund houses for a year now, dropped to the sixth position.

BEST FUND HOUSE? HOW WE DID IT

The number of schemes analysed by ET Quarterly MF Tracker varies for each fund house. We consider the percentage of schemes falling under the Platinum, Gold, Silver, Bronze and lead categories for each fund house separately to ensure that there is a level-playing field for all these fund houses. Each of the grades is assigned weights corresponding to their order of importance. Thus, Platinum gets the highest and Lead the lowest of all weights. A weighted average score (WAS) is then arrived at for each fund house and the fund houses are ranked in the descending order of their WAS. Thus, the fund house with a higher percentage (and not number) of total schemes in the Platinum and Gold grades will enjoy a higher WAS compared to the others.

Source: http://economictimes.indiatimes.com/features/investors-guide/hdfc-best-fund-house-for-fourth-consecutive-quarter/articleshow/7486839.cms