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Types Of Mutual Fund Schemes:- Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing of schemes in the Industry. Open-ended schemes are available for subscription and redemption download and sale on an ongoing basis. The units are bought and sold at NAV related prices. Close-ended Schemes:- These schemes have stipulated maturity period.
Typically, you can invest in them for between 3 to 10 years. These schemes are open for subscription only during a specified period at the time of their launch, thereafter units of the scheme can be bought or sold on the stock exchange where the scheme is listed. Interval Schemes:- Interval schemes are a combination of open-ended and close-ended schemes.
These schemes remain open for sale and redownload only during a specified period. Objectives Based Schemes:- Growth Schemes:- Growth schemes are designed to provide optimum returns through capital appreciation over medium to long term. Major parts of their fund are invested in equities. Income Schemes:- If you are looking for regular and steady returns go for income schemes. These schemes generally invest in fixed income securities such as bond and corporate debentures.
Balanced Schemes:- Balanced funds give you the best of growth and income schemes. A balanced fund invests both in equities and fixed income securities. Their returns are generally less volatile as compared to pure equity fund. Liquid Schemes:- Liquid schemes are also known as money market schemes.
These schemes generally invest in safer short-term instruments such as treasury bills, certificated of deposit, commercial paper and government securities. Other Schemes:- Tax Saving Schemes:- If you are investing because you want to save tax, go for these schemes.
They offer deduction from gross total income to the investors, at present, under Sec. These schemes invest in the securities in the same weightage comprising of an index. Sector Specific Funds:- Sector specific funds take advantage of the boom or expected upturn in a particular industry or sector by investing in them.
Literature Review:- Literature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section. Mishra, et al.
In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Kshama Fernandes evaluated index fund implement at ion in India.
In t his paper, tracking error of index funds in India is measured. The objective of the study was to know the various investment avenues and the investors risk preference towards it and to find out the preference level of investors on various capital market instruments. It is concluded with the point that, though the stock market is subjected to high risk, by using derivatives the loss can be minimized to an extent. Rama Devi.
V and Nooney Lenin Kumar :- This study conducted to compare the performance of Indian and foreign equity mutual funds, to examine the performance of different equity mutual fund schemes on the basis of risk-return parameters and to investigate the performance of Indian and foreign equity mutual fund schemes on risk-adjusted measures. So this study found that the objectives of the study had been significant based on the hypothesis 4.
A total of 23 schemes offered by six private sector mutual funds and three public sector mutual funds have been studied over the time period April to March 13 years. The analysis had been made on the basis of mean return, beta risk, and coefficient of determination, Sharpe ratio, Treynor ratio and Jensen Alpha.
These funds are further classified into broker backed and institutional backed funds for detail analysis.
Findings showed that within equity funds, broker backed category showed better performance than institutional funds. On the other hand, among income funds, institutional funds are outperforming broker backed funds.
This study further concludes that equity fund managers possess significant market timing ability and institutions funds managers are able to time their investments, but brokers operated funds did not show market timing ability Also to find out that how far the mutual fund schemes are able to win the confidence of the investors. Now, the researcher study purpose is to know the return on investment in share market and the mutual fund schemes.
The research was carried out to define how investor should invest in terms of making right choice of investment in best MF schemes, in addition which techniques should be used so that they can get the better returns from the markets. For conducting the study help of certain tools were taken such as journals and Market Information from Online.
Research Methodology and Some Basic Concepts:- In this study twenty six open ended Equity mutual funds schemes have taken in top fund houses. Secondary data has been used in this study.
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All disputes shall be subject to the jurisdiction of Delhi courts only. In some ways, this makes my views of the EPFO even stronger than they would have been had I been a member.
In fact, I fully expect a certain amount of hostility on social media, just as I faced when I once wrote that tax-saving mutual funds are a better option than the PPF. They may be less knowledgeable or more, they may take everything at face value or they may critically analyse everything they are told, but when it comes to the EPF and PPF, they seem unshakeable in their beliefs. The idea that the EPF and PPF are the ultimate ideals of safe retirement savings and everyone must put their money in them unquestionably is one of the centrepieces of their world view of money matters.
This idea is wrong. Turn to page 37 for a detailed analysis of what all is fundamentally wrong with the EPFO.
Of course, we have dwelt on the investment aspects of EPFO — the deficiencies in the service aspect even though they are decreasing now would be known better to the readers themselves. In fact, those of you who are opposed to our criticism of the EPFO should consider a further problem with it, which is in some ways deeper. We all know — at least the community of Value Research readers does — that fixed-income investments are better for the short term and equity investments are better, much better, for the long term.
If you expect your EPF kitty to look after your retired life, then you have to face the harsh fact that the kind of returns that the EPFO generates means that its members are heading for old-age poverty. EPF equity is 15 percent of incremental flows, which is nothing in the aggregate.
It will also stay at an irrelevant level for a long time to come. In contrast, the NPS is doing the right thing by having an option with equity of up to 75 per cent. NPS, which is the option basically meant for government employees, has adequate equity, while EPF, which is meant for the private sector, is locked in the mindset of the socialist era.
The question is, will this ever change? The idea of the EPFO having any equity at all had been under discussion for about a decade before it finally got done in It sounds unlikely but, as I said, a lot of once- unlikely things are getting done. Maybe this, too, will. One might think that cheaper mid caps mean more attractive mid-cap funds, but this is not always the case. As you have mentioned in the article, mid-cap funds have suffered less decline than the average mid-cap stock thanks to the superior stock selection by mid-cap funds.
This further strengthens the case for investing in mutual funds. Market movements comprise spurts and sideways activity. The last couple of years have seen spurts in the market. Hence, a decline was overdue. Now we have entered a period of sideways movement, when nothing much will seem to be happening.
In such times, many investors will lose their patience and do something foolish. A consolidating market is just about holding onto your investments and investing systematically. All of a sudden you will find another spurt and your mid caps will again outperform. And the cycle will repeat.
The changes that you have made are sensible. However, the change in star ratings is going to make things difficult for many investors. The same goes for fund mergers. Perhaps one should use the wait-and-watch strategy. If the new fund continues to perform well, you can hold it. If its performance falters, you can exit it. This will aid in making comparisons. Maybe Value Research could have come up with its own categories which are more investor friendly.
But a recent column by Mr Dhirendra Kumar has simplified the job. An average investor will just do well with an ELSS, a multi-cap fund, a balanced fund and a short- duration fund.
I like the style in which you have presented this column. Now coming to the column, this debate about investing in passive funds keeps coming back. This overcomplicates the matter. One essential element of investing is consistency. Those who keep jumping ships reach nowhere.
It depends on how fluctuating your income is. If your fluctuating income has a minimum base, make lump-sum investments every month. Be disciplined about them. Whenever you have a surplus, invest it. In effect, this would be like an SIP. How are SIPs taxed? For instance, if you made 12 monthly SIP instalments during a year and then you redeem part of your investment, your initial SIPs first, second and so forth are redeemed first. This means that in order to qualify for long-term capital gains, each of your SIP in the invested corpus must complete at least one year.
Is it fine to step-up SIP contributions for a limited period? The whole idea of SIPs is that you should be systematic with your investments. When you step up your SIPs for a limited period, this is not being systematic.
You may actually end up investing more at a market high. If you have some extra money to invest, just spread it over a period of time. For instance, if you have received an annual bonus, spread it over six months. If you have got a sizeable amount on selling an asset, spread it over the next three years.
How you deploy your windfall is determined by two factors: Is it fine to continue an SIP in a small-cap fund when the stock market is at its peak? Always invest through SIPs in small-cap funds. Never invest a lump sum. Small-cap funds are more volatile. It is very difficult to catch the bottom and the peak. Even if you get lucky with the correction, it will be extremely difficult for you to get in again.
So, continue with your SIPs. They will help you average out your downloading price and will improve your returns over time. How come the equity funds I own have delivered meagre returns via SIPs in the last 5 and 10 years? Poor SIP returns over 5 and 10 years are a sure sign that the equity funds you own are underperformers.
While SIPs are a good tool to protect your portfolio against adverse market moves, SIPs cannot help you if you have selected poor funds. Now, the difference between top-rated funds and the bottom ones is easy to point out with the benefit of hindsight. Hardly anyone could have predicted exactly 10 years ago which set of funds would end up at the top of the rankings and which would scrape the bottom.
But by regularly tracking your equity funds and replacing the ones which chronically underperform their benchmarks and category, you would be able to effect mid-way corrections in your portfolio.
My advisor tells me never to stop an SIP. Is that right? SIPs can and should be stopped in three circumstances. One, you realise that you have chosen a wrong asset class or a wrong fund for instance, a large- cap fund when you wanted the growth of a mid-cap fund for your portfolio.
Two, a fund that you are investing in is a chronic underperformer versus its benchmark or category. Finally, stop your SIPs in an equity fund as you get closer to your financial goal. Many investors lose their motivation when the markets enter a bear phase. It is to discourage such self- defeating behaviour that advisors ask you to continue with your SIPs through ups and downs of the market.
To be continued in the next issue. He also stressed the need to improve governance standards at fund houses. Also, inves- tors can now transact at any date of the month or any date of the month for each quarter in the monthly and quarterly SIPs. Canara Robeco Mutual Fund Changes names of the following schemes: The two tables list the top 10 funds in which AMC board direc- tors and fund managers have invested themselves.
Other key mana- gerial personnel like managing director, president, etc. This will surely give confidence to retail investors. R Sectoral - Infra 1, For this, we studied nearly funds across ELSS, large-cap, large- and mid-cap, mid-cap and multi- cap categories.
The tables below show the funds that have the largest share of long- term assets more than three years old and short-term assets less than 12 months old. In some cases, funds have under- gone significant changes in character and strategy, because of which they might have been forced to completely shuffle their portfolios. Categorically speaking Certain categories are expected to be more long term than others.
Out of the 40 ELSS funds that we studied, three funds, viz. They have over 90 per cent of their port- folios in long-term assets. Value-oriented funds: This category contains 15 schemes, with the oldest one launched way back in January Value investing almost always involves downloading stocks that are beaten down currently but may turn around later.
As such longevity of holdings is an integral part of value-oriented funds. Small is beautiful: Small-cap funds should be ideally long term in nature. This is because investors will gain as small-cap stocks turn into mid caps and large caps. Out of the 13 small-cap funds studied, three, viz. Equity Multi Cap Short-term assets Subscription copy of [rajeshbhutra ymail. F or any kind of long-term investment, the risk— reward ratio is heavily in favour of equity investments. This conclusion is unavoidable when you look at real, inflation-adjust- ed, post-tax returns.
Having accepted the inevitabili- ty of investing in equity, one is immediately confronted with the question of how to go about this reportedly difficult activity. However, there are two distinct ways of investing in equity.
One is to choose stocks for yourself and download and sell them yourself. And two, invest through equity funds. The final goal is nominally identical — to benefit from the superior returns that equity investing offers. However, the two activities are completely different. There are many people who manage to invest themselves with considerable suc- cess.
However, the odds are against any one individual being able to do so. An even bigger problem is that even those few would have probably learned to be successful after many failures. Investing through equity-backed mutual funds side- steps all these problems neatly.
There are many advan- tages of investing in equity through mutual funds. A major one is a disciplined diversification. Fund manag- ers operate within an institutional framework which enforces certain ground rules of investing. Taken together, such rules define a framework which ensures that the portfolio stays diversified and safe from shocks that may strike individual stocks, sectors or types of stocks.
Individuals who manage their own stock investing would rarely have the knowledge or the discipline to do all this. Another advantage is that of being able to invest with small amounts. In mutual funds, you can start off by owning the same with a few thou- sand rupees. All equity portfolios need some downloading or selling as individu- al stocks become more or less desirable. If you are trading stocks yourself, then these transactions may mean a tax liability. However, in an equity mutual fund, this trad- ing is done by the fund manager inside the fund.
For long-term investments that com- pound over years, this can make a huge difference. Perhaps you will be among the small minority who succeed. As they made their way to the dhaba for a paratha lunch, Gabbar kicked off a chat. Jai and Veeru, so happy to meet you two, yaar. I hear you both are wonder- ful investors now and I have something to ask you. We are not high net-worth inves- tors like you but tell us what it is about.
So in , I decided to give up this direct investing and invest only through SIPs in mutual funds. But they have let me down badly. Why do you say so? Well, people told me that SIPs will protect my portfolio from losses.
I have monthly SIPs running in five small- cap funds and all of them are showing negative returns of 15—19 per cent for the last one year.
If I am going to make losses only, why bother with SIPs! I can make losses myself! Ha ha! Be happy you moved to SIPs, Gabbar.
Some of those small-cap stocks which were tipped as hot favourites are down by 70—80 per cent in the last seven months. Your fund investments are only down by 15—19 per cent.
But jokes apart, someone has given you a completely wrong picture about SIPs, Gabbar. Yes, actually, the main aim of an SIP is to average your costs of downloads downwards with each instalment. But in your case, SIPs have resulted in your download- ing into a rising market until January It is only from January this year, that your SIPs have worked as they should. They have averaged your cost downwards. Then, are you telling me I was bet- ter off making a lump-sum investment?
Not at all, Gabbar. Who knew last year whether small-cap stocks would rise or fall? Probably, with your luck, if you had put in a lump sum, this bloodbath would have started in August itself. Ha ha, that's probable!
I am won- dering whether I should just stop the SIPs and reduce the pain now. The cost averaging in SIPs works best when mar- kets are crashing. Now that small-cap stocks have been falling for six months, your fund man- agers will get better opportunities to download good small-cap stocks cheap.
That improves your chances of making much better long-term returns from your funds. If you look at the history of small-cap funds, you will find that the best five-year returns were made by investors who bought them in — You are in a similar situation now.
I think I have chosen bad dates for my SIPs. My friend started SIPs at the same time and his one-year returns are still positive at per cent. The dates cannot make such a big difference to returns on an SIP. If stock prices are falling continuously like they have been in the last six months, how is it possible that investment on one date is far better than another?
Is your friend also a small-cap fan? Which funds is he investing in? No, no, he is much more cautious than me. He started SIPs in multi-cap funds.
What you are talking about is an asset-al- location choice. Small caps are like the pickle to go with your parathas. Just because pickles give you a kick, you cannot have a whole meal of them.
Yes, that sounds better. But which SIP should I stop? Should I stop the one Subscription copy of [rajeshbhutra ymail. No, you would be making the same mistake again. Which is the small-cap fund in your portfolio which has the worst five-year or year returns? Those are the points to consider. Should I redeem it? Ideally you should because once you decide that you are comfortable with a 15 or 20 per cent allocation to small- caps in your equity portion, your entire portfolio must reflect that.
But you can wait for your older investments to come back into green before making the switch. No big hurry. I hope that happens in the next six months, Veeru. These losses are making me lose my appetite! You know, small caps were in a bubble-like state before this crash. And when bubbles burst after a long spell of irrational valuations, stock prices can remain depressed for a long time. That sounds quite worrying. How much time can it take then? You know, Mutual Fund Insight did this huge num- ber-crunching exercise to study real-life SIP returns on equity funds for a year period from to Taking all equi- ty funds with a year history, they stud- ied over 3.
In that study, investors who did SIPs across diversified equity funds for one year experienced losses about 22 per cent of the time. But as they lengthened the peri- od of the SIP, the chance of making that loss fell steadily. SIPs that lasted two years made losses 16 per cent of the times and three-year SIPs suffered losses about 10 per cent of the time.
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A four-year SIP had a small 6 per cent probability of losses. But if you continued longer than that, you were sure of a positive return. So the message is quite clear, Gabbar.
All you need to do is to get your asset alloca- tion in order, continue with the SIPs and stay patient. Think of this correction as a sale on small-cap funds.
Also thank god you decided not to bet on stocks on your own and took your money out of those small-cap rockets that have crashed 70—80 per cent. Recovering that loss would have been much more difficult than getting back to green on your small-cap funds! At least here, the fund manager will sell out of the dud stocks and download better ones. I know many investor friends who are stuck with such duds, Gabbar.
That proves you are lucky after all, Gabbar. Yes, that really brings back my appetite. All you need to do is to get your asset allocation in order, continue with the SIPs and stay patient.
They have been associated with the fund since , and , respectively. Investment strategy The fund can invest across not just market caps and sectors but also geographies.
Its primary criteria for stock selection are management quality, competitive advantage and availability at a reasonable price. Portfolio companies by market cap Large caps Mid caps Small caps Fund Portfolio performance over any short period is driven by individual stock-price movements in the portfolio.
Also, we have about 24 per cent cash in our port- folio. We have been holding this cash for a while now since it has been difficult to find bottom-up opportuni- ties at reasonable valuations. Both these parts of the portfolio have given a reason- able cushion to our portfolio returns to be able to out- perform the peers and the benchmark. How do you pick stocks for this fund? Our flagship scheme has a mandate to invest across market caps, sectors and geographies. We believe in bottom-up stock picking, where the primary criteria for stock selection are management quality, competitive advantage and availability at a reasonable price.
Do you have any special criteria for selecting mid and small caps? While investing in mid and small caps, one has to be extra careful about the management quality. If you are investing in a large cap or some company which is a part of a business conglomerate, then you can be sure of the management quality. But if you are investing in a company which has no other business, then ascer- taining management quality remains a key and it is very subjective in nature.
A lot of groundwork needs to be done in case of a mid- or small-cap company. How do you allocate money across large, mid and small caps? In fact, we have investments in some mega-cap companies as well, like Alphabet. We look at a company individually and see if it fits our checklist, irrespective of its market cap. When do you sell a stock?
Mutual Fund Insight Magazine June 2018 by Value Research Free PDF Download
There are only two situations where we intend to sell a stock. Second, when the valuations have run far too ahead of the fun- damentals and we feel that the valuations are not sus- tainable for a long period of time.
You also allocate money to foreign stocks. The primary motive behind investing globally is diversi- fication.However, in an equity mutual fund, this trad- ing is done by the fund manager inside the fund. In t his paper, tracking error of index funds in India is measured. I have seen the fall. These are hardly enough savings to see you through retirement. Investors need to be clear that mutual funds are essentially medium to long term investments.