There were reports yesterday regarding SEBI thinking about asking fund houses to use benchmark indices where the dividends are assumed to be reinvested. Such total return benchmark indices (TRI) offer anywhere between 1-2% higher return each year over the normally used price indices (for large cap stocks) which do not consider dividends. While this is a welcome move, I discuss why bigger issues remain and they need to be tackled first for TRIs to make an impact.
"Which is the best way to compare my mutual fund with other funds from the same category?". The best way would be to not compare the performance of the funds that you hold with others. The second best way would be to use the exact dates in which you invested and only those dates for the comparison. The third best way is to use this free tool that allows you to compare the performance of all funds in a category from the date in which you started investing in one of them.
Freefincal has two automated stock analysis and valuation spreadsheets. One that obtains financial data from screener.in and another which obtains financials from morningstar. Both sheets also get stock price data from moneycontrol. This is an important update to both these modules due to a change in moneycontrol web layout. Thanks to swanand pointing this out.
Before we begin, my book with PV Subramanyam, You Can Be Rich Too is available at 50 discount (Rs. 198) for short periods this month as it was among the top 25 bestsellers in the last 3 months. Grab it now!
The systematic transfer plan (STP) is a way for an asset management company to lock into some "business", just as jewel shop does with a "gold scheme". It can be used to withdraw from one mutual fund to either generate regular income or transfer that money to another fund (typically equity) in the name of "reducing risk" relative to a lump sum investment. In this post, I present some Lump sum vs STP data.
It is unfortunate that mutual fund dividends are among the least understood aspect of mutual funds. They are often used when unnecessary and without understanding tax implications. In this post, I discuss when mutual fund dividends make sense and when they do not.
The first step is to understand that a fund declares a dividend by actually selling some securities (stocks/bonds). So when the dividend is paid out, the NAV drops to the same extent. Read more: When do mutual funds declare dividends