How To Deal With Reclassification Of Funds
For a long time, market regulator, the Securities and Exchange Board of India (Sebi), had been asking fund houses to reduce the number of funds they have, the purpose being to make it simpler for investors to choose funds. In October 2017, the regulator came out with a circular that reclassified openend funds into five categories and 36 sub-categories. Of the 850 open-end schemes in existence, it was expected that almost 50 schemes would have to be merged as they had similar mandates. In reality, fewer funds have been merged while the rest have been moved into different categories.
Currently, those mergers and change of mandates are happening. Fund houses have started sending out communications to investors in this regard. If any of the schemes that you have invested in has undergone a change, you need to evaluate the change and take suitable action.
After the Sebi circular, one advantage will be that fund managers will have to stick to their mandates. Large-cap funds, for instance, will have to invest the majority of their portfolio holdings in largecap stocks, which have been defined as 1-100 stocks by market capitalisation. In the past, especially during market rallies, fund managers would take large exposures to mid- and small-cap stocks in order to outperform their peers. This will no longer be possible. A foray into mid- and smallcap stocks made a large-cap fund more volatile and risky. Investors putting their money in a large-cap fund may not have wanted such volatility. Also, when all the funds follow a similar investment mandate, as will be the case now, their performance comparison becomes truer. It becomes a more like-to-like comparison.
Barring a few categories, fund houses will be allowed to own only one fund in most categories. Hence, the best fund managers in each fund house will be able to focus their attention on a single fund, or at least a reduced number of funds.
Esta historia es de la edición May 2018 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 8500 revistas y periódicos.
Ya eres suscriptor ? Conectar
Esta historia es de la edición May 2018 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 8500 revistas y periódicos.
Ya eres suscriptor? Conectar
How To Build And Maintain A Long-Term Portfolio
Building a robust long-term portfolio involves two steps. First, you must decide on your asset allocation-essentially the distribution of your investments across various asset classes such that it aligns with your financial goals and risk tolerance.
Learn The Magic Of Self-Talk
There is perpetual self-talk taking place inside all of us
Health Cover: How Family Floater health insurance plans work to your advantage?
The right amount of health insurance coverage can help you stay on track with your finances and life goals. In the absence of health insurance, one may be forced to delve into current investments, jeopardising ambitions such as children's education and home ownership.
Empowering Women: Understanding Inheritance Rights in India
In the intricate tapestry of India's diverse inheritance landscape, where the threads of religious laws weave a complex pattern, don't entrust your legacy to fate's capricious hand. Instead, wield the brush of certainty by crafting your will.
Protecting Those Who Matter Most: Understanding the Importance of Life Insurance for Our Loved Ones
Mr. Sanjiv Bajaj is the Jt. Chairman & MD, Bajaj Capital, building the platform for the Business leaders of the Financial Services and Advisory sector to exchange their vision, experience, and views on making the right financial decisions.
Unit-Linked Insurance Plans: How to make use of ULIPS to meet long-term goals?
Unit-linked insurance plans, or Ulips, are a good option if you wish to combine life insurance with savings for long-term goals in one financial plan.
Why Should One Consider Investing In A Large Cap Fund?
An investor’s ability to create wealth in the longterm is directly linked to how well they create an all-weather investment portfolio.
Meeting Medical Costs with Health Insurance Plans
A medical emergency can occur at any time and to any person.
Water: The Elixir of Life
If there is magic on the Planet Earth, it is contained in water - Loran Eiseley.
The 100 Crore Wealth Legacy! A Vision
Generating 100 crores from modest investments is feasible with a long-term outlook, though market timing remains elusive.