SIP refers to periodic investment in an MF. In this option, you commit to invest a pre-decided amount, at regular intervals, and you get allotted Units based on an MF’s NAV. E.g. Suppose you do an SIP of Rs. 1,000. If, for the 1st month its NAV is Rs. 15, you get 66.67 units. For the 2nd, the NAV is Rs. 25, so you get 40 units. For the 3rd, the NAV is Rs. 20, you get 50 units. At the end of 3 months, you have invested Rs. 3,000 and received 156.67 units at an average NAV of Rs. 19.2.
What is a direct plan?
A Direct Plan means you investing directly thru' an AMC/MF website. As there is no Distributor involved, returns generated by this plan will be higher by the percentage fees paid to a Distributor. We, at MoneyWorks4me, encourage investors to invest in Direct Plans.
What is a regular plan?
Regular Plan is when you invest in an MF scheme through a Distributor or Broker. This means you will end up paying some fees to the Distributor. The fees are directly paid by the AMC to a Distributor. For you as an investor, it is reflected in the lower NAV values, and higher Expense Ratio than a Direct Plan
What is an Asset Management Company (AMC)?
It is the Fund House or the company responsible for managing investors’ money, and in turn, all the MF schemes.
What is an Asset under Management (AUM)?
The money collected by an MF Scheme is invested across asset classes like stocks, debt Funds, gold and cash. The market value of these investments at any given time minus the MF’s liabilities is known as the Fund’s AUM. (E.g. If a Fund’s value of investments is Rs. 100 Cr and liabilities Rs 5 Cr., then AUM is Rs. 95 Cr.) Though, a large AUM denotes a Fund’s popularity and success, it also means restrictions on investing (Fund will have to invest mainly in large companies) and difficulty in replicating past high return performance.
What is Net Asset Value (NAV)?
It is the price per unit of the MF scheme. On any given day, NAV is the price at which any investor invests in an MF scheme. NAV = [the market value of all the securities held by the scheme minus its liabilities] ÷ the number of units. Since, market value of securities changes every day, NAV of a scheme also changes every day. Similar to a stock price, a high or low NAV does not affect our investment decision.
What is a Benchmark Index?
A Benchmark is a popular index like the SENSEX, NIFTY or BSE 100, against which a Fund’s performance is gauged. A Fund is supposed to choose a Benchmark based upon the market-section it invests in. E.g. a Mid-Cap Fund may use NSE Midcap Index as its Benchmark. It makes sense to invest in an MF, only if it has consistently beaten its Benchmark performance over a 3-5 year period.
What is Expense Ratio?
The Expense Ratio is the fee charged by a Mutual Fund for managing its investors’ money. It is shown as a percentage of the Assets Under Management (AUM). E.g. if you invest Rs. 10,000 in a Fund with an Expense Ratio of 1.5%, then you are paying the Fund Rs. 150 to manage your money. As a general rule, you are told to avoid Funds with high Expense Ratio. However, it can also turn to be a good investment, if it consistently generates excess returns (Alpha) over its Expense Ratio.
What is Load or No-Load Fund?
Load is the fees charged for buying (i.e. Entry load) and selling (i.e. Exit load) MF units. SEBI has scrapped the Entry load wef August 1, 2009. Some Funds may charge Investors an Exit load only on early exit (e.g. within a year of investment) to encourage long-term investment behaviour.
What is Rolling Return/Alpha?
Rolling Returns consider performance on every day or week (or any specified frequency) of a defined period, and hence, tell you how you would have fared regardless of when you chose to invest. E.g. A monthly five-year Rolling Return is return from 1-Jan-2013 to 1-Jan-2018, 1-Feb-2013 to 1Feb-2018, subsequently for all months. For 3-yr or 2-yr rolling, the year changes respectively. We advise our users to look at Rolling Alpha, because it allows you to evaluate the consistency of a Fund’s performance over time - including the ups and downs of market cycles.
What is Growth Scheme?
Choosing growth option means you will not receive extra units for Dividend declared by the Fund. Instead, the amount will stay invested in the Fund, thereby compounding your returns. Choose this option, if you prefer capital appreciation over regular income from your investment.
What is Open-ended Scheme?
An Open-ended Fund or Scheme is one that is available for subscription and re-purchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. The opposite is closed ended where the fund cannot be sold very easily.
What are the Color-coded tags or buttons that accompany every
Every fund is assessed on the following:
Consistent Outperformers : Track record of having generated returns above a benchmark on a
3-year rolling basis. Consistent performers are Green, followed by Orange. Red have an
inconsistent track record on outperforming the index.
The average 3-year rolling returns number appears in the first button.
Quality of Portfolio is assessed based on the quality of each stock held. Predominantly high
quality stocks get a Green second button, followed by Orange and Red (large amount of risky
Upside Potential: Every fund is assessed on what returns it could deliver in the next 5
years based on it.
How do you select the fund for SIP?
Select the fund that is Green on Performance which shows it has
consistently outperformed the index. Select one with a
high average 3-year rolling returns - the number in the first button. And select one with a Green
rating on Quality-the
How do you find the best funds within a category?
Use the Funds
Screener and select the category. It shows the
funds with Green on Performance and Quality right on the
top. The ones with the higher average 3-year rolling returns are ranked the highest. Funds with less
than 5 years
returns history are colored Grey on Performance. Since the track record is not for an adequately
long period they
feature lower in the list.
How do you build a portfolio with funds?
Build a well-diversified portfolio with funds that assures you
of a stable growth through market and economic cycles and
funds that enhance your portfolio returns over the long run.
Core Funds: Choose from Large cap, Large and Mid cap and Flexicap funds.
Choose from Mid and Small cap funds.
Select a Sector or Thematic Fund that is likely to outperform in the long term.
How do you analyze your current fund portfolio?
Use the Fund Portfolio Analyzer, Sher-ya-Billi to check if your
portfolio will deliver healthy returns or disappoint
you. Go to Fund Portfolio
Analyzer. You can also upload details of your funds in the Portfolio Manager and see the
report on this page.
What must you be careful about when add a new fund to your
When adding a new fund check how different is the fund compared
to your portfolio by using the link in the Right
allocation box on the Fund Decision Maker.
What are the main problems in a Fund Portfolio?
Most investors have more, many more funds that they should-over
diversified. This tends to reduce returns. Many
investors have more of the same i.e. they have funds that have very similar portfolios and hence the
fund portfolio is
not well-diversified. Either there are too many large cap dominated funds or far too many mid and
small cap funds. What
you require is a good, balanced mix. Finally investors don't know when to exit a fund and end up
carrying it even though
the future upside potential is very low.
Create stable, long-term investment portfolio with strong, consistent stocks.
Warning: Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Disclaimer: Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provides any assurance of returns to investors.
MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and
ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks.
Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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