Project for Mutual Fund

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

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

Question 8

Table 3

Average annual return for the past 3 years

Question 9

Table 4

Average annual return for the last 5 years

Question 10

Table 5

Most recent top ten investment holdings inside the fund

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

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

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

Question 19

Table 9

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

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