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Apr 06, 2011, 11.23 AM IST
Mutual funds are best suited to those investors who do not have the time, the inclination, or the knowledge to daily deal with stocks and equities. Mr Ramesh Nayak, Senior Vice President from Canara Robeco, Mr Harsh Roongta, CEO of ApnaPaisa.com spoke about mutual funds as an investment plan.
Ramesh Nayak, Senior Vice President from Canara Robeco and Harsh Roongta, CEO of ApnaPaisa.com spoke about mutual funds as an investment plan.
Below is a verbatim transcript of their interview with CNBC-TV18ís Elan Dutta. For complete details watch the accompanying videos.
Q: There are different types and different categories of funds out there. There are plethoras to choose from. How do you narrow it down?
Nayak: The broad category is equity on debt. Even in debt we have sub-categories like liquid funds, just like your current account deposit in the bank, you can operate your liquid account, get in, get out any time you want and the annualized return could be something like 7-8% in the current interest context.
Then you have little more risky products like gilt funds, which invests only in government securities. Then you have debt funds investing in varied debt instruments and then you have balance funds which have a combination of equity as well as debt. Depending upon the perception, you can choose a balance fund of your choice, 30% equity - 70% debt, 20% equity - 80% debt, 65% equity - 35% debt.
There are a variety of debt funds available. Then we get into the equity funds. Equity funds basically start with diversified funds. Means, the corpus collected from the investors are invested across the sectors on different stocks. Ideally they are said to be the most least riskiest of the investments in equity.
Then you have sectoral funds, you have thematic funds. You have Exchange Traded Funds (ETFs) which come under the commodity sector. ETFs are gaining momentum because of the sensitiveness of the gold prices currently in the market. The entire idea of all these categories and sub-categories is to provide an investor a saving instrument suiting his risk return profile.
Q: If I have to ask you for your top 5 dos and doníts, if you could enlist them for us?
Roongta: The top one is donít stop. We are talking equity funds. If you are doing a systematic investment plan (SIP), donít do it. If you are going to be scared, donít even look at your skill returns that come except when you are doing a yearly review or a two year review.
If you are going to stop in between, please donít do an SIP. You will loose both ways. So you should definitely never stop an SIP. Discipline and commitment, if you follow that, it will take care of a lot of other problems.
Nayak: I would say that before investing; look at what is your risk return profile. If you are a savvy investor and are in a position to take risks, then get into equity funds, otherwise donít get into equity funds. There are times when the market falls and even when the market goes up.
When the market falls, you look at the Net Asset Value (NAV) and say that it is less than Rs 10. When the market goes up, you see that the NAVs are maybe Rs 15 or Rs 16. In both cases, you should stay away from the tendency to either withdraw or put more money into the system. Consistently invest and invest for a longer period of time. That will certainly give you much better returns.
Q: Once invested, what about the portfolio? How many times do you check it? Do you compare it to equity markets?
Nayak: Ideally, I would suggest that every investor should look at his portfolio at the end of every six months or at least once in a year. Look at the portfolio, look at the benchmark returns, and look at the peer returns and whether they are comparable. If there is something which is not in consonance with these benchmarks or the peer performances, you should certainly look at the fund more closely and find out why they are either, performing, underperforming or outperforming.
For the complete show watch the accompanying videos...
Tags: Wealth Creators, Mutual funds, Ramesh Nayak, Canara Robeco, Harsh Roongta, ApnaPaisa.com, Elan Dutta, Exchange Traded Funds, systematic investment plan, Net Asset Value
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