Have a Cake and Eat it too…

This is yet another latest development in Investments.

Many investors who booked partial profits when markets rallied to 21000, have minimized the losses in the current market crash. In addition they now have additional liquidity to invest at lower levels.

For instance, In a partial profit booking strategy, as the value of the investment grew the excess profit would be ‘shaved’ off. Say when the investment value became Rs.1,20,000 the excess Rs.20,000 (20%) is shaved off. Again whenever the investment value grew by 20% percentage, the investor would shave off the profits (Perpetual Trigger). In Financial Planning we call this as “Asset Rebalancing”. By doing so, the investor would have pulled out Rs.60,000 so far. Hence even at the current value of Rs.70,000 he would not be worried when compared to the person who did not enjoy the fruit at all and sits at a net loss of Rs.30,000 (Rs.1 Lakh minus Rs.70000 present value).

So far this profit booking strategy had to be done manually. But now, this process has been automated by ICICI Prudential Mutual fund. It has launched “ICICI PRUDENTIAL TARGET RETURNS FUND” which works exactly in the way explained in the example above. This fund has introduced Perpetual trigger for the first time in Indian MF’s The uniqueness of this fund are:

• It is a plain diversified large cap (open ended) fund
• You can prefix the target (say 20%) – so that once it is achieved profit is booked.
• You can either redeem the entire investment or
• You can redeem the capital appreciation alone ( Perpetual trigger )
• When equity markets are rising and hitting targets, the fund trigger helps investors rebalance the investment
• Helps you create cash (out of the profit booked) which can be used to invest when markets are falling.
• Provides investors with an automatic asset allocation rebalancing tool
  Keep emotion and sentiment out of the investment process

For example, in the recent market rally from 8000 points to 12000 points, if you had chosen a 12% trigger, then 4 triggers of 12% each would have been executed so far. What else do you expect out of your investment?

Our Call on this Product:

• It is a Good concept to invest in. Just like SIP this is another safe strategy.
• It is high time investors bring in some discipline into their investment.
• Target Return fund is a strategy which could be highly be useful for one shot investment.
• It is a rare product where you can stay invested and book the profits alone. You get regular cash flow which can keep you smiling all the day.
• Since ICICI MF is the only company to have this option of Perpetual trigger, investors in ICICI MF can invest in TARGET RETURN FUND and make use of it.
• But for other fund houses – include the Trigger option for all your investments from now on. It is better to be safe than to feel sorry later.