Mutual Funds India

Union Budget Highlights

2009-02-15T23:40:00.000-08:00

The finance budget Pranab Mukherjee presented the interim budget for 2009 - 10 in the Parliament. The markets have reacted by falling almost 3% at 1 pm. Check out the key highlights of the Interim budget here.

http://indiabudget.nic.in/ub2009-10(I)/bh/bh1.pdf

Ved Prakash Chaturvedi Interview

2008-11-25T07:01:00.000-08:00

Here is the transcript of an interview with Ved Prakash Chaturvedi, MD, Tata Mutual Fund by Moneycontrol. He feels the seeds of the next bull run are being laid by the markets and industry currently.

"All good things which ultimately lay the foundation of a long-term bull market are happening now. Interest rates, inflation, and raw material costs are coming down, companies are talking about cost control, and all this will form a stable base of a turnaround when that happens. It is at least six-nine months away, but all these are seeds of the long-term bull market and maybe one can look at it optimistically."

Read the full interview at Moneycontrol.

UTI Wealth Builder Fund Series II Official Website - www.utiwealthbuilderfund.com

2008-11-05T05:11:00.000-08:00

www.utiwealthbuilderfund.com - Official Site Of UTI Wealth Builder Fund Series II

Find out all about UTI's NFO UTI Wealth Builder Fund Series II at www.utiwealthbuilderfund.com. UTI Wealth Builder Fund Series II will invest in two asset classes, Equity and Gold. The new Fund offer closes on 19th November. Find out scheme highlights, details, UTI Wealth Builder Fund Series II investment objectives, investment strategy on UTI Wealth Builder Fund Series II here.

The Concept of Value Averaging

2008-10-22T19:01:00.000-07:00

How many really take an active interest in managing their portfolios? People tend to leave it to the fund manager to manage money in case of mutual funds and tend to put any spare cash in the latest fund that is "in" or as chosen by a "financial adviser", else choose a "safe" inflation beating instrument. The more judicious squirrel away a little bit systematically and do a bit of active portfolio management while the experts look for gains in the stock market.

But there are some easy to use personal finances tools out there which actually make our money work well with a modest financial planning. However, due to ignorance, overconfidence or maybe simple laziness we tend to ignore them. Value Averaging is one such tool. Its an unbelievably simple financial planning tool that anyone with even the most rudimentary knowledge about investments can use to good effect.

Simple Definition

In value averaging one puts/withdraws a certain amount of money into/from investments so that the value of the investment remains the same.

Here's a way to make it work well and work with one's portfolio.

Choose two asset classes - preferably diversified equity and a steady liquid asset. Lets say one has a portfolio of $100,000. You put 75000 into the equity portfolio and 25000 in the liquid asset. On a fixed date every month (or quarter) review the portfolio. If say the equity portfolio has gone up by $3000, book that profit and shift the money to the liquid, low risk portfolio. And if the equity portfolio has fallen, shift money from the liquid asset into equity, so that the value of the equity portfolio remains constant either way.

Advantages

The advantages are obvious. One has kept booking profits and shifted it to a safe investment at every opportunity and rise in equity markets. Also one has invested in equity when at low, unlike dollar cost averaging where one blindly puts in a fixed amount into equity every month, whether high or low.

The trick in value cost averaging is to maintain discipline over a longish period. Its truly a golden way to beat the bears.

After all, you spend so much time earning, shouldn't you spend a little time to make your hard earned money work best...its not really rocket science.

Calculate Sensex

2008-10-22T18:59:00.000-07:00

BSE Sensex (or Sensitive Index) is the prime and older indicator of stock market trend in India (the other being the Nifty Fifty). It consists of 30 stocks representing a wide cross-section of industries. It is calculated using a well attested method called free float market capitalization.

What is Free Float Market Capitalization?

Simply put its the market capitalization of all shares in "free float!!!" Free float shares are those that are available for trading in the open market. They rest may be FDI holdings, promoter holdings, locked in shares, strategic stakes, ESOPs etc. Suppose 40% of all shares is openly available. A free float factor is decided by BSE which would be 0.4 (anything in the band of above 35% -40% would have this factor). This factor is multiplied with the total market capitalization of the company (which is the prevailing share price * total no. of shares issued by the company) to get the free float market capitalization.

How to Calculate Sensex

You know how to find the free float market cap of a company. Now add these for all the 30 companies that constitute the Sensex. You have the total free float market capitalization for the Sensex. The Sensex value is this value relative to a base period. The Base period is 1978-79 and the Base value is 100. The Free-float market Cap is divided by a number called the index divisor to arrive at the right value of Sensex. This divisor factors in changes in scrips, dividend paid, etc right from the base period. A simple way to find the current index divisor would be calculating the previous day's free-float market cap / previous day's sensex.

Here's an example to calculate the sensex

Free Float Market cap (prev day) = 320000 cr
Sensex Value = 16000
Div = 320000 / 16000 = 20

Current Free Float Market Cap = 336000
Current Sensex Value = 336000/20 = 16800

Bingo! You can find out the Sensex Value!

Start Investing With SIPs

2008-10-22T05:52:00.000-07:00

An erronous belief about investing in Mutual Funds or the stock market is that you need to have a lot of money to start investing. The answer I often come across on investment queries is "I dont have money" to invest. This answer often is the start of your investment needs. You dont have money - so you need to make whatever you have work.

Take for example you save Rs 100 every month. That makes it Rs. 1200 every year. Lets say, you are putting it in an instrument/bank/deposit that gives 5% annually. At the end of 5 years you are getting something like Rs 6830.

Suppose there was an instrument that gave you 15%? You know the amount you will make? Rs 8970! A cool disposable income of Rs 2000!!!

The next question is - who will give that kind of money/return. Mutual Funds, well researched stocks have given that kind of return and more. Do you know that markets in Brazil, India, China have given returns in excess of 40% (conservative) in the last year. And its not a single year episode. These kind of returns have been seen for the past 4-5 years. To ride these growth markets, a plethora of country specific mutual fund schemes have arisen. So investing is a global phenomena! And if you are from these nations, your choice becomes wider! Even certain sectoral funds/aggressive funds have maintained a high rate of return.

So how do you jump unto the bandwagon - so to say… You don’t happen have too much idea of stocks, returns, markets, etc and naturally you don’t want too many risks. So mutual funds become your natural choice. Mutual Funds diversify your risk (puts your money in many companies, eggs in many baskets, so to say), you can invest small, you get the benefits of professional research (every stock that a mutual fund puts its money in is researched by a team of professional fund managers) and professional fund management services; its mostly liquid, ie, you can put your hands on your money whenever you want it. The best way to start investing in a mutual fund is through a Systematic Investment Plan (SIP). It means just that! You invest small amounts systematically in a fund/scheme of your choice. It is a principle called Rupee Cost Averaging. How Rupee Cost Averaging happens, I will deal in detail in another article.

Here are some easy steps to start investing.

1. Decide how much you can save in a month…Even if you “don’t have money to invest” you must be saving something.
2. Find a financial advisor. She/he will guide you on the schemes.
3. Research on the scheme suggested on the internet. Follow some basic principles - see the pedigree of the fund house, see the pedigree of the scheme like last 3-5 yrs performance, see the other schemes the fund manager is managing, the corpus of the scheme (ie the total amount of money in that scheme)
4. Stick to your small investment amount till you are comfortable investing, ie don’t let the advisor sweet talk you into putting in more!
5. See the liquidity of the scheme, ie whether you can withdraw your money whenever you want and if any cost/load involved.
6. Bingo you can start your SIP (systematic investment plan) and be on your way to investment riches!. Remember SIPs in equity mutual funds are your first tentative steps into the stock market (and eventual unimaginable riches :-))

Please dont treat this as a comprehensive investment compendium – its just a small nudge towards making your savings more effective!

Investment Basics

2008-10-21T18:37:00.000-07:00

While there are many rules to investing, most guidelines have the same basic principles. Here are some golden rules to investing that can apply to almost anyone.

Invest regularly – Investment should not be guided by market sentiments. Often one finds investors entering the market or mutual funds during a boom and losing interest when the market falls or a fund’s performance dips. Keep putting in your money at regular intervals.

Early Bird – Time spent in the market is more important than timing the market. Start early. Compounding will ensure your nest egg is stuffed when you need it. Early twenties is the best time to starting putting away a bit.

Whimsical Buying – Don’t buy and sell on whims. If you have bought an instrument, there must be some reason behind it. So give it time to perform. Avoid hot stocks to start with! The best way to make money in the equity space is keeping a longer horizon. Give your investments time to grow. Its time in the market vs timing the market.

Taking Home Profits – Book periodic profits. If you have a target of 40% in a stock, book at least some profits at that level.

Proper asset allocation – Decide how much you can put in risky investments. The money put in equity mutual funds and stocks should be the money you would not be in a hurry to put your hands on. Say allocate 10 -15% for such instruments and keep it that way. Asset allocation has many principles to it. The most basic principle is 100 – Age. Let's say you are 60 years old, you can allocate 100-60=40% of your savings to equity related instruments. However I have found sticking to personal risk appetites while allocating assets to be most efficient.

Simple allocation – Keep it simple. Cash at bank, risk free instruments like PPF, diversified equity funds and 5-10 blue chip shares should cover 90% of your investment needs. The fancier the instrument, higher the cost in most cases! You can add one commodity like gold or silver to the above.

Review – Review your portfolio. Many investors have got this knack of a daily review. Unless you want to buy and sell just for the fun of it, a quarterly review should be good enough. Bring in major changes if needed in your yearly review.

Don’t let emotion govern your use of money. Discipline and regular investments are the keywords.

Here are some further resources.