Career Search

Friday, August 8, 2014

Invest in MNC funds

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

Invest in MNC funds

 





While these thematic funds have given good returns in the past, investors need to be aware of the risks they carry.

 

The MNC advantage

By investing in an MNC fund, can gain exposure to well-established companies with proven business models that have been tested in several countries.


These companies have weathered the competition in many markets globally and have gained from the experience. Their business models help mitigate the risk.

Most MNC companies offer goods and services of a high quality and their products are technologically superior as they have access to their parents' know-how. They enjoy a good brand image. Many of them are led by expats, who have worked in several countries and bring a lot of experience to the job.


All these factors give these companies a sustainable competitive advantage that translates into high market shares.

While catering to the domestic market, MNCs develop an ecosystem of suppliers and vendors. Then, taking advantage of cost efficiencies, they foray into export markets. This gives a multi-year fillip to their earnings.

MNCs generally adhere to high standards of corporate governance. I have not come across instances of aggressive accounting among these stocks. Since many of them are cash cows, they tend to pay dividends regularly. Their books are usually not laden with debt.

MNC funds have the ability to give sound risk-adjusted returns. The beta of UTI MNC Fund is a relatively low 4.56, while its standard deviation is only 11% (beta and SD are measures of risk). These funds also tend to weather downturns well.

Disadvantages and risks

A key handicap that managers of MNC funds have to deal with is the limited universe of stocks available to them. As the economy recovers, the banking and financial services sector is expected to do well, but very few MNC stocks are available within this space.


The paucity of listed MNC stocks also gives rise to the risk of stock and sector concentration in these funds.

MNC fund investors will also have to contend with the valuation risk. Being cash rich and belonging to sectors like FMCG, most MNC stocks are currently trading at high valuations. Invest in these only through SIPs and with an investment horizon of at least five years.

Duplication is another issue. The diversified equity funds in your portfolio may already have many of these stocks. Investing separately in MNC funds may result in duplication.

The issue of high royalty payment to parents also crops up from time to time in the case of these stocks. High royalty payments could affect the earnings of these companies in the short term, though the markets won't pay much attention to the issue if their sales volumes and exports pick up.

What should you do?

MNC funds are better suited to volatile and depressed markets. "In rising markets, you should bet more on growth-oriented funds, however, points out that these funds have the potential to offer sound risk-adjusted returns over a five-year horizon. Remember, these are thematic funds that are riskier than diversified funds.


If you invest in them, limit the exposure to 10-15% of your equity portfolio.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

No comments: