Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Balanced funds not so well-balanced - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 19, 2000

    Balanced funds not so well-balanced

    The way stock markets have been hammering technology stocks over the past few days, maybe mutual fund investors should look for some well-balanced portfolios. But are there any around? A study conducted by equitymaster.com reveals a lack of balance in most Balanced Schemes.

    We have been talking about how technology fund NAVs have fallen dramatically in the past 3-4 days with the bloodbath in the stock markets. Equitymaster.com had advised investors to adopt a wait and watch attitude till the picture becomes a wee bit clearer.

    Under such turbulent times, balanced funds would normally have been an option for the cautious investor, that’s right ‘would normally have been’, but unfortunately they aren’t. A study by equitymaster.com shows that Balanced Schemes have been mirroring the trend witnessed in Software Funds. Balanced Scheme NAVs have been falling just as fast as those of Software Schemes. Why is that? You got it – a bloated exposure to software stocks, defeating the very purpose of a balanced fund.

    Softsware Schemes NAV (Rs) as on  
      17-Apr-00 13-Apr-00 Change (%)
    Alliance New Millennium (Div) 11.0 11.9 -7.23%
    Alliance New Millennium (Gr) 11.0 11.9 -7.25%
    Birla IT Fund (Div) Plan A 23.6 25.3 -6.79%
    Birla IT Fund (Gr) Plan B 25.8 27.7 -6.83%
    KP Infotech Fund (Div) 25.7 27.7 -7.16%
    KP Infotech Fund (Gr) 37.6 40.5 -7.17%
    KP Internet Opportunities Fund (Div) 9.0 9.3 -3.33%
    KP Internet Opportunities Fund (Gr) 9.0 9.3 -3.33%
    Pru ICICI Technology Fund(Div) 7.9 8.4 -6.06%
    Pru ICICI Technology Fund(Gr) 7.9 8.4 -6.06%
    Magnum IT Fund 22.7 24.6 -7.81%

    Balanced Schemes NAV (Rs) as on    
       17-Apr-00  13-Apr-00  Change
     Exposure to
    software (%)
    Alliance 95 Fund (Div) 50.57 53.01 -4.60% 20%+
    Alliance 95 Fund (Gr) 63.19 66.24 -4.60% 20%+
    Birla Balance (Div) 13.65 14.43 -5.41% 40%+
    Birla Balance (Gr) 13.65 14.43 -5.41% 40%+
    DSP-ML Balanced Fund (Div) 10.65 11.01 -3.27% 24%+
    DSP-ML Balanced Fund (Gr) 11.89 12.30 -3.33% 24%+
    Dundee Balanced Fund (App) 8.86 9.21 -3.84% NA
    JM Balanced Fund (Div) 12.90 13.92 -7.33% 37%+
    JM Balanced Fund (Gr) 18.63 20.12 -7.41% 37%+
    K Balance Unit Scheme 99 11.32 11.71 -3.34% 34%+
    KP Balanced Fund (Div) 10.05 10.45 -3.83% 30%+
    KP Balanced Fund (Gr) 10.05 10.45 -3.83% 30%+
    Pru ICICI Balanced Fund (Div) 11.18 11.82 -5.41% 30%+
    Pru ICICI Balanced Fund (Gr) 12.06 12.76 -5.49% 30%+
    Magnum Balanced Fund 20.25 21.33 -5.06% 48%+

    The two tables above show how closely Balanced Schemes have mirrored the fall in Software Funds. Fund managers in their over-enthusiasm have taken huge exposure to software stocks, in effect, neutralising the objectives of a Balanced Scheme.

    Investors investing in Balanced Schemes are the cautious type, who want their NAVs to be as stable as possible, even in times of volatility. But with the over-exposure to software, investors are getting just the opposite. They must be wondering that if balanced funds are going to duplicate the performance software funds so closely, they might as well invest in software funds. Moreover, with the heavy exposure to software stocks, the lines of demarcation between software, growth and balanced funds are fast disappearing. Investors need to look at their portfolios more carefully, and judge for themselves what they are getting into.



    Equitymaster requests your view! Post a comment on "Balanced funds not so well-balanced". Click here!


    More Views on News

    The Right Financial Advisor Is Around the Corner (Outside View)

    Mar 10, 2016

    An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

    Why financial planning should be dull and boring (Mutual Fund Corner)

    Feb 29, 2016

    Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

    What Are E-Wallets And How To Use Them (Mutual Fund Corner)

    Feb 12, 2016

    PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

    Is Consumption Boom Over In India? (Mutual Fund Corner)

    Feb 2, 2016

    Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

    How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

    Feb 1, 2016

    Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms