Walk path of corporate governance, win investor trust

The Reserve Bank of India (RBI) in its credit policy has mentioned that a big thrust on governance reforms is needed to inspire trust and confidence in potential investors. 

“The medium-term challenge is to improve the investment climate and expand the absorptive capacity of the economy... the second big task is a big thrust on governance reforms that should inspire the trust and confidence of potential investors,” the central bank said in its policy statement. 

Most fund managers are unanimous in their view that corporate governance standards are far better than those in most emerging markets. 

For instance, despite China’s economy growing at a faster rate than that of India, the latter is a preferred destination for global portfolio investors, because of better disclosure norms and governance standards. 

“On a relative basis, India fares much better than most other emerging markets when it comes to corporate governance. I don’t think there is much dispute about that,” says Navneet Munot, chief investment officer, SBI Mutual Fund. 

“True, there may have been a few instances of rules having been violated. But then, those are one-off issues, and that is the case even with developed markets, ” he says. 

Agrees another fund manager at a private insurance firm. “Corporate governance issues are not what are holding investors back at this point.... they are more worried about other things like the economic slowdown and high fiscal deficit,” said the fund manager, who did not wish to be named. 

“Corporate governance is a combination of structural features and qualitative aspects,” says Pawan Agrawal, director, corporate and government ratings, Crisil. “The structural features are driven by regulatory requirements, such as the frequency and extent of disclosures to be made to the stock exchanges, regulations on independent directors on a company’s board, etc. On this front, India is much better placed compared with most of its peers in the emerging markets space. 

“The other aspect is a qualitative assessment of how governance is followed in practice. It is hard to generalise on the qualitative aspect of governance, as it differs in varying degrees across companies. So, a (Indian) company can adhere to most of the regulatory requirements, but we need to assess the spirit with which governance process is adhered,” he adds.

Source: http://economictimes.indiatimes.com/News/Economy/Policy/Walk-path-of-corporate-governance-win-investor-trust/articleshow/4832150.cms

Mutual funds offer flexibility

Mutual funds in India are financial instruments, handled by fund managers, also referred as the portfolio managers. The Securities Exchange Board of India regulates the mutual funds in India. The share value of the mutual funds in India is known as net asset value per share (NAV), which is calculated on the total amount of the mutual funds in India, by dividing it with the number of shares issued and outstanding shares on daily basis. 

Mutual funds in India offer flexibility by means of dividend reinvestment, systematic investment plans and systematic withdrawal plans. As these funds are available in small units, they are also affordable to the small investors. The fees charged for to the custodial, brokerage and others services is very low in case of mutual funds. These funds have the option of redeeming or withdrawing money at any point of time. The mutual funds in India have low risk as it is managed professionally. 

What are mutual funds? 

Understanding mutual funds is easy as it's such a straightforward concept. A mutual fund is a company that pools the money of many investors, its shareholders to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. 

Those securities are professionally and efficiently managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio - entitled to any profits when the securities are sold, but subject to any losses in value as well. 

For the individual investor, mutual funds propose the benefit of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. 

In general mutual funds fall into three general categories: Equity funds are those that invest in shares or equity of companies; Fixed income funds invest in government or corporate securities that offer fixed rates of return are; While funds that invest in a combination of both stocks and bonds are called balanced funds. 

The first thing that has to be kept in mind is that when you invest in mutual funds, there is no guarantee that you will end up with more money when you withdraw your investment than what you started out with. 

That is the potential of loss is always there. The loss of value in your investment is what is considered risk in investing. At the cornerstone of investing is the basic principal that the greater the risk you take, the greater the potential reward. Or stated in another way, you get what you pay for and you get paid a higher return only when you're willing to accept more volatility. 

Risk then, refers to the volatility - the up and down activity in the markets and individual issues that occurs constantly over time. This volatility can be caused by a number of factors - interest rate changes, inflation or general economic conditions. But it is this very volatility that is the exact reason that you can expect to earn a higher long-term return from these investments than from a savings account.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Mutual-funds-offer-flexibility/articleshow/4832218.cms