At the onset, let me introduce the Mutual Fund in a simple term, for those who are in the nascent stage of financial investments. It’s an investment fund where a preponderance of money follows when a number of investors purchase securities.
A mutual fund, which is made available to investors with the help of brokerage firm and that also is proceeded without any type of commission charged for the transaction. An investor will be privileged because it permits him or her to purchase the mutual fund without an up-front commission fee on the trade. For investors with a small amount of investment capital, this can be an effective investment plan.
Active and Passive Funds: Active management of funds is associated with the manager who knows where to spend so that over average returns are produced. In passive management, the copy of returns of an index like S&P 500 is made.
Large Cap value stock and Small Cap stock are mutual funds that allow you to invest in stocks but risk and returns involved vary. The Expense ratio is a payment of investment in a fund. So when there is state of choosing from two funds with similar objective and ratings. Go with the one having lower expense ratio.
After performing consistently with full boost, ICICI Prudential Value Discovery Fund is a trusted scheme prevailing these days. But in the major part of the structured pie chart of 4- quarters of last year, it has not performed wisely. So it’s position is now replaced with a better performer in the similar category. ICICI Prudential Value Discovery Fund is out of the portfolio and the SBI Magnum Multicap Fund has taken its place. It is the first scheme to be replaced in the portfolio on the basis of performance factor. Quantum Long Term Equity Fund was also replaced earlier, but the scheme’s performance was not the cause of the same. It took place because the fund house launched its regular plan.
To achieve medium and long-term goals, You can prefer investing in Balanced funds/ Hybrid Mutual Funds. If the average debt exposure is around 60% and equity is 40% then these funds are termed as Balanced funds – Debt oriented. If the average equity exposure of a balanced fund is more than 60% and the remaining 40% is in debt products then it is termed as an Equity Oriented Balanced Fund.
NRIs from many countries can also invest in mutual funds in India. But this is not applied in the US or Canada NRIs. The investments from NRIs residing in the US or Canada are restricted by several AMCs. KYC and tax norms might vary for such NRIs.
The starting step in a portfolio review process should be to check the asset allocation and line it up to one’s marked allocation in case it has changed significantly. For example, if one’s marked allocation is 50% in equities and debt respectively, at the end of 1 year, this proportion has changed to 60% and 40% for equities and debt, due to swinging performance of the asset classes. It would be sensible to rebalance the portfolio by depreciating the proportion to equity by 5% to 10% and increasing the allocation to debt so as to line it up to the targeted/marked allocation.
The next step, to check the underlying investments in the portfolio is briefly described here. In case of a portfolio of mutual funds, the performance of each fund could be compared to other funds in the similar category. For an instance, the performance of a large-cap fund could be compared with some other Large-cap funds and an accurate benchmark index. Besides this, in case you have specific views on areas like large cap in relation to mid-caps etc. The portfolio can be checked in the context of any changes in the views.
You can consider expenses, risks carefully while purchasing a variable annuity. As it offers investors, an opportunity to earn high returns. Your valuation must be accurate in order to invest in the different areas. Otherwise, the loss might cause investing exercise to go waste.