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Novelty Non-Value

NFOs may have the lure quotient, but little investment worth

Canara Robeco has unveiled a new fund offers (NFO) called F.O.R.C.E. Should I invest in it?
Canara Robeco F.O.R.C.E. Fund will be investing in financials, retail, entertainment etc. This is a distinct fund. Generally, it is better not to invest in NFOs as their previous performance cannot be scrutinised. You do have the option of investing in it now on launch, or you can invest in it later when it turns open-ended after some time.

However, it would be far better to look into funds whose track record can be checked. Then you can know how they have done when the markets were falling and when markets were rising. Also, you can get to know how the fund is in terms of risk taking. How these two NFOs perform will depend on market sentiment.

Please explain what is a portfolio’s price-to-book value (PB) ratio and how does one read the style box on http://valueresearchonline.com?
Every mutual fund has invested in a set of stocks. We look at the PB ratio of each stock that comprises the portfolio. And then we weight the assets by the percentage of assets in an individual stock. So assuming that the portfolio was a single stock then what will be the PB value. Of course, book value is not the true reflection of the underlying worth, but that is what we have as the closest thing in a very objective way. This provides an inkling into relative valuation.

Broadly, the equity style box is a nine-box grid. There are two dimensions to it and every portfolio is slotted in one of the nine boxes. On one dimension the grid is large-, mid- and small-stocks. The other side is growth, blend and value.

Looking at it one can understand whether the fund has dominantly invested in growth stocks or value stocks. If the fund tends to have a very low PB value then it tends towards value stocks. The style box is revised on a monthly basis based on the disclosure of their portfolio. So, basically, the style box of a fund shows the character of the fund’s portfolio in a nutshell.

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