Dear Arshad, if the profit is booked by fund manager, where it ‘ll be kept? The answer is simple in the same Eq. shares. In case of Dividend options of the funds, the fund manager hasd the liberty to share with investors but in case of growth options there is no such liberty.
Dear Paresh, the debt funds are also investing in securities (although these are debt & not Equity) & the market value of these securities also change on day to day basis & that’s why there can be naegative return on few days in your debt fund. This is called Mark to Market in market language & is made mandatory by none other than SEBI itself. It’s actually in your interest as an investor.
profit booking is in sense in context with traders , who are trading for short period ,say for a day, week or month. equity mfs are for investments for long period , and on contrary, during such slump, they generally prefer to invest , provided funds availability. mfs fund managers , generally , can not practice what traders do.
Any equity mutual fund need to have at least 65% equity allocation (quarterly avg)at any point of time…so even if there is mayhem.. mutual funds can’t reduce the allocation below certain limits.
Though there is limit of 65%, most of the equity mutual funds keep allocation of about 90% at any point of time..They also books profits / losses ..but can’t sell out the entire portfolio.
In the same lines as Arshad…
How do debt funds’ NAV reduce? I was under the impression that they may give lesser returns but the return should never be negative.
But I was proved wrong when I looked at my debt portfolio, the returns are negative.
1. Not every slump is due to profit booking. And if your fund manager could have predicted the slump so consistently he wouldn’t be in fund management business 🙂
Thanks for your input however I never said “all the times”…I said 50% of times…and if 50% is too high lets say 10% of times market goes down due to profit bookings…but mutual funds NAV goes down 100% of time…
Anyway, I may have to check the mathematics behind NAV calculation and find out if there is any correlation between NAV and profit bookings..
I have following 2 queries on whihc I need your input :
1. Whenever market goes down, 50% of time we read “market slump due to profit booking”….and MF NAV as a result goes down as well..my question is : Arent our fund managers book profits when every tom dick n harry is booking profit and if they do, MF NAV should go up or at least stay balanced? May be a stupid question but i still need your inputs…
2. Lets say I am investing in a MF since 18 month, and I redeem some units….it is by default that the redeemed units are considered from oldest to newest for capital gain calculations?
Dear Arshad, if the profit is booked by fund manager, where it ‘ll be kept? The answer is simple in the same Eq. shares. In case of Dividend options of the funds, the fund manager hasd the liberty to share with investors but in case of growth options there is no such liberty.
Dear Paresh, the debt funds are also investing in securities (although these are debt & not Equity) & the market value of these securities also change on day to day basis & that’s why there can be naegative return on few days in your debt fund. This is called Mark to Market in market language & is made mandatory by none other than SEBI itself. It’s actually in your interest as an investor.
Thanks
Ashal
@Bharat : Only short term traders don’t do profit bookings…institutional investors do that as well…and I am sure MFs practice this as well…
profit booking is in sense in context with traders , who are trading for short period ,say for a day, week or month. equity mfs are for investments for long period , and on contrary, during such slump, they generally prefer to invest , provided funds availability. mfs fund managers , generally , can not practice what traders do.
Any equity mutual fund need to have at least 65% equity allocation (quarterly avg)at any point of time…so even if there is mayhem.. mutual funds can’t reduce the allocation below certain limits.
Though there is limit of 65%, most of the equity mutual funds keep allocation of about 90% at any point of time..They also books profits / losses ..but can’t sell out the entire portfolio.
In the same lines as Arshad…
How do debt funds’ NAV reduce? I was under the impression that they may give lesser returns but the return should never be negative.
But I was proved wrong when I looked at my debt portfolio, the returns are negative.
1. Not every slump is due to profit booking. And if your fund manager could have predicted the slump so consistently he wouldn’t be in fund management business 🙂
2. oldest. FIFO
Hi Anshuk,
Thanks for your input however I never said “all the times”…I said 50% of times…and if 50% is too high lets say 10% of times market goes down due to profit bookings…but mutual funds NAV goes down 100% of time…
Anyway, I may have to check the mathematics behind NAV calculation and find out if there is any correlation between NAV and profit bookings..
Thanks again…
Hi Guys,
I have following 2 queries on whihc I need your input :
1. Whenever market goes down, 50% of time we read “market slump due to profit booking”….and MF NAV as a result goes down as well..my question is : Arent our fund managers book profits when every tom dick n harry is booking profit and if they do, MF NAV should go up or at least stay balanced? May be a stupid question but i still need your inputs…
2. Lets say I am investing in a MF since 18 month, and I redeem some units….it is by default that the redeemed units are considered from oldest to newest for capital gain calculations?
Thanks,
Arshad