04 KALEIDOSCOPE ERGO Monday, February 9, 2009

Ask your query

With recession and the threat of losing a
job looming large, what is the best invest-
ment option?
Newton Adhithiya, Nungambakkam
The best avenue to protect you in these
difficult times is to conserve cash. Rather
than look at investment avenues, it is better
to look for savings tools that do not lose out
on the capital. Short-term bank deposits,
liquid mutual funds are the better options
during these troubled times.
Also, reduce your expenses. Postpone or
neglect the exchange offers for mobile
phone, white goods, jewellery, TV, cars.
Look for discount stores, super markets for
your shopping.

Mini Quiz
1. PE Ratio is the acronym for
Profit – Expense Ratio

Choosing the
Price – Earnings Ratio
Public – Private Expenditure Ratio
Private Equity Ratio
2. COD is good for health, financially
too. What does this mean?

right mutual fund

Certificate of Deposit
Common Discount
Cancellation of Debt
Company Debenture
Send your answers to finergo@goergo.in or
SMS 92813 98889. Example: If you choose A as
the answer to question 1 and B as the answer
to question 2 type it as 1A2B. Winners get a
Keep these pointers in mind
free executive diary
V. RAMCHANDRAN which will give a fair idea of the strat-
ram@finerva.com egy followed by the fund to achieve
the stated objective. This will also Know these jargons

News you can use
Some FD options
■ National Housing Bank and Tata Mo-
tors have launched a new FD schemes –
these provide an alternative avenue for in-
vestments with attractive interest rates.
■ NHB offers 9.25 per cent interest for
one year. Senior citizen will get 0.50 per
cent extra. Minimum deposit amount is Rs.
50,000.
■ Tata Motors is offering 10, 10.50 and 11
per cent for one, two and three-year terms
respectively. Minimum deposit amount is
Rs. 20,000 with additional deposits accept-
ed in multiples of Rs.10, 000.
Forthcoming debenture issues
■ Companies like Tata Capital and IIFCL
have planned debenture issues. This will
liven up the bond markets for retail inves-
tors and give them the shelter required in a
falling equity market.
M
utual funds are one more in-
vestment vehicle for those
seeking alternative invest-
ment avenues other than in
banks or post office deposit
schemes.
There are many schemes available
in the market, but the key challenge
is to choose the right fund. One has
to devote time to select the right op-
tion. Here are some tips for selecting
the right fund:
Evaluate the risk: If the investor is
upset about the downswing in the
value of the investment in the short
run, then aggressive equity fund is
not his cup of tea. He has to settle for
a debt or liquid fund, which may not
give negative return.
Keep a time horizon for the in-
vestment to grow: If the investor
wishes to get a substantial return,
say Rs.10,000 to become Rs. 40,000
in around four to five years time,
then equity fund would be the right
pick.
Understand the fund: One has to
study the investment portfolio and
the fund manager’s commentary,
help to assess the potential risks in-
volved. Generally, large cap value
funds carry lesser risk than small cap
funds since large cap funds bounce
back sharper when the market picks
up.
Go for diversified funds: It is al-
ways advisable to go for diversified
funds, instead of sectoral funds, as
the later is subject to more volatility
when compared to diversified funds.
Sectoral funds also comprises of var-
ious segments of the industry.
Study the past performance of the
fund: It would be wiser to choose
funds which have been in existence
for over a period of five years.
Analyse how the fund has fared
during that period and compare its
performance with that of its peers,
which will give a broad idea as to
how the fund has delivered given the
same type of investment objective.
Stick with them: Keep the fund for
a reasonable period to reap better
returns, instead of shuffling the
funds which might result in fall in
the expected yield for the invest-
ment. ■
Equity fund: A mutual fund that
invests only in stocks
Debt fund: It invests only in debt
instruments. Debt instruments are
ones which give a guaranteed but
low return mainly in the form of
interest
Liquid funds: A type of very short
term (1-3 days) investment. They
are highly encashable but give
measly guaranteed returns
Capitalisation: The total number of
shares of the company multiplied
by its current price
Large cap: A company with a
capitalisation of over 1000 crores
Small Cap: A company with a
capitalisation of below 200 crores
Diversified fund: A fund that
invests in stocks of many industries
or sectors of business. So, if one
sector fails others will help sustain
growth
Sectoral funds: A fund that invests
only in stocks of a single industry
or sector. Example, pharma sector
or auto sector