A BEFITING MESSAGE BY BHUPINDER ONSELECTION & MONITORING MUTUAL FUND IS NO DOUBT HELPFUL TO A LAYMAN BUT ALSO TO AN EXPERT. AS IT APPEARS TO UNIVERSAL TOOL.THANKS TO BHUPINDER AND HIS ASSOCIATES BOTH. DINESHCHANDRA
I have the following advice for all mutual fund investors.
1. Go to site where you can get the mutual funds data. For example - go to www.mutualfundsindia.com/top_funds.asp
2. Select the category Equity and find all the funds with 3 months performance. Put them in a spreadsheet in Sheet 1. Arrange them alphabetically [Use Data -> Sort after selecting the cells]
3. Do the same for 12 months performance. Put them in few columns apart in the same Sheet 1. Arrange them alphabetically [Use Data -> Sort after selecting the cells]
4. Convert the 90-day and 120-day performance data into value - you may need to remove the extra space at the end of the data which was making it into text.
5. Add the 90-day and 120-day perfomance data in another column - let's call it TOTAL
6. Sort the data by TOTAL in Descending Order.
7. Choose the top 6 funds [select only one fund from Dividend / Growth type as per your individual choice when both the funds appear]
8. Put 25% each of your funds in top 2 funds for a total of 50% of your funds and 12.5% each in the remaining of the 4 funds.
9. Every 6 months - tabulate the data again and find the top 6 funds.
10. This is the important step. Allocate 25% each to the top 2 funds and 12.5% each to the next 4 top funds.
11. This is expected to give you a return of around 20% per annum. A study of the similar kind was conducted for over last 30 years in USA and it had given 18.x% (I do not remember the exact value of x)
12. Points to note - a. This is passive investment - and will work in all kinds of situations - good & bad times. It needs only few hours of your time every 6 months. b. Capital Gains Tax will be there - so if the funds are doing good and are in the top 10 - you may want to continue with the fund for one year. You may choose Dividend option as the dividend is not taxed - and use the dividend every 6 months for additional investment and other costs. c. Switching funds is frowned upon by mutual fund managers - so they charge you Exit and Entry Loads - these costs you will have to bear.
For your guidance I have made the following table based on 02 march 2007 data:
Rank Scheme Name NAV (Rs.) 90 day 1 year Total 1 DSP Merrill Lynch Technology.com Fund - Dividend 25.105 13.72 50.69 64.41 2 DSP Merrill Lynch Technology.com Fund - Growth 25.105 13.72 50.69 64.41 3 SBI Magnum Sector Umbrella - Infotech Fund 27.64 7.05 52.45 59.50 4 Prudential ICICI Technology Fund - Dividend 15.25 9.87 43.87 53.74 5 Prudential ICICI Technology Fund - Growth 15.25 9.87 43.87 53.74 6 Reliance Media & Entertainment Fund - Dividend 20.1925 7.47 39.60 47.07 7 Reliance Media & Entertainment Fund - Bonus 24.1792 7.24 39.40 46.64 8 Reliance Media & Entertainment Fund - Growth 24.1792 7.24 39.40 46.64 9 Birla SunLife New Millennium - Growth 20.01 4.44 39.05 43.49 10 Birla SunLife New Millennium - Dividend 17.05 4.35 38.84 43.19 11 UTI Growth Sector Fund - Software - Growth 27.08 2.54 40.24 42.78 12 UTI Growth Sector Fund - Software - Dividend 22.75 2.44 40.12 42.56 13 Prudential ICICI Service Industries Fund - Dividend 14.87 3.05 32.89 35.94 14 Prudential ICICI Service Industries Fund - Growth 14.87 3.05 32.89 35.94 15 Franklin Infotech Fund - Dividend 24.66 0.12 33.55 33.67 16 Franklin Infotech Fund - Growth 52.99 0.11 33.51 33.62 17 Prudential ICICI Dynamic Plan - Dividend 19.5409 (0.84) 31.12 30.29 18 Prudential ICICI Dynamic Plan - Growth 62.471 (1.10) 30.80 29.70 19 Kotak Tech Fund 10.197 0.19 29.45 29.64 20 Reliance Regular Savings Fund - Equity - Growth 14.3885 (8.15) 35.17 27.02 21 SBI Magnum Tax Gain Scheme 93 53.55 (2.01) 27.20 25.19 22 Reliance NRI Equity Fund - Bonus 23.0763 (4.06) 28.86 24.80 23 Reliance NRI Equity Fund - Growth 23.0763 (4.06) 28.86 24.80 24 Reliance NRI Equity Fund - Dividend 19.5956 (4.00) 28.76 24.76 25 Sundaram BNP Paribas Select Midcap - Growth 87.2226 (3.91) 28.47 24.55
Remember if you invest a total of Rs. 6,00,000 as per above, it will grow @20% per annum to Rs 2.3 crores in 20 years!
Go try it and fine tune it as per your requirements.
RE:How to retire with Mutual Funds?
by Ram on Mar 06, 2007 11:52 AM Permalink
You're predicting the future performance of fund from the past short term (3 year and less) data. An elementary knowledge in finance, probability and statistics is sufficient to prove you're wrong. Just from your data presented in the message it can be proven that you're wrong let alone not accounting for the fact that you've not taken into account various parameters for the performance of a MF.I hope you're not a financial advisor or MBA(Finance). I was forced to respond so that rediff readers will not be misguided by your message.
Well, everyone is upset that the market has fallen by 15% in a matter of weeks. Where were you when the markets went up 100% in 2 years. You should have been worried. It should have been apparent that there was some mismatch. If marekts keep providing 50% annual returns, everyone will quit their jobs/business, borrow money at 12% from the banks and earn 50%. But, the reality is that it can't work like that forever. Eventually the market will revert to a mean. In the US, the stock market has provided an average return of 8% over the last 100 years. Lets assume that the Indian markets can match that. So, in order to get an average 8% return over time, investors will enjoy 50% returns with years in which the years will be negative. Sp, welcome to investing. (P.S. You probably dont remember this but the Nikkei touched 40,000 in the eighties and its at 17,000 now. Yes, in 20 years the market is over 50% its high) The nasdaq touched 5,400 in 2000 and is at 2500 now. Good luck!!
It is possible for speculators to make money both in a bull or a bear market my making appropriate long or short call. However, what is important is whether this fall is making the Indian equities cheaper. Most people now acknowledge that Indian and most EMs were pretty expensive with P/E values a few months ago, and hence this correction assumes significance.
China's crackdown on illegal investments was a wise choice, even though it threw the markets in a selling spree. It gave the investors a chance to assess the fundamentals of the market and to bring it down to moderate levels, from which fresh positions may be taken. So, I think all in all this correction may be a significant one in a longer context.
As an eternal devil's advocate - why were people not concerned when the market was speeding up the slope? why the crys only when market is down?
There are 2 sides to any transaction and i see no reason to blame (entirely) organizations, FIIs, FIs and politicians. The global market has regressed because of concerns in the Chinese market and the current market is reflecting the same.
If you want to enjoy the fruits of globalization, please be prepared to accept the odd sour taste as well.
