|Rediff India Abroad Home | All the sections|
Is DSP ML Balanced Fund a good buy?
Personalfn.com | June 28, 2008 12:41 IST
Over the last few years, when equity markets were surging northwards, balanced funds were relegated to the sidelines. Instead, equity funds, especially new fund offers were the season's flavour. Fund houses were busy launching a slew of infrastructure and global funds, among others.
And most advisors (taking a cue from the markets and fund houses alike), were busy piling up their clients' portfolios with equity fund offerings. As a result, several investors landed up with investment portfolios lop-sided in favour of equities. Expectedly the volatile equity markets have adversely affected such portfolios.
Then there are balanced funds with the mandate to invest at least 65 per cent of their portfolio in equities and the balance (35 per cent) in debt instruments. In effect, balanced funds offer investors the benefits of asset allocation, while investing in a single avenue.
Also, in times of market volatility, well-managed balanced funds can have a calming influence on portfolios, thanks to the presence of the debt component. Now is a good time to put a balanced fund under the scanner and evaluate its performance. For the purpose of this study, we have chosen a leading balanced fund offering - DSP ML Balanced Fund.
DMBF's investment proposition
On the equity side, the fund generally holds a well-diversified stock portfolio comprising of stocks from across market segments. Similarly, on the debt side, the fund largely steers clear of credit and interest rate risk.
How DMBF fares vis-a-vis peers
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-�-vis those offered by a risk-free instrument)
On the 3-Yr rankings, DMBF (27.7 per cent CAGR) scores over all its peers. Over the 5-yr time frame DMBF (31.8 per cent CAGR) is second only to Tata Balance (32.5 per cent CAGR). Since inception in May 1999, DMBF's net asset value has risen by 18.8 per cent CAGR. We are unable to comment on the fund's performance vis-a-vis its benchmark index i.e. CRISIL Balanced Fund Index, since information about the latter is not available in public domain.
As can be seen in the graph above, Rs 100 invested in DMBF on inception (May 1999) would have appreciated to Rs 477 at present.
In a nutshell
What should investors do?
Therefore, investors would do well to consult their investment advisors/financial planners to determine the suitability of DMBF in their portfolios.
More Personal Finance