Category: Your Money

Are Index Funds trying to beat the Index?

Ideally, Index Funds should just track an index. Its the holy-grail of passive indexing – don’t try to be smart picking stocks, just invest in an index tracking fund and let the market work for you. Index Funds are supposed to only focus on reducing tracking error and fees. The NIFTYBEES ETF does the job pretty well:

NIFTYBEES

Since 2005-01-03, Goldman – Nifty ETF has returned a cumulative 275.22% vs. CNX NIFTY’s cumulative return of 278.36%. Chalk up the difference to asset management fees. But the story with Index Funds offered by leading AMCs is a head scratcher.

IDFC Nifty Fund

Since 2010-05-03, IDFC Nifty Fund-Regular Plan-Growth has returned a cumulative 61.17% vs. CNX NIFTY’s cumulative return of 51.62%.

IDFC nifty

LIC NOMURA MF Nifty Index Fund

Since 2010-01-04, LIC NOMURA MF Index Fund-Nifty-Growth has returned a cumulative 54.78% vs. CNX NIFTY’s cumulative return of 52.95%.

lic nifty

Taurus Nifty Index Fund

Since 2010-06-21, Taurus Nifty Index Fund – Growth Option has returned a cumulative 46.82% vs. CNX NIFTY’s cumulative return of 52.06%. Oops!

taurus nifty

IDBI NIFTY Index Fund

Since 2010-06-30, IDBI NIFTY Index Fund Growth has returned a cumulative 49.48% vs. CNX NIFTY’s cumulative return of 52.25%.

IDBI Nifty

Question

If the NIFTYBEES ETF can track the index with a 0.09% tracking error and an expense ratio of 0.5%, why would anybody invest in any of the NIFTY Index Funds?

You can run the comparison tool here: FundCompare
 
 
 

Please don’t treat the information here as investment advice.
If you want advice on investing in mutual funds, please get in touch with Shyam.
You can either WhatsApp him or call him at 080-2665-0232.
He is an AMFI registered IFA who can advice you on HDFC, ICICI Pru, UTI and Birla Sun Life funds.
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Lessons from the Latin American Debt Crisis

Excellent article at Pieria. Here’s the tl;dr:

Three times over the past thirty years the major banks have actually been bankrupt. This is what we have learnt:

  1. Short-term profits mean more to bankers than long-term risks.
  2. As long as banks are willing to roll over debts, silly loans are not dangerous to anyone.
  3. No matter how free market an ideologue a Central Banker is, he will overcome his inhibitions and do whatever it takes to save the big banks.
  4. The first thing the central bankers need to do when the banking system is effectively bankrupt is hide this truth.

Tools Central Bankers have used:

  • Get the taxpayers to buy the dumb loans from the banks.
  • Cut the short-term rates so that banks can borrow cheaply while letting long term rates remain high. Since banks borrow short and lend long, this means their profits skyrocket.
  • Impose austerity.

Read the whole thing here: LATIN AMERICA: THE ARCHETYPAL FINANCIAL CRISIS

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Comparing: ICICI Prudential Corporate Bond Fund

We ran the Fund Comparison tool to get an idea of how the ICICI Corporate Bond fund stood relative to its peers. Here are some quick takes.

Outperformed GSecs

Since 2013-01-01, IICICI Prudential Corporate Bond Fund has returned a cumulative 14.51% vs. GSEC SUB 3-8’s cumulative return of 10.21%.

ICICI Prudential Corporate Bond Fund vs GSEC SUB 3-8

Outperformed Principal Debt Opportunities Fund

Since 2012-01-02, ICICI Prudential Corporate Bond Fund has returned a cumulative 25.68% vs. Principal Debt Opportunities Fund’s cumulative return of 24.74%. But ICICI had a deeper drawdown in 2013.

ICICI Prudential Corporate Bond Fund Drawdowns:

icici drawdown

Principal Debt Opportunities Fund Drawdowns:

principal drawdown

Outperformed UTI Gilt Advantage Fund

Since 2013-01-01, ICICI Prudential Corporate Bond Fund has returned a cumulative 14.51% vs. UTI – GILT ADVANTAGE-LONG TERM’s cumulative return of 12.88% while having a shallower drawdown in 2013: -5.33% vs. -8.18%

Conclusion

The ICICI Prudential Corporate Bond Fund could be attractive to investors looking to benefit from corporate credit improving on the back of a recovering economy and riding the RBI’s expected rate cuts coming down the pike.

You can run the comparison tool here: FundCompare
 
 
 

Please don’t treat the information here as investment advice.
However, if you want advice on investing in mutual funds, please get in touch with Shyam.
You can either WhatsApp him or call him at 080-2665-0232.
He is an AMFI registered IFA who can advice you on ICICI Pru, UTI and Birla Sun Life funds.
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Can you beat a rat at trading?

From rattraders.com:

Rats are being trained to become superior traders in the financial markets. Our subjects [rats] learn to recognize patte[r]ns in historical stock and futures data as well as generating trading signals. We provide solutions for tick based trading data and day based data. RATTRADERS rats can be trained exclusively for any financial market segment. They outperform most human traders and represent a much more economic solution for your trading desk.

Kid you not!

Read the whole thing here.

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