Don't confuse the 'monsoon dhamaka' with any special offer on consumer durables like television sets or refrigerators. While consumer durable companies may or may not celebrate the monsoon season, fund houses certainly do. Interesting, isn't it? We are referring to a promotional offer introduced by one of the leading fund houses in the country.
Now investors shouldn't get all excited; expectedly, the offer doesn't have anything for them. As always, it is meant for mutual fund distributors. The promotional offer provides distributors the opportunity to make an extra buck.
Here's what distributors are required to do. Between a stipulated period, they must mobilise a given minimum sum of money. The fund house will reward distributors for the same, by offering an additional brokerage on the sum mobilised.
Now the trouble is that apart from fresh applications (fresh monies being invested in the schemes), switches (monies being transferred from one scheme in the fund house to another) are also eligible for the additional brokerage earnings. Furthermore, the offer states that switches from debt funds into equity funds are eligible as well.
So if a distributor gets an investor who is presently invested in a long-term debt fund or a monthly income plan (MIP) to switch his investments into an equity fund, he will be eligible to benefit from the offer i.e. earn additional brokerage.
No prizes for guessing how a "monsoon dhamaka" offer like this one, is likely to impact distributors. There's a fair chance that in the zeal to earn the extra income, many distributors are likely to get their investors invested in equity funds.
And in many cases, risk-averse investors are likely to see their monies being switched from debt-oriented funds to equity funds (which are unsuitable for them). Of course, the rising equity markets, which are trading at record highs, will form an integral part of the sales pitch to convince investors.
We have nothing against distributors being compensated for their honest efforts. However, our grouse is against promotional offers that can induce distributors to act in a manner, which is detrimental to investors' interests. We aren't even suggesting that blame lies with distributors; in fact, we hold the fund house in question primarily responsible for the situation.
At Personalfn we have always maintained that the investor should be put where he deserves to be, at the centre stage and the rest will follow. Any practice that can prove detrimental to the investor's interests should be discouraged, including promotional offers of the "monsoon dhamaka" variety. We urge the Securities and Exchange Board of India to scrutinise the phenomenon of mutual fund offers and their impact on the mutual fund industry.
It was another good week for investors as equity markets surged northwards and touched record highs. The BSE Sensex posted a gain of 1.92% to close at 15,566 points; the S&P CNX Nifty closed at 4,566 points (up by 1.35%). The CNX Midcap rose by 1.03%, before settling at 6,269 points.
Leading open-ended equity funds
| Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Reliance Media & Ent. | 30.92 | 3.12% | 7.59% | 26.41% | 103.70% | 7.57% | 0.36% |
| Reliance Banking | 49.22 | 2.97% | 10.63% | 24.42% | 100.41% | 9.00% | 0.20% |
| JM Auto Sector | 22.25 | 2.32% | 7.70% | -4.05% | 44.87% | 7.66% | 0.17% |
| StanChart Classic | 18.59 | 2.31% | 9.55% | 13.59% | 57.43% | 7.24% | 0.29% |
| LIC Index Sensex | 32.08 | 2.05% | 7.73% | 7.06% | 38.11% | 6.02% | 0.37% |
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
It was a good week for Reliance Mutual Fund as two of its funds i.e. Reliance Media & Entertainment (3.12%) and Reliance Banking (2.97%) occupied the top two slots in the equity funds segment. JM Auto Sector (2.32%) also featured among the top performers.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| Birla Income Plus | 32.15 | 1.56% | 4.14% | 6.28% | 9.33% | 0.75% | -0.04% |
| ICICI Pru. Income | 22.46 | 1.48% | 3.89% | 4.77% | 9.07% | 0.82% | -0.09% |
| Templeton Income | 26.93 | 1.33% | 3.54% | 5.12% | 8.13% | 0.69% | -0.18% |
| Grindlays Dynamic Bond | 14.18 | 1.28% | 2.50% | 5.62% | 10.06% | 0.38% | -0.09% |
| Birla Sun Life Income | 27.38 | 1.23% | 2.99% | 7.02% | 11.89% | 0.59% | 0.13% |
The 10-year benchmark 8.07% GOI yield closed at 7.88% (July 20, 2007, source: Reserve Bank of India website), 20 basis points below the previous weekly close. Bond yields and prices are inversely related, with falling yields translating into higher bond prices and net asset value (NAV) for debt fund investors.
Birla Income Plus (1.56%) emerged as the top performer in the long-term debt funds segment. ICICI Prudential Income (1.48%) and Templeton Income (1.33%) came in at second and third positions respectively.
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-year | SD | SR |
| LIC MF Balanced | 48.38 | 1.96% | 9.30% | 4.60% | 32.75% | 5.85% | 0.26% |
| Birla Balance | 31.57 | 1.87% | 8.23% | 11.75% | 40.87% | 4.41% | 0.37% |
| FT Balanced | 37.58 | 1.31% | 6.81% | 11.51% | 46.96% | 4.83% | 0.40% |
| Birla Sun Life 95 | 207.32 | 1.30% | 5.27% | 15.56% | 51.12% | 4.71% | 0.41% |
| HDFC Prudence | 129.63 | 1.16% | 5.39% | 10.85% | 48.68% | 4.44% | 0.47% |
LIC MF Balanced (1.96%) led from the front in the balanced funds segment. Birla Balance (1.87%) and FT Balanced (1.31%) also featured in the top performers' list.
Planning for children's future is one of the most important priorities for parents. However, simply having your heart in the right place isn't good enough any more. In the good old days, attractive returns offered by assured return schemes like PPF (Public Provident Fund), NSC (National Savings Certificate) and fixed deposits (FDs) could make ends meet as far as planning for children's future needs was concerned.
To be sure, the 'good old days' are well behind us. Now parents need to proactively work towards achieving the desired objectives.
Why you must plan for your child's future
Providing for a child's future is a task that is best left to experts like financial planners. The same would entail monetising the desired objectives i.e. determining how much monies would be required to meet the objectives, drawing up investment plans to achieve the objectives, getting invested in line with the plans and ensuring that the investments stay on course.
In our view, parents would do well to engage the services of a competent and experienced financial planner to ensure that their child's future is not compromised with.
By Personalfn.com, a financial planning initiative
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