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Investors! Here's help for you

Nikhil Lohade in Mumbai | December 09, 2004 12:18 IST

A rising market has left many a retail investor confused about timing his investments. Investors try and buy at lows (when stock prices are at a low) and sell at highs (when stock prices are soaring), but this is easier said than done.

Mutual funds still remain somewhat of a mystery though they are widely acknowledged as a better investment option for small investors.

In such as scenario, professional portfolio managers are gaining credence. We look at two portfolio management schemes available in the market that can be useful for the retail investor.

IL&FS Investmart offers a portfolio advisory scheme, iPreserve, for investments into mutual funds. The primary objective of iPreserve is to advise clients regarding their investments in funds.

Sharad Shukla, head of investment advisory services at IL&FS Investmart says, "This product is for an investor at any stage of his investment life. We look at the risk profile and needs of the investor and accordingly construct a portfolio."

IL&FS Investmart's team of research analysts dedicated solely to fund research, identify investment opportunities through in-depth research of various schemes spanning various fund houses.

Based on investment goals and risk profile of the client, a portfolio of mutual fund investments is designed between equity and debt schemes.

Clients are advised to switch / re-balance their investments among various schemes, based on predefined triggers and parameters, to optimise returns, Shukla explains.

Similarly, an intra-scheme migration strategy (say between liquid schemes to income schemes or gilt funds or monthly income plans - MIPs) is also advised to each client based on his needs.

The minimum portfolio size to qualify for the advisory scheme is Rs 500,000 and there is no lock-in period.

No advisory fee is charged for this service.

The Benchmark Mutual Fund's Systematically Trading Portfolio executes the age-old principle of sell at highs and buy at lows, disciplined by a quantitative model. Benchmark employs indexing and 'quantitative techniques' of investing.

Such philosophy endeavours to provide transparency and risk control and avoids human biases that can increase risk in uncontrollable manner, fund managers say.

Sanjiv Shah, executive director at Benchmark Mutual Fund says, "We use quantitative techniques to control risks and give high returns. It is good for a small investor who wants to control risk and play volatility in the market and get equity kind of returns."

The Nifty STraP's investment comprises of equities and cash. The equity portion is invested in Nifty BeES, while the cash portion in liquid BeES. The initial investment is executed as per the asset allocation of a master portfolio which is updated continuously.

The portfolio is rebalanced once a month and no adjustments are made in between, even in case of severe volatility.

On the rebalancing day, the model decides whether to increase or decrease equity by comparing the current market levels with the three-month moving average.

If the current market level is higher than the moving average, then equity allocation is reduced and vice versa, Shah explains. The level of increase or decrease is decided on the current level of the market relative to its moving average.

Current asset allocation and continuation of trends, fund managers explained. The minimum amount one needs to invest in the STraP is Rs 10 lakh (Rs 1 million) and the fees charged is 1.75 per cent of asset size. This comes down as the investment amount increases.

Nifty Benchmark Exchange Traded Scheme (Nifty BeES) is an exchange-traded fund (ETF) tracking S&P CNX Nifty index and listed on the National Stock Exchange of India (NSE).

Liquid BeES is a liquid ETF scheme, which enjoys a AAA rating from Fitch for credit and V1+ rating for lowest volatility of returns.

These are some of the products available for the retail investor which require a lower minimum portfolio size. Many brokerages run their own PMS but it important to find out if these are registered.

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