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Comparison of benefits to EOU SEZ and DTA
Posted on February 22, 2014 by indiataxfin
We have provided here comparison of benefits available to EOU SEZ vis-a-vis DTA units.
In case of any query please post it in comments section
Factor
SEZ Unit
DTA unit
Location
Anywhere in India
In the Zone
Anywhere in India
Not Permitted
Permitted
No restrictions
Trading
Units
NFE
requiremen
t
NA
No restriction on DTA
sale
DTA sales
payable
Yes
No
NA
Customs
Bonding
Income tax
holiday
No
Service tax
Yes
MAT still
payable
No
Input services
exempt/refund
specified procedure
Exemption available
Exempt/Refund as per
VAT
service units
cost
Customs
Exempt on inputs,
Duty
goods
capital goods
and construction
Exemption depends
on product/ industry
material
Exemption on raw
material/
consumables
available against
advance authorization
Exemption on capital
goods available
against EPCG
authorisation
If exemption not
available
Exempt on inputs,
on product/ industry
capital goods
Excise duty
Exemption depends
If exemption not
and construction
available, credit of
goods
material
Ease of
Customs
No routine examination
compliance
by Customs
Cargo By Customs
Import /
export
be imported without
restrictions
import licence
import licence
of restricted goods
Allowed
Allowed
NA
Restricted/ canalised
Transfer of
existing
employees
from
existing
facilities
capital
goods
Allowed
Manufacturing SEZ
approvals
sectoral guideline
Units
sectoral guideline
situated
NA
Abbreviations
STP
Software Technology Park unit established under Chapter 6 of Foreign Trade of Policy of India
EOU
Export Oriented unit established under Chapter 6 of Foreign Trade of Policy of India
SEZ
DTA
Domestic Tariff Area means area which is not SEZ, EOU or STP
+NFE
Positive Net Foreign Exchange Earner Export in forex is more than imports in forex
MAT
Value added tax- Levied on sale within the State. Rate of tax varies from 4% to 15% depending upon nature
VAT
Central Sales Tax- Levied on inter State sale of goods- Rate equal to VAT rate in the State of sale; rate 2%
VAT
BCD
Additional duty of Customs in lieu of Excise duty levied on import of goods- Rate is equal to Excise duty
CVD
SAD
Additional duty of Customs in lieu of VAT/ CST levied on import of goods- Rate is 4%
Credit
Granite
2.
Textiles / Garments
3.
Food Processing
4.
Chemicals
5.
Computer Software
6.
Coffee
7.
Pharmaceuticals
8.
9.
Engineering Goods
In case of Natural Stone Exports (2006) 198 ELT 440, it has been held that duty is payable only at the time of de-
In case of Suvarna Aqua Farm (2005) 190 ELT 284 it has been held that penalty cannot be imposed if export obligation
was not fulfilled as the circumstances were beyond the control of the assessee.
c)
In case of Noel Agritech (2011) 273 ELT 306, it has been held that in case of failure to meet export obligation, duty is
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Share
Symbol:FBALX
No Transaction Fee 1
Fidelity Fund Pick 2
Summary
-10%0%10%20%
1 Yr
3 Yr
5 Yr
10 Yr
Life
-0.70%
8.65%
9.47%
6.30%
9.11%
S&P 500
-0.61%
12.40%
13.34%
6.80%
9.80%
0.95%
8.14%
9.33%
6.23%
8.95%
-2.51%
6.41%
7.33%
5.08%
--
21%
11%
7%
12%
--
929
838
722
481
--
Moderate Allocation
Rank in Morningstar Category
# of Funds in Morningstar Category
Yield
10/19/201
5 9/30/2015
Glossary definition opens in new
window.30-Day Yield 6
1.66%
1.67%
S&P 500
Moderate Allocation
6k9k12k16k19k22k
This Fund
Benchmark
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
10.68%
11.65%
8.99%
-31.31%
28.05%
13.76%
1.68%
12.90%
20.50%
10.37%
-3.75%
4.91%
15.79%
5.49%
-37.00%
26.46%
15.06%
2.11%
16.00%
32.39%
13.69%
-5.29%
Benchmark-2
4.95%
12.96%
4.13%
-21.51%
18.40%
12.13%
4.69%
11.31%
17.56%
10.62%
-2.62%
5.13%
11.29%
5.99%
-28.00%
24.13%
11.83%
-0.11%
11.72%
16.48%
6.21%
-4.44%
+/- Benchmark
5.77%
-4.14%
3.50%
5.69%
1.59%
-1.30%
-0.43%
-3.10%
-11.89%
-3.32%
1.54%
+/- Benchmark-2
5.73%
-1.31%
4.86%
-9.80%
9.65%
1.63%
-3.01%
1.59%
2.94%
-0.25%
-1.13%
+/- Category
5.55%
0.36%
3.00%
-3.31%
3.92%
1.93%
1.79%
1.18%
4.02%
4.16%
0.69%
Category
1 Yr
3 Yr
5 Yr
10 Yr
Life
-0.70%
8.65%
9.47%
6.30%
9.11%
S&P 500
-0.61%
12.40%
13.34%
6.80%
9.80%
0.95%
8.14%
9.33%
6.23%
8.95%
-2.51%
6.41%
7.33%
5.08%
--
-3.47%
6.86%
8.22%
5.17%
--
Moderate Allocation
-5.36%
4.65%
5.98%
3.81%
--
Glossary definition opens in new window.After taxes on distributions and sale of fund shares
Fidelity Balanced Fund
Moderate Allocation
0.88%
6.38%
7.28%
4.83%
--
-1.37%
4.32%
5.27%
3.63%
--
YTD (Daily)*
YTD (Monthly)
1 Month
3 Months
6 Months
0.18%
-3.75%
-2.60%
-5.97%
-5.86%
S&P 500
--
-5.29%
-2.47%
-6.44%
-6.18%
--
-2.62%
-1.21%
-3.39%
-3.87%
Moderate Allocation
--
-4.44%
-2.13%
-5.60%
-6.11%
*AS OF 10/20/2015
Risk
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or
economic developments. Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default,
issuer credit risk and inflation risk. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. Lower-quality
bonds can be more volatile and have greater risk of default than higher-quality bonds. Leverage can increase market exposure and magnify investment
risk.
Volatility Measures
Beta0.69
AS OF 9/30/2015
A measure of a portfolio's sensitivity to market movements (as represented by a benchmark index). The benchmark index has a beta of 1.0. A beta of
more (less) than 1.0 indicates that a fund's historical returns have fluctuated more (less) than the benchmark index. Beta is a more reliable measure of
volatility when used in combination with a high R2 which indicates a high correlation between the movements in a fund's returns and movements in a
benchmark index.
R20.94
AS OF 9/30/2015
A measurement of how closely the portfolio's performance correlates with the performance of the fund's primary benchmark index or equivalent.
R2 is a proportion which ranges between 0.00 and 1.00. An R 2 of 1.00 indicates perfect correlation to the benchmark index, that is, all of the
portfolio's fluctuations are explained by performance fluctuations of the index, while an R 2 of 0.00 indicates no correlation. Therefore, the lower the
R2, the more the fund's performance is affected by factors other than the market as measured by that benchmark index. An R 2 value of less than 0.5
indicates that the Annualized Alpha and Beta are not reliable performance statistics.
Sharpe Ratio1.24
AS OF 9/30/2015
The Sharpe ratio is a measure of historical risk-adjusted performance calculated by dividing the fund's excess returns (fund's average annual return for
the period minus the average annual return for the period of the Salomon Smith Barney 3-Month T-Bill Index) by standard deviation of the fund
returns. The higher the ratio, the better the fund's return per unit of risk.
Standard Deviation6.95
AS OF 9/30/2015
Statistical measure of how much a return varies over an extended period of time. The more variable the returns, the larger the standard deviation.
Investors may examine historical standard deviation in conjunction with historical returns to decide whether an investment's volatility would have
been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater
historical volatility. Standard deviation does not indicate how an investment actually performed, but it does indicate the volatility of its returns over
time. Standard deviation is annualized. The returns used for this calculation are not load-adjusted.
Year
Total Returns
2015
-3.75%
$1.215
$0.282
$19,620.86
2014
10.37%
$1.862
$0.366
$20,043.90
2013
20.50%
$1.134
$0.342
$17,916.15
2012
12.90%
--
$0.347
$14,826.99
2011
1.68%
--
$0.349
$14,861.70
2010
13.76%
$0.008
$0.351
$17,287.94
2009
28.05%
$0.01
$0.379
$18,108.33
2008
-31.31%
$0.03
$0.386
$16,459.65
2007
8.99%
$1.18
$0.42
$27,227.22
2006
11.65%
$1.04
$0.4
$22,439.29
2015 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and,
for fund performance, you should check the fund's current prospectus or other product materials for the most up-to-date information concerning
applicable loads, fees and expenses.
1. No Transaction Fee Fidelity funds are available without paying a trading fee to Fidelity or a sales load to the fund. However, the fund may
charge a short-term trading or redemption fee to protect the interests of long-term shareholders of the fund. Shares are subject to the fund's
management and operating expenses. See Expenses & Fees for more information.
2. The funds on the Fund Picks From Fidelity list are selected based on certain selection criteria. Fund Picks From Fidelity is not a personalized
recommendation or endorsement of any fund for an investor's individual circumstances.
3. Percent Rank in Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest
(or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always
receive a rank of 1. % Rank in Category is based on total returns which include reinvested dividends and capital gains, if any, and exclude sales
charges.
4. The Morningstar Category Average is the average return for the peer group based on the returns of each individual fund within the group, for
the period shown. This average assumes reinvestment of dividends.
5. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns
are reported as of the period indicated. Life of fund figures are reported as of the commencement date to the period indicated and are cumulative
if the fund is less than one year old. Total returns do not reflect the fund's [%] sales charge. If sales charges were included, total returns would
have been lower.
6. A standard yield calculation developed by the Securities and Exchange Commission for bond funds. The yield is calculated by dividing the net
investment income per share earned during the 30-day period by the maximum offering price per share on the last day of the period. The yield
figure reflects the dividends and interest earned during the 30-day period, after the deduction of the fund's expenses. It is sometimes referred to
as "SEC 30-Day Yield" or "standardized yield".
7. This chart illustrates the performance of a hypothetical $10,000 investment made in this investment product (and a benchmark or category
average, if shown) from the beginning date shown or on the inception date of the product (whichever is later). The inception date used for
products with underlying funds, or multiple shares classes, or are offered as a separate account, strategy or sub account, may be the inception
date of the underlying fund, the earliest share class of the product, or the date composite performance for the product was first made available.
The product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Benchmark returns include reinvestment of
capital gains and dividends, if any, but do not reflect any fees or expenses. It is not possible to invest in an index. Past performance is no
guarantee of future results. This chart is not intended to imply any future performance of the investment product.
Generally, data on Fidelity mutual funds is provided by FMR, LLC, Morningstar ratings and data on non-Fidelity mutual funds is provided by
Morningstar, Inc. and data on non-mutual fund products is provided by the product's investment manager, trustee or issuer or the plan sponsor
whose plan is offering the product to participants. Although Fidelity believes the data gathered from these third-party sources is reliable, it does
not review such information and cannot warrant it to be accurate, complete or timely. Fidelity is not responsible for any damages or losses arising
from any use of this third-party information.
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Morningstar Category: Moderate Allocation
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vThe discussion on investment objectives would not be complete without a discussion on the risks that investing in a mutual fund
entails.
At the cornerstone of investing is the basic principle that the greater the risk you take, the greater the potential reward. Remember that
the value of all financial investments will fluctuate.
Typically, risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that your accumulated real capital
will be insufficient to meet your financial goals. And if you want to reach your financial goals, you must start with an honest appraisal of
your own personal comfort zone with regard to risk. Individual tolerance for risk varies, creating a distinct "investment personality" for
each investor. Some investors can accept short-term volatility with ease, others with near panic. So whether you consider your
investment temperament to be conservative, moderate or aggressive, you need to focus on how comfortable or uncomfortable you will
be as the value of your investment moves up or down.
Recognizing the type of investor you are will go a long way towards helping you build a meaningful portfolio of investments that you can
live with. Take the test "Tolerance Questionnaire" to determine where your preferences lie.
Managing risks
Mutual funds offer incredible flexibility in managing investment risk. Diversification and Automatic Investing (SIP) are two key techniques
you can use to reduce your investment risk considerably and reach your long-term financial goals.
Diversification
When you invest in one mutual fund, you instantly spread your risk over a number of different companies. You can also diversify over
several different kinds of securities by investing in different mutual funds, further reducing your potential risk. Diversification is a basic
risk management tool that you will want to use throughout your lifetime as you rebalance your portfolio to meet your changing needs
and goals. Investors, who are willing to maintain a mix of equity shares, bonds and money market securities have a greater chance of
earning significantly higher returns over time than those who invest in only the most conservative investments. Additionally, a diversified
approach to investing -- combining the growth potential of equities with the higher income of bonds and the stability of money markets -helps moderate your risk and enhance your potential return.
The Unitholders of the Scheme can benefit by investing specific Rupee amounts periodically, for a continuous period. Mutual fund SIP
allows the investors to invest a fixed amount of Rupees every month or quarter for purchasing additional units of the Scheme at NAV
based prices.
Here is an illustration using hypothetical figures indicating how the SIP can work for investors:
Suppose an investor would like to invest Rs.1,000 under the Systematic Investment Plan on a quarterly basis.
Amount
Invested (Rs.)
Purchase
Price (Rs.)
No. of Units
Purchased
Initial
Investment
1000
10
100
1000
8.20
121.95
1000
7.40
135.14
1000
6.10
163.93
1000
5.40
185.19
1000
6.00
166.67
1000
8.20
121.95
1000
9.25
108.11
1000
10.00
100.00
1000
11.25
88.89
10
1000
13.40
74.63
11
1000
14.40
69.44
TOTAL
12,000
1,435.90
Types of risks
All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation will rise faster than
your earnings, leaving you with less real purchasing power than when you started (Rs. 1000 gets you less than it got your father when
he was your age). Consider these common types of risk and evaluate them against potential rewards when you select an investment.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens,
the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is
due to "market risk".
Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation sprints forward faster than the earnings on your investment,
you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs when prices rise faster than your returns.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to
pay the interest you are promised, or repay your principal when the investment matures?
Inflation Risk
Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting" which way rates will go is
rarely successful. A diversified portfolio can help in offseting these changes.
Exchange Risk
A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign
currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an
effect on the investment of the fund.
Investment Risk
The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the
NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio
of equities.
At the cornerstone of investing is the basic principle that the greater the risk you take, the greater the potential
reward. Remember that the value of all financial investments will fluctuate.
Typically, risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that your
accumulated real capital will be insufficient to meet your financial goals. And if you want to reach your financial
goals, you must start with an honest appraisal of your own personal comfort zone with regard to risk. Individual
tolerance for risk varies, creating a distinct "investment personality" for each investor. Some investors can accept
short-term volatility with ease, others with near panic. So whether you consider your investment temperament to
be conservative, moderate or aggressive, you need to focus on how comfortable or uncomfortable you will be as
the value of your investment moves up or down.
Recognizing the type of investor you are will go a long way towards helping you build a meaningful portfolio of
investments that you can live with. Take the test "Tolerance Questionnaire" to determine where your preferences
lie.
Managing risks
Mutual funds offer incredible flexibility in managing investment risk. Diversification and Automatic Investing (SIP)
are two key techniques you can use to reduce your investment risk considerably and reach your long-term
financial goals.
Diversification
When you invest in one mutual fund, you instantly spread your risk over a number of different companies. You
can also diversify over several different kinds of securities by investing in different mutual funds, further reducing
your potential risk. Diversification is a basic risk management tool that you will want to use throughout your
lifetime as you rebalance your portfolio to meet your changing needs and goals. Investors, who are willing to
maintain a mix of equity shares, bonds and money market securities have a greater chance of earning
significantly higher returns over time than those who invest in only the most conservative investments.
Additionally, a diversified approach to investing -- combining the growth potential of equities with the higher
income of bonds and the stability of money markets -- helps moderate your risk and enhance your potential
return.
The Unitholders of the Scheme can benefit by investing specific Rupee amounts periodically, for a continuous
period. Mutual fund SIP allows the investors to invest a fixed amount of Rupees every month or quarter for
purchasing additional units of the Scheme at NAV based prices.
Here is an illustration using hypothetical figures indicating how the SIP can work for investors:
Suppose an investor would like to invest Rs.1,000 under the Systematic Investment Plan on a quarterly basis.
Amount
Invested (Rs.)
Purchase
Price (Rs.)
No. of Units
Purchased
Initial
Investment
1000
10
100
1000
8.20
121.95
1000
7.40
135.14
1000
6.10
163.93
1000
5.40
185.19
1000
6.00
166.67
1000
8.20
121.95
1000
9.25
108.11
1000
10.00
100.00
1000
11.25
88.89
10
1000
13.40
74.63
11
1000
14.40
69.44
TOTAL
12,000
1,435.90
Types of risks
All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation
will rise faster than your earnings, leaving you with less real purchasing power than when you started (Rs. 1000
gets you less than it got your father when he was your age). Consider these common types of risk and evaluate
them against potential rewards when you select an investment.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences.
When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling
corporation may be affected. This change in price is due to "market risk".
Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation sprints forward faster than the earnings
on your investment, you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs
when prices rise faster than your returns.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you invest? How certain are
you that it will be able to pay the interest you are promised, or repay your principal when the investment
matures?
Inflation Risk
Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting"
which way rates will go is rarely successful. A diversified portfolio can help in offseting these changes.
Exchange Risk
A number of companies generate revenues in foreign currencies and may have investments or expenses also
denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative
impact on companies which in turn would have an effect on the investment of the fund.
Investment Risk
The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular
sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may
be more volatile than a more diversified portfolio of equities.
Managing risks
Mutual funds offer incredible flexibility in managing investment risk. Diversification and Automatic Investing (SIP)
are two key techniques you can use to reduce your investment risk considerably and reach your long-term
financial goals.
Diversification
When you invest in one mutual fund, you instantly spread your risk over a number of different companies. You
can also diversify over several different kinds of securities by investing in different mutual funds, further reducing
your potential risk. Diversification is a basic risk management tool that you will want to use throughout your
lifetime as you rebalance your portfolio to meet your changing needs and goals. Investors, who are willing to
maintain a mix of equity shares, bonds and money market securities have a greater chance of earning
significantly higher returns over time than those who invest in only the most conservative investments.
Additionally, a diversified approach to investing -- combining the growth potential of equities with the higher
income of bonds and the stability of money markets -- helps moderate your risk and enhance your potential
return.
The Unitholders of the Scheme can benefit by investing specific Rupee amounts periodically, for a continuous
period. Mutual fund SIP allows the investors to invest a fixed amount of Rupees every month or quarter for
purchasing additional units of the Scheme at NAV based prices.
Here is an illustration using hypothetical figures indicating how the SIP can work for investors:
Suppose an investor would like to invest Rs.1,000 under the Systematic Investment Plan on a quarterly basis.
Amount
Invested (Rs.)
Purchase
Price (Rs.)
No. of Units
Purchased
Initial
Investment
1000
10
100
1000
8.20
121.95
1000
7.40
135.14
1000
6.10
163.93
1000
5.40
185.19
1000
6.00
166.67
1000
8.20
121.95
1000
9.25
108.11
1000
10.00
100.00
1000
11.25
88.89
10
1000
13.40
74.63
11
1000
14.40
69.44
TOTAL
12,000
1,435.90
Types of risks
All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation
will rise faster than your earnings, leaving you with less real purchasing power than when you started (Rs. 1000
gets you less than it got your father when he was your age). Consider these common types of risk and evaluate
them against potential rewards when you select an investment.
Market Risk
At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences.
When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling
corporation may be affected. This change in price is due to "market risk".
Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation sprints forward faster than the earnings
on your investment, you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs
when prices rise faster than your returns.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you invest? How certain are
you that it will be able to pay the interest you are promised, or repay your principal when the investment
matures?
Inflation Risk
Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting"
which way rates will go is rarely successful. A diversified portfolio can help in offseting these changes.
Exchange Risk
A number of companies generate revenues in foreign currencies and may have investments or expenses also
denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative
impact on companies which in turn would have an effect on the investment of the fund.
Investment Risk
The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular
sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may
be more volatile than a more diversified portfolio of equities.
bad depends upon the state of the market. If the market sentiments are bullish, then a high beta stock is better
and if the market sentiments are bearish then, low beta stock is better. 3. Sharpe ratio: This is one of the most
widely used performance tracker in the mutual fund industry. It evaluates the return that a fund has generated
relative to the risk taken. It shows whether the returns from investments are due to smart investment decisions or
the result of excess risk taken by the Fund Manager. Sharpe Ratio depicts what is the return earned at what
level of risk. Fund Name Beta SD Sharpe 1-yr Returns (%) HDFC Capital builder Fund 18 24 Reliance Vision
Fund 21 24
Source: ACE MF, Data as on 27th March 2014 In the above example, both funds have given
absolute return of 24% each in last one year period. Reliance's fund with an SD of 21 was more volatile than
HDFC's (SD of 18). This implies that HDFCs fund carried less risk compared to Reliance. Which fund is better
among the two, given the situation? Obviously, HDFC Capital Builder Fund is better, as it is offering same return
at a lower risk (represented by standard deviation) Higher ratio depicts a high return with lower risk. (Here,
Sharpe ratio of HDFC's fund is higher than Reliance's Fund). Let us consider another example, where risk
measures - Beta and Std. Dev are same and returns generated by them are different for the same period. Fund
Name Beta SD Sharpe 1-yr Returns (%) Principal Large Cap Fund 0.91 20 0.07 22 Franklin India Bluechip
Fund 0.91 20 0.05 15
From the above table, we can see that if the investor was faced with the same levels
of risk, he should have gone for Principal large cap fund which gave 22% returns, whereas Franklin India
Bluechip fund posted only 15% returns for the same tenure. Thus, if one has to choose between two funds with
the same level of risk, then he should go for a fund which generated higher returns. The above interpretation is
only for analytical purposes; both the funds have similar characteristics and belong to the same category. In a
nutshell, Ratio Name Significance Standard Deviation The lower this figure, the better the fund is, as a higher
figure means more inconsistency and a higher risk of a downslide in return. Beta Gives an idea of how much a
fund is likely to move compared to movements of the benchmark. Thus, if you are Bullish; you should opt for a
high beta funds and go in for a low beta if you are bearish. Sharpe Funds that post a higher-than-market Sharpe
are preferable. And a ratio that does not beat the risk free rate of return is worth ignoring.
Conclusion:
These ratios are just raw numbers which are meaningless unless compared with ratios of other investments over
the same time frame with similar objectives and features. These ratios should not be looked at in isolation but
with other parameters like fund performance, long term objective, etc.
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