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Right selection would be the key The gala time for Equity MF investors achieving 30-40% p.a. returns finally is coming to an end. Till 8 Feb’07 (Sensex 14652) year-on-year for last 4 years returns surpassed expectations. Unprofessional Mutual Fund distributors including Banks (sorry I cant call them advisors at all) kept on promising 30-40% returns to their clients showing them last few years past performance. Genuine advisors who dared to advice their investors to tone down the returns expectations to realistic 15-20% p.a. going ahead were not taken that seriously by the investors. But now that’s the truth. In last FY 06-07, Midcap Index has moved marginally and Sensex has moved up only 15.89% from 11280 (31.3.06) to 13072 (30.3.07) and only the right selection of Equity Funds have rewarded the investors. Only 5 diversified funds gave returns over 20% last year. 34 other funds could manage double digit returns between 10-20%. 67 funds could manage mere single digit returns. And sadly 29 funds gave negative returns. Just to remind you, we recommended to switch totally from Equity Funds to Liquid Funds between 13850-14500 in Dec ’06 AURUM when most of the funds were showing over 30% gains before the current fall. That was a master stroke by us. Going ahead the funds that would outperform are expected to deliver 20-30% p.a. returns over next 3 years & majority of funds would deliver 10-20% returns. Lets not talk about the funds that would perform badly, which I am sure would be many. So two very very critical aspects the financial advisor must be expert at for your future wealth creation – first is to be in and out of market at reasonably low and high levels (timing the market to some extent if possible) and second is to offer you a portfolio/recommendations of ‘FUTURE WINNERS’. If your advisor has been successful in delivering results on both these fronts in the past - then you need to thank God for that. If not, change your advisor, he is no good for the next phase of the market. |
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