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Investing in NFO

ImageNFO [New Fund Offer] is always deemed as a risk. Everyone advises you to go for an existing MF, rather than invest in a NFO. One of the reasons being that, the existing funds have performance and past results to go by. But in case of NFO, its a big risk.

But then, investment itself is a risk. Even MFs can turn non-profitable if fund managers don’t do their job well. The kind of analysis we do before buying a MF, we can do a similar analysis of the AMC before investing in the NFO.

I have invested in quite a few NFOs, based on the past performance of the AMC who have managed successful MFs. Also, the asset allocation makes a difference too. As in the case of Sundaram Equity Plus fund where 35% was allocated to gold and rest 65% to equity. That made it an interesting assortment and I leapt towards that NFO. It perfromed pretty well and even touched a high of 11.02, which was a real positive.

Another NFO which turned out well for me was SBI Bluechip Fund [D]. It oaid great dividends in its first few years before the slow down. But then I burnt my finger in SBI PSU Fund.

Another point to note is the timing of the NFO. When you invest in a NFO while the market is bearish, then you will earn profits during bull run. But when you invest in a NFO which is launched during a bull run, taking advantage of rising sensex, then its a sham. It takes away the hard earned money as soon as the bull run dies down. This happened to me with Reliance Small Cap Fund [G]. I got the timing totally wrong.

Anyways, that has not deterred me. Just a few days back I went ahead and invested in two more NFOs. One was the IDBI India Top 100 Equity Fund and the other was Taurus Banking & Financial Services Fund.

The simple reason for this step was to take advantage of the situation where banking stocks have been beaten down and with falling sensex I can look to gain during a bull run. I could have also go in for a Banking Fund from any of the AMCs, but the NAV was quite high. For each unit purchased from existing MF, I can have 5 units here. And then, the %gain would be more or less the same, if they invest in similar banking stocks.

All I can say is, do not stay away from NFOs. The NFOs give us a chance to enter the market at a lower cost and more number of units. But do check on the market status since timing is everything.

This post was also published on Yahoo Network

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Posted by on May 11, 2012 in lifestyle, mutual fund, nfo, personal finance

 

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My Own ‘Capital Protection Oriented Fund’

Last year, in March’ 2010, I made the mistake of creating a FD for Rs.100000/-. I did not have time to look into other investment options and blindly went for this option through my ICICI a/c. What was worse is that, the interest rate offered, back then, was 7%. The only clever thing I did was that, I made the FD for 390 days only. So, at the end of the term, sometime in April’ 2011, an amount of Rs.106500/- was credited to my a/c, after deducting TDS etc.

This time around, I had the same option of renewing that FD at about 9.25%; but I decided against it. I made up my mind to create a ‘Capital Protection Oriented Fund’ of my own and test its performance for a period of 1 year. I know it sounds silly, but I did. Its a bit experimental, but all I wish to achieve from it is growth at 12-14%. Here’s what my fund now consists of:

a. I made a FD of Rs.40000/- at 8.5% for 390 days only. The interest generated is Rs.3400/-. I could have got a higher interest, but I would have to go for a longer term.

b. I put another Rs.10000/- in a NFO called ‘Sundaram Equity Plus’, so I now have 1000 units of it. The reason for investing in this NFO was that, it balanced out the equities with gold; 5 – 35% to be placed in gold and 65 – 95% in equity.

c. The remaining Rs.50000/- I put it in the stock market in the following scrips in a balanced portfolio:

i. Jaypee Infratech – 100 nos @ 52.15

ii. Punj Lloyd – 75 nos @ 56.5

iii. IRB Infra – 50 nos @ 158.38

iv. Next Mediaworks(Mid-day Multimedia) – 50 nos @ 5.75 [penny stock purchased so I don’t leave out a single paisa]

v. Zee News – 25 nos @ 11.05 [penny stock purchased so I don’t leave out a single paisa]

vi. Rajesh Exports – 50 nos @ 86.7

vii. Reliance Com – 50 nos @ 82

viii. Vijaya Bank – 50 nos @ 69.6

ix. Manappuram – 75 nos @ 57.5

x. IPO Muthoot Finance – 40 nos @ 175 [had applied for more, allotted 40]

xi. FPO Power Finance – 43 @ 192.85 [5% discount to retail investor]

I shall keep updating this as and when I do a buy/sell. Suggestions/comments welcome!

This post was also published on Yahoo Network

Update 1 in Feb-2012: I sold Rajesh Exports @ 136.15, giving me a profit of 2472.05.  I should have sold it earlier, when it had touched a high of 145, but I missed the opportunity as I wasn’t able to track my portfolio during that period. Anyways, I re-invested the amount in buying the following:

i. Manappuram – 45 nos @ 45.15

ii. Jp Power – 45 nos @ 45.35

iii. Vijaya Bank – 50 nos @ 57.75

Update 2 in May-2012: The FD of Rs.40000/- matured and I decided that this time around I would not renew the FD for that high a value. Too much money in debt instrument isn’t a good idea. So, I created a new FD for Rs.30000/- at 9.25% interest. This FD matures in June’13 and the maturity amount is Rs32974/- . The remaining proceed of Rs13400/-, I re-invested it in the following:

i. Adani Power – 50 nos @ 50.75

ii. IRB Infra – 25 nos @ 111.15

iii. JP Associates – 45 nos @ 59.4

iv. Manappuram Fin – 25 nos @ 23.65

v. Muthoot Fin – 20 nos @ 131.5

vi. Power Fin – 17 nos @ 140.25

 

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