In the first part on why you should ignore mutual fund star ratings, I had stressed on the importance of focusing on our portfolio health and performance of the fund with its benchmarks. In this post I would like to add a couple more reasons to strengthen the argument. Let us assume that an investor named Tom has chosen…

‘Should I choose only five star rated mutual funds?’, ‘Should I switch funds each time my funds rating is downgraded?’. These are extremely common questions among mutual fund investors.  In this post, let us discuss how star fund ratings are irrelevant to the goal-based investor. Any action, buy, sell, hold, switch etc. should be based on…

It is raining closed-ended mutual fund NFOs. Here is why one should avoid this category of mutual funds. There are many articles that describe the features of closed-ended mutual funds. Therefore, I will not mention them here. Let us focus on the titular suggestion alone. 1) The first and foremost rule of purchasing – be…

This post details a backtesting analysis based on the investment strategy to be adopted by the NFO IDFC Dynamic Equity Fund. It is inspired by a thread in facebook group Asan Ideas for Wealth started by Anup Maheswari. IDFC Dynamic Equity Fund (IDEF) is a quantitative tactical asset allocation fund along the lines of  Franklin’s…

What factors should we consider before choosing a mutual fund or evaluating a mutual that we hold? Should we only look at star ratings? Should we consider only returns? Risk-adjusted returns perhaps? Should we track the actions of the fund manager? Should I understand the kind of stocks that he/she has picked or is likely…

On Aug. 25th 2014, the Economic Times carried an article titled, PPF investment can beat Sensex returns over 20-year period. They showed that between Aug. 1994 to Aug. 2014, Sensex returned an annualized return of 9.15% while the PPF returned 10.46%. Needless to mention this article created a lot of buzz among investors and distributors. Investors panicked and…

We choose a type of instrument almost solely based on the kind of returns that it can yield.  Thus, our expectation is governed by past history. While there is nothing wrong with this, past returns can vary quite a bit, and depends on the period chosen for evaluation. While it is a good idea to base…

Here is a risk vs. reward analysis of debt mutual funds. This is a companion post to: (Equity) Mutual Fund Investing: Risk vs. Reward vs. Volatility   and The key to successful mutual fund investing All the posts are based on Value Research Online’s fund selector page. First some definitions. Average Maturity A debt mutual fund holds debt…

Here is a simple goal planner that serves as a visual aid to highlight the importance of beating inflation for long-term financial goals.  It compares the evolution of the current cost of an expense with an assumed inflation rate and the growth of monthly and lump sum investments. The monthly or lump sum investment along with…

Here is a simple Excel sheet to keep track of monthly SIPs.  Unlike the automated mutual fund tracker, where the focus is on returns, this sheet helps to visually track the growth of a SIP relative to an expected growth. The user will have to enter the value of SIP each month to track its…

A step-up SIP, also known as growth SIP or increasing SIP or top-up SIP is one in which the monthly contribution  amount increases each year either by a fixed amount or by a fixed percentage of the current contribution. Here is a step-up SIP calculator that can be used to back-test investments from April 3rd 2006 onwards….

Nearly two years ago, one of my personal finance influencers, Ramesh Mangal, cautioned me that there is no clear-cut relationship between risk and reward. Although he had pointed me towards proof of the same, I did not pay much heed to it at that time. Now after being reasonably comfortable with commonly used risk-return metrics…

Do past returns matter? Does it make any sense to choose a mutual fund that has performed consistently in the past? After all, there is no guarantee that it would continue to perform well in future. Let us try out a simple exercise. Download returns data from Value Research Online of all equity funds currently…

Budget 2014 appears to have struck a cruel blow to debt mutual fund investors and distributors. Here is the latest version of the debt mutual fund vs. fixed deposit calculator to evaluate the utility of debt mutual funds. Update: Ramesh Mangal pointed out an error in the tool and the graphs. So I have pull…