Strategy for transcations in Mutual Funds..Pls Help!

[life2007]

Hello!

I have one nagging query and I am truly confused about it.

What should be one's strategy while putting money in Mutual Funds? Let me give my details to clarify better.

After doing lot of reading in this forum and receiving various expert opinion, I started investing in MFs in the year Jan-2008. I did both small SIPs and Lumpsums as my income was not steady. Out of the 7 funds 2 are ELSS and 5are regular diversified MFs. We can forget about ELSS now as there is 3 year lock in period. Now from the remaining 5 MFs, 3 are performing exceeding well and giving annual returns in the range of 28-31%.

However, the Investment sum is not too big, I just started in 2008 so about 12-14K for each fund. So despite the results showing good returns, the excess money (profit) is not so much that I can start drumbeats and bands

So here comes my real query! What should be my strategy?

A) To book profits? :We all agree that returns of 28-31% is too good and if
market goes crashing even 2K points, I will back to where I was. So what
am i doing since 2008, putting my hard earned money to help rich NRIs,
FIIs, markets and indian economy to grow!:lol:

B) If the answer is YES, then what am I going to do with the small Profits
booked? Put it in safe debt instruments or FDs or PFs. So that these
money is the real money I have earned by taking risks in stocks. Re-
investing in stock markets by waiting and watching for the stocks to come
down does not make sense to me as I feel it is like the bull tied to a pole
and moving round and round.

C) Take the whole chunk of the Investment I have made and wait for the
markets to crash to re-invest at lower levels? But as we all agree we
cannot time the markets so who knows if it goes to 25K level or 5K levels
from here. Does not seem practical either.

D) Have a pre-determined target say like when the markets reach 21K
regardless of whatever the situation, I will withdraw the whole investment
or book profits? Is this a good idea. Once pre-decided, it is then matter of
time, if I am lucky, the markets can shoot upto 21K in 2 weeks time, if i
am not (like most of us:lol then it wont be ladders but only snakes to reach the bottom
level.

I know many of you would be of the opinion that dont look at the markets, what is your financial goal and plan accordingly! To those, before they put in that comment, I would like to say that I am looking at long term perspective of some wealth creation. If I cannot do that in practical, atleast 5 years is the pre-decided target unless some emergency occurs!

My personal thoughts after reading so many articles is for example if I am investing Rs. 100 and and now getting Rs. 128, simply take that Rs. 28 and book it in FD or PPF and forget it. Let the balance Rs. 100 grow again and do the same thing. Ofcourse, we may not get Rs. 28 if the MF has risen within an year as 10% would be deducted due to short term trading, but still I thought it to be best method! How far you support this theory?

Wealth creators! Please do indicate an honest and your successful way of investing! And do reply before the markets tank down... or else I will complain to QuickGunMurugun:rofl:

Thanks & Regards

Jeet

 

[rajeshn2007]

Hi Jeet,
You have asked for help, but I guess "you" have helped many people out here about strategy for MF investing.
My view:
stock markets have performed well over long period of time , say 5-7 yrs.
since our markets is of high-beta, there are huge ups/dns, tempting small investors( traders ?) to time the markets, which will not be fruitful.
Hence , stay invested for 5 years, the time frame you have planned.

Review every 6 months, any bubble zone of 30/35 p/e, (which may/maynot happen), you can exit the markets and re-enter only below 15 p/e.
This may sound like timing , we are not following technicals here, but we are exiting/entering based on some basic fundas.

 

[life2007]

Hello Rajesh!

How have I helped people out there, I was just translating my thougths. Well, if I have really helped, wow... i have natural inclination to be a financial advisor. . Just on lighter vein Rajesh

Rajesh, I got your point of staying invested for 5 years. But two queries...
A) What if the famous 2008 crash occur just at the end of the term of 5 years.. It would take another 2-3 years to get back my prinicipal amount and another 2-3 years to get decent returns. So in total for 10 years, I get returns say about @ 15% which is lesser or equal to FDs or PFs or any other assured returns investment. Then what is the point to carry out that small headache of our hard earned money diving in midair?. I know the opposite could also happen i.e just at the end of the term there is an explosive growth, but if it happens, I dont care and I know you wont either

B) Again staying invested for 5 years is an on going process. It is not something that I invest 1 lac today and wait for the next 5 years. Sometimes, you invest just a paltry SIP of 1K per month, sometimes, if you are lucky to have surplus amount, you put another 5K or 10K lumpsum. Even in the fourth year, you keep on investing. Do you mean that for every year I invest X amount I have to wait for 5 years ie. let us say I invest 25K in the 4th year from today (2013) so I have to wait for the next 5 years ie. until
(2018)?

Somehow I am not finding it too practical to stay invested for long term without seeing the actual picture of our investments atleast monthly. Why not pocket those extra unexpected returns when there is explosion in the market. By that way, probably we will take home the principal amount invested bit by bit and still remain in the market.

I hope I am expressing myself clearly. Hope others will also join in this intersting discussion for benefit of all

Thanks & Regards

Jeet

PS: Rajesh! I did not get much of your last paragraph " Review every 6 months..............some basic fundas". Please do explain once again if you can. Thanks.

Hi Jeet,
You have asked for help, but I guess "you" have helped many people out here about strategy for MF investing.
My view:
stock markets have performed well over long period of time , say 5-7 yrs.
since our markets is of high-beta, there are huge ups/dns, tempting small investors( traders ?) to time the markets, which will not be fruitful.
Hence , stay invested for 5 years, the time frame you have planned.

Review every 6 months, any bubble zone of 30/35 p/e, (which may/maynot happen), you can exit the markets and re-enter only below 15 p/e.
This may sound like timing , we are not following technicals here, but we are exiting/entering based on some basic fundas.

 

[rajeshn2007]

Historically, markets have given a returns of about 20/25%p.a over 5/7 yrs time. there might be ups and dns in between, which we are not concerned about.

Just a few notes:

1. invest a fixed amount as sip for 3/5/7yrs from any particular date.

2.no intermediate investments, unless markets below 10k.

3.at the end your planned tenure check out the returns, if it is below 20%, continue the sip for another 2Yrs. markets will average out and give you the above mentioned returns.


And when to re-enter. that's where the fundamentals come into play.

Going by the fundamental data, any investments around 8-10k is good and similarly if any explosive /bubble in markets (p/e ratio of 25 and above times) would take the sensex around 25k.
Any levels around there would be an exit opportunity.

 

[chincho]

Hello!

I have one nagging query and I am truly confused about it.

What should be one's strategy while putting money in Mutual Funds? Let me give my details to clarify better.

After doing lot of reading in this forum and receiving various expert opinion, I started investing in MFs in the year Jan-2008. I did both small SIPs and Lumpsums as my income was not steady. Out of the 7 funds 2 are ELSS and 5are regular diversified MFs. We can forget about ELSS now as there is 3 year lock in period. Now from the remaining 5 MFs, 3 are performing exceeding well and giving annual returns in the range of 28-31%.

However, the Investment sum is not too big, I just started in 2008 so about 12-14K for each fund. So despite the results showing good returns, the excess money (profit) is not so much that I can start drumbeats and bands

So here comes my real query! What should be my strategy?

A) To book profits? :We all agree that returns of 28-31% is too good and if
market goes crashing even 2K points, I will back to where I was. So what
am i doing since 2008, putting my hard earned money to help rich NRIs,
FIIs, markets and indian economy to grow!:lol:

B) If the answer is YES, then what am I going to do with the small Profits
booked? Put it in safe debt instruments or FDs or PFs. So that these
money is the real money I have earned by taking risks in stocks. Re-
investing in stock markets by waiting and watching for the stocks to come
down does not make sense to me as I feel it is like the bull tied to a pole
and moving round and round.

C) Take the whole chunk of the Investment I have made and wait for the
markets to crash to re-invest at lower levels? But as we all agree we
cannot time the markets so who knows if it goes to 25K level or 5K levels
from here. Does not seem practical either.

D) Have a pre-determined target say like when the markets reach 21K
regardless of whatever the situation, I will withdraw the whole investment
or book profits? Is this a good idea. Once pre-decided, it is then matter of
time, if I am lucky, the markets can shoot upto 21K in 2 weeks time, if i
am not (like most of us:lol then it wont be ladders but only snakes to reach the bottom
level.

I know many of you would be of the opinion that dont look at the markets, what is your financial goal and plan accordingly! To those, before they put in that comment, I would like to say that I am looking at long term perspective of some wealth creation. If I cannot do that in practical, atleast 5 years is the pre-decided target unless some emergency occurs!

My personal thoughts after reading so many articles is for example if I am investing Rs. 100 and and now getting Rs. 128, simply take that Rs. 28 and book it in FD or PPF and forget it. Let the balance Rs. 100 grow again and do the same thing. Ofcourse, we may not get Rs. 28 if the MF has risen within an year as 10% would be deducted due to short term trading, but still I thought it to be best method! How far you support this theory?

Wealth creators! Please do indicate an honest and your successful way of investing! And do reply before the markets tank down... or else I will complain to QuickGunMurugun:rofl:

Thanks & Regards

Jeet

As said before do not try to time the market. Stay invested for a long term and you will get the returns.

As you are saying that you have very small investment thru SIP's continue them for 2 - 3 years so that you build up good corpus and then can cash on hen you gain desired returns. Please remember the value of return depends upon the investment you are doing so if you invest only 10,000 at 10% returns you are going to get only 1,000 , but if you would have invested 1,00,000 you would have got 10,000. Do not go on value of returns calculate it in percentages.

A 20 - 25% anuualized return is very good in long term. So stay invested do not time markets. Their are always exceptions to rules so if you feel that their is bubble in the market you can cash on.

Happy Investing....

 

[kmehul]

You could stragesize to capture profits on your investments in two ways. If th ePE ratio goes above 22 than book profits and again invest if the PE ratio is below 15. Change the ratio threshold to your comfort. The other way to book profit in any month/quarter if the holdings go up by 15% from the last month/qtr. reinvest when it goes below 15% so as to shore up the deficit to complete the 15% or less gap. this is called value investing.

you can email me at [email protected] for clarifications

cheers,
mehul

 

[mrindia]

Hello!

I have one nagging query and I am truly confused about it.

What should be one's strategy while putting money in Mutual Funds? Let me give my details to clarify better.

After doing lot of reading in this forum and receiving various expert opinion, I started investing in MFs in the year Jan-2008. I did both small SIPs and Lumpsums as my income was not steady. Out of the 7 funds 2 are ELSS and 5are regular diversified MFs. We can forget about ELSS now as there is 3 year lock in period. Now from the remaining 5 MFs, 3 are performing exceeding well and giving annual returns in the range of 28-31%.

However, the Investment sum is not too big, I just started in 2008 so about 12-14K for each fund. So despite the results showing good returns, the excess money (profit) is not so much that I can start drumbeats and bands

So here comes my real query! What should be my strategy?

A) To book profits? :We all agree that returns of 28-31% is too good and if
market goes crashing even 2K points, I will back to where I was. So what
am i doing since 2008, putting my hard earned money to help rich NRIs,
FIIs, markets and indian economy to grow!:lol:

B) If the answer is YES, then what am I going to do with the small Profits
booked? Put it in safe debt instruments or FDs or PFs. So that these
money is the real money I have earned by taking risks in stocks. Re-
investing in stock markets by waiting and watching for the stocks to come
down does not make sense to me as I feel it is like the bull tied to a pole
and moving round and round.

C) Take the whole chunk of the Investment I have made and wait for the
markets to crash to re-invest at lower levels? But as we all agree we
cannot time the markets so who knows if it goes to 25K level or 5K levels
from here. Does not seem practical either.

D) Have a pre-determined target say like when the markets reach 21K
regardless of whatever the situation, I will withdraw the whole investment
or book profits? Is this a good idea. Once pre-decided, it is then matter of
time, if I am lucky, the markets can shoot upto 21K in 2 weeks time, if i
am not (like most of us:lol then it wont be ladders but only snakes to reach the bottom
level.

I know many of you would be of the opinion that dont look at the markets, what is your financial goal and plan accordingly! To those, before they put in that comment, I would like to say that I am looking at long term perspective of some wealth creation. If I cannot do that in practical, atleast 5 years is the pre-decided target unless some emergency occurs!

My personal thoughts after reading so many articles is for example if I am investing Rs. 100 and and now getting Rs. 128, simply take that Rs. 28 and book it in FD or PPF and forget it. Let the balance Rs. 100 grow again and do the same thing. Ofcourse, we may not get Rs. 28 if the MF has risen within an year as 10% would be deducted due to short term trading, but still I thought it to be best method! How far you support this theory?

Wealth creators! Please do indicate an honest and your successful way of investing! And do reply before the markets tank down... or else I will complain to QuickGunMurugun:rofl:

Thanks & Regards

Jeet

Hello Jeet!
Though I am not a wealth creator, but would like to share views of my tiny brain!!
All our financial planning has some financial goals also. Ppl who start to invest at a younger age have time interval on their side & it has been proven that equity beats all forms of investment-returns over long time. I agree that a sudden sink of indices may erode ur hard earned money over years. That why 2 things are advised:
1) Try to re balance ur portfolio like once a yr. See if you plan to allocate 65% in equities & 35% in safe bets(FDs etc), & equity out-pours at a period, book partial profits & allocate the earned money to debt.
2) As U approach near ur goal, use instruments like SWP to come out. Although the returns will be tapered as u approach ur goal over the years; but u will not feel urself in lurch when its time to utilize that money. That's why- as the age moves towards retirement, experts tell to remain more towards debt rather than equities.

Some other usual facts to be borne in mind:
* MFs are not like Stocks. We r paying fund managers to churn stocks every-day & let them play with the bets & concentrate on general performance of the fund, its overall risk profile.
If the stock rises, its the job of fund manager to decide about booking profit or not.
Usually stock trading requires u to actively participate in market & MFs allow u take rest from trading at least for months together
* Never allocate that money in Equity instruments which u require for next 4-5 yrs
Happy investing

mr india

 

[Quakerman]

Jeet:

You may want to consider the AIM trading system (automatic investment management) developed by Rbt. Lichello back in the 70's.

Another system is the Simple Trading System, by Praveen Puri based on Constant Value Investing, which is similar to the above.

Both systems are discussed in detail at different web sites. As well you can purchase
books on ebay and amazon. Lichello book is How to make $100000 automatically. Praveen Puri book is Simple Trading System

Hope this helps you

Quakerman

 

[Lyagushkka]

Who knows where to download XRumer 5.0 Palladium?

Who knows where to download XRumer 5.0 Palladium?
Help, please. All recommend this program to effectively advertise on the Internet, this is the best program!

 

[swama694]

Best method is to take 3-4 equity funds and corresponding debt funds of the same funds house

For example

Birla SL Frontline Equity Birla Sunlife Dyn Bond Fund
IDFC Premier Equity IDFC Dynamic Bond Fund
DSPBR Equity DSPBR Short/medium Term Fund

Fololow the BSE or NSE p/e ratio everymonth and tweak portfolio accordingly by setting triggers based on P/E this will bring some discipline and get away from human emotions behind buying n selling

P/E Equityebt
Upto 13 80 :20
13-17 65:35
17-21 50:50
21-25 35:65
25 and above 20:80

This strategy you can tweak based on risk taking capacity.

No worries of rebalancing...but try to track the underlying index of the respective fund.
May be this option wont outperform the portfoilio made from SIP investments in same fund but can contain the downside as SIP in uptrend market will come out with only worse results and adding lumpsum is not wise.....so we need to time the market in some sense.



Alternative method is to use a value purchase investment program.
Check for how to do that in snP CNX 500 fund from benchmark. There they have given a presentation on how to do that with VIP. Make a spread sheet and take an online account with HDFCbank as they are offereing free service now or fundsindia.com. Then same way take some debt fund and equity fund from same fund and make sure rebalance complete portfolio every year or when you feel that portfolio has change more than 15% or more.

Regards,

Swama