Thursday, December 15, 2011

Now investors can buy funds via SMS in IDFC’s Money Manager Fund

You used your cell phones to text your friends, family, colleagues, browse internet, and click pictures. Now investors can buy a mutual fund by just sending an SMS.

In what can be called as a trend setter for the mutual fund industry, IDFC Mutual Fund has allowed investors to invest up to Rs. 99, 99,999 as well as redeem mutual funds in its IDFC Money Manager Fund (Treasury Plan). It plans to extend the same facility to other funds as well in the days to come.

The investor doesn’t need to sign a cheque every time he wishes to invest. Just one SMS can help him buy funds on the same day’s NAV, thanks to the electronic time stamping mechanism.

What makes this initiative different from the already existing mobile buying facility is that investors don’t need to own a GPRS or smart phone with high speed internet connection. India has more than 72 crore mobile phone users and the potential seems huge.

The facility is currently available for sole proprietors, resident individuals (including guardians on behalf of minor). The AMC has tied up with SBI, Standard Chartered, Kotak Mahindra, HSBC, Axis Bank, ING Vysya Bank, Citibank and plans to extend the facility to more banks going ahead.

How does it work?

The investor needs to sign a onetime debit mandate form & submit at any of the CAMS office or IDFC AMC branches. The commissions will be given to distributors as per the default broker code mentioned in the mandate. If there are multiple brokers in the scheme, the last transacted broker would get the commissions. To encourage distributors to promote this facility, IDFC is giving a trail commission of 75 basis points in the first quarter, 50 in the second quarter and 40, which is the normal commission from the third quarter.

It takes 15 days for this facility to get activated. The investor receives a confirmation after which they can start transacting. For purchases one needs to send an SMS - Inv < space> amount to 56767267 and for redemptions type Red Amount to 56767267. 

The investor will receive a return SMS from CAMS confirming receipt of request for transaction mentioning the date, transaction amount & time of receipt. He can also open a zero balance account.

Embracing Technology

Fund houses have been increasingly embracing technology to save costs in order to reach out to more investors. AMCs also allow investors to buy funds through debit cards also. Most AMCs allow transactions through their websites and the response has not been encouraging. Similarly the stock exchange platform is yet to take off in a big way. The existing online investing platforms like iFAST, FundsIndia do not boast of huge volumes. This shows that investors not all investors are open to the idea of virtual investing.
On the anvil is AMFI’s MF Utility platform which will allow investors and distributors to put orders to transact across all AMCs. BSE is also planning to allow investors buy funds through mobile phones.
What makes IDFC’s SMS facility unique is its simplicity, ease of investment and its potential to become the game changer in MF industry. It remains to be seen if other AMCs follow suit.

Source: http://cafemutual.com/News/InnerNews.aspx?srno=965&MainType=New&NewsType=AMC&id=23

Debt fund investors score big as long-term gilts & bonds see sharp rally

Equity investors may be having a nightmarish time but investors in debt funds have something to smile about. Long-term gilt and bond funds have rallied sharply in the past month, with many of them delivering returns of above 4%.

The consistent drop in the 10-year bond yield in the past four weeks has pushed up NAVs of these funds. The benchmark yield has dropped from a high of 8.97% on November 14, to 8.46% on December 12 following signs of easing inflation and hopes of a CRR cut by the RBI.

The biggest gainers have been funds that lined their portfolios with long-term bonds. The average maturity of bonds in the portfolio of the top-performing Birla Sun Life Gilt Plus PF fund is over 10 years. The bonds with Kotak Gilt Investment fund have an average maturity of over 15 years. When yields fall, the value of these long-term bonds rises.

The average medium- and longterm gilt fund has risen 3.4% in the past one month. On an annualised basis, this means a return of over 40%.

Experts say while long-term funds have risen sharply in the past month, the growth from here on will not be as spectacular. "Long-term funds will continue to give good returns because the interest rate cycle has peaked. But it's unlikely that the 4% return per month will be replicated," says Mahhendra Jajoo, head-fixed income, Pramerica Mutual Fund.

This scintillating performance comes after several quarters of sluggish growth. Most long-term debt funds have performed abysmally in the past three years because of the steady rise in interest rates.
As RBI turned the screws on inflation, the benchmark 10-year government bond yield rose from 5.4% in December 2008 to 7.5% in 2009, 7.9% in 2010 and finally touched 8.97% in November this year. While short-term debt funds were cushioned from the impact of the hike in rates, the NAVs of long-term funds went into a tailspin.

Source: http://economictimes.indiatimes.com/markets/bonds/debt-fund-investors-score-big-as-long-term-gilts-bonds-see-sharp-rally/articleshow/11100164.cms

Why should you buy paper gold?

While gold ETFs offer investors a multitude of advantages in the form of affordability, tax benefits, liquidity and purity, investors still need to be watchful on the following counts

The festive season brings along numerous occasions to buy gold. Instead of purchasing a gold coin or bar from a local jeweller or the nearest bank branch, investors could look at buying gold in dematerialized form, which also serves as an avenue for income generation. There are three channels to invest in paper gold—gold exchange-traded funds, gold fund of funds (FoFs) and electronic gold (e-gold). Currently, 11 asset management companies offer 11 gold ETFs and three gold FoFs in India, while National Spot Exchange Ltd facilitates investments in e-gold.

Introduced in 2007, gold ETFs are open-ended schemes, which invest in standard gold bullion (0.995 purity). A gold ETF invests 90-100% of the funds in bullion and 0-10% in money-market instruments. It aims at offering returns in line with those provided by the domestic price of gold. The fund house appoints authorised participants, who purchase units from the mutual fund in exchange for actual pure gold in the initial phases. They facilitate secondary market trading of gold ETF units through the stock exchange.

Through gold ETFs, investors gain an avenue to participate in the gold bullion market without the necessity of taking physical delivery of gold and to buy and sell that participation through the trading of a security on a stock exchange.

While gold ETFs offer investors a multitude of advantages in the form of affordability, tax benefits, liquidity and purity, investors still need to be watchful on the following counts.

Rules of the game: 
To begin with, it is imperative that investors learn the basic rudiments of investing in gold ETFs. The investor’s holding, denoted in units (usually 1 unit is equal to 0.5 to 1g of gold), is listed on the stock exchange. There is no entry/exit load on gold ETFs bought or sold through the secondary market. However, an investor would be bearing a cost in terms of brokerage for trading gold ETF units. The price of the units in the secondary market will, to a great extent, reflect the price of one unit. The net asset value (NAV) of these schemes would reflect the value of underlying gold.

Tracking error: 
ETFs track indices by measuring the price and yield performance of various asset classes. However, they do not assure mirroring every movement seen in the underlying asset price. They largely seek to replicate the price movements, to the extent possible. When these funds lag behind, it gives rise to a tracking error. Performance of gold ETFs may differ from domestic gold prices due to expenses and other factors. Investors must watch movements in gold prices vis-à-vis the performance of gold ETFs to detect incidences of the error.

Fund house credentials: 
As gold ETFs follow gold prices, evaluating these funds may be largely based on the track record of the fund house, the processes it follows and the post-investment support it offers.

Hidden costs: The cost of purchasing ETFs on stock exchanges is also known as the impact cost. Investors should consider the impact cost and the cost (charges post-investing) structure offered by the fund house. As a thumb rule, they should always opt for the fund which charges the least recurring expenses.

Comparison with benchmark indices: Once the investor is clear about how to evaluate the fund house and the performance of the fund versus the underlying asset, he needs to look at the performance of the fund vis-à-vis the benchmark indices in the Indian equity market.

Comparison across gold ETFs: Investors need to have a relevant benchmark to evaluate performance of investment products with gold as the underlying investment. To aid such a comparison, CRISIL Research launched the CRISIL Gold index recently. The index has a base date of 2 January 2007 and is based on the landed price of 10g of gold in Mumbai. This index tracks the performance of gold prices in the domestic market. Investors can use this benchmark to assess the contribution of gold in the overall portfolio performance and reach an optimal asset allocation considering the risk profile, the financial environment and target returns.

Interestingly, during the 2008 financial crisis, gold prices rose by 28%, whereas the S&P CNX Nifty (Nifty) declined by 51%. While in the latest decline seen in 2011, equity markets (Nifty) have fallen over 18% till 30 August compared with a gain of 30% in gold prices during the same period.

Gold thus acts as an effective hedge especially during turbulent times and is considered as the safest haven for investments. Given the lower correlation to asset classes like equity, debt and other commodities, it becomes a suitable asset for diversification and asset allocation. Further, it has a positive correlation with inflation and hence can be a good hedge against rising prices.

If an investor is clear about investing in gold, there is every reason to include gold ETFs as an asset class in the portfolio, even as part of retirement planning. Nevertheless, they should maintain an optimum asset allocation mix depending on the risk profile and accordingly gold should not form too large a portion of the portfolio.

Source: http://www.livemint.com/2011/12/14211350/Why-should-you-buy-paper-gold.html

Guidelines regulating role of advisers soon: SEBI

SEBI, which had put up a discussion paper on the role of investment advisors, has received detailed feedback.  The market regulator is set to announce norms for regulating these entities soon

Capital market regulator Securities and Exchange Board of India (SEBI) on Tuesday said it will soon come out with norms for regulating the role of investment advisors, reports PTI.

“We have received a very detailed feedback and we are undergoing a process of discussion and shortly we will come out with regulations (on investment advisers),” SEBI whole-time member Prashant Saran said here.

“It is very difficult to give a time-line. We do need to build a consensus,” he said on the sidelines of an Assocham event here.

In September this year, SEBI had proposed to bar investment advisers from acting as agents for promoting financial products.

The entities, which include banks and fund managers, would have to be registered with a self-regulatory organisation (SRO) as investment advisers, said the concept paper on Regulation of Investment Adviser issued SEBI.

“No financial incentives/consideration would be received from any person other than investors seeking advice. In case of advice regarding investment in entities related to the investment adviser, adequate disclosures shall be made to investor regarding the relationship,” the paper had said.

It had said, “The person who interfaces with the customer should declare upfront whether he is a financial adviser or an agent of the manufacturer.”

Mr Saran said mutual funds must increase their penetration in smaller cities and rural areas while financial literacy should spread among the uneducated also.

The focus should be on small investors so that the base widens. Financial education should be sector-specific and product-neutral, he said.

Most of the money parked in mutual funds comes from institutional investors which include corporates, banks and foreign institutional investors (FIIs).

Many financial products are becoming complicated and it is not easy for even an educated person to understand and analyse them, he said.

At the same time, Mr Saran said financial structures across the world do not command as much respect as they used to in the past.

Source: http://www.moneylife.in/article/guidelines-regulating-role-of-advisers-soon-sebi/22173.html

Just click away from joining most active Mutual Fund India google group

Google Groups
Subscribe to Mutual Fund india
Email:
Visit this group

Aggrasive Portfolio

  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
  • Reliance Growth Fund (Stock Picker Fund) 11%
  • IDFC Premier Equity Fund (Stock picker Fund) (STP) 11%
  • HDFC Equity Fund (Mid cap Fund) 11%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 10%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund) 8%
  • Fidelity Special Situation Fund (Stock picker Fund) 8%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Moderate Portfolio

  • HDFC TOP 200 Fund (Large Cap Fund) 11%
  • Principal Large Cap Fund (Largecap Equity Fund) 10%
  • Reliance Vision Fund (Large Cap Fund) 10%
  • IDFC Imperial Equity Fund (Large Cap Fund) 10%
  • Reliance Regular Saving Fund (Stock Picker Fund) 10%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 9%
  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Conservative Portfolio

  • ICICI Prudential Index Fund (Index Fund) 16%
  • HDFC Prudence Fund (Balance Fund) 16%
  • Reliance Regular Savings Fund - Balanced Option (Balance Fund) 16%
  • Principal Monthly Income Plan (MIP Fund) 16%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Principal Large Cap Fund (Largecap Equity Fund) 8%
  • JM Arbitrage Advantage Fund (Arbitrage Fund) 16%
  • IDFC Savings Advantage Fund (Liquid Fund) 14%

Best SIP Fund For 10 Years

  • IDFC Premier Equity Fund (Stock Picker Fund)
  • Principal Emerging Bluechip Fund (Stock Picker Fund)
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund)
  • JM Emerging Leader Fund (Multicap Fund)
  • Reliance Regular Saving Scheme (Equity Stock Picker)
  • Biral Mid cap Fund (Mid cap Fund)
  • Fidility Special Situation Fund (Stock Picker)
  • DSP Gold Fund (Equity oriented Gold Sector Fund)