Insights

An email exchange inside FundsIndia

October 31, 2013 . Srikanth Meenakshi

A few minutes back, there was an email exchange between one of our advisors and our head of research, Vidya. It kind of illustrates the kind of dialogues we have internally and throws light on our research and advisory philosophy. I thought I would share the exchange with our blog readers. Please see below and you can judge for yourself.

FundsIndia Debate

One of our advisors, Krish Anand sent an email to Vidya with a question:

=============

Hello Madam,

Please see this article by a young person, Pratik Vasa who says that more money is made from sector funds. He says that the rally upto Sensex 21K from around 18K levels has not been broad based and we need to look at specific sectors to get good returns. It is a question of risk vs rewards ratio.

http://wealthforumezine.net/Advisorspeak261013.html#.UnHnLJSztZg

Kindly request to consider sector funds in FundsIndia. Investor has to be advised on the risk factors.

Warm regards,

K. Anand
Advisory Department

=============

Vidya’s response to Anand’s mail was as below.

============

Hello Anand,

Good article. But I think it does not talk about sector funds. It talks about looking beyond the Sensex, into specific sectors and stock-specific opportunities (we discussed yesterday with an example as to how stock-specific opportunities arise even in a bear market). He has discussed how some sectors played out well even as the Sensex went nowhere. That is precisely what active fund managers do in a diversified fund. They take a bottom up approach for a good part and increase or decrease sector holding (as we saw with FMCG, banking IT etc) based on the sector’s fortunes.

Sector funds choices need more than a ‘past track record’ to catch the right sectors and also exit them right as there are no perennial bull runs in sector funds.
The risk of not catching them is very high. I would also urge you to read our article https://www.fundsindia.com/blog/mutual-funds/should-you-have-sector-funds-in-your-portfolio/2301 and see the data between 2003-07 and how the currently hot sector funds did then when compared with diversified funds.

We can only offer long-term wealth building portfolios and not calls for ‘tactical allocations’. We are not running an PMS. Besides, choosing sectors is the job of the fund manager not an advisor. Recommending sector funds involves understanding the fortunes of each sector and its prospects in-depth. That is something a fund manager should be doing.

I believe the primary first objective for FundsIndia advisory should be ‘to mitigate risks as much as possible and then comes building wealth efficiently’. In this regard, I shall be constrained from including any sector fund in our core portfolios. At best one sector that may qualify for a long-term portfolio would be banking. But that again may be a recommendation outside the Select list.

Thanks
Vidya

============

I think this exchange illustrates both the active debates we have internally, as well as the core objective of our advisory services – ‘to mitigate risks as much as possible and then building wealth efficiently’.

Comments

Get FundsIndia’s articles delivered straight to your inbox!

Enter your email address to get:

  • Mutual fund recommendations from experts
  • Buy, hold or sell calls for stocks
  • Investment tips and tricks
  • All the latest news from Fundsindia.com

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

2 thoughts on “An email exchange inside FundsIndia

  1. Given that both HDFC’s index funds (Sensex and Nifty) have 0.15% expense ratio (direct plan), it’s foolish to not invest in them.

    I would recommend keeping them as the “core portfolio” (say 60% equity allocation) and dabbling with the rest of your equity investments in whatever sector catches your fancy. But not having index investments (SIP) is way too risky in the long run.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 4,405 other subscribers