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manish962
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   Posted: 27/Jun/2011 at 5:32pm |
You can invest in FMPs of 1year horizon having 9.5 to 9.6% yield.
Or invest in Short term FMPs of 3months horizon yielding 9 to 9.2% and once the interest cycle peaks out(3 to 6months time), you can invest in G-sec funds/Income funds.
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kumardiwesh
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Posted: 27/Jun/2011 at 8:07pm |
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How to invest in G-secs?
Do I do that through gilt funds?
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"History does not tell you the probability of future financial things happening" - Warren Buffett
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smartcat
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Posted: 27/Jun/2011 at 10:36pm |
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Yessir. Through gilt funds.
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Monkey
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Posted: 28/Jun/2011 at 12:09pm |
One interesting variant is "P/E ratio fund" offered by Franklin Templeton. This fund adjusts equity & debt allocation based on P/E ratio of Nifty. With increasing P/E ratio of Nifty, equity allocation decreases and debt allocation increases and vice versa. In theory, this ensures automatic rebalancing plus it is tax efficient as well. I am not sure how well it works practically. I have not tried it. If anyone on forum has experience on this fund, pelase do share.
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smartcat
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Posted: 28/Jun/2011 at 12:21pm |
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If managed well, those P/E ratio funds should offer good risk adjusted returns. But they don't seem to be doing that
Tata Equity PE fund, for example, has returned 24% CAGR in the past 7 years. However, its NAV has been as volatile as any other plain vanilla equity MF.
Those seeking a smoother ride should opt for HDFC Balanced fund. It has been around for 17 years now and has offered 21% CAGR.
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kumardiwesh
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Posted: 28/Jun/2011 at 1:44pm |
Originally posted by smartcat
Yessir. Through gilt funds. |
Thanks a lot for the info.
How do I calculate returns for a certain movement in interest rates?
Is there any way to figure out how much I would earn from investing in G-secs if interest rates go down by, let's say, 100 bps?
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"History does not tell you the probability of future financial things happening" - Warren Buffett
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nikrod12
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Posted: 28/Jun/2011 at 2:32pm |
Originally posted by kumardiwesh
How do I calculate returns for a certain movement in interest rates?
Is there any way to figure out how much I would earn from investing in G-secs if interest rates go down by, let's say, 100 bps? |
I don't have a quick formula for calculating this. You'll have to search that on web. But I'll explain it with a quick example. Assume a bond with face value of 1000 and interest rate of 10%. That means bond pays 100 Rs. every year as interest. Let's also assume that current inerest rates are 10%. So bond will trade for Rs. 1000. Now if interest rates move to 9%, you will get that return from all simillar bonds. Hence market adjusts bond price to match the interest with yield. Since our bond is paying 100 Rs. a year, which should now be 9%, the market price will move to 100 * (100/9) = 1111 On the other hand if interest rates move up to 11%, bond value would be 100 * (100/11) = 909
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manish962
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Joined: 21/Feb/2010
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Posted: 28/Jun/2011 at 3:14pm |
Originally posted by smartcat
If managed well, those P/E ratio funds should offer good risk adjusted returns. But they don't seem to be doing that
Tata Equity PE fund, for example, has returned 24% CAGR in the past 7 years. However, its NAV has been as volatile as any other plain vanilla equity MF.
Those seeking a smoother ride should opt for HDFC Balanced fund. It has been around for 17 years now and has offered 21% CAGR.
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I would prefer HDFC Prudence to HDFC Balanced fund as Prudence fund has larger AUM (6200 Cr.) and the returns are higher than that of Balanced fund. Also Prudence fund is since 1994 and is well managed by Mr. Prashant Jain.
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