Qualitative Factors:
 Risk-adjusted returns
 Sharpe ratio
 Beta
 Returns over various periods of time
 Composition of the portfolio

Final recommendation is done by adding together the qualitative and quantitative parameters. Usually any fund, which has a corpus below Rs 400 crore and less than a year’s track record, is not usually recommended. The few funds which are favoured with fund managers are HDFC Equity, ICICI Prudential Discovery, HDFC Top 200, UTI Dividend Yield and UTI Equity Fund. Among largecap funds, are HDFC Top 20, DSP Blackrock Top 100, Birla Sunlife Frontline Equity and ICICI Prudential Focused fund.
All decisions taken by a fund manager are reflected in the net asset value (NAV) of a scheme. While selecting a fund a wealth manager looks at NAVs on a daily basis and compare them with their peers over a one-year period. Funds are recommended on the basis of philosophy, discipline and predictability of the performance. Stability is the key to one’s financial investment goals. The equity funds that have recommendations of managers are HDFC Top 200, DSP Blackrock Top 100 and ICICI Prudential Dynamic Fund (in large-cap category). Among mid-cap funds, Birla Midcap and Reliance Growth Fund have been given preference.

Qualitative factors are given a higher weightage than quantitative factors while recommending funds. Though qualitative factors such as investment process, service quality and communication with the investors are strictly not measurable, quantitative performance of mutual fund are. So, ultimately it is quality that counts to make most from investment of funds.

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Most investors do not make use of the facility to switch between funds offered by Ulips which can help them pull their asset allocation in line with their assessment of the market situation. Typically, policyholders are allowed to make four free switches between funds offered by their life insurer in a year. However, many Ulip holders fail to make use of even one. Since a Ulips’ performance is market-linked, it is imperative for policyholders to actively monitor the markets and decide to switch funds accordingly. For instance, in the current scenario, those who have selected the pure equity fund option can think of partially transferring a part of their money to a debt fund option to book profits, but only if they have made a significant profit of say 70-100%. A profit of merely 15-20% will not merit using the facility.

Since it is impossible to time the market a decision should be taken based on your financial goals. Like if you need the money next year, then, you can think of partially transferring the money to a debt fund which will preserve your capital and earn some return. On the other hand, if your goal is 5-10 years away, you can stay put in the pure equity option. In fact, policyholders can use this opportunity to increase investments into equities — buying into equities when the markets are down can get them more number of units, which will push up the realizable value at the time of exiting their Ulips. Those who have chosen a balanced fund option or those whose investments are skewed towards debt can consider using the switching fund option and transferring some amount to the equity fund offered by their insurer, if they are comfortable with changing their risk profile.

To summarize:

ü      Most Ulips allow investors to switch between debt, equity and balanced funds up to four times a year

ü      If you have made gains of up to 70 – 100% because of a rise in the stocks it is time to book profits by switching

ü      Those with policies that have over 10 years left to mature should look at shifting more funds into equity

ü      Your risk-taking ability depends on how many years you have left

ü      If you have too many liabilities (child education, mortgage), stay invested in a balanced fund

ü      If you have made decent gains and your policy is just about to mature you can switch to a debt fund

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