How Should MF Investors Position For Next 5 Years?: Kalpen Parekh & Amit Kukreja Decode

Summary

The Mutual Fund Show, hosted by Alex Matthew, discusses strategies for mutual fund investments amidst market volatility. The show features Kpin Parik, CEO of DSP Mutual Fund, who addresses concerns about recent SIP data and equity market trends. They delve into thematic funds' popularity and the importance of timing investments. Parik emphasizes the long-term benefits of equities and the stability of corporate India's growth rates, recommending hybrid portfolios to balance asset classes. Amit Kukreja joins the discussion, comparing ETFs and index funds, and advising on systematic investment plans for market dips and retirement planning.

Takeaways

• 📈 The mutual fund show aims to provide actionable information to help viewers make informed decisions when investing in mutual funds.
• 📊 Despite market volatility, the long-term trend of SIP investments has been strong, with a consistent flow of new investors joining the industry.
• 💡 The managing director of DSP mutual fund suggests that investors should focus on profit growth and return on equity (RoE) when considering long-term investments.
• 🤔 Concerns are raised about investors potentially buying into 'hot' themes at the peak of their cycle without understanding the associated risks and volatility.
• 🕒 The June 4th market dip highlighted issues with transaction cut-off times and the need for aggregators to ensure timely investment execution.
• 🌐 The importance of diversification in a portfolio is emphasized, suggesting a mix of equity, bonds, and other asset classes to mitigate overvaluation risks.
• 💼 Amit kukreja, the founder of am Amit cra.com, discusses the challenges of timing the market and the benefits of systematic investment plans (SIPs) over trying to capitalize on short-term market fluctuations.
• 💹 The script touches on the performance of thematic funds, which have delivered superior returns in recent years, attracting significant investment flows.
• 📉 The potential for missed investment opportunities due to cut-off times is acknowledged, but the long-term impact is considered minimal for disciplined investors.
• 🏦 The role of banks and financial institutions in facilitating real-time transactions is highlighted as crucial for investors looking to capitalize on market dips.
• 📝 A reminder that the costs associated with ETFs should be considered in the context of overall investment strategy, including brokerage fees and transaction costs.

Q & A

What is the main focus of the Mutual Fund Show?

The Mutual Fund Show focuses on providing actionable information to help viewers make informed decisions when investing in mutual funds.

What was the recent experience in the equity markets that Alex Matthew referred to in the show?

Alex Matthew referred to the 'chop and churn' in the equity markets over the last week and a half, which likely refers to significant volatility and fluctuations in stock prices.

Who is Kpin Parik and what is his role in the discussion?

Kpin Parik is the Managing Director and Chief Executive Officer at DSP Mutual Fund. He joined the show to discuss positioning and portfolio management in the context of recent market experiences.

What is the significance of the SIP number mentioned in the script?

The SIP (Systematic Investment Plan) number, close to 20,900 crores since July of the previous year, signifies the amount of new investments coming into the mutual fund industry, indicating a trend of increasing participation from new investors.

What does Kpin Parik suggest about the gross to net SIP ratio and its implications?

Kpin Parik suggests that the gross to net SIP ratio, which is around 40 to 50%, indicates that while there are many new investors joining, there is also a consistent 'leakage' or closure of SIPs from existing investors, which is a common trend over a long period of time.

What was the total flow into Equity mutual fund schemes as discussed in the script?

The total flow into Equity mutual fund schemes was discussed to be well over 30,000 crore rupees, closer to 35,000 crore rupees, with a significant amount going into thematic funds.

What is the 'iron law of fund selection' as mentioned by Kpin Parik?

The 'iron law of fund selection' refers to the human tendency to invest in funds based on their past performance, which can lead to investing in funds that have recently delivered superior returns but may not necessarily continue to do so in the future.

What issue did investors face on June 4th when trying to 'buy the dip'?

Some investors faced the issue of their funds being received after the cut-off time, which meant they did not get the NAV (Net Asset Value) of the day they intended to invest, but rather the NAV of the next day when the market had already recovered.

What is the role of aggregators in mutual fund investments as discussed in the script?

Aggregators play a crucial role in facilitating the transfer of money from investors' accounts to mutual fund scheme accounts, especially for banks that do not have real-time transmission capabilities.

What are the two key factors that Kpin Parik identifies for long-term equity returns in India?

The two key factors identified for long-term equity returns in India are the profit growth rate of corporate India, which has historically been between 13 to 15%, and the Return on Equity (RoE), which is typically between 18 to 22%.

What is the recommended approach for investors with a 5 to 7-year time horizon according to the discussion?

For investors with a 5 to 7-year time horizon, the recommended approach is to have a hybrid portfolio that blends multiple asset classes, which can help mitigate the impact of overvaluation and provide stability in returns.

What is the current 10-year Sovereign bond rate in India as per the script?

The current 10-year Sovereign bond rate in India is at 7%, which is considered stable with a potential downward drift.

What are the two main risks that a bond investor should be aware of?

The two main risks that a bond investor should be aware of are interest rate risk and credit risk.

What is the difference between investing in ETFs and index mutual funds in terms of cost?

While ETFs generally have a lower expense ratio than mutual funds, the overall cost can be higher due to additional costs such as brokerage fees and DMAT account costs for transactions.

Why might an investor choose to invest in ETFs over index mutual funds?

An investor might choose to invest in ETFs over index mutual funds for the ability to buy or sell at a specific price during market dips, providing more control over the entry and exit points of their investments.

What is the recommended minimum holding period for midcap investments according to Amit?

The recommended minimum holding period for midcap investments is eight years, as it allows for better returns over the long term due to the higher volatility associated with midcap stocks.

What is the potential accumulation for a 56-year-old investor starting an SIP of 10,000 rupees per month in the HDFC midcap opportunities fund with a 5-year time horizon?

With a 14% compound annual growth rate (CAGR), the potential accumulation for this investor would be approximately 8.5 lakhs over a 5-year period.

Outlines

00:00

📈 Market Volatility and Investment Strategies

In this segment, Alex Matthew introduces the Mutual Fund Show and discusses recent market fluctuations. He is joined by Kpin Parik, CEO of DSP Mutual Fund, to explore strategies for positioning investments amidst market uncertainty. They delve into the significance of the latest SIP numbers, the impact of thematic funds, and the importance of timing investments. Parik emphasizes the 'iron law of fund selection', noting that past performance influences future investment decisions.

05:04

🤔 Investor Behavior and Market Dynamics

This paragraph delves into investor behavior, focusing on the tendency to invest based on past performance. It discusses the challenges of timing investments, especially during market dips, and the importance of having a long-term perspective. The conversation highlights the significant inflows into thematic funds and the potential risks of investing in 'hot themes' without understanding market cycles. The speakers also address the issue of investors missing out on the opportunity to buy at lower prices due to transaction cut-off times.

10:05

💼 Building and Maintaining Long-Term Portfolios

The discussion shifts to long-term investment strategies, emphasizing the role of equities in beating inflation and increasing purchasing power. Corporate India's consistent profit growth and the return on equity (RoE) are identified as key factors influencing long-term returns. The impact of valuations and the benefits of time on investment returns are explored. The conversation also touches on the role of hybrid portfolios in managing overvaluation risks and the importance of a 5 to 7-year time horizon for Indian investors.

15:07

📊 Fixed Income Investments and Bond Market Insights

This section provides insights into the fixed income side of a balanced portfolio, focusing on the current state of the bond market. The stability of the 10-year Sovereign bond yield and the factors influencing bond prices are discussed. The potential for bonds to earn between 7 to 9% over the next 2 to 3 years is highlighted, along with the importance of avoiding inferior-quality corporate bonds to manage credit risk effectively.

20:09

🕊️ Market Timing, ETFs vs. Mutual Funds, and Retirement Planning

The final paragraph addresses the challenges of market timing and the merits of ETFs versus mutual funds, especially in the context of capturing market dips. The conversation includes a discussion on the costs associated with ETFs and the potential for higher returns compared to index funds. Additionally, the segment provides guidance for a viewer looking to build a retirement fund, emphasizing the importance of a long investment horizon and the selection of appropriate funds based on risk tolerance and investment goals.

Keywords

💡Mutual Fund

A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities that is managed by an investment company. In the video, mutual funds are the central theme, as the show aims to provide actionable information to help viewers make informed investment decisions in mutual funds. The discussion includes various aspects of mutual fund investment strategies and market behaviors.

💡Equity Markets

Equity markets refer to the forums where stocks or shares of publicly held companies are traded. In the script, the 'chop and churn in the equity markets' is mentioned, indicating the volatility and fluctuations that investors might have experienced, prompting discussions on how to position investments amidst such market conditions.

💡SIP (Systematic Investment Plan)

A SIP is a method of investing in mutual funds by contributing a fixed amount at regular intervals, typically monthly. The script discusses SIP numbers, indicating the amount of money being invested through this systematic approach, and how it reflects the participation of new investors in the mutual fund industry.

💡Gross vs. Net SIP

Gross SIP refers to the total amount of new investments coming in, while net SIP is the amount after considering redemptions or withdrawals. The script mentions the difference between these two figures, highlighting the ongoing trend of new investments versus those that are being withdrawn or completed.

💡Thematic Funds

Thematic funds are a type of investment fund that focuses on specific themes or trends, such as technology or renewable energy. The script discusses the significant inflows into thematic funds, suggesting that investors are showing interest in these focused investment areas, which have delivered superior returns in recent years.

💡NAV (Net Asset Value)

NAV is the value of a fund's assets minus its liabilities, divided by the number of shares outstanding. It represents the value of each share of a mutual fund. The script mentions NAV in the context of investors trying to buy at a dip and the challenges of receiving the desired NAV due to market fluctuations and cut-off times.

💡Portfolio Diversification

Portfolio diversification is the process of spreading investments across various financial instruments, industries, and other categories to minimize risk. In the video, diversification is recommended as a strategy to manage the risk of overvaluation in the market, by blending different asset classes such as equities, bonds, and gold.

💡ROE (Return on Equity)

ROE is a measure of the profitability of a company relative to the equity owned by its shareholders. In the script, ROE is discussed as an important factor for investors to consider, as it reflects the efficiency with which a company generates profit from the money shareholders have invested.

💡Hybrid Portfolio

A hybrid portfolio is an investment strategy that combines different asset classes, such as equities and bonds, to balance risk and return. The script suggests that a hybrid portfolio can be beneficial for investors, particularly in the current market conditions where valuations are slightly high.

💡ETFs (Exchange-Traded Funds)

ETFs are investment funds that are traded on stock exchanges, similar to individual stocks. They often track an index, a commodity, bonds, or a basket of assets. The script discusses the advantages of ETFs for investors looking to take advantage of market dips during the day, as they allow for trading at specific prices unlike mutual funds which only offer end-of-day NAV.

💡Index Funds

Index funds are a type of mutual fund with a portfolio constructed to match or track the components of a financial market index, such as the S&P 500. The script contrasts index funds with ETFs, discussing the cost considerations and the overall investment strategy, noting that while ETFs may offer specific advantages, the long-term cost difference between ETFs and index funds is minimal.

Highlights

The Mutual Fund Show aims to provide actionable information for investing in mutual funds.

Equity markets have experienced significant volatility, prompting discussions on investment positioning.

Kpin Parik, CEO of DSP Mutual Fund, shares insights on navigating the current market situation.

Discussing the significance of the latest data on Systematic Investment Plans (SIPs).

The disparity between gross and net SIP numbers and its implications for the industry.

The trend of thematic funds gaining popularity among mutual fund investors.

Concerns about investors buying into 'hot' themes without understanding the risk.

The importance of timing when investing in thematic funds to avoid market volatility.

Investors' experiences with mutual funds during market dips and the challenges of NAV allotment.

The role of aggregators in mutual fund investments and potential improvements in the process.

Strategies for building and maintaining a long-term portfolio in the current market climate.

The historical performance of equities as an asset class for long-term growth.

Factors influencing the returns on investments in corporate India, such as profit growth and RoE.

The impact of market valuations on long-term investment returns and strategies to mitigate risks.

Recommendations for a hybrid portfolio approach to balance different asset classes.

Analysis of the fixed income market and the potential returns on bonds in the current economic environment.

The difference between investing in mutual funds and exchange-traded funds (ETFs).

Cost considerations when choosing between ETFs and index mutual funds.

Strategies for retirement fund building and considerations for investors of different age groups.

Transcripts

[Music]

hi thanks so much for joining in you're

watching the mutual fund show and my

name is Alex Matthew like the name

suggests this show is geared towards

getting you information actionable in

information that will help you make the

right choices when you're investing in

mutual funds and we have a host of

topics that we normally discuss but

given the kind of uh exper experience

that you've probably had over the last

week week and a half or so with the kind

of chop and churn in the equity markets

I'm sure a lot of you are wondering with

the dust now showing signs of settling

how you should position yourself going

forward what are the aspects to focus on

because the political the theater over a

period of time will wind down at least a

little bit to talk about that and more

I'm joined by kpin parik who is the

managing director and chief executive

officer at DSP mutual fund

thanks is always for taking the time

always a pleasure having you on the show

uh and you know before we start with

some of these aspects with positioning

yourself and identifying how to build

and maintain your long-term portfolio

I'm actually curious about some what you

think about some of the latest data that

has come through from ay and um just

interesting about that uh sip number

first of all which is close to 20,900 00

CR since July of last year we've been

seeing all-time highs every month but

we've also come to know about the net

number which is much lower of course

than the gross number uh and so is it um

do you take this data uh as a

representative of the industry with a

pinch of

salt uh thanks for inviting me uh again

uh to your show Alex and uh like like

you mentioned lot has happened in the

last 3 weeks or so uh actually I've been

immune to that because I was on two

holidays I've just lucky you Calin I I I

left uh when Nifty was at a level and

it's back to the same number so actually

nothing has happened for me and that is

how investing should be coming to the

numbers you know this data has been

there forever you know for many years

now um there is a ratio of around 40 to

50% in terms of the gross to net so

uh the 15 to 20,000 CR gross number that

we see every month is the new sips that

are coming in from a different set of

new investors who are joining the

industry and um finally when you see the

net number in you know closer to 8 or

9,000 crores there are some old sips

which are completing their tenor there

are certain sips where the investor may

have a cash flow need and he's stopping

his sips so this has been a common trend

for a long period of time and there's

nothing unusual that I would read into

it it is business as usual there is

always this leakage I won't use the word

leakage it's actually closure or end of

sip so let's say if in 2015 I had done a

8e sip that 8e sip is getting over and

that's why it's not getting reflected in

the next round so nothing to really read

too much into it according to me I'm I'm

glad that you pointed that out but and

before we get into again the portfolio

side one or two other aspects uh struck

me in today's data which is the kind of

flows overall into Equity mutual fund

schemes and I'm talking about the

actively managed schemes well over

30,000 CR rupees in fact closer to that

35,000 CR rupees but a large amount

going cpan into thematic funds we're

talking about one nfo of course but uh

that accounted for about 9,500 CR rupees

out of 19,000 CR rupes which is very

substantial what does that tell you

about the U the objetive

or the expectation of the mutual fund

investor so uh see Seb has created

various buckets large cap midcap small

cap and anything which does not come

into this bucket or which is a very you

know narrow idea or theme comes in in

the Thematic bucket and in the last year

also in fact it's not just this month

Alex in fact when I was presenting to my

board few weeks back even the year-to

DAT number the largest FL flows have

gone into either thematic or small and

midcap as a category and some of the

themes which have been at play for the

last two or three years have delivered

Superior returns so uh in fact except

Banking and um consumer and Tech all

other thematic uh strategies or funds

have delivered significantly higher

returns than Nifty and you know almost

to the tune of 20 to 25% cagr in the

last 3 to 5 years now what does this

indicate this indicates um the iron law

of fund selection that human beings you

know bring to the four always which is

most of us invest for the future looking

at the past so in the last few years

thematic funds have delivered Superior

returns and in current times thematic

fund nfos are also garnering a large

amount of assets um that collectively is

reflecting in this larger chunk of

thematic flows um now part of it if if

done thoughtfully by knowing what theme

you are buying with what type of risk

profile is absolutely fine but I do

worry at times if investors are buying

into hot themes at the peak of it cycle

without knowing that these themes have

you know sharp cycles and they can go

through extreme amounts of volatility so

mostly if you talk to anyone of us in

our industry we always recommend

Diversified funds FX cap funds multicap

funds thematic funds need to be timed

well and the best time to invest in a

theme is when it does not feel like the

best time to invest which is the last

three year return I'm not looking that

great well put uh you know I'm just

going to take a chance and get your

opinion on this because I think a lot of

investors cpain are upset about this and

they tried to buy the dip you know it's

it's said very uh you know

vociferously every time we speak on

television buy the dip buy the dip and

when they tried to do that on the 4th of

June uh some of them that tried to

invest got the nav of the next day not

through no fault of theirs and I'm

guessing through no fault of the mutual

fund industry either because they

received the funds after the cut off

time but U is there something that you

think can be solved I I I know that you

may not have a solution for this but I'm

still curious of your

opinion uh see I think U and I don't

have really a full color to this in

terms of you know uh what amounts of

flows did not get participation on that

day but there are two things to keep in

mind um you know there is a need for

agregator so the ideal condition is that

I have money I bought on that day for

example I was in Goa on a holiday

markets were down 5 7% I went to my

mobile app of DSP and I chose three

funds and uh I transferred money in one

minute all the three funds you know the

money was transferred and I got the end

of the day so so there is one way of

investing which uh you know you you go

on the platforms directly and get it now

there is another way where you have to

go through aggregators and there is a

huge role that aggregators P because not

all banks uh you know have API linked in

such a way where money can you know

transfer real time so there are many

banks around the country some uh you

know private sector Banks public sector

Banks Cooperative Banks now all banks do

not have full uh transmission real time

so in fact even I asked my team to see

what can we do so that you know in

future this does not happen and U it was

a 4% fall what tomorrow it could have

been a 10% drop and 10% rise the St that

would have meant a significantly large

loss to investors for no fault of their

so we'll have to investigate figure out

where in the process is this leakage

happening where is the money getting

delayed from uh you know transferring

from investors's account into the

aggregator and through the aggregator to

the mutual fund scheme account and see

how we can solve for that point yeah I'm

guessing everybody's trying to find a

resolution and in fact I guess at some

point the regulator might also have to

step in to identify what needs to be

fixed but let's go to the topic that I

promised and thank you so much Calpine

you're such a sport you've taken

questions on topics everything apart

from what we had agreed to speak about

but let's talk about building an a

portfolio or maintaining a portfolio

because after such um important events

like we've just witnessed over the

course of the last couple of weeks it

also pays to take stock and to

reposition if so so if you're looking at

the next 5 years pain what do you need

to bear in

mind I think U from a from from a

long-term investors perspective what we

have to bear in mind is that U we are

here to invest so that we can beat

inflation and increase our purchasing

power and um the best asset class which

has done that so far in history has been

equities uh and equities again do not

always make money we we recently

released a report uh through NRA I think

a month back which highlighted that in

many countries 10 year 20 year 30e

returns also has been negative for

Equity as an asset loss or returns have

been lower than fixed income or returns

of that stock market have been lower

than gold in their local currency terms

because currencies also tend to you know

go through phases of decline in case of

Indian investors we have been very

fortunate that um two things that matter

for the health of our money um you know

corporate India continues to grow

profits uh uh in a return in in a ratio

of 10 to 20% so in in bad times we've

seen our economy when it whenever it has

slowed down profits have grown at 10 to

12% and in good times they have grown at

18 to 20% so on an average over the last

25 30 years we have seen 13 to 15% sort

of profit growth rate for um corporate

India so if we are shareholders of this

profit growth rate more or less that

transfers into our long-term return now

this number can get either diluted or

enhanced depending on what price we pay

for this 13 to 15% profit growth rate

over a long period of time so one is the

profit growth rate and the second thing

is the Roe of corporate India so if

there are 500 companies in Nifty Nifty

500 and most of us as mutual funds

invest in 250 of these 500 companies the

Roes of most funds again are between 18

to 22% so uh around 14% growth profit

growth around 18% Roe this is what you

are buying as an investor um the only

variable that changes you know the

outcome from a return point of view is

what price we are paying the price that

we are paying to buy this profit pool

and this Roe today is around 21 22 times

uh it is slightly expensive than what it

should ideally be at now what is ideal

according to you and me may not be what

the market wants so the market can

remain less ideal at different points in

time so right now the only thing that

you know can reduce your returns from

this growth rates is the higher

valuation but if you have a 5 to seven

year time Horizon time takes care of

most of these challenges overvaluation

can be solved for by two things one by

introducing two three other asset

classes which you know in a way reduce

the impact of overvaluation so if you

add some Bonds in the portfolio if you

add some Global stocks in the portfolio

if you add gold in the portfolio it

somewhere will solve for overvaluation

on on on one side and the other other

part of overvaluation can be solved by

time Horizon so what return you would

have earned let's say in in 5 years you

may end up earning in six years so your

returns could get marginally moderated

but I don't think Indian investors need

to worry if they have a 5 to seven year

time Horizon because we have two things

going right for us our growth rates are

reasonably stable and durable compared

to many parts of the world and our

macroeconomic stability has never been

as good as we have seen uh in the last

decade so our currency is stable our

deficits are stable our inflation is

stable uh policym has been reasonably

disciplined all through uh periods of

shocks in the last 5 seven years whether

you know the shocks of demonetization

the shocks of covid we our policym has

never been at extremes compared to rest

of the world so these few Dimensions you

know tell us that our returns could get

moderated but we don't have to worry too

much in terms of significant volatility

we could have marginal volatility at the

margin and which is why we recommend

hybrid portfolio portfolios which blend

multiple asset classes at this point

only to solve for the slightly higher

valuation which exist at this point in

time come to that exactly in fact if I

remember correctly uh either at the

start of the year or towards the end of

last year we had spoken about something

similar and You' said that hybrid is a

good way to go because of the blending

of these aspects and that seemingly

continues to be the case but if you are

to do it yourself cpan and if you are to

have a blend of equity and and bonds

then what should you bear in mind on the

fixed income side on the bond Side based

on everything that you're seeing all the

moving

Parts see again in fixed income today

the The 10e Sovereign bond which is the

best quality bond in the country uh is

at 7% uh normally it fluctuates in a

range of you know 6% to 8% these are the

broad boundary conditions we are

somewhere in the middle uh now from

Seven it can go higher from Seven it can

go lower the odds are it it will remain

stable with a downward drift because um

normally Bond markets look for

parameters like stable inflation stable

currency and the demand Supply uh of

bonds so every year the government needs

to borrow more more between 10 to 12

lakh crores via auctions now um in the

next two to three years there is enough

demand from domestic investors as well

as Global Investors for uh India bonds

and that demand is likely to not just

match but um you know be

higher than the supply that is likely to

come from more insurances either by

government of India or by corporate

India so interest rates are likely to

remain at at stable rates at 7% with a

bias for them to be lower one or two

years from now now if rates fall the

investor not only earns the 7% but can

earn between 1 to 2% more in terms of

Mark to Market so there are reasonable

chances or probabilities that the

investor could earn more than the

current carry if rates were to rise he

would earn 7% % minus Mark to Market if

rates were to fall the investor would

earn 7% plus some Mark to Market and at

this juncture where we are poised right

now where our currencies are you know

our currency is fairly stable our

inflation is reasonably stable deficits

are reasonably under control as long as

Government behaves well in terms of

fiscal policy and the RBI you know has

the pragmatic monetary policy that it

has played out in the last four five

years I think our interstates are

unlikely to see any negative upward bias

and hence bonds can earn between 7 to 9%

return in the course of next 2 to 3

years with reasonable amount of

stability so I think a bond investor

just needs to keep in mind that he's not

buying uh credits without understanding

or going Below in terms of inferior

quality of corporate bonds because there

are only two things to to keep in mind

interest rate risk and credit risk

interest rate risk reasonably stable

right now because of the setup we are

credit RIS the investor has to ensure

that you don't make the mistake that we

all made in the last cycle where we gave

money to so-called people in names even

you know without really looking at cash

flows and balance sheet and governance

and those parameters but I think if

investor were to just buy the Sovereign

Bond or even a guilt or if not do on his

own but give it to a hybrid fund where

the fund manager will help you blend

these two asset classes and uh P you

over the next five years fantastic cin

always a pleasure speaking with you and

I look for forward already to the next

chat thank you so much for taking the

time good thanks Alex Amit kukreja the

founder of am Amit cra.com is joining us

on the program right now Amit thanks as

always for taking the time and uh

specifically speaking about that June 4

issue that so many people have spoken

about did you have people that you

interacted with that pointed out the

same

issue no so the issue was not pointed

out Alex but a couple of clients did

reach out saying they wanted to invest

money today as when the counting was

happening and the market had already

fallen decent 6 7% that day and we did

submit the purchase orders and you see

in mutual funds you get the end of the

day nav and thankfully market closed

about 5% or 6% lesser than what it

started with so the dip was able to be

capitalized in some of the client

portfolios but if the market had risen

back by the by the time the you know the

closing Bells have rung then the dip

would not have been capitalized in the

mutual fund Investments portfolio um and

we checked the nvs were assigned as of

fourth of June so no issues on that

front but I heard there were issues uh

reported by several other advisers where

some of the mutual funds were not

allotted the NOS of end of that

particular day but but were aligned but

were allotted the NS of the subsequent

day when the market had already come

back up by 3 to 4% so just so that we're

all on the same page and my invest my my

viewers know what what we're talking

about what are the thresholds and what

are the cut off times that we should

focus on

Amit I think for equ mutual funds uh

definitely before 2:00 we should go for

I think the cut off is 2:30 or 3 uh but

we normally go for 2:00 because at times

we have seen there are lot of

intermediary connectedness issues with

with respect to infrastructure

availability sometimes the transactions

do not go through for debt funds we we

keep one 1:30 p.m. internally at a firm

level as a c of time but I know the time

communicated to us is 3:00 p.m. um for

um for equity and debt but we keep it

before 2:00 so you know I was actually

thinking about this and not to belittle

the issues that have been pointed out

but in the largest scheme of things Amit

my question to you is if somebody is

missed the opportunity of investing at

the low point of the 4th of June unless

it's a very large amount of money that

is being invested have you lost anything

dramatically if you're talking about the

longer time

frame no you haven't see if you're

looking at the trend of a over a period

of 10 years or eight years these are

little glitches that you will easily be

able to you know capitalize much later

depending upon your holding period

because if you're missing out the dips

I'm sure you will miss out Miss out the

um wrong Windows to sell also so you you

cannot calculate all these opportunities

and put a mathematical value against

them but you can just keep a trend in

mind that if I'm in a good macro

situation where the economy is expected

to do well next 10 years these dips will

keep coming but we will have a

continuous systematic purchase plan

either through sip or through STP in

mutual funds and we will write the wave

of volatility and do and do the cost

averaging on the basis of that rather

than by timing the market nobody can

time the market

perfectly uh I do want to talk about uh

buying at a specific price point though

because in the passive segment at least

Amit we're talking about index funds

versus ETFs and the advantage of ETFs of

course is that it offers you the

opportunity to buy or sell at a specific

price so if you have an event like the

4th of June and if you absolutely need

to get a specific price is it a better

Avenue to look at e

FS see if you if you're trying to take

advantage of the market dips during the

day then ETFs definitely give you that

advantage over mutual funds because in

mutual funds you get the end of day

nav however in ETF also you can't just

buy you can you will have to put a limit

order right at at this price or lesser

you'll be able to buy otherwise you'll

miss the order so you based on the limit

order or you do a market order

transaction like what you do for stocks

exactly same approach is required for

ETF it's very tricky um you know the

ETFs can marginally give you better

returns than index funds but in the long

run the difference averages out to very

very minimum number

so stocks and timing the

stock or trying to find a stock or buy a

stock at a dip might be a better or

rewarding experience then trying to do

that with ETF because ETF at the end of

the day is a collection of stocks which

is an index which is a very passive

strategy of building your Investment

Portfolio that's a fair point uh we did

incidentally have a question from Deo

prio uh s sadhu who's aged 58 and he's

asking what the difference between a

mutual fund and an exchange Trad fund is

and you've broadly answered the question

but in your uh study of it are the costs

lower for exchange rated funds

so ETF definitely comes out to be lesser

expense ratio than mutual funds but if

I'm having a strategy to buy ETF then I

will also look at my dmat account cost

The Brokerage that I'm incurring for

doing the transactions and in some cases

it turns out to be an overall more

expensive Affair than the index mutual

funds where everything is taken up um

where everything is looked after by the

fund house by the asset management

company that is managing that ETF so it

depends depends upon what ETF you are

choosing compared to the index fund of

that index for which you have chosen the

ETF broadly it comes out to be the same

and in some cases ETF turns out to be an

expensive Affair if you look at all the

overall cost of demat and transaction

but if you looking at only passive

investing through mutual funds your

mutual funds will come out to be cheaper

uh if you compare the overall cost of

ETF and managing an ETF based portfolio

we have time to take one more query and

that's coming in from paraa Mitra who

says he's 56 years old and he's looking

to build a retirement fund I do not know

what his of overall Corpus looks like

Amit but he's thinking of starting an

sip of 10,000 rupees in the HDFC midcap

opportunities fund he's got a Time

Horizon of 5 years and he's aiming for

an overall Corpus of 1 CR rupees what

should he bear in

mind so PARTA as I see his age is 56 I

don't know what is partha's experience

in mutual fund Investments is if he is a

seasoned investor he can definitely

start investing in a midcap fund HDFC

midcap opportunities is a good fund but

remember for a midcap investment you

have to have a minimum holding Horizon

of eight years the longer the better

because your returns are going to be

much and so for for five years um if

he's investing about 10,000 a month at

14% cagr he's likely to accumulate 8.5

lakhs approximately

Fair Point all right U I hope that

answers paa's question Amit thanks so

much for joining in and for speaking to

us about ETFs versus index funds and how

to buy the dip and also for answering

the questions that came through uh

viewers that brings us to the end of

this particular edition of the mutual

fund show thanks so much for tuning in

there's lots to talk about over the

course of the day you'll find all of

that right here on NTV profit

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