ICICI Prudential Value Discovery Fund

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HOW HAS THE ICICI Prudential Value Discovery Fund PERFORMED?
With a 10-year return of 15.26%, the fund has delivered twice the category average return (7.84%) and 2.5-times the benchmark return (6.34%).

This value-driven fund has changed colours considerably over the past few years. While retaining its multicap approach, it has shifted from focusing on the mid-cap segment to taking a heavy large-cap tilt. It has cut down the portfolio size from around 60 stocks in May 2015 to just over 40 now, even as the ICICI Prudential Value Discovery Fund corpus has ballooned.

This is in response to the stretched valuations in the small- and mid-cap space, and a sharper focus on relative valuations for picking stocks. Since opportunities in the largecap space are comparatively limited, the portfolio has also contracted.

ICICI Prudential Value Discovery Fund has struggled recently as its strict emphasis on value puts it at odds with the momentum driven rally in the market. But its track record suggests that this approach bears good results over the long term.

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L&T India Value Fund

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L&T India Value Fund Scheme seeks to generate long term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on undervalued securities. It could also additionally invest in Foreign Securities in international markets.

L&T India Value Fund is not a specially designated mid-cap fund but has figured in this category because of its relatively high exposure to this market-cap range. It started off in a difficult year but has managed a very consistent show since then, outperforming the indices and peers every year except its debut one.

While most mid and small-cap funds in the market tend to stick to a growth style of investing, this fund is managed in a value style. It hunts for undervalued stocks in the market and is market-cap agnostic. Value opportunities are often identified in sectors and companies in special situations such as cyclically low earnings, turnaround and revival plays and so on.

Recently, a high 45 to 55 per cent of the portfolio has been parked in large caps, 35 to 40 per cent in mid-caps and the rest in small-caps. This makes the fund overweight on large-caps relative to its peers.

L&T India Value Fund returns since launch are at 18.2 per cent. On the basis of three and five year CAGR, it has outperformed its benchmark by 10 to 12 percentage points and peers by 2 to 3 percentage points. It has been ahead of its benchmark and peers in every year since launch but is yet to encounter a serious bear market like 2008.

L&T India Value Fund has outpaced its index and peers in the last one year, despite this being a challenging period for mid-cap funds. This could be owing to its tilt towards value investing, a style that has made a comeback since 2016.

L&T India Value Fund is A value fund to beat high market valuations.

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SBI Magnum Midcap Fund

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SBI Magnum Midcap Fund scheme aims to provide investors with opportunities for long term growth in capital along with the liquidity of an open-ended scheme by investing predominantly in a well-diversified basket of equity stocks of Midcap companies.

After a bumpy ride until 2010, this fund has managed a steady improvement in performance, earning itself a four-star rating for much of the last three years.

SBI Magnum Midcap Fund has managed a consistent outperformance of both its benchmark and peers in the last four years. This is among the most true-to-label funds in the mid-cap category, with 65 to 70 per cent of its portfolio steadfastly parked in mid-cap stocks; it has a residual small-cap allocation. It rarely takes refuge in large caps, which make up about 5 per cent of its assets. The mid-cap universe for it is defined as the 101st to the 400th stock ranked by market cap.

SBI Magnum Midcap Fund scheme looks for structural growth stocks or emerging companies in any sector which are growing faster than its peers. It filters for capital-light business models, high scalability, strong management track record, high promoters’ holding and consistent dividend and tax payouts.

After a consistent show until 2016, the fund has suffered a few hiccups in the past one year as it has had trouble outpacing the benchmark and the category. The fund’s trailing one-year return lags behind the benchmark and category returns by double-digit margins. This has tended to weigh on the three-year record as well, though the fund still outpaces its benchmark by 4 percentage points on a five-year basis. The fund’s clear mid-cap and growth tilt could have worked against it at a time when large-cap and deep-value stocks had a strong bounce-back.

A good performer in a challenging category, but the recent slowdown bears watching.

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Liquid Vs Ultra Short Term Funds

Liquid and Ultra Short-term Funds Comparison

1. What are Ultra Short term funds?

Ultra short-term funds are a category of debt funds that invest in commercial paper, treasury bills, certificate of deposit and corporate paper with average maturity of more than 91 days. Typically , the portfolio invests in a basket of securities that mature in a week to 18 months.

2. How are ultra short-term funds different from liquid funds?

Liquid funds are meant for investors looking to invest for very short time periods -from as low as a day to three months.

They hold a liquid portfolio of debt instruments, and as per regulations, the average maturity of the instruments does not exceed 91 days. Interest accrues on the securities held, and there is no volatility , except in rare circumstances.

Ultra short-term (UST) funds also earn accrual income from the instruments they hold. However, Ultra short-term Funds have longer maturity than liquid funds. They also hold in struments whose prices can fluctuate on a daily basis. Hence, they are slightly volatile when compared to liquid funds over the short term of 1-2 months. The longer average maturity for UST funds means that you need to hold them between 1 month and a year.

3. How can ultra short-term funds be used by investors?

Ultra short-term funds can be held by investors looking to invest in equities, but are unsure of the direction of the market and are a looking for a right opportunity to enter. Vice-versa, investors apprehensive of high equity valuations can book profits there and park the money in ultra short-term funds before they decide what to do next.

They can also be used to park funds needed before you make lump sum payments for buying a large asset such as real estate. Wealth managers advise use of ultra short-term funds for systematic transfer plans (STPs). If you wish to invest a lump sum amount in an equity fund, and do not want to invest at one go, put the money in an ultra short-term fund and give instructions to switch a regular sum every month to your equity fund. Investments in ultra short-term funds earn slightly higher returns than a liquid fund.

4. Is there any exit load in an ultra short-term fund?

Most fund houses do not levy an exit load in such funds. However, at times certain fund houses do levy a small exit load of 0.25 0.5% for a time period of 1 week to 6 months. It is best to take a look at this, before making an investment decision.

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Invest in SIPs and not in Endowment Plans

Most of you who read this column are now investing in the right way, using a systematic investment plan (SIP). But did you know that your dull, boring SIP is the result of more than 10 years of regulatory change? Most of you have also discarded the low-return endowment plans and now purchase a pure term plan to look after your life insurance needs. But did you know that you got to the right solution not because of regulatory change but despite it. I’ve been mapping the Indian personal finance industry for over 15 years and the behaviour of two regulators in industries that both manage household money has been fascinating. We now have the data to show the impact of regulatory change in the mutual fund and the life insurance industries on firms, sellers and households. I will relate the story through four tables.

Mutual funds have gone through a decade of regulatory action on costs and where they are placed. I find that the mutual fund industry made and sold products with the highest costs. Table 1 shows how the industry kept moving to launch fund types that allowed them to charge more from investors. Till 2006-07 all mutual funds could charge 6% of a new fund collection to investors which lead to churning of investor money. Mutual funds would go on launching new schemes, drum up a lot of advertising to get investor interest, pay distributors large commissions and get investors to buy. Nothing wrong with that except, in a few months, another new fund offer would do the same and agents would ‘churn’ investors from the old to the new scheme with a view to harvest the commissions.

The Securities and Exchange Board of India (Sebi) banned the 6% NFO charges on open-ended funds initially. The industry began launching closed-end funds because they chould still charge the 6% on those funds. Sebi plugged that gap. But then the industry began to harvest the 2.25% front load (commission embedded in the price of the scheme) in the product. In 2009, Sebi banned upfront commissions totally. Mutual funds became a no-load product and sellers could now either get a trail commission or charge a fee. Mutual funds (some of them, not all) found a way out to compensate agents. They began launching series of closed-end funds and ‘upfronted’ the trail commissions for the next three or five years. The data shows the numbers of closed-end funds jumping clearly. By 2015, the ‘upfronting’ was capped at 1% of the investment. As a persistent regulator kept closing gaps, the industry began an extensive outreach and literacy programme, telling investors to use a systematic way to access equity markets. Table 2 shows the almost vertical rise in investor interest that looks unlinked to the state of the stock market, post the clean-up in the mutual fund industry. The SIP flows at over Rs 4,000 crore a month by May 2017 show that this is sensible stock-market investing. Note that net assets turn positive and then are rising post-2014. This means that retail investors are holding their equity funds for a longer period of time, or that churning is less than before. Data is showing that both industry and investors have done well as the regulator has set sensible rules of the game.


The life insurance industry saw a disruptive change in 2010 when the regulator introduced arbitrage within the industry. In 2010, the ministry of finance leaned on the insurance regulator to check the rampant mis-selling of unit-linked insurance plans (Ulips). Used to the guaranteed returns of traditional plans, investors were hit by a new product called Ulip that agents said would double their money in three years. The rising markets made the deal look good. Stories of sharp sales, fraud and fudged signatures on policy documents reached the ministry of finance, which then asked the regulator to clean up. The regulator did clean up, but just the Ulip product, leaving the traditional plan to continue with its high-cost and opaque product structure. Table 3 shows how the industry flipped the sales from Ulips to traditional insurance policies. The argument that investors burnt their hands in the market and therefore demanded traditional plans flies in the face of the insurance industry argument that very high upfront incentives are needed to sell life products because insurance is sold and not bought.

Did the regulatory change benefit investors? No, it did not, because the reform nudged the industry to move from a now transparent, lower cost and potentially higher return (Ulip) product to an opaque, higher-cost and poor return (traditional) one. One way to map investor behaviour in a long-term product is to look at persistency, or the number of policies that are funded in subsequent years. If a person is right-sold a push product, then she clearly knows that she needs to fund it for 15 to 20 years. Why would a person who is buying a long term product stop funding it after the first few premiums? You can argue that a few people may do this due to some circumstances, but for more than half the policies sold to die after the 5th year points to mis-selling. In the case of certain companies, more than 80% of the policies sold don’t survive five years. Did the persistency numbers improve post the 2010 regulatory change? Table 4 compares persistency numbers before and after the 2010 regulation change. The data clearly shows that persistency has fallen post the switch from Ulips to traditional plans after the 2010 regulatory change. I’ve chosen the firms that represent more than 90% of the market. Investors are being sold insurance due to the high (and increasing) incentives allowed by the regulator, but the industry is a leaking bucket – it is unable to retain money even for five years. This is not good for investors because they get very little of their money back if they exit traditional plans within the first few years.

Clearly regulatory change impacts firm and investor behaviour. There is now evidence to show that the capital market regulator reform has given us a better market but insurance regulator has caused more harm than good to retail investors in India.

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Earning regular Income from Muutal Funds

Best SIP Funds to Invest Online

Falling interest rates mean investors should be more open to recognising the advantages of using mutual funds rather than FDs for regular income

In recent times, after the collapse of interest rates on fixed deposits, there is a heightened interest in using equity based mutual funds as a source of regular income. This realisation that bank fixed deposits are a poor way of earning an income hasn’t come a day too soon. On an inflation adjusted basis, fixed deposits (and other interest bearing assets) were always a bad bet. In reality, for deriving a regular living income, specially for long periods as in retirement, equity mutual funds or balanced funds are by far the best option.

There are three reasons for this: One, a lower tax rate. Two, taxation only on withdrawal. And three, higher returns. Taken together, this effectively closes the argument. Let’s see how.

Let’s examine FDs first. Suppose you have Rs 1 crore as savings from which you need a regular income. In a bank FD, a year later, it will come up to Rs 1.07 crore. So you have earned Rs 7 lakh, effectively Rs 58,000 a month, right? Only in theory. Assuming an inflation rate of 5 per cent, if you want to preserve the real value of your Rs 1 crore and continue earning for years, you must leave Rs 1.05 crore in the bank. That leaves Rs 2 lakh that you can spend, which is just a paltry Rs 16,666 a month! This means that if you need Rs 50,000 a month, you need to have Rs 3 crore. Of course, at that level, income tax also kicks in and about Rs 30,000 a year will have to be paid. It’s actually even worse, because the tax has to be paid whether you realise the returns or not.

The situation is very different when, instead of receiving interest, you are withdrawing from an investment in a hybrid (balanced) mutual fund. Unlike deposits, these are high earning but volatile. In any given year, the returns could be high or low, but over five to seven years or more, they comfortably exceed inflation by six to seven per cent or even more. For example, over the last five years, a majority of equity funds have returns of 12 to 14 per cent annually or more, some as high as 20 per cent. The returns may have fluctuated in individual years, and that’s something that the saver has to put up with, but this is the way to defeat the threat of old age poverty.

In such funds, one can withdraw four per cent a year and still have a comfortable safety margin. On top of that, the tax is much lower. Instead of being added to your income, as with interest income, you have to pay capital gains tax on withdrawal. As long as the period of investment is greater than one year, returns from equity funds are taxed at 10 per cent. So for a monthly income of Rs 50,000 a month, Rs 1.5 crore will suffice instead of Rs 3 crore in case of FDs. And no matter how high your savings and expenditure is, it’s still taxed at 10 per cent.

However, the tax advantage has yet another hidden factor. Let’s say you invest Rs 10 lakh in a mutual fund. A year later, the value of the investment has increased to Rs 10.80 lakh. Now, you want to withdraw the Rs 80,000 you have gained. In your holding, 7.4 per cent is the gain and the rest (92.6 per cent) is the original amount you invested. When you withdraw any money, the withdrawal shall be considered (for tax purposes) to consist of the gains and the principal in this same proportion. Therefore, of that Rs 80,000, only Rs 5,926 will be considered gains and will be added to your taxable income. Obviously, this makes a big difference in the tax you pay.

The bottom line is clear: in every possible way, it is better to draw your earnings as regular withdrawals from an equity mutual fund, rather than as interest income. The SWP (Systematic Withdrawal Plan) facility is available for regular withdrawals from every open-ended fund. In fact, we are seeing specific schemes that facilitate this.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

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Aditya Birla Sun Life Top 100 Fund

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Aditya Birla Sun Life Top 100 Fund is now called Aditya Birla Sun Life Focus Equity Fund

How has the Aditya Birla Sun Life Top 100 Fund performed?
With a 10-year return of 10.2%, the fund has outperformed both the benchmark (6.1%) and the category average (7.7%) by a wide margin.

The fund has comfortably beaten both the index and its peers over the past decade.

Aditya Birla Sun Life Top 100 Fund has been a consistent outperformer for many years under its current fund manager. It is undergoing a transformation, taking on a more focused approach instead of a diversified startegy. It will remain a true-to label large-cap offering, but will be distinct from its larger sibling, Aditya Birla Sun Life Frontline Equity, which is a diversified fund. Accordingly, the fund portfolio will become more compact, with the fund manager taking larger positions in high conviction bets. It will also retain higher flexibility to deviate from its benchmark index at a sectoral level. This will potentially allow it to generate higher return but could be accompanied by higher volatility. Investors looking for a focused large-cap scheme may consider this fund.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Invesco India Growth Fund

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Invesco India Growth Fund is now called Invesco India Growth Opportunities Fund

Given the recent volatility in the stock market, it makes sense to stay with large-sized companies showing healthy earnings growth, thanks to their long-established presence in the organised part of the economy. One of the funds that understand this strategy well is Invesco India Growth Fund, managed by Taher Badshah and Amit Ganatra.

Invesco India Growth Fund, which could be categoried as an all-weather equity fund, takes the bottoms-up approach to investing, and the fund managers believe in taking controlled risks. With respect to the benchmark index (S&P BSE100), the fund managers are up to 50% overweight on a sector or underweight. There is no deviation from this norm. Another factor that explains the fund managers’ strategy is to accommodate companies based on growth and value themes. This protects severe downside during declines.

The fund managers choose stocks at reasonable valuations. In portfolio of 36 stocks, the scheme has 75% of its portfolio is dedicated to the growth theme, while the rest is committed to the value theme. Due to this strategy, the scheme has outperformed its peers and the benchmark by a good margin. In the past three-year and five-year periods, the scheme has given 27% and 13.7% returns (annualised), while its benchmark has given 19% and 8% returns, respectively.

At present, the Invesco India Growth Fund scheme is overweight on themes such as consumer discretionary, financials and industrials indicating that the fund managers are banking on consumption and economic recovery themes.

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SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Franklin India High Growth Companies Fund

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Franklin India High Growth Companies Fund is not Franklin India Focus Equity Fund

A large number of big-sized companies clocked double-digit revenue growth in the December 2017 quarter. This could be a good starting point for savvy investors to enhance their exposure to large companies through a schemes that not only focus on large-sized companies, but also believe in value investing. Franklin India High Growth Companies is one such scheme which is value conscious and selects companies that are likely to deliver earnings growth higher than the market.

Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair follow key valuation parameters, such as enterprise value, price-to earnings growth ratio, forward price-to-sales ratio and discounted earnings per share in selecting companies for investments. Taking into account these valuation parameters, the fund managers invest in companies which are poised for high growth in their sectors. The scheme has more than 60% of its portfolio dedicated to large-sized companies, and 30% to mid- and small-sized companies.

In the past three-year and five-year periods, the scheme has given returns of 9.4% and 22.4%, respectively, while its benchmark index, Nifty 500, has given 8.7 and 14.7% during the same periods. In the past six months, the scheme’s fund managers have bought in value themes represented by Infosys, Mahindra & Mahindra and GAIL.

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SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich – Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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Canara Robeco Emerging Equities Fund

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Canara Robeco Emerging Equities Fund scheme seeks to generate long term capital appreciation by primarily investing in diversified mid cap stocks that have a potential to emerge as the bigger corporates with higher performance. For the Purpose of this fund, mid & small companies are defined as those which are ranked from 151 to 500 on the basis of market capitalization.

Consistency over time, rather than an ability to trounce the category, has been the hallmark of this fund, which has hovered between a three and four star rating for nearly seven years now.

Canara Robeco Emerging Equities Fund is a sector-agnostic fund which looks out for opportunities across sectors with a bias towards mid-caps. Its attempt is to identify companies which have the potential to become leaders of tomorrow in their respective sectors. It uses a growth-at-a-reasonable-price approach to pick companies which show consistent earnings growth higher than that of the market.

The portfolio break up reveals almost equal weights in large and mid-cap stocks, at 40 per cent each recently. But historically, the fund has had a much higher exposure of 60 per cent plus to mid and small-caps, with a 15 per cent weight in large-caps. The shift may have been driven by the need to contain risks at elevated market levels. The fund is currently overweight on large-caps relative to the category.

Canara Robeco Emerging Equities Fund shift towards large-caps seems to have been timely, as it has kept ahead of both benchmark and category in the last one year. On a three and five-year basis, it has outperformed its benchmark by 3 to 9 percentage points and category by 3 to 5 percentage points. The performance relative to the benchmark suffered a blip in 2016 but has made a comeback since then. Overall, it’s a fund which has kept up well with the ups and downs of the market.

SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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