Markets
BSE See NSE See 39,046.34
85.55 (0.22%)
collapse Related Readings collapse

Understand MFs To Get Desired Results

| 10/25/2010 12:58 PM Monday

In the changing financial landscape, mutual funds are playing an increasingly important role in the investors’ portfolio. While mutual funds offer a lot in terms of variety, flexibility, transparency and tax efficiency, it is crucial for investors to have a clear understanding of the products. It is equally important to have them in the portfolio in right proportion in line with one’s risk profile and time horizon.  However, understanding products at time can be a little tricky. Though it is easier to differentiate between products like a diversified fund and a specialty or a sector fund, it can be challenging for investors to differentiate between products that may have similar features and characteristics. However, the key is to understand that in spite of having a few similarities, the end results could be substantially different.  A couple of such examples are diversified equity fund vs. multi/flexi-cap fund as well as Index funds vs. Exchange Traded Funds (ETF). Let us analyze how are they different, and the pros and cons of investing in them.

Diversified Funds vs. Multi-cap/Flexi-cap Funds
A diversified fund is a fund that contains a wide array of securities. The fund manager of a diversified fund actively maintains a high level of diversification in its holdings, thereby reducing the amount of risk in the fund. In a typical diversified fund, the offer document provides freedom to the fund manager to invest across industries as well as various market segments, i.e. large-cap, mid-cap and small-cap. However, most fund houses have internal guidelines for fund mangers with regard to the maximum exposure they can have in each industry as well as segment. As regards flexi-cap/ multi-cap funds, though broadly speaking, they belong to the category of diversified funds; the offer document clearly spells out the limits for minimum and maximum exposure to different market caps. To that extent, an investor retains the control on the exposure to each market segment, which is not possible in a typical diversified fund. At the same time, thanks to the flexibility available to the fund manager in a diversified fund, he may be able to handle the volatility in a much better manner.

Index fund vs. ETF

An index fund is a type of passively managed fund that seeks to track the performance of a benchmark market index like BSE Sensex or S&P CNX Nifty. To achieve this intended result, the fund maintains the portfolio of all the securities in the same proportion as in the benchmark index. The offer document of an index fund clearly states as to which index the fund would track. The major advantage of investing in an index fund is that one knows exactly the shares the fund would invest in. Besides, for an individual investor, it is practically impossible

 

Find More Articles on: Personal Finance, DSIJ Magazine, In Focus, Mutual Funds

«« First « Previous |1 2 | Last ››
news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

MIDHANI and HAL partner to develop bio implants

Geyatee Deshpande / Article rating: 5.0

Mishra Dhatu Nigam Limited (MIDHANI) signs an MoU with Hindustan Antibiotics Limited (HAL). This MoU will provide synergy for quality manufacturing of MIDHANI’s Bio-medical Implants and get access to the pan-India distribution of HAL. This partnership is aimed to gain advantage from the strengths of both the companies and benefit users of Bio-medical products in India.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.