Monday, June 4, 2007
Infrastructural Funds
UTI Infrastructure Fund with benchmark of BSE 100
Tata Infrastruture Fund with Benchmark of BSE Senesx
ICICI Pru Infrastruture Fund with Benchmark of Nifty
Can Infrastructure Fund with Benchmark of BSE 100
Birla Infrastructure Fund
Principal PNB Infrastructure fund
Sahara Infrastructure Fixed Pricing Fund
Sahara Infrastructure Variable Pricing Fund and
SBI Infrastructure Fund all with Benchmark of Nifty completes the scene. All of them take 2.25% entry load; Achieved 1 year returns close to 33% pa; have expense ration range 1% to 2.18%; the pathbreaker was UTI in April 2004 followed by Tata in Nov 2004. Next came ICICI and CAN in 2005 Principal PNB and Sahara in 2006 and SBI in May 2007
The sector is poised to grow as 11th plan contemplates 15% pa growth rate for this industry with 32,000 crore USD investments alone in this sector.
Infrastructural Funds is where profit come in longer hauls...
Pharma Sector Funds
Franklin Pharma,
UTI Pharma & Health care;
Magnum Pharma,
Reliance Pharma and
JM Health Care
are the funds avaialble. First three came in 1999 and the last two in 2004; No fresh entries from 2005 reflects the saturation in the Industry.
UTI Pharma & Health care;
Magnum Pharma,
Reliance Pharma and
JM Health Care
are the funds avaialble. First three came in 1999 and the last two in 2004; No fresh entries from 2005 reflects the saturation in the Industry.
Although there are only a handful of funds in this class, pharma is a long term bet.
Banking Sector Funds
There is one ETF and Two Mutual Fund Schemes in this class. 2009 being the target RBI has kept for creating level playing field in the banking industry, more action is awaited in this class of mutual fund products.
Reliance Banking Sector Fund entered in 2003 and 2004 saw entry of UTI Banking sector Fund and the ETF called BankBeEs
First two take 2.25% entry load; Expense ratio is 2.5% for UTI and 2.21% for Relinace; Both put together size is less than 200 croes but bankBees assumes above 3300 crores(30April 2007)!!
Tuesday, May 15, 2007
SWP in Mutual Funds
Monday, May 7, 2007
'Trigger' in Mutual Funds
The trigger facility in Mutual Funds help you to pre-determine when you want to get out of the market. Administered carefully, it can be a facilitator to augment wealth; A trigger can be hasty, if your exit date happened to be on a secularly increasing market trend. Same way a trigger may save you in a secularly falling market from breaking to bruises.
A good strategy for risk averse/beginners in the capital market.
What is 'Trigger' in Mutual Funds? Read in Business Manorama dated 7th March 2007
A good strategy for risk averse/beginners in the capital market.
What is 'Trigger' in Mutual Funds? Read in Business Manorama dated 7th March 2007
Monday, April 30, 2007
Systematic Investment Plan is a way of disciplined investment. At pre-determined intervals, you make fixed sum investments in to your preferred scheme. If you are riding a growing market, you make good profits. Ideal for risk averse investors who prefer very long term stay in the markets.
SIPs in Mutual Funds : read full original text Business Manorama dated 30th April 2007
SIPs in Mutual Funds : read full original text Business Manorama dated 30th April 2007
Monday, April 23, 2007
Arbitrage Funds
Arbitrage Funds look for making a bit more than the debt Funds by taking positions in the Cash & Equity markets; With permission of debt derivatives, more opportunities will be created in this segment. They are high Risk class.
A derivative is a futures contract traded on the exchange. Essentially a contract is an agreement with another to exchange a specified asset(physical/financial)at a pre-determened price on a specified future date. Commodity derivatives are just getting ppularised in India. Futures in the modern form date back to June 2000. Entry of Mutual Fund Products came by later.
Benchmark Derivative Fund(Dec 2004)
Kotak Equity Arbitrgae Fund (Sep 2005)
J M Arbitrage Advantage Fund (Jun 2006)
UTI SPrEAD(Jun 2006)
SBI Arbitrage Opportunities Fund (Oct 2006)
Standard chartered Arbitrage fund( Nov 2006)
ICICI Pru Equity & Income Optimiser(Dec 2006)
Lotus India Arbitrage fund (Apr 2007)
Direct the Flow of Your Investments where it is needed
This is about a family whose Income/Expenses were examined along with their Assets and Liabilities to plan for the upcomong liabilities in their life. The wealth Management approach is not denying GOD; But uses the talents provided by the almighty to plan in a better manner translating one's life purpose into financial milestones. The services are available for a fee. Interested parties may contact the author.
Liquid/MMMFs
they have been prominently in news since budget 2007 due to imposing of DDT. how do they add value to you? Inspite of skyrocketing BSE Sensex, it is this class of funds that flourished, if one goes by size, in the Indian Context.
Tuesday, April 10, 2007
Benchmarking in Indian Mutual Funds
Benchmarking tells you against what market index you can compare the performance of your fund. CRISIL, ICICI Securities etc.. produces and maintains market indices for the debt market. in the equities market, we have popular indices like BSE Sensex, Nifty etc..
The major problem in the industry is the way each fund manager defines his benchmark and how he really manages the fund. When you hear about a balanced fund, you have a notion that it is 50:50 in equity and debt with plus or minus 10% on either side. But the author could see schemes with 80% equity allocation also claiming to be a balanced fund.
The major problem in the industry is the way each fund manager defines his benchmark and how he really manages the fund. When you hear about a balanced fund, you have a notion that it is 50:50 in equity and debt with plus or minus 10% on either side. But the author could see schemes with 80% equity allocation also claiming to be a balanced fund.
read the full text in Business Manorama dated 9th April 2007. It is from the family of Malayala Manorama and comes every Monday with the main daily
The Rights of the Mutual Fund Investors
Knowing your rights as a Mutual Fund Investor irons out several irritants in dealing with any constituent of the Industry.
The MF regulation 1996 and the ammendments from time to time has put MF investors right upfront of averything. But it is for the investor to take adequate care before entrusting hard earned money to study the Offer Document undersand the riskprofile of the scheme and match it to one's risk profile and life needs.
Receive the Statement of account within 30 days, receive the repurchase cheques within 10 days, Income Distribution warrants within 30 days, portfolio details every half year and a annual review of performance etc.. are to be seen as guidance for Mutual Funds to improve their service technologies than legal requirements. Indian MFs have realised it and reciprocating better disclosure practices; Any failiures needs to be brought to their notice for faster rectification.
read the original text in Business Manorama dated 2nd April 2007
The MF regulation 1996 and the ammendments from time to time has put MF investors right upfront of averything. But it is for the investor to take adequate care before entrusting hard earned money to study the Offer Document undersand the riskprofile of the scheme and match it to one's risk profile and life needs.
Receive the Statement of account within 30 days, receive the repurchase cheques within 10 days, Income Distribution warrants within 30 days, portfolio details every half year and a annual review of performance etc.. are to be seen as guidance for Mutual Funds to improve their service technologies than legal requirements. Indian MFs have realised it and reciprocating better disclosure practices; Any failiures needs to be brought to their notice for faster rectification.
read the original text in Business Manorama dated 2nd April 2007
The pangs of growing up
Interested? pl take a trip tohttp://www.asiacase.com/case/southAsia/icfai-MVMonica.html
A must read for any student of Portfolio Management & Mutual Funds. Takes you through the turmoils Indian Mutual Fund Industry in its initial decade after private players entry.
Also you would be interested in the Book Review on 'Business Environment' at http://www.indianmba.com/Books/Book41/book41.html Why are we not able to define the crumbling of marxism as a business ideology? Pl share your thoughts.
A must read for any student of Portfolio Management & Mutual Funds. Takes you through the turmoils Indian Mutual Fund Industry in its initial decade after private players entry.
Also you would be interested in the Book Review on 'Business Environment' at http://www.indianmba.com/Books/Book41/book41.html Why are we not able to define the crumbling of marxism as a business ideology? Pl share your thoughts.
Saturday, March 31, 2007
The 'SRI' of Mutual Funds
SRI stands for Socially Responsible Investments. This shows the superiority of investors. Inside the company, they use their votes in the AGMs to influence the management from within. Outside the company, they even avoid buying scrips of such companies that are known to indulge in non-humanitarian policies/business actions. The same spirit is captured by MFs when they create the portfolios using sieves designed to exclude socially un-welcome businesses.
Today, it is felt that businesses should turn from economic efficiency & current wealth maximisation to healing the wounds of the society/community or the eco-system itself. This made US companies in 1970s to turn to SRI. in the 1980s, US investors tried to boycott those companies that practiced aparthied in South Aafrica. The USA has about $ 40 billion in SRI oriented MFs by 2005. There are about 230 funds in this class among the 19000 funds of USA. Canada has about $ 65.5 billion in such funds by 2004 itself.
America has a specific index also developed for measuring the performance of such funds. it is called Domin Social Index( DSI); Developed by Kinder, Lydenberg and Domin & CO (KLD) . It has 400 scrips taken on market capitalization basis. This is developed in the same manner as the S&P 500 Index
The scrips are selected in a step by step process. In the first stage, the companies are excluded using quantiative parameters. For example, a company is having more than 2% cash flow from tobacco related sources in its sales is dropped. In the second stage qualitaive fators are used. For example, the usefulness of the product or customer friendliness of the product, labour policies of the company etcc . In the last stage normal economic/financial criteria are applied.
In India, ABN AMRO MF has broght the first fund in thi sclass christened " ABN AMRO Sustainable Development Fund". The fund has done an (Environmental/Social/)ESG rating using 100 questions in each subcategory on environment and social contributions by the company. No personal qualitative measures are involved and strictly goes by market capitalisation & published facts. The back-testing was done for 2000-2006 period prior to launch. This is their 25th product globally.
read the full text in malayalam in Business Manorama dated 26th March 2007.
Today, it is felt that businesses should turn from economic efficiency & current wealth maximisation to healing the wounds of the society/community or the eco-system itself. This made US companies in 1970s to turn to SRI. in the 1980s, US investors tried to boycott those companies that practiced aparthied in South Aafrica. The USA has about $ 40 billion in SRI oriented MFs by 2005. There are about 230 funds in this class among the 19000 funds of USA. Canada has about $ 65.5 billion in such funds by 2004 itself.
America has a specific index also developed for measuring the performance of such funds. it is called Domin Social Index( DSI); Developed by Kinder, Lydenberg and Domin & CO (KLD) . It has 400 scrips taken on market capitalization basis. This is developed in the same manner as the S&P 500 Index
The scrips are selected in a step by step process. In the first stage, the companies are excluded using quantiative parameters. For example, a company is having more than 2% cash flow from tobacco related sources in its sales is dropped. In the second stage qualitaive fators are used. For example, the usefulness of the product or customer friendliness of the product, labour policies of the company etcc . In the last stage normal economic/financial criteria are applied.
In India, ABN AMRO MF has broght the first fund in thi sclass christened " ABN AMRO Sustainable Development Fund". The fund has done an (Environmental/Social/)ESG rating using 100 questions in each subcategory on environment and social contributions by the company. No personal qualitative measures are involved and strictly goes by market capitalisation & published facts. The back-testing was done for 2000-2006 period prior to launch. This is their 25th product globally.
read the full text in malayalam in Business Manorama dated 26th March 2007.
Fund of Funds
MFs serve in meeting life goals by relating the savings needs & risk appetite through Fund of Funds as a single shot investment. All requirements of differing risk levels (return goes hand in hand as you know) are met by dividing the investment into component schemes at entry.
The savings needs of an individual are linked to his life goals as follows:
1. accumulation phase
2. consolidation phase
3. spending phase
4. gifting phase
In the accumulation phase one is planning to meet his life goals like acquiring a higher qualification, buying a car, buying a house etc.. In the consolidation phase, he has met one or two of the goals or nearing the achievement of these goals. So he makes a rationalisation of all his investments. Re groupe it according to attainment of goals/new goals set. Spending phase is characterised by spending for higher education of the child/marriage of the child etc.. One is almost self sufficient in this phase. In the gifting stage, he spends for charity or social works as he has lot more left after providing for his current & future well being.
Fund of Fund normally builts these aspects normally either by way of age/risk level classifications. FT India Life Stage fund comprises of 5 options connecting age as a proxy for risk level. Pru ICICI, Birla AMCs has risk level as its bas for classification. The Optimix from ING Vysya group has five FOFs with themes:
Income/Growth,
Financial planning,
Active Debt Management,
Good value equity, and
Asset allocation.
It is interesting to note that, schemes like ALL season's Bond Fund of Standard Chartered (Grindlay's SCABF) invests only in first class bond funds only. Kotak dynamic equity Fund also invests in other MF schemes.
Basically, fund of funds invest in MF schemes. It can be from same fund house or outside or in any combination as provided in the OD. A normal fund cannot invest in FOF as also another FOF. SEBI requires to keep the fund expenses to 0.75% of AUM.
The important feature is that the component schemes are managed independently and therefore the risk level is maintained same all throught the life of the investment. Diversification across strategies/styles are captured well by the FOFs.
For the original version please read the Business Manorama dated 19th March 2007
The savings needs of an individual are linked to his life goals as follows:
1. accumulation phase
2. consolidation phase
3. spending phase
4. gifting phase
In the accumulation phase one is planning to meet his life goals like acquiring a higher qualification, buying a car, buying a house etc.. In the consolidation phase, he has met one or two of the goals or nearing the achievement of these goals. So he makes a rationalisation of all his investments. Re groupe it according to attainment of goals/new goals set. Spending phase is characterised by spending for higher education of the child/marriage of the child etc.. One is almost self sufficient in this phase. In the gifting stage, he spends for charity or social works as he has lot more left after providing for his current & future well being.
Fund of Fund normally builts these aspects normally either by way of age/risk level classifications. FT India Life Stage fund comprises of 5 options connecting age as a proxy for risk level. Pru ICICI, Birla AMCs has risk level as its bas for classification. The Optimix from ING Vysya group has five FOFs with themes:
Income/Growth,
Financial planning,
Active Debt Management,
Good value equity, and
Asset allocation.
It is interesting to note that, schemes like ALL season's Bond Fund of Standard Chartered (Grindlay's SCABF) invests only in first class bond funds only. Kotak dynamic equity Fund also invests in other MF schemes.
Basically, fund of funds invest in MF schemes. It can be from same fund house or outside or in any combination as provided in the OD. A normal fund cannot invest in FOF as also another FOF. SEBI requires to keep the fund expenses to 0.75% of AUM.
The important feature is that the component schemes are managed independently and therefore the risk level is maintained same all throught the life of the investment. Diversification across strategies/styles are captured well by the FOFs.
For the original version please read the Business Manorama dated 19th March 2007
Asset allocation funds
The asset allocation of balanced funds or hybrid funds are rigid where as that of asset allocation funds are flexible. The OD of asset allocation funds infuse flexibility by giving full freedom to the fund manager or define his freedom by linking the asset allocation to some parameters like market P/E ratio. It helps in surging ahead in a volatile market without each time have to refer to the investor's communication/advertisement in local daily about changes in the fund management policy.
FT India PE ratio fund, UTI Variable Investment Plan,Pru ICICI Dynamic Equity Plan etc are examples in this respect.
Templeton has defined asset allocation as <12%>.
UTI has put slabs from 7151 to 9900 levels of BSE Sensex progessively declining equity allocation from 90% to 30%. Here UTI could not capture the growth in BSE Sensex beyond 9900 when the level above 9900 continued more than an year.
Read the full vernacular text in business manorama dated 12th March 2007
FT India PE ratio fund, UTI Variable Investment Plan,Pru ICICI Dynamic Equity Plan etc are examples in this respect.
Templeton has defined asset allocation as <12%>.
UTI has put slabs from 7151 to 9900 levels of BSE Sensex progessively declining equity allocation from 90% to 30%. Here UTI could not capture the growth in BSE Sensex beyond 9900 when the level above 9900 continued more than an year.
Read the full vernacular text in business manorama dated 12th March 2007
Thursday, March 15, 2007
Getting the Wealth Management Policy right first...
The professional service of drawing one's Wealth Management Policy Statement (WeManPoSt)is offered.
Pl respond with your email address; NRIs can register for awailing this facility in advance so that convenient schedules on your stay in India can be an added advantage. Generally expected information in the first sitting from the participant:
1. Address proof & Identity proof
2. income, savings already made, tax, expenses, liabilities, responsibilities in life, family & educational background, any details that have a bearing on income or expenses
Your WeManPoSt will be as good as the disclosures you make. You may have to come prepared to sit for 2-3 hours in a single session platform. Otherwise it can be stretched into 3 sessions of 1 hour or as required by mutual understanding.
The charges are very moderate & collecting to meet the expenses of the office. Registration fees Rs.500; Filing the input form Rs 2500.00 Receipt of WeManPoSt Rs. 2500.00 No other payments. Fees are subject to revision & therefore participants are requested to confirm the current rates while taking the appointment.
Pl respond with your email address; NRIs can register for awailing this facility in advance so that convenient schedules on your stay in India can be an added advantage. Generally expected information in the first sitting from the participant:
1. Address proof & Identity proof
2. income, savings already made, tax, expenses, liabilities, responsibilities in life, family & educational background, any details that have a bearing on income or expenses
Your WeManPoSt will be as good as the disclosures you make. You may have to come prepared to sit for 2-3 hours in a single session platform. Otherwise it can be stretched into 3 sessions of 1 hour or as required by mutual understanding.
The charges are very moderate & collecting to meet the expenses of the office. Registration fees Rs.500; Filing the input form Rs 2500.00 Receipt of WeManPoSt Rs. 2500.00 No other payments. Fees are subject to revision & therefore participants are requested to confirm the current rates while taking the appointment.
Getting your Wealth Management Policy Statement RIGHT First!
Giving voice to one's concern's in life; aspirations in life by taking stock of income/expenses; assets/liabilities as a family/business is very important for meeting them in an orderly way.
the 'how' of meeting life goals as financial milestones is an ever increasing need of millions of people in India too.
Have a look at page number 36, Sampadyam, February 2007 a quarterly magazine published from Manorama group, Kottayam, Kerala
the 'how' of meeting life goals as financial milestones is an ever increasing need of millions of people in India too.
Have a look at page number 36, Sampadyam, February 2007 a quarterly magazine published from Manorama group, Kottayam, Kerala
Arbitrage Funds India
World of derivatives opened for Indian Capital markets in June 2000 when Futures trading started. But the MFs had to wait till 2003 to get the guidelines issued. It was also an effort to offer capital protection oriented schemes to the investors as Assured return products were extint.
Read the original malayalam version in Business Manorama dated February 26, 2007 ;
Such Funds offer a bit more than ordinary debt funds; But needs to look at the strategies applied as they carry more risk than the normal debt funds.
Read the original malayalam version in Business Manorama dated February 26, 2007 ;
Such Funds offer a bit more than ordinary debt funds; But needs to look at the strategies applied as they carry more risk than the normal debt funds.
Rating of Mutual Funds
The funds are classified according to their managerial efficiency and performance based on certain common parameters of quality. This service is given inIndia by CRISIL, ICRA
Pl remember that rating is not perpetual. It is about that period under consideration. It is again only for that product and no other product from the same fund. So always look for th ecurrent rating reports only
valueresearchonline give 5star to single star grading
CRISIL give CPR 1 to CPR 5 and
ICRA give MFR 1 to MFR 5 to denote progressively good performance
Have a glance on the original Malayalam version in Business Mnorama dated February 19, 2007
Pl remember that rating is not perpetual. It is about that period under consideration. It is again only for that product and no other product from the same fund. So always look for th ecurrent rating reports only
valueresearchonline give 5star to single star grading
CRISIL give CPR 1 to CPR 5 and
ICRA give MFR 1 to MFR 5 to denote progressively good performance
Have a glance on the original Malayalam version in Business Mnorama dated February 19, 2007
Myths about Investing in Mutual Funds
This article deals with the myths about investing in mutual funds.
Myth No:1. It is better to invest in a scheme with Rs.10.00 as NAV (Face Value) than investing in an existing scheme with NAV Rs 14.00
let us consider that the the NAV appreciates from Rs. 10 to Rs.11 and the NAV of Rs. 14 to Rs. 15.40; Now the appreciation in both schemes are identical - both has given 10% increase only. Identiacl schemes in the same period gives identical returns. So the crux of the matter is not the NAV per se but whether the schemes are identical in all aspects!! The NAV shows the realized performance. So please do not penalise good performance by fund managers.
Myth No:2. Long term investments give good returns. So one needs to buy & hold only.
Even if the investments are made on a long term basis, one needs to periodically, at least once in an year, review the performance of the fund & one's dsireability in holding it further in view of changes in macro-economic factors as also personal life goal shifts. Again, it is the aggressive growth stage of mutual funds as far as India is concerned. So it is possible to have mergers & acquisitions happening in a big way. It could be scheme mergers of the same fund family, or between funds. There is also need for updating the change of address/bank account as th einvestor changes residence/bank etc.. Some times, the fundamental attributes of the scheme is altered by the fund providing information to the investor. So it is in the interest of the investor to annually once see what is happening on his investments, whether he should continue holding or change course.
Myth No:3. (Systematic Investment Plan)SIP is a panacea for anythng & everything.
Some people belive that SIP is a cure for all investment needs. SIP is only a beginning. As you earn, you save. But, to translate it into life goals is really amatter of concern. The cash flows at the time of requirement should be sufficient to meet the life goals. The decisons about SIP is concerned with
How much amount?
What periodicity?
Which fund?
Which scheme?
What period?
What frequency?
This is where more thoughts needs to go.
Myth No: 4. Index funds do not give good returns. Fund Managers do not manage it.
Index funds give returns equivalent to that of the Index being tracked. If BSE sensex is tracked by the fund as taht in Master Index fund of UTI MF, both should give same returns in the same period. It is achieved by the fund manager by mimicing a portfolio as taht of the index. Ofcourse, the fund manager's skills are to the extent of manging the dividends/bounses received, always maintaining the portfolio composition as that of the index. Therefore operating expenses are kept low. Not much is spent for portfolio selection as well. In totality, one can say that, these low cost funds are best suited for common man looking at taking same risk as that of the market.
Myth No: 5. Dividend Scheme is better than the growth scheme.
This is like the bird-in-hand policy. You do not know what will happen in future. So whatever is got, fine. To put it scientifically, one Re. received today is more valuable than same recevied/ receivable later. The capital appreciation translates into money ony when one repurchases the units. A dividend declared is ready money. From the point of view of taxation, capital gains are non-taxed. Dividends are subject to dividend distribution tax for debt funds at the aggregate level but not in the hand of the individual. Nevertheless, take a learned decision.
Nifty Index NAV (Rs per Unit)
Dividend Growth
3900 15 15
4250 18 18
Dividend 3 0
15 18
3900 12 14.4
investor got 12+3=15 14.4
Myth No: 6 Diversification reduces risk. An investment into an equity scheme provides adequate diversification. So I need to invest only in that scheme alone to ensure required diversification. Put differently, how much diversification is adequate diversification?
The books say that if one is holding about 15-20 scrips, it is adequate diversification. Most of the mutual funds have portfolios larger than that. So if one buys into a scheme of a mutual fund, it is correct diversification, going by the books. Now what are the risks that one is open to? the strategy/style/asset allocation of a single fund manager. Therefore, it is advisable to have some 3-4 different funds in your investment portfolio.
Have a look at the original malayalam version in Business Manorama dated February 12, 2007
Myth No:1. It is better to invest in a scheme with Rs.10.00 as NAV (Face Value) than investing in an existing scheme with NAV Rs 14.00
let us consider that the the NAV appreciates from Rs. 10 to Rs.11 and the NAV of Rs. 14 to Rs. 15.40; Now the appreciation in both schemes are identical - both has given 10% increase only. Identiacl schemes in the same period gives identical returns. So the crux of the matter is not the NAV per se but whether the schemes are identical in all aspects!! The NAV shows the realized performance. So please do not penalise good performance by fund managers.
Myth No:2. Long term investments give good returns. So one needs to buy & hold only.
Even if the investments are made on a long term basis, one needs to periodically, at least once in an year, review the performance of the fund & one's dsireability in holding it further in view of changes in macro-economic factors as also personal life goal shifts. Again, it is the aggressive growth stage of mutual funds as far as India is concerned. So it is possible to have mergers & acquisitions happening in a big way. It could be scheme mergers of the same fund family, or between funds. There is also need for updating the change of address/bank account as th einvestor changes residence/bank etc.. Some times, the fundamental attributes of the scheme is altered by the fund providing information to the investor. So it is in the interest of the investor to annually once see what is happening on his investments, whether he should continue holding or change course.
Myth No:3. (Systematic Investment Plan)SIP is a panacea for anythng & everything.
Some people belive that SIP is a cure for all investment needs. SIP is only a beginning. As you earn, you save. But, to translate it into life goals is really amatter of concern. The cash flows at the time of requirement should be sufficient to meet the life goals. The decisons about SIP is concerned with
How much amount?
What periodicity?
Which fund?
Which scheme?
What period?
What frequency?
This is where more thoughts needs to go.
Myth No: 4. Index funds do not give good returns. Fund Managers do not manage it.
Index funds give returns equivalent to that of the Index being tracked. If BSE sensex is tracked by the fund as taht in Master Index fund of UTI MF, both should give same returns in the same period. It is achieved by the fund manager by mimicing a portfolio as taht of the index. Ofcourse, the fund manager's skills are to the extent of manging the dividends/bounses received, always maintaining the portfolio composition as that of the index. Therefore operating expenses are kept low. Not much is spent for portfolio selection as well. In totality, one can say that, these low cost funds are best suited for common man looking at taking same risk as that of the market.
Myth No: 5. Dividend Scheme is better than the growth scheme.
This is like the bird-in-hand policy. You do not know what will happen in future. So whatever is got, fine. To put it scientifically, one Re. received today is more valuable than same recevied/ receivable later. The capital appreciation translates into money ony when one repurchases the units. A dividend declared is ready money. From the point of view of taxation, capital gains are non-taxed. Dividends are subject to dividend distribution tax for debt funds at the aggregate level but not in the hand of the individual. Nevertheless, take a learned decision.
Nifty Index NAV (Rs per Unit)
Dividend Growth
3900 15 15
4250 18 18
Dividend 3 0
15 18
3900 12 14.4
investor got 12+3=15 14.4
Myth No: 6 Diversification reduces risk. An investment into an equity scheme provides adequate diversification. So I need to invest only in that scheme alone to ensure required diversification. Put differently, how much diversification is adequate diversification?
The books say that if one is holding about 15-20 scrips, it is adequate diversification. Most of the mutual funds have portfolios larger than that. So if one buys into a scheme of a mutual fund, it is correct diversification, going by the books. Now what are the risks that one is open to? the strategy/style/asset allocation of a single fund manager. Therefore, it is advisable to have some 3-4 different funds in your investment portfolio.
Have a look at the original malayalam version in Business Manorama dated February 12, 2007
Exchange Traded Funds
This is a new class of products ushered in by the Benchmark Mutual Fund. The concept of ETF is very simple. The AMC approaches those heavy investors in the equities (asset class) to be the contributors. The corpus thus raised is divided into treadable units called creation units and listed on the stock exchange. This group of applicants ensure supply of units anytime. They buy and sell units in the proportion of scrips in the Index and not in cash. The Mutual Fund then sell the portfolio to common investors like you and me who enter and exit in cash mode trading through a broker with the stock exchange. With ETF, you get live NAV than normal MF where you get historic NAV; No tracking error as in Index Funds. Thus ETFs combine benefits of diversification to the full extent, if you are on a broad market Index.
Today we have ETFs on different indices as asset classes.
Read in malayalam the original artice of Business Manorama dated February 05, 2007
Today we have ETFs on different indices as asset classes.
Read in malayalam the original artice of Business Manorama dated February 05, 2007
Fixed Maturity Plans & Capital Protection Oriented Schemes
Fixed Maturity Plans(FMPs) and Captal Protection Oriented Funds (CPOSs) are the findings in search of excellent products to risk averse investors in the wake of drying up of Assured Return MIPs from Mutual Funds in the Indian context.
Way back in 1993 itself, private mutual funds started innovating and perfected this idea by late 90s when they succeeded in offering debt funds that matched the maturity of the underlying portfolio. The portfolio generally had only one asset with same maturity as that of the scheme offered. Though the fluctuations in the interest rate in the market affected the value of the portfolio, by reserving some 20% to the equity markets fund managers tried to meet investor expectations. The trial and error finally led to force SEBI to issue formal guidelines to offer FMPs and CPOSs.
FMPs do not offer any capital protection at all. FMPs, the objective is return generation whereas in the case of CPOS, the Fund Manger tries to protect the Capital , but not guranteed. The debt instruments needs to get compulsorily credit rated for inclusion in the portfolio. They use Options and Futures to achieve this end. As the derivatives market is in the experimental stages in India, the coming years will open flood gates of opportunityies to those who seek a bit more than returns from debt funds.
See the malyalam version in Business Manorama dated 29th Jan 2007
Way back in 1993 itself, private mutual funds started innovating and perfected this idea by late 90s when they succeeded in offering debt funds that matched the maturity of the underlying portfolio. The portfolio generally had only one asset with same maturity as that of the scheme offered. Though the fluctuations in the interest rate in the market affected the value of the portfolio, by reserving some 20% to the equity markets fund managers tried to meet investor expectations. The trial and error finally led to force SEBI to issue formal guidelines to offer FMPs and CPOSs.
FMPs do not offer any capital protection at all. FMPs, the objective is return generation whereas in the case of CPOS, the Fund Manger tries to protect the Capital , but not guranteed. The debt instruments needs to get compulsorily credit rated for inclusion in the portfolio. They use Options and Futures to achieve this end. As the derivatives market is in the experimental stages in India, the coming years will open flood gates of opportunityies to those who seek a bit more than returns from debt funds.
See the malyalam version in Business Manorama dated 29th Jan 2007
Index Funds - India
Index Funds are those having portfolio that closely mirror that of the underlying Market Index. For Example, BSE Sensex is a popular equity market index. A fund that closely follows this index will have exactly the same scrips in the same ratio in its portfolio as that of the index. The Portfolio Manger does not do great research to identify the scrip that way. The composition of the portfolio undergo change when he gets dividend/bonus/rights from these companies. Tehn he does necessary purchases/sales to maintain the proportion as that of the Index. The Portfolio manager also does purchases/sales when he faces redemption/sales of fresh units for maintaning the portfolio proprtion. This is based on the Efficient Market Hypothesis that Nobody can Beat the Market. they are passively managed as compared to their equity counterpoarts in the industry.
Almost all MFs have Index Funds. They are common man's investment vehicle; One can easily compare with the Index and make sure whether the fund manager has performed or not.
Look at Business Manorama dated January 22, 2007 for the related Malayalam article
ULIP For Tax savings;Accompanied by Pension Funds
ULIP of UTI MF has been a path breaking product for lower Sum Assured strata. With more money into investments than the Insurance based products, it carved a niche for itself in the Indian Investorscape from 1976. However, the power of marketing may push this species from mutual funds into oblivion. Read the related Malayalam article in Business Manorama dated January 15, 2007
Tax saving Schemes from Mutual Funds
let me introduce to you the Tax saving Schemes of Mutual Funds(MF). upto Rs.1,00,000 investments in Tax saving MF schemes qualify for Tax rebate @ 20% along with other specified investments. There are 3 type of such products from MFs.
1. Equity Linked savings Scheme(ELSS)
2. Uint Linked Insurance Plan(ULIP)
3. Pension funds
Some MFs have multiple ELSS offerings Like HDFC, Principal and UTI. These investments can be repurchased after 3 year lock-in-period only. Otherwise the normal term of investment is 10 years in certain cases and some are Open ended. These schemes are useful as a savings instrument as also a tax saving vehicle.
while investing in any MF, one sholud look at the expenses charged from the investor in terms of initial expense(if it is a NFO), entry load, exit load, fund management expenses. These are all legally valid charges. But is the extent of cahrges warranted? There is no uniformity among funds in charging the customers. some funds charge loads 2.25-2.5%, when some others of same class charge 1.75-2.25%. It is here, the investor should think for himself. Rs 25 NAV fetches 0.9564 unit with entry load where as 1.00 unit without entry load. after 10 years, assuming that you are getting 12% compounded annual growth rate, your investment Rs 25.00 would have grown into Rs.71.02 or Rs. 77.65 depending on whether you got fraction of a unit or a full unit initially.So prefer a no-load fund; if not go for a exit load and not entry load.
When it come to size, it really matters. A very large fund is better than a small fund with same number of unitholders. The large fund can absob scale of economies by sheer size. market shocks mostly get absorbed without affecting the NAV badly. Go for a fund with large corpus than a small corpus.
When you are making an investment for long term, like 10 years, one can be a little lax on the service quotient.
You can read the related Malayalam article in Business Manorama dated January 08, 2007
1. Equity Linked savings Scheme(ELSS)
2. Uint Linked Insurance Plan(ULIP)
3. Pension funds
Some MFs have multiple ELSS offerings Like HDFC, Principal and UTI. These investments can be repurchased after 3 year lock-in-period only. Otherwise the normal term of investment is 10 years in certain cases and some are Open ended. These schemes are useful as a savings instrument as also a tax saving vehicle.
while investing in any MF, one sholud look at the expenses charged from the investor in terms of initial expense(if it is a NFO), entry load, exit load, fund management expenses. These are all legally valid charges. But is the extent of cahrges warranted? There is no uniformity among funds in charging the customers. some funds charge loads 2.25-2.5%, when some others of same class charge 1.75-2.25%. It is here, the investor should think for himself. Rs 25 NAV fetches 0.9564 unit with entry load where as 1.00 unit without entry load. after 10 years, assuming that you are getting 12% compounded annual growth rate, your investment Rs 25.00 would have grown into Rs.71.02 or Rs. 77.65 depending on whether you got fraction of a unit or a full unit initially.So prefer a no-load fund; if not go for a exit load and not entry load.
When it come to size, it really matters. A very large fund is better than a small fund with same number of unitholders. The large fund can absob scale of economies by sheer size. market shocks mostly get absorbed without affecting the NAV badly. Go for a fund with large corpus than a small corpus.
When you are making an investment for long term, like 10 years, one can be a little lax on the service quotient.
You can read the related Malayalam article in Business Manorama dated January 08, 2007
MFs: Good Prospects
Mutual funds being a link between the savers and investors, are placed at a strategic position in a nation's economy. The MFs give a standard portfolio to investors for risk diversification.The fund managers deploy different investment strategies and styles, research methods etc.. to deliver good returns irrespective of the market fluctuations. Ordinary investors lack the capital,knowledge, experience and capacity in terms of fund management. So far there are about 30 MFs registered under SEBI offering more than 650 products. http://www.amfiindia.com/showhtml.asp?page=mfindustry
The NAV is published by evening 7.00pm on the website of the AMFI to eliminate any manipulation of the data on csah flows from/to the funds.
Tax saving schemes are generally on sale across the months, but particularly in January-March the last lap is available for investors to complete their shopping for the current fiscal. In the early weeks of Jan 2007, UTI, Canbank, Optimix (from ING Vysya) are in the market with fresh products among others. MIN was made mandatory from 1st Jan 2007 and subsequently replaced by the budget 2007 by PAN. You can read more on MIN from http://www.amfiindia.com/
Malayalam version of this article appeared in Business Manorama dated January 01, 2007
Tax saving schemes are generally on sale across the months, but particularly in January-March the last lap is available for investors to complete their shopping for the current fiscal. In the early weeks of Jan 2007, UTI, Canbank, Optimix (from ING Vysya) are in the market with fresh products among others. MIN was made mandatory from 1st Jan 2007 and subsequently replaced by the budget 2007 by PAN. You can read more on MIN from http://www.amfiindia.com/
Malayalam version of this article appeared in Business Manorama dated January 01, 2007
Tuesday, February 13, 2007
fraternity of finance teachers of mgt institutes of Kerala
Why not we have a regular exhange of views on Kerala's wealth creation processes in an organized manner by exchanging notes and having an action programme to educate panchayat/taluk/districtlevel rulers and administraters and planners to have a developmental plan in the background of globalisation so that the younger generation will have more space to operate.One may not be a William Sharpe or Harry Markowitz but small thoughts, collective efforts can push the mankind forward.
Monday, February 12, 2007
Want to learn how to plan your wealth creation?
This is a professional service from your Portfolio Doctor. At Portfolio Doctor, we try to assess the assets and liabilities, incomes and expenses of one family/business in its lifetime. We try to translate into financial terms, one's life goals for meeting life purpose. The disclosures the client make are the inputs along with the assessment of portfolio doctor about the external market conditions and clients personal aspirations.
Plan your Financial Needs; Learn to live with Savings than on Credit; the age old Indian Tradition of saving habits deserves a re-look - We need not copy plastic money of westerners blindly.
Plan your Financial Needs; Learn to live with Savings than on Credit; the age old Indian Tradition of saving habits deserves a re-look - We need not copy plastic money of westerners blindly.
What links do I have
Seek Goddess Saraswati known for 'vidya'(knowledge/education): http://www.ibsindia.org/ibs_kochi.asp
Have a glimpse of Goddess Lakshmi of wealth at http://www.utimf.com/
Add some spice to life from http://www.spicesboard.org/
to the rich experiences at http://matsyafed.org/home.htm. Improve your Wealth by reading 'Fund Scan' in Business Manorama, published every Monday from www.malayalamanorama.com
& also meet the "Portfolio Doctor" in the Quarterly Magazine called 'Sampadyam' from the same group.
Have a glimpse of Goddess Lakshmi of wealth at http://www.utimf.com/
Add some spice to life from http://www.spicesboard.org/
to the rich experiences at http://matsyafed.org/home.htm. Improve your Wealth by reading 'Fund Scan' in Business Manorama, published every Monday from www.malayalamanorama.com
& also meet the "Portfolio Doctor" in the Quarterly Magazine called 'Sampadyam' from the same group.
Sunday, February 11, 2007
Why did I choose this name for my space?
As a student of finance, I have always wonderd why is that people concerned about money? Later when I started teaching finance, I found myself more interested in wealth creation, though I did n't own much to boast about other than my first husband, the two children born out of him and of course a neighbourhood of anybody's envy. My circle of friends, colleagues and students, well-wishers and professional alliances goes along without saying!! I am a firm believer in God. Readers should not go with the notion when most of the scriptures says that God takes care of one and even the hairs in the head are counted why in the forthcoming columns I am discussing only about money, wealth & all that goes with it. When one takes care of the 'talent' under possession, God takes care of him. My columns are submitted to all those who wants to take care of their 'talents'.
Wishing all of you get solutions across generations,
Wishing all of you get solutions across generations,
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