Invest In India » mutual fund http://investmoneyinindia.com Indian Financial News Resource Fri, 10 Feb 2012 08:03:08 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Foreigners can directly invest in Indian stocks http://investmoneyinindia.com/3738/foreigners-can-directly-invest-in-indian-stocks http://investmoneyinindia.com/3738/foreigners-can-directly-invest-in-indian-stocks#comments Mon, 02 Jan 2012 14:02:57 +0000 Ziaulla Namani http://investmoneyinindia.com/?p=3738 ©2009 Copyright by Invest In India

]]> India is encouraging rich foreign individual investors to buy and sell shares in our stock markets. The government is now looking to this category of investors to bring in more foreign capital. The decision will be effective 15 January 2012. Earlier, foreign individuals could buy into Indian companies indirectly. They could either buy units of a local or a foreign mutual fund or ask a brokerage firm to use its own proprietary account to trade for them.

Here are five things you need to know:

 The government has created a new category of company ownership called the Qualified Financial Investors (QFI). Foreign individuals can now own up to 5 per cent of an Indian company’s equity. Overall, this category of investors can own maximum 10 per cent in a company. This means a company cannot have more than 10 per cent owned by different foreign individuals.

 Falling exports and shrinking industrial output is making India a bigger importer than an exporter. The rupee continues to fall against major currencies and there is a need to stem the fall.

The presence of a new category of investors would spread ownership of shares in a company. This is likely to reduce volatility in share prices.

The stock market so far has not shown much excitement about the announcement. Many influential foreign brokerage firms have suggested to their clients to cut exposure to Indian shares. Going forward, they see a sharp slowdown in the economic growth and a fall in the corporate profitability. It must be noted that the same influential brokerage firms service rich global individual investors too.

 The move is among many steps taken recently to boost the rupee. Earlier, RBI encouraged non-resident Indians to save more in their foreign currency accounts by letting banks fix interest rates. As a result, major banks have raised rates on non-resident external savings and fixed accounts to 9 per cent from less than 4 per cent earlier. The central bank also eased restrictions on FII flows into corporate and government bonds.

 

Source – NDTV Profit.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/3738/foreigners-can-directly-invest-in-indian-stocks/feed 0 Investment Advisor Vs Financial Planner http://investmoneyinindia.com/3719/investment-advisor-vs-financial-planner http://investmoneyinindia.com/3719/investment-advisor-vs-financial-planner#comments Wed, 28 Dec 2011 12:18:19 +0000 Malvika http://investmoneyinindia.com/?p=3719 ©2009 Copyright by Invest In India

]]> A few decades ago, there was confusion with what sales and marketing are. People thought they are one and the same. But it is to be understood that sales is just an important ingredient of the functions of marketing. Sales lies in persuading and convincing a person to buy a product that is suitable. Marketing involves all the activities right from the conception of the product, to branding, advertising and retailing. It is an all pervasive function from the product being ready to reach the market and ultimately to being sold to the customer.

 

Today here prevails a similar confusion with who is an investment advisor and who is the financial planner.  It is quite common to find these terms used interchangeably, but it is necessary to understand that an investment advisor and a financial planner have the similar and vast differences as between sales and marketing.

 

 

Why is this confusion?

 

There is a real confusion among the investors regarding who a financial planner is and who is an investment advisor. These terms are used very loosely, so it is necessary that one understands the function of each of these professionals and approach the right people.

 

The main confusion in these terminologies arises out of a person’s own perception. This arises due to most professionals offering financial services like insurance advisors, mutual fund distributors and stock brokers calling themselves financial planners. This term has been used very loosely by many to suit their own convenience and image.  This is more like a compounder professing to be a doctor, when he/she knows purely only about the medicine that one has to dispense. A compounder will not have the expertise to diagnose the disease that needs to be treated.

 

Who is the Financial Planner?

 

Financial planner is involved in planning all the finances of a person. His job includes drawing up an appropriate plan that covers all financial needs and goals in the short, medium and long run. Such a planner is like an architect of a building and helps to analyze and draw a complete map of how his or her client’s finances need to be planned. It includes considering the need for liquidity, cash management for various needs, goals planning and feasibility, long term cash flow, estate planning and risk management.

 

Who is an Investment Advisor?

 

In contrast an investment advisory/advisor is a person or group that helps his client to decide on the financial products that he or she should invest in. Such an advisor understands what his or her client actually wants after communicating with him or her and understanding the need. An investment advisor makes a thorough analysis of the various securities before doing so.

 

Hence investment advisory is just one of the ingredients of financial planning.

 

Goal Achievability:

A financial planner will be able to tell you, is it possible to achieve all your financial dreams with your current and projected earning capacity. If it is not possible, then the financial planner will be able to tell you what could be achieved with your earning capacity and to achieve all your dreams what kind of earning capacity you should have.

Risk Management Plan:

A financial Plan also covers creating a risk management plan. A risk management plan includes creating an emergency reserve, assessing the human life value and suggesting a term insurance; identifying medical insurance cover required and suggesting a health insurance plan; and also suggesting a general insurance policy to cover the natural perils like fire, flood, earthquake … against your properties.

Investment Plan:

A financial plan that suggests investments comes only after all the aspects have been analyzed fully. The best investment advice can only flow out after a deep analysis of a client’s need and after the preparation of a financial plan. Financial Planning should precede the investment planning.

Existing Portfolio Revamp:

It is also necessary to understand that a financial planner also looks at past investments. He then makes necessary changes to make them amicable to achieve a client’s financial goals over a period of time. Also he will assist you in restructuring your existing outstanding loans. If necessary he will create a debt pay-off plan also.

Tax Planning:

A financial planner should assist you in creating a tax plan also. This tax plan will be in sync with your overall financial plan.

Review:

A financial planner will do a periodic review on your financial plan and investment plan. If you are preponing or postponing one of your goal or if you have got a job promotion, then you may need a financial plan review. If direct tax code has got implemented or one of your investment schemes underperforming, then you may need an investment review.

In a nutshell a financial planner will not only give you an investment advice he assists you in managing your personal finance in a complete, comprehensive and a holistic way.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the  Director and Chief Financial planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

 




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/3719/investment-advisor-vs-financial-planner/feed 0 A Step by step guide to choose a right mutual fund scheme http://investmoneyinindia.com/3597/a-step-by-step-guide-to-choose-a-right-mutual-fund-scheme http://investmoneyinindia.com/3597/a-step-by-step-guide-to-choose-a-right-mutual-fund-scheme#comments Wed, 02 Nov 2011 06:50:27 +0000 Malvika http://investmoneyinindia.com/?p=3597 ©2009 Copyright by Invest In India

]]>
 

“Models work when they are appropriate for the particular circumstance, but some of the best investment judgments over time have come when people recognized that models derived in other periods were broken or not directly relevant.”   Abby Joseph Cohen

 

Investing in mutual funds seems interesting, with number of websites, TV and other finance and wealth magazines publishing various information. However it is a challenging task and involves    knowledge regarding the shares and securities market and various laws that govern mutual funds is necessary before investing in them. Understanding the principle of mutual funds; the investment of the money of a large number of investors in stocks, bonds and money market instruments that are managed by managers makes one feel relieved.  However it is best for you as an investor to make a right choice of the mutual fund that suits your need.

 

Choosing right MF:

Investment Objective & Time Horizon

 

The objective of the fund or the use to which the funds would be put to would be a vital deciding factor. Mutual funds investing in stocks would suit those that are ready to take more risks; stocks means more exposure to the volatile market though higher returns. The length of time that one has to wait to get reasonable returns also plays a vital role. So it is best to read the offer document or fund brochure carefully before making the decision.

Liquidity:

In addition whether a fund is an open-ended or close ended one points out to how liquid your investment is. Open-ended funds are preferable to close ended ones as they can be converted to cash more easily than close ended ones that involve waiting for a period of time. Historically open ended funds have performed better than closed ended funds.

Diversification:

It pays to check for diversification in mutual funds, for an optimum diversification makes for a good choice. Opting for a diversification over 8 to 10 securities would be more risky than going in for diversification of 20 to 30 stocks. The diversification of stocks over 80 to 100 securities may mean difficulty of management to the fund manager. In addition making sure to ensure that there is a balanced diversification helps.

 

 

 

Fund Performance:

After getting comfortable with the fund’s objective, it becomes equally important to know and analyze the fund’s performance. This involves looking at the fund’s short term and long term performance and comparing it with larger market indices or benchmarks like BSE Sensex and NSE Nifty. A higher market index over a longer period indicates better funds, however past performances in case of mutual funds can never be a guarantee of future returns and can serve only as an indicator.

 

Level of Risk:

The level of risk involved would be another important indicator, with higher returns available only at higher risk levels. Would you like to go for a low risk debt fund or to go for a moderate risk balanced fund or a high risk equity fund? Look before you leap.

 

Volatility & Consistency:

Next it is to be understood that any 2 funds giving the same return are not necessarily the same, as one fund could be more subject to market ups and downs than the other.  Volatile nature of funds is more a standard deviation meaning more risk involved. In the same category of funds, an investor needs to choose funds performing consistently.

 

Fund management:

The management of the fund plays an important role in deciding the best mutual fund for you, with professionalism being very important. The experience of the fund manager and the number of years he/she has been associated with the fund matters. With a new manager and frequent turnover are not good for investors.

 

Charges:

Things seem pleasant in mutual funds; however the charges like entry load, exit load, administrative charges and fund management charges on an annual basis are to be carefully looked into. It is significant to note that these charges cannot exceed 2.5% of the fund’s assets. Most funds have uniform charges, however hidden charges need to be looked into and carefully analyzed

 

To conclude mutual funds may be the best investments as they can be done in small amounts as compared to other types of investment and carry a comparatively lower risk. But your ultimate success in the form of good returns can only be assured with following these steps of smart mutual investment planning.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in  

 




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/3597/a-step-by-step-guide-to-choose-a-right-mutual-fund-scheme/feed 0 Mutual Funds Myth Buster http://investmoneyinindia.com/3368/mutual-funds-myth-buster http://investmoneyinindia.com/3368/mutual-funds-myth-buster#comments Tue, 23 Aug 2011 12:02:56 +0000 Tushar Mathur http://investmoneyinindia.com/?p=3368 ©2009 Copyright by Invest In India

]]> Rahul is working for a mutual fund house. They have recently came out with an NFO (new fund offer). The day on which the fund house announced its maiden NAV (net asset value), he received lot of calls from investors asking why the NAV is at below par. They thought something was wrong.

Then Rahul went on clarifying them that though both an equity fund and a stock extend market-related returns, there are some key differences between the two. If you have similar misconceptions about equity funds and stocks, this article will demystify all those misconceptions.

New Fund Offerings:

A new fund offer is not likely to generate amazing returns as can be the case with an initial public offering from a company.

This is because the NAV reflects the market value of the stocks held by the fund on any day. Because a fund holds several stocks in its portfolio, the NAV can only reflect the combined returns on the portfolio between the NFO date and the date of first NAV.

The first NAV declared by a fund can, at times, be lower than the par value of investment. A lower NAV does not mean a cheaper fund: Just because a New Fund is issued at Rs 10, it does not mean it has a chance of giving better returns than an existing fund that has a higher NAV.

Whether the scheme in which you are planning to invest has an NAV of Rs.15 or Rs.150 does not matter at all.

There is a difference between the price of a listed security and the NAV of a mutual fund scheme. Listed security has a price, determined by the demand and supply of the security. Whereas the unit’s NAV of the scheme has a value determined mathematically, by the prices of the securities in the portfolio. If the portfolio appreciates by 10% Rs.15 NAV will become RS.16.5 and Rs.150 AV will become Rs.165. So in whatever the NAV you invest your investment will fetch you 10% return.

So instead of concentrating on LOW NAV and more number of units, it is worthwhile to consider other factors (performance track record, fund management, volatility) that determine the portfolio return.

A fund with higher NAV may give higher returns than a lower NAV fund, if its stocks did better in the markets.

Funds Vs Stocks

Point of distinction Equity Fund Stocks
Level of Risk High Highest
Entry/Exit cost No Entry Load; But there will be Exit load. Advisory fee may be applicable. Demat a\c and Brokerage charges
Options Options available like dividend payout, dividend reinvestment, growth. No such options
Minimum Investment Min investment is usually Rs.5000. Even one share can be bought.
Measuring Performance Returns Vs Benchmark Net Profit margins/EPS
Sub-division Classified based on stocks in which it invests. (Diversified, Midcap, sectoral, thematic) Classified as per the industry in which it operates.(FMCG, IT, PSU, METAL)
Pricing Based on the price of the underlying securities Based on the demand and supply of the particular stock

Dividends are not extra returns:

Immediately, after the dividend payment of dividend the NAV of the fund will fall to the extent of the dividend payment. Let us illustrate.

Fund’s cum dividend NAV is Rs.25. Proposed dividend is 50%. You are investing Rs.1 Lac and you will not get Rs.50000 as dividend. It is only Rs.20000 (50% on the face value Rs.10 is Rs.5 per unit) as the unit price is Rs.25 you will get 4000 units. Rs.5 dividend * 4000 units=Rs.20000.

And this dividend is not an additional gain or income. After payment of dividend the NAV of the scheme will fall to the extent of the payment and distribution taxes (if applicable). Now your nav will become Rs.20 and your investment value will be Rs.80000 (4000 units * Rs.20 NAV).

In a nutshell,

  •      Investment amount   Rs.1,00,000
  •      Dividend amount     Rs.  20,000
  •       Present Value      Rs.  80,000

It is nothing but investing Rs.80000 after dividend distribution at NAV Rs.20.

So investing in a scheme because it is declaring dividend in the near future is meaningless.

Usually a company with a liberal dividend policy may enjoy greater investor interest in the stock market. The same is not applicable to an equity-oriented mutual fund.

Investing more number of funds is not actual diversification. It may reduce your return.

Owning several mutual funds doesn’t necessarily broaden your holdings. It will be a mistake to buy the same securities over and over again in different funds with different names. You tend to believe they’re diversified. But it is not real diversification.

There are only very few funds which are performing consistently. Instead of investing in few funds, if someone chooses to invest in more number of funds (because he intends to diversify) he may be forced to choose some average performing schemes also. As a result his returns will be diluted. The step taken by the investor to diversify his investment is not leading to diversification but to dilution of return.

Thus ideally your portfolio should not have more than four-five funds.

NO tax for churning:

When we buy shares and sell them within a year we are accountable for short term capital gain tax at the rate of 15%.

But mutual funds provide the benefit of churning of stocks with no tax implications. A fund which churns its portfolio within a year is exempt from tax because it only redistributes these profits to investors.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/3368/mutual-funds-myth-buster/feed 0 Mutual Fund SIP: for Short term or Long term? http://investmoneyinindia.com/3267/mutual-fund-sip-for-short-term-or-long-term http://investmoneyinindia.com/3267/mutual-fund-sip-for-short-term-or-long-term#comments Wed, 13 Jul 2011 08:29:26 +0000 Malvika http://investmoneyinindia.com/?p=3267 ©2009 Copyright by Invest In India

]]> It may look very strange when everyone is advocating Mutual Fund Sip for long term, what is the necessity for this debate on ‘Is Mutual Fund SIP for Short term or long term?’.

 

Theoretically doing a Mutual fund SIP for long term will work for investors. But for practical reasons we need to commit a Mutual Fund SIP for short term. That is we need to break that long term into many 6 months or 1 year periods and commit your Mutual Fund SIP for first 6 month or 1 year.

 

Then at the end of 6 month or 1 year renew your SIP for another 6 month or 1 year. You need to renew like this till you complete your predetermined long term period.

 

You may think it is an unnecessary paperwork and waste of time. But you will be completely convinced when you have finished reading this article.

 

Contribution towards Mutual Fund SIP Changes:

 

How much you are contributing towards Mutual Fund SIP changes over a period of time.

 

Ø  At the beginning of a career a person will be able to commit Mutual Fund SIP for small sum of amount. As he progresses in his career, he or she will be able to increase his contribution towards Mutual Fund SIP.

Ø  Similarly, when someone reaches a stage where he need to spend more on kid’s higher education, daughter’s wedding, buying a house or meeting a major financial commitment, it is difficult for him to continue the same amount of Mutual Fund SIP contribution.

Ø  So whenever you renew your Mutual Fund SIP at the end of 6 month or 1 year, you can look at your cash flow position and based on that you can renew the Mutual Fund SIP for the increased amount or the same amount or the reduced amount.

 

Portfolio Review:

 

Also it gives you a chance to review your portfolio with your advisor once in 6 months or 1 year.

 

Ø  The scheme which you have chosen for Mutual Fund SIP is performing well when compared to its peers or not? You need to review this periodically. The scheme may turn out to be a laggard.

Ø  The scheme may be performing well when you have chosen for doing SIP. But over a period of time, it could have derailed from its performance. This is something like our cricket players. They will be in a good form in the game for some period of time. Then they will lose their form after sometime. So you need to periodically check up whether the fund is performing NOW or not.

Ø  If you are committing a Mutual Fund SIP for 10 years, then the advisor may not be coming back to you whenever you call him for reviewing your portfolio. If you commit for 6 months or 1 year he or she will be definitely coming to you for renewing the Mutual Fund SIP. You can have a review with him or her at that time.

 

When you commit Mutual fund SIP for long term, generally we ignore to review it. It may generate poor returns. You can avoid this by periodic review.

 

Equity Exposure in Overall Portfolio:

 

How much equity exposure you can give to your overall portfolio can change the amount of Mutual Fund SIP in equity and debt.

 

Ø  As the age goes up, your ability to take risk comes down. So you need to change your equity mutual fund SIP contribution periodically.

Ø  How close or distant you are to achieve your financial goals will also decide your equity exposure. If you have got long period to achieve your financial goal then you can have more equity exposure. When you have short period to achieve your financial goal, then you need to reduce your equity exposure.

Ø  Rebalancing your portfolio based on your predetermined asset allocation will also decide your equity exposure.

 

All this can change your Mutual Fund SIP amount in equity funds.

 

So committing a Mutual Fund SIP for long term looks good on paper. For practical reasons we need to commit for short term and renew it at the end of every short term till achieving our financial goals.

 

In this regard, instead of committing a Mutual Fund SIP just like that, having a long term financial plan and committing Mutual Fund SIP based on that plan will be really fruitful. This will make a solid difference in achieving your financial goals.

 

 

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

 

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]]> http://investmoneyinindia.com/3267/mutual-fund-sip-for-short-term-or-long-term/feed 0 All you wanted to know about Mutual fund ELSS http://investmoneyinindia.com/3199/all-you-wanted-to-know-about-mutual-fund-elss http://investmoneyinindia.com/3199/all-you-wanted-to-know-about-mutual-fund-elss#comments Fri, 24 Jun 2011 06:07:47 +0000 Malvika http://investmoneyinindia.com/?p=3199 ©2009 Copyright by Invest In India

]]> There are so many tax saving investment options; how Mutual fund ELSS Schemes stand out from all other options?

 

A Mutual Fund ELSS is similar to diversified equity funds. That means the fund manager can invest in shares of various companies across various industries. The difference is ELSS has got the added tax benefit, something a diversified equity fund does not offer.

 

ELSS is part of the Section 80C instruments which are cumulatively eligible for a deduction from income up to Rs.1 Lakh. This gives the tax payers benefits from 10 per cent to 30 per cent (excluding the educational cess) based on their current tax slab.

The other tax saving investments like NSC, PPF will give only 8% return p.a whereas the Mutual Fund ELSS has got the potential to deliver more than 12% return p.a. Also the lock-in period in Mutual Fund ELSS is 3 years and with NSC it is 6 yrs lock-in and with PPF it is 15 years. Among the various tax saving investment option, Mutual fund ELSS has got the least lock-in period.

 

Ulips are also one of the tax saving investment options. But now everyone has realized that Ulips has got heavy front loaded charges. Moreover smart investors want to separate their insurance from their investments. They no longer see insurance as an investment; they see insurance as a protection plan. So the smart investors go only for pure term insurance and reject ulips.

 

This is how Mutual Fund ELSS stands out of the crowd.

 

Before deciding to go for Mutual fund ELSS, here are some points to ponder over. First check your overall portfolio. Does it need more equity exposure? If yes then you can go for ELSS; if no then you can go for PPF or NSC.

 

Second thing is to keep in mind, the equity investments are for long term, say 5 years or more. Though the lock-in period in ELSS is 3 years it is better to invest with a time horizon of 5 yrs or more.

 

Also investors need to keep in mind, SIP is the best form of investing in mutual funds and ELSS is not an exception. So doing an SIP in ELSS is a good strategy to be followed.

 

The poor performing ELSS has given around 10% annualized return in the last 5 years whereas the best performing ELSS has delivered around 25% annualized return in the last 5 years. So investors need to be careful in choosing the right ELSS scheme. Past performance, risk adjusted return, consistency are a few parameters to be evaluated in selecting a best performing ELSS scheme. Investors also can approach financial advisors for selecting the right scheme.

 

There are two groups of ELSS investors. Majority of investors belong to the first group. They will wake up late to these tax saving investments. For salaried individuals, it is typical that they will be informed by their accounts department somewhere around end of January to provide proof of tax saving investment immediately or else extra tax will be deducted from their February salary. At the neck of the moment, the choice ends up being guided by convenience alone. They tend to think about tax first and investments later. As long as something saves tax, its real benefits and features as an investment are paid less attention to. That means the investments will be chosen more for convenience than for suitability.

 

There is another group of investors. Though this group is a very small group, it is a very smart group. They will not rush for tax saving scheme at the last minute. They will plan in advance. That means they will have more time to choose the right product. They will save tax as well as choose a good investment option. They will also check whether this particular tax saving scheme will suit their overall portfolio or not; will this tax saving investment is going to fit into their comprehensive financial plan. That means they will consciously choose an investment which saves tax as well as helps them in achieving their financial goals like children’s higher education, buying a house, retirement plans.

 

So…now just check up which group you are in.

 

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

 




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/3199/all-you-wanted-to-know-about-mutual-fund-elss/feed 0 Mutual Funds Mythbuster http://investmoneyinindia.com/2871/mutual-funds-mythbuster http://investmoneyinindia.com/2871/mutual-funds-mythbuster#comments Sat, 19 Mar 2011 21:24:35 +0000 Tushar Mathur http://investmoneyinindia.com/?p=2871 ©2009 Copyright by Invest In India

]]> Rahul is working for a mutual fund house. They have recently came out with an NFO (new fund offer). The day on which the fund house announced its maiden NAV (net asset value), he received lot of calls from investors asking why the NAV is at below par. They thought something was wrong.

Then Rahul went on clarifying them that though both an equity fund and a stock extend market-related returns, there are some key differences between the two. If you have similar misconceptions about equity funds and stocks, this article will demystify all those misconceptions.

New Fund Offerings:

A new fund offer is not likely to generate amazing returns as can be the case with an initial public offering from a company.

This is because the NAV reflects the market value of the stocks held by the fund on any day. Because a fund holds several stocks in its portfolio, the NAV can only reflect the combined returns on the portfolio between the NFO date and the date of first NAV.

The first NAV declared by a fund can, at times, be lower than the par value of investment. A lower NAV does not mean a cheaper fund: Just because a New Fund is issued at Rs 10, it does not mean it has a chance of giving better returns than an existing fund that has a higher NAV.

Whether the scheme in which you are planning to invest has an NAV of Rs.15 or Rs.150 does not matter at all.

There is a difference between the price of a listed security and the NAV of a mutual fund scheme. Listed security has a price, determined by the demand and supply of the security. Whereas the unit’s NAV of the scheme has a value determined mathematically, by the prices of the securities in the portfolio. If the portfolio appreciates by 10% Rs.15 NAV will become RS.16.5 and Rs.150 AV will become Rs.165. So in whatever the NAV you invest your investment will fetch you 10% return.

So instead of concentrating on LOW NAV and more number of units, it is worthwhile to consider other factors (performance track record, fund management, volatility) that determine the portfolio return.

A fund with higher NAV may give higher returns than a lower NAV fund, if its stocks did better in the markets.

Funds Vs Stocks

Point of distinction Equity Fund Stocks
Level of Risk High Highest
Entry/Exit cost No Entry Load; But there will be Exit load. Advisory fee may be applicable. Demat ac and Brokerage charges
Options Options available like dividend payout, dividend reinvestment, growth. No such options
Minimum Investment Min investment is usually Rs.5000. Even one share can be bought.
Measuring Performance Returns Vs Benchmark Net Profit margins/EPS
Sub-division Classified based on stocks in which it invests. (Diversified, Midcap, sectoral, thematic) Classified as per the industry in which it operates.(FMCG, IT, PSU, METAL)
Pricing Based on the price of the underlying securities Based on the demand and supply of the particular stock

 

Dividends are not extra returns:

Immediately, after the dividend payment of dividend the NAV of the fund will fall to the extent of the dividend payment. Let us illustrate.

Fund’s cum dividend NAV is Rs.25. Proposed dividend is 50%. You are investing Rs.1 Lac and you will not get Rs.50000 as dividend. It is only Rs.20000 (50% on the face value Rs.10 is Rs.5 per unit) as the unit price is Rs.25 you will get 4000 units. Rs.5 dividend * 4000 units=Rs.20000.

And this dividend is not an additional gain or income. After payment of dividend the NAV of the scheme will fall to the extent of the payment and distribution taxes (if applicable). Now your nav will become Rs.20 and your investment value will be Rs.80000 (4000 units * Rs.20 NAV).

In a nutshell,

Investment amount   Rs.1,00,000

Dividend amount     Rs.  20,000

Present Value      Rs.  80,000

It is nothing but investing Rs.80000 after dividend distribution at NAV Rs.20.

So investing in a scheme because it is declaring dividend in the near future is meaningless.

Usually a company with a liberal dividend policy may enjoy greater investor interest in the stock market. The same is not applicable to an equity-oriented mutual fund.

Investing more number of funds is not actual diversification. It may reduce your return.

Owning several mutual funds doesn’t necessarily broaden your holdings. It will be a mistake to buy the same securities over and over again in different funds with different names. You tend to believe they’re diversified. But it is not real diversification.

There are only very few funds which are performing consistently. Instead of investing in few funds, if someone chooses to invest in more number of funds (because he intends to diversify) he may be forced to choose some average performing schemes also. As a result his returns will be diluted. The step taken by the investor to diversify his investment is not leading to diversification but to dilution of return.

Thus ideally your portfolio should not have more than four-five funds.

NO tax for churning:

When we buy shares and sell them within a year we are accountable for short term capital gain tax at the rate of 15%.

But mutual funds provide the benefit of churning of stocks with no tax implications. A fund which churns its portfolio within a year is exempt from tax because it only redistributes these profits to investors.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

 




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/2871/mutual-funds-mythbuster/feed 0 UTI to be first on NSE mutual fund platform http://investmoneyinindia.com/2219/uti-to-be-first-on-nse-mutual-fund-platform http://investmoneyinindia.com/2219/uti-to-be-first-on-nse-mutual-fund-platform#comments Thu, 03 Dec 2009 07:46:00 +0000 Tushar Mathur Around 30 of the 100 schemes of UTI Mutual Fund will be listed on the new NSE Mutual Fund platform.
The liquid schemes will not be included among them, said a top UTI official.
For the fund industry, it will be a new technology-driven initiative when UTI MF lists its schemes on Monday on NSE's new platform – the Mutual Fund Service System (MFSS).
In November 2000 a similar initiative by the Association of Mutual Funds in India made it possible for Indian funds to declare their NAVs on a common platform.
BSE to join soon
Around 10 mutual funds are expected to join NSE's platform within a week's time, an NSE official said. BSE too is readying a similar platform for launch, a BSE spokesperson said, without giving further details.
The new transaction platform allows investors who have demat accounts to transact in mutual funds online by logging on to their broker's telecom network, which will be linked to NSE's MFSS.
Those who do not have demat accounts will have to apply to their respective mutual funds for generation of a personal identification number (PIN), a user ID and password; this route will also facilitate online transactions, without the broker coming into the picture.
Such investors will have to provide their bank account details along with their PAN and fund folio numbers to get their PIN.
Transactions would be processed on the business day on which the investor's funds are credited to the mutual fund's bank account. Units will be allotted at the previous day's NAV for orders received up to 3 p.m.
In addition to online subscription and redemption, investors can apply for new fund offers and additional subscription in various schemes.
The facility will also enable switching of units from one scheme, plan or option to another.
No entry load will be charged for direct applications that are not routed through a broker or distributor, but are forwarded online to mutual fund houses through their online transaction facility, the Web site of UTIMF said.
There is no clarity on levy of brokerage and securities transaction tax. NSE officials declined to comment on this matter.

©2009 Copyright by Invest In India

]]> Around 30 of the 100 schemes of UTI Mutual Fund will be listed on the new NSE Mutual Fund platform.
The liquid schemes will not be included among them, said a top UTI official.
For the fund industry, it will be a new technology-driven initiative when UTI MF lists its schemes on Monday on NSE’s new platform – the Mutual Fund Service System (MFSS).
In November 2000 a similar initiative by the Association of Mutual Funds in India made it possible for Indian funds to declare their NAVs on a common platform.
BSE to join soon
Around 10 mutual funds are expected to join NSE’s platform within a week’s time, an NSE official said. BSE too is readying a similar platform for launch, a BSE spokesperson said, without giving further details.
The new transaction platform allows investors who have demat accounts to transact in mutual funds online by logging on to their broker’s telecom network, which will be linked to NSE’s MFSS.
Those who do not have demat accounts will have to apply to their respective mutual funds for generation of a personal identification number (PIN), a user ID and password; this route will also facilitate online transactions, without the broker coming into the picture.
Such investors will have to provide their bank account details along with their PAN and fund folio numbers to get their PIN.
Transactions would be processed on the business day on which the investor’s funds are credited to the mutual fund’s bank account. Units will be allotted at the previous day’s NAV for orders received up to 3 p.m.
In addition to online subscription and redemption, investors can apply for new fund offers and additional subscription in various schemes.
The facility will also enable switching of units from one scheme, plan or option to another.
No entry load will be charged for direct applications that are not routed through a broker or distributor, but are forwarded online to mutual fund houses through their online transaction facility, the Web site of UTIMF said.
There is no clarity on levy of brokerage and securities transaction tax. NSE officials declined to comment on this matter.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/2219/uti-to-be-first-on-nse-mutual-fund-platform/feed 0 Axis Mutual Fund launches its first equity fund http://investmoneyinindia.com/2214/axis-mutual-fund-launches-its-first-equity-fund http://investmoneyinindia.com/2214/axis-mutual-fund-launches-its-first-equity-fund#comments Thu, 26 Nov 2009 11:29:00 +0000 Tushar Mathur Axis Bank-promoted Axis Mutual Fund has launched its first equity fund, Axis Equity Fund, a diversified equity fund benchmarked to the S&P CNX Nifty.

“We aim to offer total investment solutions to consumers and not just individual products. Our research has shown that there is a huge demand for simplicity and trust in financial services,” Axis AMC’s Managing Director & CEO, Rajiv Anand, said in a statement here today.

“We have chosen to launch a simple but effective product in the category of diversified equity funds. Industry data indicates that in the last five years (as on October 30, 2009) all the 85 diversified equity funds have given positive returns with the worst giving 12 per cent per annum and the best 34 per cent per annum. With a simple product and a reputed brand name like Axis, we have an appealing solution for the consumer,¿ Anand said.

Axis Equity Fund will open for subscription on November 11 and close on December 8, the statement said. It will re-open for purchase and redemption on January 7, 2010.

Investors can apply through a lump sum purchase or through Systematic Investment Plans during the NFO. The minimum lump sum purchase is for Rs 5,000.

The scheme is available in two options-growth and dividend and one per cent will be charged as exit load if the investor redeems/switches out from scheme within one-year from the date of allotment.

“Axis Equity Fund is a solution designed for a consumer who is seeking a balance between deciding the best investment option that helps him provide for his family's future and ensuring that he has invested wisely, thus helping him enjoy the present with his family's National Sales Head, Karan Datta, said.

Axis Mutual Fund had launched two debt schemes in the month of October 2009. It manages Rs 1,988-crore in these two schemes as on October 31. Axis Mutual Fund already has offices in over 25 Indian cities.

©2009 Copyright by Invest In India

]]> Axis Bank-promoted Axis Mutual Fund has launched its first equity fund, Axis Equity Fund, a diversified equity fund benchmarked to the S&P CNX Nifty.

“We aim to offer total investment solutions to consumers and not just individual products. Our research has shown that there is a huge demand for simplicity and trust in financial services,” Axis AMC’s Managing Director & CEO, Rajiv Anand, said in a statement here today.

“We have chosen to launch a simple but effective product in the category of diversified equity funds. Industry data indicates that in the last five years (as on October 30, 2009) all the 85 diversified equity funds have given positive returns with the worst giving 12 per cent per annum and the best 34 per cent per annum. With a simple product and a reputed brand name like Axis, we have an appealing solution for the consumer,¿ Anand said.

Axis Equity Fund will open for subscription on November 11 and close on December 8, the statement said. It will re-open for purchase and redemption on January 7, 2010.

Investors can apply through a lump sum purchase or through Systematic Investment Plans during the NFO. The minimum lump sum purchase is for Rs 5,000.

The scheme is available in two options-growth and dividend and one per cent will be charged as exit load if the investor redeems/switches out from scheme within one-year from the date of allotment.

“Axis Equity Fund is a solution designed for a consumer who is seeking a balance between deciding the best investment option that helps him provide for his family’s future and ensuring that he has invested wisely, thus helping him enjoy the present with his family’s National Sales Head, Karan Datta, said.

Axis Mutual Fund had launched two debt schemes in the month of October 2009. It manages Rs 1,988-crore in these two schemes as on October 31. Axis Mutual Fund already has offices in over 25 Indian cities.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/2214/axis-mutual-fund-launches-its-first-equity-fund/feed 0 Sahara Star Value Fund reopens for sale http://investmoneyinindia.com/1969/sahara-star-value-fund-reopens-for-sale http://investmoneyinindia.com/1969/sahara-star-value-fund-reopens-for-sale#comments Mon, 21 Sep 2009 12:12:00 +0000 Tushar Mathur Sahara Mutual Fund has announced the re-opening of its equity scheme “Sahara Star Value Fund” with effect from September 18, 2009. As per the provisons of the scheme, units will be offered for purchase and redemptions on all business days on an ongoing basis. The scheme debuted at Rs 10.1468 per unit as against a face value of Rs 10 per unit on September 17, 2009.

Announcing this, Mr. Naresh Kumar Garg, Chief Executive Officer, Sahara MF mentioned that the equity markets worldwide have started appreciating post early signs of economic revival. The Indian markets to is reflecting the early signs of good economic growth going forward backed by stronger government policies and good industrial production. While stock across sectors have already posted handsome gains, there are still many quality stocks which are attractive picks. Sahara Star Value Fund, which would invest in such quality stocks which hold value on relative parameters. The fund is positioned as a preferred vehicle for investors to participate in the perceived long term value creation.

Sahara Star Value Fund, is an open ended growth scheme with the objective to provide long term capital appreciation by investing predominantly in equity and equity related instruments of select companies based on value parameters.

©2009 Copyright by Invest In India

]]> Sahara Mutual Fund has announced the re-opening of its equity scheme “Sahara Star Value Fund” with effect from September 18, 2009. As per the provisons of the scheme, units will be offered for purchase and redemptions on all business days on an ongoing basis. The scheme debuted at Rs 10.1468 per unit as against a face value of Rs 10 per unit on September 17, 2009.

Announcing this, Mr. Naresh Kumar Garg, Chief Executive Officer, Sahara MF mentioned that the equity markets worldwide have started appreciating post early signs of economic revival. The Indian markets to is reflecting the early signs of good economic growth going forward backed by stronger government policies and good industrial production. While stock across sectors have already posted handsome gains, there are still many quality stocks which are attractive picks. Sahara Star Value Fund, which would invest in such quality stocks which hold value on relative parameters. The fund is positioned as a preferred vehicle for investors to participate in the perceived long term value creation.

Sahara Star Value Fund, is an open ended growth scheme with the objective to provide long term capital appreciation by investing predominantly in equity and equity related instruments of select companies based on value parameters.

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]]> http://investmoneyinindia.com/1969/sahara-star-value-fund-reopens-for-sale/feed 0 India’s ETF investors making up for missing gold buyers http://investmoneyinindia.com/1970/indias-etf-investors-making-up-for-missing-gold-buyers http://investmoneyinindia.com/1970/indias-etf-investors-making-up-for-missing-gold-buyers#comments Mon, 21 Sep 2009 12:09:00 +0000 Tushar Mathur Record prices have forced many of India's traditional gold buyers out of the market in recent months with jewelry demand remaining largely lethargic, but the recent rally in prices is creating a new source of demand: investors who are looking for the safety, convenience, and steady returns of exchange-traded funds, or ETFs, backed by gold.

Even among investment products, ETFs are gaining an upper hand over gold bars and coins because of the easy liquidity and lower costs associated with ETFs, analysts say. India has for long been the biggest market for gold, but much of that demand has traditionally been from rural households which buy gold in the form of jewelry.

While India continues to be a price-sensitive market with every rally hitting demand for the yellow metal, the rising popularity of ETFs indicate that going forward, the Indian market could see less of an impact from rising prices at a time when gold is again in the limelight because of a falling dollar and increasing fears about the return of high inflation.

"In the last 10 days, our daily volumes have more than doubled to 70-80 kilograms. This is despite it being an inauspicious period to buy gold in the country," said Sanjiv Shah, executive director of Benchmark Mutual Fund, which has the largest volumes and assets under gold ETFs in India.

Domestic spot gold prices rose above 16,000 rupees ($332.6) for 10 grams for the first time Wednesday after international prices convincingly moved above the key $1,000-per-troy-once level earlier this week.

The rally has come at time when Indian consumer demand has already been at multi-year lows since the start of the year. According to the World Gold Council, India's gold consumption fell 38% on year in the April-June quarter to just 109 tons. During the previous quarter, gold sales were only 17.7 tons, down 83% on year.

Those numbers, however, are not deterring fund houses from launching even more instruments for investors looking at gold as an option.

According to market participants, a number of Indian fund houses are planning to launch gold ETFs in the next few months.

Religare Mutual Fund and HDFC Mutual Fund have submitted proposals to the Securities and Exchange Board of India -- the industry regulator -- to launch new ETFs.

Six fund houses -- Benchmark Asset Management Co., Kotak Mahindra Mutual Fund, UTI Asset Management Co., Reliance Capital Asset Management Ltd., Quantum Mutual Fund, and SBI Mutual Fund -- already offer gold ETFs in India.

Separately, UTI Mutual Fund, Reliance Mutual Fund, and IDFC Mutual Fund have submitted proposals to launch funds that invest in gold ETFs.

"In the last year Indian gold ETFs have given excellent returns, prompting major fund players to plan more launches to tap this market," said Kapil Gandhi, a trader with STCI Commodities.

According to data from exchanges and the Association of Mutual Funds in India, gold ETFs have given returns of about 35% in the year ended Sept. 15, while gains from gold futures were around 25% for the same period. The stock market, as measured by the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, returned an even lower 23%, making gold ETFs one of the best investment choices last year.

With some analysts expecting domestic gold prices to hit 18,000 rupees/10 grams soon, more investors are expected to go in for asset re-allocation and increase their investment in gold ETFs.

"Investors who had been waiting on the sidelines are now coming in and volumes have been above average in the last few days," said Arvind Chary, fund manager for Quantum Mutual Fund's gold ETF.

"Out of the total consumption of 800 tons of gold (annually), anecdotal evidence suggests that 200 tons were in coins and bars. Over a period of time, this demand will shift to gold ETFs," said Shah of Benchmark Mutual Fund.

This is expected to result in more gold buying by these fund houses. Currently, gold holdings by the six listed ETFs in India are estimated around 6 tons.

But some industry officials warn fund houses may be getting overly excited about the scope of the market.

"Indians still prefer to hold gold in their hands," and that is "proving to be a deterrent to the growth of ETFs in India," said Ashok Minawala, former chairman of the All India Gems and Jewellery Trade Federation. "People have started accepting" the current high prices as expectations are for prices to rise further. That is helping revive consumer demand, he said.

©2009 Copyright by Invest In India

]]> Record prices have forced many of India’s traditional gold buyers out of the market in recent months with jewelry demand remaining largely lethargic, but the recent rally in prices is creating a new source of demand: investors who are looking for the safety, convenience, and steady returns of exchange-traded funds, or ETFs, backed by gold.

Even among investment products, ETFs are gaining an upper hand over gold bars and coins because of the easy liquidity and lower costs associated with ETFs, analysts say. India has for long been the biggest market for gold, but much of that demand has traditionally been from rural households which buy gold in the form of jewelry.

While India continues to be a price-sensitive market with every rally hitting demand for the yellow metal, the rising popularity of ETFs indicate that going forward, the Indian market could see less of an impact from rising prices at a time when gold is again in the limelight because of a falling dollar and increasing fears about the return of high inflation.

“In the last 10 days, our daily volumes have more than doubled to 70-80 kilograms. This is despite it being an inauspicious period to buy gold in the country,” said Sanjiv Shah, executive director of Benchmark Mutual Fund, which has the largest volumes and assets under gold ETFs in India.

Domestic spot gold prices rose above 16,000 rupees ($332.6) for 10 grams for the first time Wednesday after international prices convincingly moved above the key $1,000-per-troy-once level earlier this week.

The rally has come at time when Indian consumer demand has already been at multi-year lows since the start of the year. According to the World Gold Council, India’s gold consumption fell 38% on year in the April-June quarter to just 109 tons. During the previous quarter, gold sales were only 17.7 tons, down 83% on year.

Those numbers, however, are not deterring fund houses from launching even more instruments for investors looking at gold as an option.

According to market participants, a number of Indian fund houses are planning to launch gold ETFs in the next few months.

Religare Mutual Fund and HDFC Mutual Fund have submitted proposals to the Securities and Exchange Board of India — the industry regulator — to launch new ETFs.

Six fund houses — Benchmark Asset Management Co., Kotak Mahindra Mutual Fund, UTI Asset Management Co., Reliance Capital Asset Management Ltd., Quantum Mutual Fund, and SBI Mutual Fund — already offer gold ETFs in India.

Separately, UTI Mutual Fund, Reliance Mutual Fund, and IDFC Mutual Fund have submitted proposals to launch funds that invest in gold ETFs.

“In the last year Indian gold ETFs have given excellent returns, prompting major fund players to plan more launches to tap this market,” said Kapil Gandhi, a trader with STCI Commodities.

According to data from exchanges and the Association of Mutual Funds in India, gold ETFs have given returns of about 35% in the year ended Sept. 15, while gains from gold futures were around 25% for the same period. The stock market, as measured by the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, returned an even lower 23%, making gold ETFs one of the best investment choices last year.

With some analysts expecting domestic gold prices to hit 18,000 rupees/10 grams soon, more investors are expected to go in for asset re-allocation and increase their investment in gold ETFs.

“Investors who had been waiting on the sidelines are now coming in and volumes have been above average in the last few days,” said Arvind Chary, fund manager for Quantum Mutual Fund’s gold ETF.

“Out of the total consumption of 800 tons of gold (annually), anecdotal evidence suggests that 200 tons were in coins and bars. Over a period of time, this demand will shift to gold ETFs,” said Shah of Benchmark Mutual Fund.

This is expected to result in more gold buying by these fund houses. Currently, gold holdings by the six listed ETFs in India are estimated around 6 tons.

But some industry officials warn fund houses may be getting overly excited about the scope of the market.

“Indians still prefer to hold gold in their hands,” and that is “proving to be a deterrent to the growth of ETFs in India,” said Ashok Minawala, former chairman of the All India Gems and Jewellery Trade Federation. “People have started accepting” the current high prices as expectations are for prices to rise further. That is helping revive consumer demand, he said.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/1970/indias-etf-investors-making-up-for-missing-gold-buyers/feed 0 Avoid these common mutual fund pitfalls http://investmoneyinindia.com/1814/avoid-these-common-mutual-fund-pitfalls http://investmoneyinindia.com/1814/avoid-these-common-mutual-fund-pitfalls#comments Mon, 03 Aug 2009 11:54:00 +0000 Tushar Mathur Equity markets are on the rise. New fund offers (NFOs) are the rage once again. And again, you are receiving solicitations from your financial advisers to invest in mutual funds (MFs) so that you don’t miss the boat. At times such as these, it’s important to avoid the pitfalls of investing, so that you get the most out of your investments.

Invest in funds backed by experienced asset management companies (AMCs) and asset managers

If you had the choice, you’d probably go to an experienced doctor rather than someone fresh out of medical school. It is the same with MFs. It is always advisable to invest through an experienced asset management company and a fund manager, both of which boast an impressive operating and investment history in India.

Cheapest is not always best

This is probably the most common mistake investors make when investing in mutual funds. For some reason, they think that a Rs10 net asset value (Nav) is better than a Rs20 existing fund of the same category and type because the former is cheaper. What matters is the amount of money you are putting in. Rs1 lakh put into either fund will grow the same amount, assuming that both funds are invested in the same underlying securities. So, whether Rs10 grows to Rs12—a 20% increase—or Rs20 grows to Rs24, it’s the same thing.

Don’t invest in a new fund if a previous one of the same category exists

At the time of a new fund’s launch, there is a lot of hype created through advertising aimed at enticing you into investing. However, there might be a fund of this type already existing, which might be a better option because it has had an operating history for a while, as well as proven risk management experience in that category. You are better off avoiding the new fund at its launch and investing in the older fund of the same category.

Understand your risk appetite

Not all medicines are suited to all patients. Some can handle a higher dosage, depending upon their age, their size, the allergies they are prone to, etc. Similarly, not all mutual funds are meant for everyone. Before you invest blindly, understand the risks involved and evaluate whether you can handle the risks associated with the fund and its underlying exposure.

Build a strong foundation

Just as a house needs a strong foundation, so does your mutual fund portfolio. Make sure you have safe and stable exposure to index funds and large-cap diversified funds before you start exposing yourself to sector- and industry-specific funds, which are usually of a higher risk value.

Be realistic about returns

Be realistic about the returns you can expect. Your money is unlikely to double in the next two years through mutual funds—and don’t fall for the salesmanship of your adviser.

Give your money the chance to compound

By chopping and changing your portfolio and getting in and out of funds frequently, you are disturbing the process of compounding and not giving your money the chance to grow. Be patient, even if a fund might not be doing well in the short term.

©2009 Copyright by Invest In India

]]> Equity markets are on the rise. New fund offers (NFOs) are the rage once again. And again, you are receiving solicitations from your financial advisers to invest in mutual funds (MFs) so that you don’t miss the boat. At times such as these, it’s important to avoid the pitfalls of investing, so that you get the most out of your investments.

Invest in funds backed by experienced asset management companies (AMCs) and asset managers

If you had the choice, you’d probably go to an experienced doctor rather than someone fresh out of medical school. It is the same with MFs. It is always advisable to invest through an experienced asset management company and a fund manager, both of which boast an impressive operating and investment history in India.

Cheapest is not always best

This is probably the most common mistake investors make when investing in mutual funds. For some reason, they think that a Rs10 net asset value (Nav) is better than a Rs20 existing fund of the same category and type because the former is cheaper. What matters is the amount of money you are putting in. Rs1 lakh put into either fund will grow the same amount, assuming that both funds are invested in the same underlying securities. So, whether Rs10 grows to Rs12—a 20% increase—or Rs20 grows to Rs24, it’s the same thing.

Don’t invest in a new fund if a previous one of the same category exists

At the time of a new fund’s launch, there is a lot of hype created through advertising aimed at enticing you into investing. However, there might be a fund of this type already existing, which might be a better option because it has had an operating history for a while, as well as proven risk management experience in that category. You are better off avoiding the new fund at its launch and investing in the older fund of the same category.

Understand your risk appetite

Not all medicines are suited to all patients. Some can handle a higher dosage, depending upon their age, their size, the allergies they are prone to, etc. Similarly, not all mutual funds are meant for everyone. Before you invest blindly, understand the risks involved and evaluate whether you can handle the risks associated with the fund and its underlying exposure.

Build a strong foundation

Just as a house needs a strong foundation, so does your mutual fund portfolio. Make sure you have safe and stable exposure to index funds and large-cap diversified funds before you start exposing yourself to sector- and industry-specific funds, which are usually of a higher risk value.

Be realistic about returns

Be realistic about the returns you can expect. Your money is unlikely to double in the next two years through mutual funds—and don’t fall for the salesmanship of your adviser.

Give your money the chance to compound

By chopping and changing your portfolio and getting in and out of funds frequently, you are disturbing the process of compounding and not giving your money the chance to grow. Be patient, even if a fund might not be doing well in the short term.

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]]> http://investmoneyinindia.com/1814/avoid-these-common-mutual-fund-pitfalls/feed 0 Simple Steps to help you to select the right mutual funds http://investmoneyinindia.com/1570/simple-steps-to-help-you-to-select-the-right-mutual-funds http://investmoneyinindia.com/1570/simple-steps-to-help-you-to-select-the-right-mutual-funds#comments Mon, 15 Jun 2009 14:46:06 +0000 Tushar Mathur http://investmoneyinindia.com/?p=1570 ©2009 Copyright by Invest In India

]]> Simple Step 1: Know your fund

Try answering this question. Do you know the objective of every fund that you have invested in? Probably not!

Take for example a large equity diversified fund which belongs to a well known fund house. It follows an index plus style of investing and invests at least 60% of its money from a selection of stocks in the BSE 200 Index.

The fund has a large cap bias and hence is suitable for those investors who can take medium to high risk (you take risk when the outcome of an event that you undertake is not certain. In investments, risk could lead to less than expected earnings or even erosion in the investment value).

When you know the objective of a fund, it is easier for you to set an expectation and align the fund selection. You should not be investing in a midcap fund if you cannot handle the inherit enhanced risk.

Simple Step 2: Make time tested funds a larger part of your portfolio

More new funds are churned out by the marketing machinery of the mutual fund houses than a real attempt to add value to your portfolio. Just avoid them!

Also avoid the sectoral/thematic funds as they tend to work in cycles with a restricted investment mandate.

There are many time tested (read experienced) funds with fantastic track records available to meet your needs.

Simple Step 3: Keep Returns expectations aligned with the risk you are taking

Returns are a function of many factors: risk being a key one. The play of risk in the investment world is often not understood. Remember, higher the return, higher the risk!

While searching for the maximum returns, you may not realize that you may be taking on the highest risk. Imagine driving at top speed. The chances of an accident grow exponentially. With equity mutual funds, you could be thinking the same way.

So do not over expect. Know your risk taking ability and select your funds accordingly.

Simple Step 4: Review your portfolio regularly – avoid frequent churning

Over a period of time, a portfolio needs to be rebalanced to reflect changes in your needs and risk taking ability. Compositions of funds undergo change and so does their performance. Hence it is necessary to review the portfolio regularly, at least annually, so as to ensure that it remains on track to deliver on your expectations.

However, avoid frequent churning, which can increase your overall expenses and bring down your total returns.

Simple Step 5: Take informed decisions. – Keep yourself updated.

Track important economic variables like interest rates, inflation, and industry growth. More simply, be observant and look for economic activity around you to understand what is happening.

Seek researched and unbiased views from experts. While it cannot be denied that some of your agents/advisors are honest in their advice, many are not.

So, you have to take control of your own investments and portfolio and seek the right information inputs from a source, which has no interest in selling a particular mutual fund to you.




©2009 Copyright by Invest In India

]]> http://investmoneyinindia.com/1570/simple-steps-to-help-you-to-select-the-right-mutual-funds/feed 0 HDFC FLEXINDEX PLAN http://investmoneyinindia.com/1102/hdfc-flexindex-plan http://investmoneyinindia.com/1102/hdfc-flexindex-plan#comments Fri, 20 Mar 2009 12:57:40 +0000 Tushar Mathur http://investmoneyinindia.com/?p=1102 ©2009 Copyright by Invest In India

]]>

  • What is HDFC FLEXINDEX PLAN?

    It empowers you to automatically transfer your investments from select Debt/Liquid Schemes to select equity Schemes of HDFC Mutual Fund at closing BSE SENSEX levels of your choice.

    • “Equities are probably the only asset class where investors are comfortable buying at a higher price and vice-a-versa” – Warren Buffet
    • “Be fearful when others are greedy and greedy when others are fearful” – Warren Buffet
    • Investors find it very difficult to invest due to various reasons when markets fall and thereby are unable to benefit from high returns of equities
    • HDFC FLEXINDEX PLAN offers investors a tool to plan their investments. The Plan prevents investors from the indecision of investing or not investing in bear/volatile market conditions

  • How does HDFC FLEXINDEX PLAN work?

    Investors can invest in HDFC Mutual Fund’s select Debt/Liquid Schemes and choose four BSE SENSEX levels of their choice to transfer amounts to HDFC Mutual Fund range of select equity Schemes

  • Illustration

    Source Scheme HDFC Liquid Fund
    Investment Amount Rs. 1,00,000
    Target Scheme HDFC Top 200 Fund Options
    Four stages of switch execution BSE SENSEX levels* Flexible Instalment
    option**    		 Fixed Instalment
    option
    I 9000 15% 25%
    II 11000 20% 25%
    III 8500 40% 25%
    IV 8000 25% 25%
    Total 100 100

    * Investors to fill this column with BSE SENSEX levels in multiples of 500 points. ** Please note that under Flexible Instalment option, the minimum percentage in each row should be 10%.

    As per the illustration, under the Fixed Instalment option Rs. 25,000 each will be transferred from HDFC Liquid Fund automatically to HDFC Top 200 Fund when the specified BSE SENSEX level is reached. Under Flexible Instalment option, Rs. 40,000 will be transferred into the Target Scheme at the specified BSE SENSEX level at stage III of the illustration.

  • What is duration of the HDFC FLEXINDEX PLAN?

    The validity of the HDFC FLEXINDEX PLAN is 1 year from date of registration

    • On completion of one year from the date of registration, in case the Triggers indicated by the investors remain inactive, the proportionate registered amount will be automatically transferred into the Target Scheme in 6 equal monthly instalments on 1st of every month
    • In case investors decide to opt out of the facility, they can give a written request to cease the Trigger facility

  • How does one benefit by the HDFC FLEXINDEX PLAN?

    Facilitates an entry to equities at SENSEX levels of your choice and takes advantage of market volatility

    • Invest at a targeted level and do not miss out on an opportunity; it enables automatic decision making at levels with which you are comfortable.
    • Investments are into select equity schemes with long term track record
    • Initial investment in Liquid/Debt Schemes help you to earn income till investments are transferred to equity funds.
    • Take advantage of the market movements without the hassle of constant tracking
    Source Scheme Target Schemes
    HDFC Cash Management
    Fund – Call Plan, Savings Plan and Treasury Advantage Plan    		 HDFC Growth Fund
    HDFC Liquid Fund HDFC Equity Fund
    HDFC Liquid Fund – Premium Plan HDFC Top 200 Fund
    HDFC Floating Rate Income
    Fund – Short Term Plan    		 HDFC Capital Builder Fund
    HDFC Index Fund
    HDFC Core & Satellite Fund
    HDFC Premier Multicap Fund
    HDFC Prudence Fund
    HDFC Balanced Fund

    Minimum registration amount in Source Scheme: Rs. 50,000 and in multiples of Rs. 1,000 thereafter.

    • Please refer to the HDFC Flexindex Enrolment Form for terms and conditions before enrollment.




    ©2009 Copyright by Invest In India

    ]]>     http://investmoneyinindia.com/1102/hdfc-flexindex-plan/feed 0     Why Invest in International Equity Mutual Funds? http://investmoneyinindia.com/701/why-invest-in-international-equity-mutual-funds http://investmoneyinindia.com/701/why-invest-in-international-equity-mutual-funds#comments Tue, 30 Dec 2008 18:41:00 +0000 Tushar Mathur Studies have consistently shown that investing in a mix of U.S. and foreign stocks has produced better returns - with less risk - than investing in the U.S. equity market alone. While investments in all mutual funds involve risk, investing in foreign securities presents risks such as currency fluctuations and changes in political, regulatory or economic conditions. All of these factors may result in greater share-price volatility.The simplest way to invest in international equities is through a mutual fund, which offers investors the following advantages, as stated by Iris Greenberger:

    Diversification: Diversification helps reduce the risk of loss associated with any single investment. While diversification cannot eliminate risk entirely, it smoothes portfolio performance during periods of market volatility.

    Professional Management:Most investors have neither the time nor the expertise needed to manage a large portfolio of securities. Mutual funds are managed by portfolio managers, who track the fund's holdings daily and decide what stocks to buy and sell.

    Liquidity:Having liquidity means that any or all of your shares can be redeemed on any business day. You will receive the value of your investment at the close of the market. The value of the fund fluctuates with market conditions, and therefore, at redemption, the value of an investor's shares may be more or less than their original cost.

    Convenience:The mutual fund handles all administrative aspects of share ownership. You will receive account statements, which include information on the tax status of any capital gains and dividends you receive.

    To know more about the investing reasons in international equity fund,check this article: Why Invest In International Equity Mutual Funds?, by Iris Greenberger

    ©2009 Copyright by Invest In India

    ]]>     Studies have consistently shown that investing in a mix of U.S. and foreign stocks has produced better returns – with less risk – than investing in the U.S. equity market alone. While investments in all mutual funds involve risk, investing in foreign securities presents risks such as currency fluctuations and changes in political, regulatory or economic conditions. All of these factors may result in greater share-price volatility.The simplest way to invest in international equities is through a mutual fund, which offers investors the following advantages, as stated by Iris Greenberger:

    Diversification: Diversification helps reduce the risk of loss associated with any single investment. While diversification cannot eliminate risk entirely, it smoothes portfolio performance during periods of market volatility.

    Professional Management:Most investors have neither the time nor the expertise needed to manage a large portfolio of securities. Mutual funds are managed by portfolio managers, who track the fund’s holdings daily and decide what stocks to buy and sell.

    Liquidity:Having liquidity means that any or all of your shares can be redeemed on any business day. You will receive the value of your investment at the close of the market. The value of the fund fluctuates with market conditions, and therefore, at redemption, the value of an investor’s shares may be more or less than their original cost.

    Convenience:The mutual fund handles all administrative aspects of share ownership. You will receive account statements, which include information on the tax status of any capital gains and dividends you receive.

    To know more about the investing reasons in international equity fund,check this article: Why Invest In International Equity Mutual Funds?, by Iris Greenberger

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