There's a fair chance that you might be tempted to ignore this note given its rather mundane title. And we wouldn't blame you, given what we have seen in the equity markets over the last few weeks. You are likely to be more enthused by a note that reads something like "How to make the most of these markets" or "Gain from the rising markets."
But that's precisely why we are writing this note. At a time when losing your head and adopting a 'cavalier' investment approach is the order of the day, keeping your bearings is really the key. In other words a disciplined investment approach is just what the doctor ordered.
In the present investment scenario, it's easy to get carried away and do something silly like take on more risk that you can afford to in a bid to make a quick buck.
For example, you might be tempted to invest in a sector/thematic fund, which is topping the performance charts. Else, you may start believing that it would be a good idea to time the markets; say liquidate your investments now and then reinvest later when markets are at lower levels.
Here's why you should not indulge in any such 'misadventure'. Regardless of how lucrative any sector/thematic fund seems at the moment, the fact remains that such funds are high risk investment propositions and that they only perform over shorter time periods when the underlying sector/theme hits a purple patch.
Over the long-term it is always conventional diversified equity funds that emerge winners. Also let's not forget that in rising markets, the more risk you take, the more returns you clock. But then the party has to end some time. And when markets fall, such funds fall the hardest.
As regards timing the markets, do a quick recap of July-August 2007 when the markets fell sharply because of the sub-prime crisis. Recall all the doomsday scenarios that were being predicted. Were you then able to time the markets and predict that in less than 3 months markets would trade at record highs? You probably didn't.
The fact remains that timing the markets and doing so consistently is beyond the reach of almost anyone. So why bother wasting time over such a futile activity.
The fact remains that over the long-term (which is what equity investing is all about), a disciplined investment approach is the key to wealth creation. Keep it simple at all times invest in line with your risk profile and pre-determined investment objectives. Timing the markets and taking on undue risk are at best frivolities that smart investors must avoid.
It was another good week for investors as equity markets surged northwards and touched record highs. The BSE Sensex posted a gain of 3.63% to close at 18,419 points; the S&P CNX Nifty closed at 5,428 points (up by 4.67%). The CNX Midcap rose by 0.32%, before settling at 6,931 points.
Leading open-ended equity funds
| Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Sundaram Select Focus | 89.56 | 6.92% | 28.03% | 51.44% | 67.12% | 8.62% | 0.46% |
| Magnum Comma | 23.68 | 6.86% | 21.94% | 55.89% | 57.13% | 9.23% | 0.38% |
| UTI Mastershare | 48.70 | 6.10% | 21.96% | 42.94% | 53.63% | 7.23% | 0.39% |
| LIC Equity Plan | 27.90 | 5.98% | 20.74% | 36.75% | 46.77% | 8.26% | 0.31% |
| UTI Infrastructure | 42.00 | 5.79% | 20.93% | 52.67% | 70.18% | 8.50% | 0.49% |
(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)
Sundaram Select Focus (6.92%) surfaced as the top performer in the equity funds segment. Magnum Comma (6.86%) and UTI Mastershare (6.10%) occupied the second and third positions respectively.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Grindlays GSec IP | 14.26 | 0.31% | 0.29% | 3.52% | 6.12% | 0.51% | -0.13% |
| UTI GSec | 19.78 | 0.30% | 0.46% | 3.51% | 5.06% | 0.46% | -0.31% |
| HDFC Gilt | 16.06 | 0.30% | 0.28% | 3.39% | 3.71% | 0.61% | -0.48% |
| DSP ML GSec | 24.02 | 0.29% | 0.42% | 4.65% | 4.88% | 0.71% | -0.22% |
| UTI Gilt Advantage | 11.68 | 0.28% | 0.38% | 3.03% | 4.49% | 0.47% | -0.31% |
The 10-Yr 8.07% GOI yield closed at 7.97% (October 12, 2007, source: Reserve Bank of India website), 2 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.
Gilt funds dominated the proceedings in the long-term debt funds segment. Grindlays GSec (0.31%) led the pack, followed by UTI GSec (0.30%) and HDFC Gilt (0.30%).
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| LIC MF Balanced | 55.82 | 3.39% | 16.28% | 29.22% | 32.45% | 6.04% | 0.36% |
| Canbalance | 35.97 | 3.15% | 11.95% | 30.00% | 34.77% | 4.73% | 0.34% |
| Tata Balanced | 66.12 | 3.09% | 12.31% | 29.80% | 47.27% | 5.54% | 0.47% |
| Magnum Balanced | 33.23 | 2.88% | 13.49% | 29.91% | 39.56% | 6.72% | 0.47% |
| Canbalanced II | 48.41 | 2.72% | 14.50% | 31.23% | 32.30% | 5.55% | 0.49% |
LIC MF Balanced (3.39%) occupied the top slot in the balanced funds category. Canbalance (3.15%) and Tata Balanced (3.09%) also featured in the top performers' list.
There are some investors who believe that investing as an activity should be exciting. We are accustomed to hearing views like "your advice is always the same; it's boring."
On our part, we take that as a compliment. We are consistent in our views (that are backed by solid research) and don't feel the need to change them in line with short-term events. And rest assured, if there is a need to do something out of the ordinary, we'll be the first to inform our clients.
As regards the excitement bit; if excitement is what you seek, a ride on the roller coaster at the amusement park is where you should be headed for.
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