[aargee]

I got an email regarding this from SBI Mutual fund; I can invest a little & lock it up for about 4-5 years. What do you guys think? Is this adviced?
SBI PSU FUND

[KRRaj]

Originally Posted by aargee

I got an email regarding this from SBI Mutual fund; I can invest a little & lock it up for about 4-5 years. What do you guys think? Is this adviced?
SBI PSU FUND

This is something even I would like opinions on. My Auditor was advising against it currently regards the stock market's current situation. Would like to see other's comments also.

[carboy]

Originally Posted by KRRaj

This is something even I would like opinions on. My Auditor was advising against it currently regards the stock market's current situation. Would like to see other's comments also.

What is the stock market's current situation?

[joslicx]

Originally Posted by aargee

I got an email regarding this from SBI Mutual fund; I can invest a little & lock it up for about 4-5 years. What do you guys think? Is this adviced?
SBI PSU FUND

Rather than a new fund, put your money in a well performing fund with a long track. If you want to invest in SBI MFs, then Magnum Contra is a good choice. Reason is a fund with a good history means it is/has been well managed and it is likely to be well managed in future as well because for the company it is a showpiece for the world (to show their prowess). On the other hand a new fund attracts lot of hidden charges which make them unattractive (although 10 Rs NFO price seems attractive, one should look at returns and not MF prices while looking at their performance). Another very good fund to look at is Reliance Growth (it is their most important and most well run fund).

Also try to take a look at 3 year and 5 year performance of a fund before investing. Since in this time markets would have gone up and down multiple times, this will give you a very good idea of how well run that particular fund is with respect to others.

Disclaimer: I might or might not have any investments in these funds mentioned. These are just examples.. There are many other good/better funds there...

[aargee]

Joslicx - With due respects, I've few questions from your post...

Originally Posted by joslicx

Reason is a fund with a good history means it is/has been well managed and it is likely to be well managed in future as well because for the company it is a showpiece for the world (to show their prowess).

Well not necessary because, the its quite possible that fund managers change in between & the new ones are not as effecient as the old ones or the viceversa could also happen. IMO, I would see where the investment is being done; automotive, power, infrastructure, IT, Telecom & so on. Then relate to see how much opportunity is stored in for each segment & then choose the company (which is very difficult) like SBI/ICICI/Franklin & so on.

Originally Posted by joslicx

Also try to take a look at 3 year and 5 year performance of a fund before investing. Since in this time markets would have gone up and down multiple times, this will give you a very good idea of how well run that particular fund is with respect to others.

Well to me, the greatest profit can be made when you buy less rather than sell at higher price. In that way, buying a fund that is already existing in the market (should be of recent launch) & the price should've dropped from the initial fund value (see how many ifs) makes sense.

[carboy]

Originally Posted by joslicx

Reason is a fund with a good history means it is/has been well managed and it is likely to be well managed in future as well because for the company it is a showpiece for the world (to show their prowess).
[snip]
Also try to take a look at 3 year and 5 year performance of a fund before investing. Since in this time markets would have gone up and down multiple times, this will give you a very good idea of how well run that particular fund is with respect to others.

Or it could be pure luck that a particular fund has doing well.
This is what Warren Buffet wrote - The Stock Valuer: Buffett's coin-flipping contest

[joslicx]

Originally Posted by aargee

Joslicx - With due respects, I've few questions from your post...

Well not necessary because, the its quite possible that fund managers change in between & the new ones are not as effecient as the old ones or the viceversa could also happen. IMO, I would see where the investment is being done; automotive, power, infrastructure, IT, Telecom & so on. Then relate to see how much opportunity is stored in for each segment & then choose the company (which is very difficult) like SBI/ICICI/Franklin & so on.

Good to see your questions. Let me try to answer them as well as I can.
I would admit its a very valid point that fund managers can change in between. See the thing is, with the good MF houses (e.g. Frankline, Fidelity, SBI, HDFC etc) they work more on philosophies (behind particular funds) and have very well defined processes for fund management. Fund Managers work within those set parameters only. All fund houses have some star performers (true for managers as well as funds themselves) and all of them try really hard to keep both (managers as well as funds). Star performers funds are those that have a history of consistent performance - fund houses love to showcase them to people whenever they launch new fund offers (these act as their advertisements). In a way these funds get best attentions within the fund houses (generally best people manage them etc). In case the manager leaves and a new person comes, first they ensure the new one to manage their star fund is a capable person, and also that person has to follow the funds philosophies. most of the times its quite seamless! If you look at data, fund manager changes have not really made difference to well-run star funds (example- SBI Magnum Contra! It was managed by Sabarwal who left but the fund has still given same kind of returns! Thats the good thing about well run funds. They are NOT run by managers alone!)

Well to me, the greatest profit can be made when you buy less rather than sell at higher price. In that way, buying a fund that is already existing in the market (should be of recent launch) & the price should've dropped from the initial fund value (see how many ifs) makes sense.

Guruji if only you could know the best times (to buy and sell) you would be the next Warren Buffet!!! I also want to buy at lowest price and sell at highest price - the million dollar Q is how to know these prices!!!
Or you can just leave it to your fund manager as he is best qualified to make these calls. he is paid for that!!!

And my advice would be avoid new funds. dont just look at price. It does not matter if the price is 10/- or 1000/-. what matters is the returns!!! So look at % returns only. the problem with new funds is there are lot of hidden charges - like money spent by fund houses in promotion and distributor commissions. these are amortised over few years with typically major portion in first yr itself. what it means is for first year ur returns wud be lower than real returns .

Originally Posted by carboy

Or it could be pure luck that a particular fund has doing well.
This is what Warren Buffet wrote - The Stock Valuer: Buffett's coin-flipping contest

Well thats why I said look at 3 or 5 year performance figures. If a fund fares well in long run then they are doing something right.

By the way, heres a small checklist that one can use to ascertain if a fund is good. (It might not be an exhaustive one):
1. Look at how the fund fares against its benchmark. every fund has to declare a benchmark that it uses as a parameter to publish its performance. If the fund consistently beats its benchmark then it is doing most things right.
2. Look at 3 or 5 year performance figures. Typically in this time it would have seen good and bad times (markets high/low). If even during the low times it beat other funds (or its category average) then it indicates good performance.

And the great thing is all this data is easily available on internet.

[carboy]

Originally Posted by joslicx

Well thats why I said look at 3 or 5 year performance figures. If a fund fares well in long run then they are doing something right.

Well, you are not getting my point. If there are a 1000 funds, by plain simple luck, some of them could do good for 3-5 years.

[DCEite]

This is especially for Argee and people who are new to mutual funds, its very common to think of a Rs. 10 NFO of a Mutual Fund as "cheaper" than say a MFof NAV 100, but actually its a BIG MISUNDERSTANDING.

Originally Posted by http://new.valueresearchonline.com/story/h2_storyView.asp?str=10062

Is Low NAV Cheap?



Is a fund with a low NAV a better investment option than a fund with a higher NAV? Since you can buy more units when the NAV is low, isn't it cheaper? Should mutual fund schemes with a higher NAV be avoided? These are questions, which trouble many first-time investors in mutual funds.

The answer to these questions is that it is irrelevant how high or low the NAV of a fund is. The amount of your investment remaining unchanged, between two funds with identical portfolios, a low NAV would mean a higher number of units held and consequently a high NAV would mean lower number of units held. But under both circumstances, the product of the number of units and the applicable NAV, which is the value of your investment, would be identical. Thus it is the stocks in a portfolio that determine returns from a fund, the value of the NAV being immaterial.

When one sells those units, the return will be the same as that of another scheme, which has performed similarly. The 'cost' of a scheme in terms of its NAV has nothing to do with returns. What you want to buy in a scheme is its performance. The only instance where a higher NAV may adversely affect you is where a dividend has to be received. This happens because a scheme with a higher NAV will result in a fewer number of units and as dividends are paid out on face value, higher NAV will result in lower absolute dividends due to the smaller number of units. But even here, total returns will remain the same.

So from whichever angle you see it, the NAV makes no difference to returns. Mutual fund schemes have to be judged on their performance. And the simplest way to do this is to compare returns over similar periods.

[ashthedivx]

Originally Posted by carboy

Well, you are not getting my point. If there are a 1000 funds, by plain simple luck, some of them could do good for 3-5 years.

Adding to joslicx's point. One should bet on a running horse rather then a newbie horse. Apart from this the old fund is already earning a handsome profits with their current investments where-as the new fund will be starting out new prepositions.

Some may contradict the point by saying that the new fund is having much more probalbility of getting higher profits but the older fund will also be performing atleast 80% of the high returning new funds as all are otherwise investing in same markets.

[DCEite]

Another thing i would like to add in relevence to the thread topic, Ihighly recommend reading following regularly to understand the better way to financial planning and how not to fall into buying products which do not suite you

Money Today Magazine
Outlook Money Magazine
ValueresearchOnline Webside
Investment Guide on ET Now
Smart Money on UTV Bloomberg

[carboy]

Originally Posted by ashthedivx

Adding to joslicx's point. One should bet on a running horse rather then a newbie horse.

Never disputed that. All I am saying is just because a fund has done well for 3-4 years, it doesn't neccessarily mean that it's a well managed fund.
Considering the amount of funds existing in the market, it's still very probable that someone could be doing well by chance for a 3-4 year period.

Originally Posted by ashthedivx

Apart from this the old fund is already earning a handsome profits with their current investments where-as the new fund will be starting out new prepositions.

What is the advantage in that?

Originally Posted by DCEite

Another thing i would like to add in relevence to the thread topic, Ihighly recommend reading following regularly to understand the better way to financial planning and how not to fall into buying products which do not suite you

Money Today Magazine
Outlook Money Magazine
ValueresearchOnline Webside
Investment Guide on ET Now
Smart Money on UTV Bloomberg

Out of this Outlook Money is probably the best in my opinion.

One bible to read before stepping into the market is Benjamin Graham's "Intelligent Investor". Graham is the guy who 'invented' financial analysis of stock. He is also Warren Buffet's teacher.
Irrespective of whether you invest in equity directly (by picking stocks) or through mutual funds (by picking mutual funds), this book is a must read - because even if you are investing in MFs, this book will help you analyze the philosophy of the mutual fund, if it in fact has one.

[Daewood]

Originally Posted by aargee

I got an email regarding this from SBI Mutual fund; I can invest a little & lock it up for about 4-5 years. What do you guys think? Is this adviced?
SBI PSU FUND

It is always better to invest in general funds than sector specific funds.
They have a better safety net.

for eg: if you buy a fund exclusively investing in telecom, tomorrow if telecom becomes less proftable with plunging margins, even your money will decrease in value no matter how good the fund manager is.

If it is a general fund, the manager will switch our money from a non-performing sector to a 'hot sector' and always maintain a better balance.

[joslicx]

Originally Posted by carboy

Well, you are not getting my point. If there are a 1000 funds, by plain simple luck, some of them could do good for 3-5 years.

If such a fund exists (that has outperformed its peers for a long time, in both bull and bear markets multiple times) than it is definitely a very good fund (regardless of the fact that it is pure luck)! I would definitely consider investing in such a fund.

[carboy]

Originally Posted by joslicx

If such a fund exists (that has outperformed its peers for a long time, in both bull and bear markets multiple times) than it is definitely a very good fund (regardless of the fact that it is pure luck)! I would definitely consider investing in such a fund.

Again, I have no problem with that. All I am pointing out is that past performance isn't an indictor of good management or future performance.