Games Mutual Funds Play

March and April are critical months when it comes to personal funds. You either get a high out of wiggling out of any taxing situation or you then get into a funk when you realise that you have to then go and declare your next set of investments for the year ahead. Any way it goes, these permutations and combinations do raise hackles and at times do call for a swig of fresh lime sodas that soothe parched throats (lime ‘n’ soda’s my poison).

Now while sorting out my financials, I decided to also reassess my mutual fund investments made nearly a decade back. I am averse to taking risks and I can safely say that the four mutual funds in which I invested were some crazy train stuff that I felt I could handle then. So far following are the results.

Franklin Templeton Tax Shield (Dividend) – This was a well thought out investment considering it was my first. In 2007 I needed two things. One, save on tax by making an investment and two, make an investment that would in turn give me returns. With these sole criteria I began pouring over newsletters, business pages and asking CAs and bank officers in the family for tips on how to manage my funds. Through popular choice and with a strong recommendation from Karnataka Bank I took up the Franklin Templeton Tax Shield (Dividend) fund. This mutual fund came with pedigree – a good track record that saw everyone who invested swear by this fund. Seven years later, this has turned out to be the star performer among all my mutual funds. Besides the initial tax advantage, this fund has been giving me consistent dividends that have reasonably tidied over the principal amount. It is indeed a star performer and though the dividends have reduced in amount over the last few years it still works out in the long run.

SBI Magnum Tax Advantage Fund – The fund started off badly. Again, dividend related and while providing the initial tax shelter, this fund sputtered out a few dividends and then there was silence. However a slight upturn resulted in this fund climbing out of the doldrums. At one point in time I saw my principal amount reduced to half. In this scenario, the fund has made quite a recovery and I decided to encash it with a negligible profit on this.

SBI Magnum Tax Gain Scheme – Now this was one star fund that went bust. At one point in time SBI Magnum Tax Gain Scheme was the darling of investors. The great Indian middle class embraced this fund like never before. I did too and the first few years were super rosy. I managed to get my initial highest dividends from this product and boy did it make me a happy man. And then came the 2009 slump. Dividends did keep coming even though the initial investment shrunk to nearly half. And while the fund has picked up slowly, the funny part is dividends keep coming unlike the Tax Advantage fund scenario where the product performed well but no dividends were paid out. For now I have decided to keep this fund with a view that it may reach its high of 2005-07 soon. With elections almost done and the next lot ready to set claim I am looking forward to a climb in the numbers.

Fidelity India Growth Fund (now called L&T India Large Cap Fund) – This investment was pure rush. With dividends coming in, I used that amount to make a risky but high return investment in Fidelity India Growth Fund. Not only that, I opted for the Growth model in this fund, meaning I would not get any dividends till I closed the fund at a possibly successful level. Expecting it to grow, I saw the fund tank. Not completely, but almost. And then the fund was bought over by L&T and with the rechristening there have been some positive improvements. Being a risky investment, I have always been there without any expectations, but there was just that tiny hope that I could have a goldmine on my hands. I have decided to keep this fund too considering the electoral and global market dynamics. It will always be a risk and with its good performance of late I expect this fund to claw its way to a profitable venture for me. It’s working hard for now with a healthy net asset value (NAV).

It’s been entertaining studying the markets and playing around with the investments. The initial playfulness has given way to careful scrutiny as I wait and watch what happens over the three mutual funds that I retain. Quoting Jim Morrison, “I think the highest and lowest points are the important ones. Anything else is just…in between. I want the freedom to try everything.”


“I love to drink all day”

Trust Jersey Shore‘s Snooki to come up with the line of the decade when it comes to beverages. Only difference, I am talking about coffee. With business intel on the coffee industry showcasing better tidings this year, price fluctuations would be closely watched. Being a part of this industry, I would. Vietnam and Brazil are showcasing a shortfall and it must be seen how India rises up to this shortage. The last time such an instance occurred was in the mid-nineties when Brazil experienced a severe frost and its crop got nearly wiped out.

Coffee Board India
Coffee Board of India Website

Such scenarios require a clear view of the market rates as they fluctuate and there was a time when ITC’s e-Choupal provided day-to-day updates in line with the NYSE. Somehow this venture to connect rural India and enable farmers to be direct sellers fizzled out. I wont be surprised if the middle-men lobby got to ITC and threatened their supply chain considering ITC was on the verge of entering the food chain at that point in time.

The Coffee Board of India has tried to do its bit in providing real-time prices as Arabica and Robusta prices keep swinging. However real-time is an unreal phenomenon when the Coffee Board updates its site. The dependance on real-time price falls back on the middle-men (exporters) who are a phone call away from the latest prices. Chennai port determines the prices (don’t ask me why).

Commodities trading websites, mainly Wall Street based, do provide the international prices. But then you have the conversion rates and export rates to take into account and it just doesn’t add up. All you have is an approximation, in terms of percentage, where you can sort of predict the swing from the rates quoted by exporters.

For all the talk about e-nabling the agricultural sector, nothing concrete seems to be in place. The price still depends on the local mandis and APMC yards where fixers are galore. ITC proved that this could be done in the past and there’s no reason why it cannot happen again. Reuters came into the picture some time back and contacted coffee growers directly for business intel reports that were delivered on your mobile. I did receive them for some time and then the fee subscription kicked in. Waited to see how this would work, but looks like that too fizzled out. Anyway I did realise that these Reuters reports were a day old, so there you go – lack of real-time monitoring and measuring. Real-time management in an information age governed by digital guidelines is not something you can ignore. Let’s see how long it takes to get there. It’s a market opportunity for anyone willing to listen. You get the agri sector hooked in India and you will realise the depth of this market.