Yes. The entry load is levied on each monthly installment that is deducted from your bank account. This has been the case whether you purchase your fund through a broker or directly from the mutual fund.
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| But now, after the new guidelines of the Securities and Exchange Board of India (SEBI), if you purchase the units directly from the mutual fund, you will save on the entry load. For this, you will have to write to the asset management company (AMC) to make your future SIP investment in 'Direct Mode' and remove the broker from your records. |
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| Can you tell me about the performance of Reliance NRI Fund? How is the 'beta' factor of the fund, considering the current overheated equity market? I understand that only NRIs are eligible to apply for this fund. Does this fetch any unique benefit to the NRI applicant? - Amlanjyoti Basu Reliance NRI Fund is a 5-star rated, diversified equity offering with assets under management of around Rs 190 crore (as on December 31, 2007). The fund has done exceptionally well till now and has delivered an annual return of 56.16 in the past three years. |
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| Only NRIs are eligible to purchase units of this fund and resident Indians are prohibited from doing so. Nevertheless, there is no special benefit for NRIs. Most other mutual fund schemes are open for purchase by NRIs on a repatriable and non-repatriable basis. |
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| Beta is a measure of the fund's sensitivity to market movements. It is calculated based on the trailing three-year monthly returns of the fund and the benchmark and hence can change over time. |
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| Though the beta of the fund is 0.78 for its benchmark, it may not be useful gauge to evaluate a fund. Beta is very relevant for a stock but not so for a fund. A fund's portfolio keeps changing in complexion and character making beta less relevant. |
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| I have one financial goal: To achieve the magical figure of Rs 1 crore as soon as possible. So I would appreciate you taking a look at my portfolio and advising me of steps to take to get there. Here's a look at my SIPs which amount to Rs 51,000 every month: Reliance Banking Fund (Rs 25,000), Reliance Media & Entertainment Fund (Rs 5,000), Reliance Diversified Power Fund (Rs 5,000), HDFC Equity (Rs 5,000), Reliance Vision (Rs 5,000), Franklin Opportunities Fund (Rs 5,000) and UTI Infrastructure Fund (Rs 1,000). - Robin Dsouza If we assume a consistent annual return of 20 per cent from this portfolio, your investments would be worth Rs 1 crore in around eight years. |
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| It appears that you are expecting to reach your goal much earlier. And you probably feel so given that the sectors you are bullish on have a lot of momentum. But we have not assumed a higher return because your portfolio is an extremely risky one. |
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| It has four sectoral funds, a large concentration of investment in just one fund house and more than half of your monthly SIPs in one single scheme. Your portfolio is largely dependent on the performance of the banking sector and how Reliance Banking plays the theme. No matter how bullish you are on a sector, it is not prudent to channelise that huge an investment into it. |
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| While you are rightly following the SIP route by regularly investing, your portfolio lacks diversification. In our view, well performing diversified equity funds from different fund houses should be the core of a long-term portfolio and sector and thematic funds should play a supplementary role. |
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| Following this strategy, you will be better placed to navigate through decline in a sector preference. A good diversified equity fund will also ensure participation in a performing sector and stocks without your active involvement. |
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| Our suggestion: Allocate more money to funds like Reliance Vision, HDFC Equity, Franklin Opportunities and UTI Infrastructure and lower the allocation to sector funds like Reliance Banking, Reliance Media & Entertainment and Reliance Diversified Power. |
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| I invested in Reliance Vision Fund (dividend option) over the last 18 months. I noticed that the recent NAVs are not matching up with other funds of the same category. Should I stay invested or opt out for any alternative fund? - Shirish Deshpande Reliance Vision is well diversified equity fund with a brilliant track record. The fund was launched in October 1995, and has shown a compounded annualised growth rate (CAGR) of 60 per cent in the past five years (as on November 19, 2007). As stated in its mandate, the fund invests predominantly in large-cap stocks. |
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| As per the November portfolio it had a 68 per cent, large-cap exposure. Obviously, in an environment where mid- or small-cap stocks are being favoured, this fund's NAV will not rise as fast as others which have a relatively smaller large-cap exposure. Do not sell a fund just by seeing its short term performance. |
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| The fund was assigned a five-star rating in October 2002, but was recently downgraded to four stars in September this year. Nevertheless, it still remains a compelling option for investors who prefer large-cap oriented funds. Though the fund has not delivered huge returns this year, it has still managed to match the category average. You should continue to remain invested in the fund. |
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| I have two questions. If I sell my equity fund units before the completion of a year, is short term capital gains (STCG) tax deducted at source before the proceeds are credited to my bank account? If a mutual fund gives a return of 60 per cent within a year, is it wise to book profits? - Dr. Saxena The rate of STCG tax as per current tax norms is 10 per cent. Whether you redeem your mutual fund units or sell your shares within a year of buying, you need to pay this tax on the gain. You need to specify the short term gain in the income tax return that you file and pay the tax accordingly. The broker or the mutual fund company does not deduct this tax at source. |
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| Whether it is a good idea to book profits occasionally and pay STCG tax is a personal call that depends on your financial status, goals and risk appetite. |
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| You need to assess the time horizon you have and for how long you would like your money to stay invested. Historically it has been proved that equity investments reap best results when one invests for the long term. |
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| I have invested Rs 80,000 in SBI Magnum Tax Gain and around Rs 40,000 in HDFC Long Term Advantage Fund. My parents and my wife have also invested significantly in SBI Magnum Tax Gain. Is our exposure heavy towards the SBI tax saving fund? Should our investment, as a family, be diversified across various funds? If yes, which other tax saving funds can we choose? - Sameer If you consider your family's portfolio as one, then you are right. Over exposure to a single fund is certainly not advisable. No doubt SBI Magnum Tax Gain has done exceedingly well, but it could not match up to its peers in 2007. |
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| So it is always better to diversify your portfolio among three to four tax saving funds (if the amount invested is high). You can choose some other well rated tax saving funds like Sundaram Tax Saver, Birla Sun Life Tax Relief 96, HDFC Tax Saver and Principal Tax Savings. |
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