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Dear Anonymous,
An index fund is an equity fund, which tracks a particular index like the BSE Sensex or the Nifty. Such a fund holds the same stocks as the underlying index and in the same proportion as in the index. The investment objective of these funds is to match the index return over a period of time.
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| The funds mentioned by you, Nifty Banking BeES and Nifty Junior BeEs are two of the oldest Exchange Traded Funds (ETFs) of Benchmark AMC. From an investment point of view, these funds are simply index funds that-unlike normal index funds-can be bought and sold at intra-day prices throughout a trading day. In this respect they are more like shares rather than like mutual funds. ETFs, since they need to be transacted upon throughout the day, are bought and sold through stockbrokers (using a demat account) just like shares. Initially, to invest in these you need to open a demat account with a broker and then buy the units of the fund like any other share.
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I have invested in the DSP ML Tiger Fund recently. I read in the papers that Merrill Lynch has incurred a loss of 8 billion dollars. Is this going to have an impact on my investment?
- Rajiv Dear Rajiv,
You can be rest assured that these losses would not affect the performance of the fund chosen by you, nor would it affect any other mutual fund scheme of DSP ML. In India, DSP ML i.e. DSP Merrill Lynch is a joint venture between DSP Financial Consultants, India and the Merrill Lynch Co. since 1995. The losses of 8 billion dollars incurred by the Merrill Lynch Co. due to the sub prime crisis would not have any affect on mutual fund schemes of DSP ML in India. Hence, you can continue to remain invested in these funds.
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The HDFC Equity Fund and the HDFC Long Term Advantage Fund seem to have run out of steam. Is it advisable to continue investing in them or is it time to exit from these two funds?
- Anonymous
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Dear Anonymous,
The HDFC Equity Fund and HDFC Long Term Advantage Fund have been two of the best performing funds in their respective categories, but are going through a rough patch of late. However, such short term fluctuations should not alter your investment strategy and force you to sell your quality investments.
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| As on November 8th 2007, HDFC Equity has generated a return of 38.76 per cent on a year to date basis, almost matching its category average. One cannot classify this as a poor performance, but it is evident that when compared to peers, the fund has not done well. The fund however continues to have a 5-star rating, and is one of the best core picks.
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| HDFC Long Term Advantage has been a laggard in the ELSS category in the recent past. In the past one year (as on November 8, 2007) the fund has returned a disappointing 30 per cent whereas the category average has been 45.42 per cent. If you have plans of selling your investments exactly after three years, then you could perhaps think of routing your future tax saving investments in better performing ELSS funds which have outperformed the category in the recent past.
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In a portfolio, how does one calculate annualised returns? I would like to know the mathematical formula used, especially in a complex case such as of SIPs and partially realised gains.
- Kapil Khanna
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Dear Kapil,
We use two methods of computing fund returns over a period of time. Returns of fund
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