Quantum Index Fund

Quantum is coming out with an Index fund:
NFO opens: 9th June 2008
NFO closes: 20th June 2008
Objective of the fund: To invest in stocks of companies comprising S&P CNX Nifty Index and endeavour to achieve return equivalent to the Nifty by 'passive' investment.
Minimum Investment: INR 5000

Mutual funds in selling mode

Mutual funds pressed sales in equities for a third day in a row on Thursday, 22 May 2008. Mutual funds sold shares worth a net Rs 92.20 crore Thursday, compared to outflow of Rs 44.50 crore on Wednesday, 21 May 2008. Mutual funds had pressed sales worth a net Rs 488.70 crore on Tuesday, 20 May 2008.
Mutual funds outflow of Rs 92.20 crore on Thursday, 22 May 2008, was a result of gross purchases Rs 548.80 crore and gross sales Rs 640.90 crore. Sensex lost 336.05 points or 1.95% at 16,907.11 on that day.
Mutual funds outflow reached Rs 728.30 crore in the month of May 2008, till 22 May 2008. Mutual funds had sold shares worth a net Rs 111.50 crore in April 2008. They had offloaded shares worth Rs 1971.30 crore in March 2008.

MF ODs now get in a simpler format

In order to make offer documents (ODs) and Key Information Memorandum (KIM) more reader friendly, Securities And Exchange Board of India (SEBI) has given its nod to mutual fund houses to simplify it.
A committee set up by the Association of Mutual Funds in India (AMFI) had recommended that the existing offer documents may be split into two parts namely Statement of Additional Information (SAI), which will incorporate all statutory information on mutual funds, and Scheme Information Document (SID).
All mutual fund scheme ODs filed with SEBI on or after 1 June 2008 will have to be prepared in the new set-up. Fund houses, which have already filed their ODs for which SEBI has not yet suggested changes, may be required to modify the same in the format of SID and SAI after receiving the final observations.
However, the schemes, which have already received final observations from SEBI, can use the old OD format provided they are launched on or before 31 July 2008. But, in this case SID has to be adopted.
SEBI has asked fund houses to file a single SAI (common for all the schemes) as a one-time filing. The SAI shall be filed along with the first draft SID for any scheme filed on or after 1 June 2008.

Standard Chartered Arbitrage Plus Fund Plan A

Standard Chartered Asset Management Co. Pvt. Ltd comes out with another arbitrage fund.
Objective of the fund: The investment objective of the scheme is to generate income (absolute to low volatility returns) by taking advantage of opportunities in the cash and the derivative segments of the equity markets including the arbitrage opportunities available within the derivative segment, by using other derivative based strategies and by investing the balance in debt and money market instruments.
Minimum Investment amount INR 10,000
Fund Manager: Mr. Rajiv Anand

One thing to remember

Investors Think Long Term But Act Short Term…….

5 corners of a sound Investing Strategy

The market is a roller coaster and let know one tell you otherwise. In the short term the market outlook may seem uncertain. But on the longer horizon Indian markets look very good. The government has been making conscious business friendly policies; the fiscal deficit too is getting under control. India continues to be one of the fastest growing economies in the world. These factors coupled with many others are ensuring India’s position as a global destination. To grow personal capital from India’s growth one has to choose the correct investment avenue.

Choosing between the plentiful available mutual funds and schemes is not easy. A well thought out and well-planned decision is one that will bear fruits in the long run. Thus a structured approach to fund selection with a systematic checklist to achieve it is of utmost importance. Even though there are many available methods of product comparisons, one doesn’t want to be weighed down by all of them. Dwelling into too many numbers, will only lead to further confusion. Therefore only a few areas of comparison are of true importance and will be comprehensive enough to produce a thorough comparison.

Portfolio: Portfolio is very important while comparing schemes. Even though some of the underlying stocks in portfolios could be similar, most portfolios have differing mandates and investment philosophies. As a result it is rather important to understand the stance the manager has taken while building his scheme portfolio. The portfolio will not only determine the future outcome of your investment but will also tell you how risky the product is and hence if it is appropriate for your appetite. For example, an equity scheme, which invests in companies, could be safer than one that invests in mid. The portfolio for debt instruments is determined on duration of securities. A high duration, high return investment is potentially volatile and risky; while a short duration investment Portfolio is less risky. This is where we come to the next parameter of comparison

Risk: In today’s scenario, investments that generate meaningful post tax; post inflation returns have risks attached to them. These are market risk, credit risk, government policy risk etc. At this point one has to understand how much risk he is willing to take in order to generate higher return. The rule of thumb is that the more risk one is willing to take the better the returns potential. The measurement for risk to return is known as Sharpe Ratio. The higher the value, the better the risk attached to the scheme is managed. A volatile investment can also be very risky. Thus this aspect must also be quantified. Standard deviation will help us understand the volatility of a scheme vis-à-vis its benchmark. Be aware a riskier investment is not always better and a sure fire way to generate superior returns.

Performance comparisons: These are the most favored methods of investors and amongst the easiest. Performance numbers are available in plentiful. But performance is only measured in hindsight, and can never be guaranteed in the future. Also performance can only be compared across similar categories of funds. For example, performance or return comparison between an equity scheme and a debt scheme should never be done. It must be kept in mind that comparison happens only between similar funds. A large cap fund should be compared with another large cap fund and not a mid cap fund. Thus compare apples to apples only. Performance and return comparison should be conducted usually when one has decided on the above-mentioned factors like risk and product category.

Fund management and Institutional backing: Since trusting your hard earned savings to some one can never be easy, it is important to evaluate their money managing capabilities. The markets are a game of understanding numbers and involve immense skill to generate growth from these numbers. Only a very capable person with a lot of experience can generate capital appreciation in today’s confusing market swings while managing risk.

Investment horizon: It is very important to determine investments based on one’s time horizon viz equity typically being volatile should be considered for investment horizon of 1 to 3 years. While the short term debt schemes should be considered for investment horizons of up to 1 year.

It is therefore important to invest with a fund house with a good track record. It is also important to give due weightage to the quality and track record of the spouses of the fund. After evaluating these parameters and choosing a scheme one can be reasonable sure that the investment they are going into is the right one. At this point I would like to stress, that any of these parameters could only be a guiding star and not a guarantee for the future. Choosing an investment avenue is like getting into a marriage, so do it wisely. Happy Investing!

7 Reasons to Invest in to Equity

Fact No. 1: Over a long term horizon, equity investments have given returns which far exceed those from the debt based instruments. They are probably the only investment option, which can build large wealth.

Fact No. 2: In short term, equities exhibit very sharp volatilities, which many of us find difficult to stomach.

Fact No. 3: Equities carry lot of risk even to the extent of loosing ones entire corpus.

Fact No. 4: Investment in equities require one to be in constant touch with the market.

Fact No. 5: Equity investment requires a lot of research.

Fact No. 6: Buying good scrips require one to invest fairly large amounts.

Systematic Investing in a Mutual Fund is the answer to preventing the pitfalls of equity investment and still enjoying the high returns. And it makes all the more sense today when the stock markets are booming

1. It’s an expert’s field – Let’s leave it to themManagement of the fund by the professionals or experts is one of the key advantages of investing through a mutual fund. They regularly carry out extensive research - on the company, the industry and the economy – thus ensuring informed investment. Secondly, they regularly track the market. Thus for many of us who do not have the desired expertise and are too busy with our vocation to devote sufficient time and effort to investing in equity, mutual funds offer an attractive alternative.
2. Putting eggs in different baskets Another advantage of investing through mutual funds is that even with small amounts we are able to enjoy the benefits of diversification. Huge amounts would be required for an individual to achieve the desired diversification, which would not be possible for many of us. Diversification reduces the overall impact on the returns from a portfolio, on account of a loss in a particular company/sector.
3. It’s all transparent & well regulated The Mutual Fund industry is well regulated both by SEBI and AMFI. They have, over the years, introduced regulations, which ensure smooth and transparent functioning of the mutual funds industry. This makes it safer and convenient for investors to invest through the mutual funds.
4. Market timing becomes irrelevant One of the biggest difficulties in equity investing is WHEN to invest, apart from the other big question WHERE to invest. While, investing in a mutual fund solves the issue of ‘where’ to invest, SIP helps us to overcome the problem of ‘when’. SIP is a disciplined investing irrespective of the state of the market. It thus makes the market timing totally irrelevant. And today when the markets are high, it may not be prudent to commit large sums at one go. With the next 2-3 years looking good from Indian Economy point of view, one can expect handsome returns thru’ regular investing.
5. Does not strain our day-to-day finances Mutual Funds allow us to invest very small amounts (Rs 500 – Rs 1000) in SIP, as against larger one-time investment required, if we were to buy directly from the market. This makes investing easier as it does not strain our monthly finances. It, therefore, becomes an ideal investment option for a small-time investor, who would otherwise not be able to enjoy the benefits of investing in the equity market.
6. Reduces the average cost In SIP we are investing a fixed amount regularly. Therefore, we end up buying more number of units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high. This is called rupee-cost averaging. Generally, we would stay away from buying when the markets are down. We generally tend to invest when the markets are rising. SIP works as a good discipline as it forces us to buy even when the markets are low, which actually is the best time to buy.
7. Helps to fulfill our dreams The investments we make are ultimately for some objectives such as to buy a house, children’s education, marriage etc. And many of them require a huge one-time investment. As it would usually not be possible raise such large amounts at short notice, we need to build the corpus over a longer period of time, through small but regular investments. This is what SIP is all about. Small investments, over a period of time, result in large wealth and help fulfill our dreams & aspirations.

AMFI Practical Test Part E

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