Should you treat mutual funds like stocks?
In this issue:
» UPA bribed its way through Nuke deal?
» The US headed for another war?
» Investors dumping US treasury bonds
» Are emerging markets still attractive?
» and more!
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Why not? You can very well apply several principles here that you apply while you invest in stocks. How do you ideally go about selecting a stock? You look for a robust business with a good track record right? You can do that with a mutual fund as well. Firstly, be just as wary about New Fund Offers (NFOs) as you are about IPOs. Do not get carried away by big names and glossy billboards.
We suggest you choose from funds that have a performance history of at least 5 to 10 years. See how well the funds have performed with respect to the benchmark indices and their peers over the years. A plethora of information on the same is freely available. Then glance through the portfolio holdings of the fund you're considering. Check the companies and the sectors that the fund is heavy on. Do you think those stocks and industries will do well? Does it suit your risk appetite?
After you have invested in a mutual fund, is your job done? Can you relax and forget about it? Not at all! You cannot afford that luxury. Your mutual fund is not a fixed deposit scheme. NAVs keep changing as stocks prices do. We're not suggesting you keep looking for the NAV and the gains every day. An ideal time horizon would be between one and three months. See how the fund has been gaining or losing relative to its benchmarks and peers. Check out how the portfolio composition is changing. Other indicators like ratios that measure risk may also give you a better picture.
At the same time remember you have not married the fund for life. It is just as important to track how other funds are doing. They could pretty much be your future investment choices.
Do you think your mutual fund investments will do better if you treat them like stocks? Share your comments with us or post your views on our facebook page.
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However, yields dropped to a low of 2.1% in December, 2008 and currently are hovering around the 3.4% mark. Fearing an end of the 3-decade rally in treasuries, investors are pressing the exit button. Bill Gross, head of Pimco, the US$ 237 bn world's biggest bond fund has dumped US government debt. Warren Buffet, the most famous investor and BlackRock, the biggest money managers are both shifting to short term debt. According to Jim Rogers, US government bonds are not a safe haven any longer. Concerns that investors have is an expected rise in inflation and the rampant spending of the US government. Both these factors will slowly but surely lead to an increase in interest rates. With this, short term debt, equities and energy holdings seem to be the new flavours in town.
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Today's investing mantra |
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11 Responses to "Should you treat mutual funds like stocks?"
bharat c dalal
Mar 20, 2011Your articles are very interesting and perceptive. I would like to have your views on expensive and inferior
education in Business and technical aspects. The rule of
AICT is reducing quality education initiatives. A small surface survey would indicate that AICT is corrupt and its policies are indeed destructive and are giving a great opportunity for foreign educational institutes to provide quality education.
Shome suvra chakraborty
Mar 19, 2011The mutual fund aggregates pools of fund from smaller investors as well and invest in diversified portfolio where the unsystematic risk is diversified away. ETFS are mainly investing in stock indexes where minimum variance hedge ratio can be a good hedge against volatility.
Manohar Sharma
Mar 19, 2011Yes I completly agree that mutual funds need to be treated in the same manner as the stocks.I have learnt it at a huge cost while listening to specialists from various banks or other advisors.
TAK
Mar 19, 2011About rethinking on Nuclear power: The earthquake in Japan measured 8.9 on the Richter scale. The Fukushima plant was engineered to withstand earthquakes up to 8.2 on the Richter scale. One should understand that the difference between 8.9 and 8.2 is not 0.7 since the Richter scale is a logarithmic scale. The difference is 5 times or 500% so a 8.9 earthquake is 5 times more powerful and destructive as a 8.2 earthquake. This shows that Japanese engineering was excellent.
India cannot afford to go slow on Nuclear energy, since this would mean continuing our dependence on foreign oil, a continuing trade deficit and perpetual poverty for our people. We should engineer our plants to withstand more sever calamities.
Kishen Narayan
Mar 19, 2011Please inform whether Income by way of dividends from stocks
(shares)is exempted from tax. If yes, indicate the Section
under which it is exempted. As I know Dividends from Mutual
funds are exempted U/S 10(35). Thank you.
Kisen Narayan.
Anirban
Mar 18, 2011Your great, easy to read and insightful articles are backed by a non-responsive sales team with little evident desire to close deals. My past attempts to subscribe to mid cap & small cap reports have proved futile. If someone's listening, pls write to me.
Sawant V E
Mar 18, 2011Your comments about recent earthquake in Japan and related nuclear power plants security reflects your knowledge about nuclear power and its security, better avoid commenting on unknown subjects.
pravin.thakrar
Mar 18, 2011HellO!
You may be aware that War on Libya would be funded from froze assets of Gaddafi. Again each country involved has
a national interest at heart, particularly,Italy,France,
Britain. Again further damage to infrastructure and military hardware will create a new market in billions. Any damage in lives and assets will b called collateral
unavoidable damage. Just repetition of what they did to
Iraq. It is win win war irrespective of human costs.
Again it would be difficult to segregate between pro-Gaddafi and rebels. This is at best face-saving last minute venture.
Manoj Kumar
Mar 25, 2011Very Good Advice indeed! Worth following.