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Question 1

The DSP BlackRock Equity Fund – Daily Strategy – Dividend would be the mutual fund for my savings. DSPG, currently trading in $37.39, will be the symbol of the mutual fund used.

Question 2

Mr. Atul Bhole, a B. Com Chartered accountant, manages the fund since 2016. The fund is managed by the fund management. The scheme seeks to produce long-term wealth from an equity portfolio, according to the fund's management. The strategy also aims to satisfy its liquidity and aspirations through debt and monetary securities investments. The investment manager considers both value and growth to assess investment opportunities.

Question 3

The year when the fund started is in June 2007 under the Equity class of assets. The fund is under the benchmark of Nifty 500 Index. In the past 10 years, the mutual fund has been ranked among the best type of investment one could consider as an individual. By analyzing the year of the fund investment in the market, it is also important to consider other investment factors such as the asset turnover and the expense ratios.

Question 4

The funds category is under Equity Funds Diversified, and according to year 2017 financial analysis, the mutual fund has been ranked 3rd in the category of diversified equity. The diversified equity category is among the best choices one would choose in their investment. From my analysis, the reason for choosing the DSPG under the equity fund diversifies is that one does not have to be specific on the sector and size of investment. The type of fund diversifies investments across the stock market with the aim of maximizing gains for investors. Thus, when I invest my funds with the company, I expect a high return with moderate high risk. With its type of investment which is done across companies across different industry sectors, the fund maintain high growth in the economy since it is not limited to a specific sector.

Diversified equity fund is ideal for long term savings plan such as cases of retirement and children education. Since its objective is to have an increase in capital appreciation, investors are assured of a moderate risk return. The minimum investment in DSPG is $1,000, which is a flexible and affordable plan for first time investors.

Question 5

The mutual fund is rated as a three star in the Morning Star, where it is under the flexicap category and large growth investment style. The company ratings vary from one star to five stars and help it is used as a guideline for investors when making investment decisions. The ratings are estimated from past performances in terms of risks, cost adjusted returns, and fund manager’s skills. In our investment fund DSPG, it is a three star rating, which means that it has 35% of the funds allocation.

Question 6

Table 1

Year-to-date return for 2017

 

YTD

Growth of 10,000

13,321

Fund

33.21

+/- S&P BSE 500 India INR

3.29

+/- Category

1.80

% Rank in Cat

42

# of Funds in Cat

466

The above represents the annual average return for year 2017, which indicates the growth rate, funds investment and the return by the investment made.

Question 7

Table 2

Total return for calendar year ended 12/31/2016

 

1 Yr

 

Growth of 10,000

13,008

 

Fund

30.08

 

+/- S&P BSE 500 India INR

1.26

 

+/- Category

0.26

 

% Rank in Cat

50

 

# of Funds in Cat

466

 

Question 8

Table 3

Average annual return for the past 3 years

 

3 Yr

Growth of 10,000

13,804

Fund

11.34

+/- S&P BSE 500 India INR

1.87

+/- Category

-1.53

% Rank in Cat

66

# of Funds in Cat

446

Question 9

Table 4

Average annual return for the last 5 years

 

5 Yr

Growth of 10,000

21,502

Fund

16.55

+/- S&P BSE 500 India INR

2.62

+/- Category

-1.51

% Rank in Cat

66

# of Funds in Cat

218

Question 10

Table 5

Most recent top ten investment holdings inside the fund

Company

Market Value (Cr.)

Holding (%)

HDFC Bank Limited

139.72

5.56

 

Bajaj Finance Limited

93.60

3.72

 

Yes Bank Limited

91.21

3.63

 

CBLO / Reverse Repo Investments

81.50

3.24

 

Dalmia Bharat Limited

77.96

3.10

 

Question 11

The average expense ratio for year to date is at 2.32% (Table 6), which has been on a constant rate for the past three years. The company has had high cost of investment thus the increase in the expense ratio.

Table 6

Average expense ratio YTD

Year

2012

2013

2014

2015

2016

YTD

Annual Nex expense ratio

1.88%

2.07%

2.33%

2.32%

2.33%

2.32%

Question 12 and 13

In the mutual funds, a load represents funds paid by an investor, which is transferred to an agent or a financial advisor. Front end are fees paid upfront prior to the services while back end are payments done when the services are completed by the agent. The fees are estimated using a commission based on the value of stock sold.

Question 14

The portfolio turnover ratio, according to Morning Star is at 97% (Morning Star, 2017). The percentage represents the fund’s holdings that vary in a given financial period. The ratio of 97% for DSPG will be used to measure the funds trading activities. The estimated turnover amount is computed by dividing net of purchases and sales by the monthly net assets. With a high turnover rate, the company’s funds turnover is also high and there is reduction in the overall performance of the mutual fund investment.

Question 15

The risk rating done by morning star is for the past ten years and the category described is average (Table 7).

Table 7

Risk rating analysis

 

11/30/2017

3-Year

5-Year

 

Morningstar Return

 

 

 

 

0P00009J3N

Average

Average

Average

 

Morningstar Risk

 

 

 

0P00009J3N

Above Average

Above Average

Average

             

Morningstar Rating

 

 

 

0P00009J3N

-

-

-

             

# of Funds in Category

455

224

165

             

Question 16

The return rating done by Morning Star is for the past ten years and the category described is average (Table 7).

Question 17

Beta in relation to mutual funds investment measures the movement of funds compared to the market. The market is assumed to have a beta of 1.00, which will be compared with other mutual funds beta. DSPG has an average beta value of 1.11 as at investment year 2017. With a 1.1 beta of the mutual funds it means that my investment will have high returns of 10% higher than the index in an up market. The beta value will also help in determining the volatility and sensitivity of the fund. Thus, beta is important in choosing the mutual funds one should invest. Other factors considered is the standard deviation of the fund and for DSPG it is at 16.03%, yield to maturity, and Sharpe ratio.

Question 18

Table 8

$5,000 annual recurring investment starting at age 21 and ending at age 65

Investment, $5,000

 

Growth

0.49%

year

Return

25

5649.905

26

5677.59

27

5705.41

28

5733.366

29

5761.46

30

5789.691

31

5818.061

32

5846.569

33

5875.217

34

5904.006

35

5932.935

36

5962.007

37

5991.221

38

6020.578

39

6050.078

40

6079.724

41

6109.514

42

6139.451

43

6169.534

44

6199.765

45

6230.144

46

6260.672

47

6291.349

48

6322.177

49

6353.155

50

6384.286

51

6415.569

52

6447.005

53

6478.595

54

6510.34

55

6542.241

56

6574.298

57

6606.512

58

6638.884

59

6671.415

60

6704.105

61

6736.955

62

6769.966

63

6803.139

64

6836.474

65

6869.973

Question 19

Table 9

$10,000 investment in 2006-2007 for the last 10 years

 

YTD

1 Mo

1 Yr

3 Yr

5 Yr

10 Yr

Growth of 10,000

13,256

9,908

13,123

13,440

21,229

26,326

Fund

32.56

-0.92

31.23

10.36

16.25

10.16

+/- S&P BSE 500 India INR

2.74

1.34

1.55

1.12

2.53

4.38

+/- Category

1.38

0.33

0.12

-1.87

-1.56

0.70

% Rank in Cat

44

35

54

72

66

40

# of Funds in Cat

472

475

472

452

221

165

References

DSP BlackRock Equity Fund (2017). Retrieved from https://invest.dspblackrock.com/mutual-fund-products/equity-schemes/multi-cap-equity-fund/dspeq-regular-dividend

Morning Star. (2017). DSP BlackRock Equity Reg DP. Retrieved from http://www.morningstar.in/mutualfunds/f0gbr06sdq/dsp-blackrock-equity-fund-dividend/overview.aspx

Taylor, C. (2016). How to calculate the return on an investment with recurring expenses. Retrieved from https://budgeting.thenest.com/calculate-return-investment-recurring-expenses-22781.html

Thune, K. (2016). What is a mutual fund's beta? What you need to know about a mutual fund's beta. Retrieved from https://www.thebalance.com/what-is-a-mutual-fund-s-beta-2466643

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