Price Earning Funds & Financial Planning

Price earnings ratio captures how many times the Earnings per Share is covered by the Market Price for the share. It is a traditional measurement algorithm with no substitute available so far. One compares it with peers and takes a call on whether a share is reasonable priced or not and take buy/sell/hold decisions.


In a rising market P/E Funds give good performance while in a fluctuating or falling markets the Dividend yield funds give best rate of return. Dividend yield is the ratio between the Rupee dividend and price per share.

Somebody looking for full diversification should be holding both class for getting cash flows in all weather conditions.


The P/E funds available are:
a). Tata Equity P/E Fund
b). FT India Dynamic PE Ratio Fund of Funds (FTDPEF)
Equity component in the scheme is directly linked to levels of P/E of the NSE Nifty, one of the most popular indices of equity markets of India.

Weighted Average PE Ratio of NSE Nifty	Equity Component(%)	Debt Component(%)
Upto 12	90-100	0-10
12-16	70-90	10-30
16-20	50-70	30-50
20-24	30-50	50-70
24-28	10-30	70-90
Above 28	0-10	90-100

c).



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