Invest in a Fund manager with long track record
With 400%
returns since May 2003, equities have evinced the interest of many small
investors. But they need to know the right approach to investing in equities
and whether equities will continue to be the asset class of choice. We spoke
to DSP Merrill Lynch president and chief investment officer S Naganath to get
an insight. Excerpts:
updated :
28-Dec-2006
India is a growth economy. To
what extent can one put a premium to the growth story compared with other
emerging markets?
There has been a structural shift in global
investment towards emerging markets and among these, there is significant
interest towards India. We believe valuations are still attractive and that
the fundamentals for growth are in place – rising corporate profits, robust
return on earnings and a decreasing cost of debt — all these project a
positive picture for the future.
We believe that there is still plenty of growth
potential in the Indian markets. In addition, both foreign and domestic
investment in India has been quite strong, with FII ownership steadily
increasing over the past four years. We believe the momentum will continue for
quite some time.
Are there any significant risks
in the India growth story?
We believe India’s economic growth is fuelled by
strong fundamental factors, and do not expect any significant deceleration in
growth momentum in the near future. The potential risk for India’s capital
markets, however, could be its vulnerability to external fund flows.
What should be the return
expectations of small investors over three years from a diversified equity
mutual fund?
There is a wide range of diversified equity
mutual fund schemes available to investors today, which exhibit an equally
wide-ranging performance history. It is difficult even for experts in the
field to precisely predict returns over any given time period, retail
investors should expect a diversified equity mutual fund scheme to outperform
its benchmark index.
Therefore, when choosing to invest in a
diversified equity mutual fund scheme, investors should look at the fund
management team to see if they have a reasonably long track record and have
consistently been able to beat the benchmark index.
Are capital protected funds the
best play for a small retail investor?
A capital protected fund is for relatively
conservative investors, who would like to preserve their initial investment
amount, and also benefit from the high-growth potential of equities through a
slight equity exposure. Typically, a capital protected portfolio will have
only a small portion invested in equity and equity-related instruments, with
the balance invested in fixed income instruments. So, identify your risk
status and take a decision accordingly. Read
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