The charm of ICICI Prudential Tax Plan Fund lies in its ability to generate trail-blazing returns. But it won't go down well with investors who prefer stability over high returns. |
The fund's high-risk high-return strategy is evident in its performance record. During the first quarter of 2007, when equity markets were in a spot of bother, this one lost massively (it was down 10.92 per cent), much higher than the category's loss of 6.45 per cent. It has also earned around 40 per cent returns in three consecutive quarters of 2003. |
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Indian stock markets have witnessed increased volatility over the last one year, and ICICI Prudential Tax Plan has found the going quite tough, as it has been ranked 25th in the category of 26. But increase your time horizon to three years, and the fund is placed among the top performers-- with annualised returns of over 53 per cent, it sits pretty at third rank. Even over a five-year period, it has beaten the benchmark. |
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What adds to the risk of this fund is the kind of portfolio it holds. It invests aggressively in the stocks of small-sized companies. The combined allocation to mid- and small-caps has averaged 87 per cent of the assets in the last one year. But of late, the fund has increased its allocation to large-caps to over 22 per cent (from under 10 per cent earlier) to tone down its aggression a bit. |
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At the end of May 2007, it had Infosys, ONGC, ICICI Bank and Tata Consultancy Services among its top ten holdings. Moreover, its sector concentration is also aggressive. Over 56 per cent of its sector allocation is in just five sectors. Its top five holdings account for nearly 25 per cent of the portfolio. |
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The fund is not only aggressive in selecting stocks but also tends to churn its portfolio quite frequently. The fund manager loves to try out stocks but the buy-and-hold strategy does not seem to be his priority. But it spreads its portfolio across over 50 stocks to partially mitigate the risks that come with investing in smaller stocks. |
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In a nutshell, this fund has the calibre to reward you well but it will definitely test your nerves. Therefore, invest in it only if the ups and downs of the markets do not bother you much. |
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