UTI Wealth Builder Fund Series II

Q. Dear Ashal,
This fund`s theme seems to be good. Is it worth investing? I am asking, since I have invested in Gold funds (I was going to quit these ones and start investment in Gold ETF). But now i want to know, what will be good.

regards,
MIK

Ans. Dear MIK, this UTI fund is in a class of it`s own. Having at least or more than 65% Eq. exposure (this is to gain from the Taxation window for Eq. MFs) & mandated to not more than 35% in gold ETFs or money market instruments, it`s very hard to compare this fund with any other fund.

The fund is relatively new (just completed it`s 1st year of operation in Nov. 2009). From it`s launch in Nov. 2008, till March 2009 the Eq. as well as Gold market, both were dull. From march 2009 onwards, both these asset class r firing all guns blazing. This may create a misleading picture due to super duper performance.

In future how it`s Eq. component 'll perform is yet to be tested. having only 35% Gold ETF exposure may not give enough diversification for a person who wants to invest a part of his portfolio in gold ETFs. Yes to have a Gold exposure as per ur requirement u w`d have to stop in some of ur other plain Eq. funds to keep the Eq. & Gold ratio in ur portfolio at ur desired level.

Sample this what i mean.

I assume Gold price 17K per 10 gm.

In normal if u want to invest for 1 gm. of gold in ur portfolio ur inv. amount `ll be 1700 Rs.
In case of this UTI Wealth Builder Fund II, to have the same 1 gm. Gold u w`d have to invest around 5K Rs. - 1700 Rs. for 1 gm of Gold & remaining 3300 Rs. for 65% eq. exposure. As u rinvesting additional 3300 Rs. in Eq. thru this fund, u w`d have to stop some of ur other funds. To maintain the over all balance of Eq. & Gold.

In general, people may invest from diversification point of view to have exposure in 2 asset class under a single investment.

Thanks

Ashal...