Real Estate Mutual Funds in India

Finally, after the long wait, SEBI lays the foundation stone for Real Estate Mutual Funds in India. Though real estate funds were available to HNIs through private equity funds, now even small retail investors can invest in property through Real Estate Mutual Funds.

These funds shall be close-ended with units listed on stock exchanges, the Securities and Exchange Board of India (SEBI) said and the net asset values of the funds must be made public every day.

Such schemes shall invest at least 35 percent of their funds directly in real estate assets and the rest in mortgage-backed securities and instruments of firms engaged in the sector, it added.

They can invest up to 25 percent of their corpus in other securities, according to the statement.

"Taken together, investments in real estate assets, real estate-related securities... shall not be less than 75 percent of the net assets of the scheme," SEBI said. The asset managers should get the assets valued every 90 days.

What's in for us?

• Opportunity to benefit from Real Estate Boom without investing huge sums
• Good diversification opportunity in such a volatile market
• If you invest in real estate just for investment, then this is going to be real hassle-free. No huge paper work, registration, broker charges, chances if fraud or your house being declared on illegal land or forest land ;)

Something to worry about...

• Return might not be as good as real estate due to percentages of investments
• Closed ended!
• No experience or past performance to refer to

Kindly post your views on the same as comments...

Should you buy ICICI Prudential Focused Equity Fund?

NFO Closes: 7th May

ICICI Prudential Focused Equity Fund in simple terms is a fund that aims to invest in 20 of the Top 200 large-cap stocks in terms of market capitalization. What that means is that investors money would be revolving amongst Top 200 companies on NSE thereby giving some stability to the portfolio, however reducing the growth chance as well.

It can be argued that one can go for Index Funds and pay less management fees, however, there is a difference between this fund and index funds. ICICI Prudential Focused Equity Fund will NOT invest in just Top 20 equities but 20 of the Top 200 companies on NSE. So there is going to be a difference in return and holdings.

ICICI Prudential AMC Chief investment officer Sankaran Naren, during launch said that the fund invest in stocks of companies which are profitable and leaders in the industry and have experienced rapid growth and have superior management skills.

Type Options Min. Application Amount

Open ended Equity Scheme Retail: Growth and Dividend (Payout and Reinvestment) Institutional Option I: Growth Retail: Rs.5000 and in multiples of Re.1 thereafter Institutional Option I: Rs.10 crores and in multiples of Re.1 thereafter

For details and to invest online visit: http://www.icicipruamc.com/pruicicin/htdocs/FocusedFund/landing.asp

Fixed Deposit or Debt Fund?

So you have some extra cash which you don't want to use, atleast for now. So , what to do with it? Forget high-risk investments aka equities, equity funds etc as of now. Here we are talking about good old bank FDs or new age Debt Funds.. Well, both have their pros and cons, and hence you have to understand and decide what you are comfortable with.. Here are some pointers to help you..

Always calculate post-tax return while comparing...
Yes, in case of FD you need to pay tax on earnings according to the tax-bracket you fall in. So your actual return could be much lower than those beautifully advertised figure. In case of debt fund there is only one simple Dividend Distribution Tax (DDT), which is deducted at source. hence what you get in hand from debt funds is purely tax-free.

Liquidity?
This is where debt funds score largely over FDs. Debt funds are virtually like savings account. Deposit, withdraw, whenever. (though it's not as instant as a savings account)

Penalty and Loads..
Most of the banks charge a penalty on closing an FD before schedule. Be aware of the charge. And add to that some banks don't even allow premature withdrawal in case of special rates. However, on the other hand most debt funds don't have any entry/exit loads, barring few. So check that too..

Guaranteed Returns
Here is where FDs smile. Mutual Funds, by law, cannot guarantee returns. And in fact for very short term like 1-3 months, they might be volatile.

Best Tax Saving Funds

Here are some tax saving funds aka ELSS funds that you might want to consider investing.. Just a reminder, best way to invest is through SIPs throughout the year and not just last minute shopping to save tax..

1. Principal Personal Tax Saver
One of the top performing funds of last 3 years. Worth a place in your portfolio.

2. ICICI Prudential Tax Plan
Very aggressive, and hence falls in the category of high risk high return funds. Got an ability to give really good returns, however considering the volatility in the market, you might want to keep your exposure low in this fund.

3. SBI Magnum Tax Gain
Was very aggressive till 2006, however, after that it has increased its exposure in large caps to reduce the risk. That makes this fund all the more better.

4. HDFC Tax Saver
Year after year it has proved its worth. Definitely worth a place in your tax saving portfolio


For a comparison of returns click here

Best Debt Funds

Past few years have seen portfolios leaning heavily towards equity. However, smart investors are those who understand the risk and diversify their portfolio. Fixed Deposits and Debt Mutual Funds are two most common choices for risk-free investments. Infact Debt Mutual Funds are little easier to deal with (if you have an online demat account, nothing like it) and more transparent.

Easy because you can buy and sell any time without committing for a specific period in beginning and transparent because you know where your money is invested.

Check the load
Yes, it's very important. Some funds don't charge any entry or exit load. So you should go for these funds when you are using debt funds as savings account and might need to buy/redeem frequently.

There are few schemes that offer zero entry load after a specific period (say 6months or 1 year). You can go for them if you won't need your money for that period.

Approximate Returns in different types of debt funds in last one year
Money Market Debt Funds: 8.0 - 8.2 %
Debt - Short Term: 8.5 - 10.5 %
Debt - Long Term: 9.0 - 14.5%
Debt - Floating Rate: 8.7 - 9.3%

However, Debt Short term and long term have shown negative returns also. See Moneycontrol for comparison of returns.

Here are few good funds from each category. However, before investing don't forget to check their past performance, investment style, load structure and your objective. They should be in sync.

Money Market: LIC MF Liquid Fund (G) :: HDFC Cash Mgmt. Fund - SP (G) :: HDFC CMF - Savings Plus RP (G)

Debt - Short Term: Kotak Bond (Regular) (G) :: Reliance Short Term Fund (G) :: Tata Income Fund (App.)

Debt - Long Term: Birla Income Plus - Retail (G) :: Birla Income Fund (G)

Debt - Floating Rate: Kotak Floater LTP (G) :: LIC MF Floating Rate Fund (G) :: HSBC FRF - LTP (RP) (G)