Prajna Capital |
- Mutual Fund NAV
- Infrastructure bonds 2012 - 2013
- How to arrange Funds for retirement
- Investment for senior citizens in small savings
| Posted: 06 Jul 2012 04:54 AM PDT Download Mutual Fund Application Forms The NAV of a mutual fund has not been correctly understood by a large section of the investing community.
This is quite evident from the fact that Mutual Funds had been recently collecting huge corpus in their New Fund Offers or NFOs, whereas the collections in the existing schemes were negligible. In fact, investors sold their existing investments and invested in NFOs. This switch makes no sense, unless the new fund has something different and better to offer.
Misconception about NAV
This situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 or Rs 100. However, this perception is totally wrong and investors would be much better off once they appreciate this fact. Two funds with same portfolio are same, no matter what their NAV is. NAV is immaterial.
Why people carry this perception is because they assume that NAV of a MF is similar to the market price of an equity share. This, however, is not true.
Definition of NAV
Net Asset Value or NAV is the sum total of the market value of all the shares held in the portfolio including cash less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the book value.
NAV vs Price of an equity share
In case of companies, the price of its share is as quoted on the stock exchange, which apart from the fundamentals, is also dependent on the perception of the company's future performance and the demand-supply scenario. And hence the market price is generally different from its book value.
There is no concept as market value for the Mutual Fund unit. Therefore, when we buy MF units at NAV, we are buying at book value. And since we are buying at book value, we are paying the right price of the assets whether it be Rs 10 or Rs.100. There is no such thing as a higher or lower price.
NAV its impact on the returns
We feel that a Mutual Fund with lower NAV will give better returns. This again is due to the wrong perception about NAV. An example will make it clear that returns are independent of the NAV.
Say you have Rs 10,000 to invest. You have two options, wherein the funds are same as far as the portfolio is concerned. But say one Fund X has an NAV of Rs 10 and another Fund Y has NAV of Rs 50. You will get 1000 units of Fund X or 200 units of Fund Y. After one year, both funds would have grown equally as their portfolio is same, say by 25%. Then NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y. The value of your investment would be 1000*12.50 = Rs 12,500 for Fund X and 200*62.5 = Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the NAV.
It is quality of fund, which would make a difference to your returns. In fact for equity shares also broadly this logic would apply. An IT company share at say Rs 1000 may give a better return than say a jute company share at Rs 50, since IT sector would show a much higher growth rate than jute industry (of course Rs 1000 may fundamentally be over or under priced, which will not be the case with Mutual Fund NAV) -------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
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| Infrastructure bonds 2012 - 2013 Posted: 06 Jul 2012 12:30 AM PDT Download Mutual Fund Application Forms
The kind of infrastructure bonds that were available till last year, investments in which were given tax exemption as a deductable income, have been abolished. Now, there are a different kind of infrastructure bonds that are available, but only through their IPOs. These bonds are suited for income-oriented investors. The income you earn from these bonds is tax-free in your hands. Hence, tax exempt infrastructure bonds are available, but not the bonds that used to entail a tax break in terms of computing your taxes every year. --------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
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| How to arrange Funds for retirement Posted: 05 Jul 2012 11:19 PM PDT Download Mutual Fund Application Forms
------------------------------------------- Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms
Best Performing Mutual Funds
Mutual Fund Application Forms Download Any Applications Buy Mutual Funds Online Invest Online Infrastructure Bond Application Forms Download Applications  |
| Investment for senior citizens in small savings Posted: 05 Jul 2012 07:48 PM PDT Download Mutual Fund Application Forms
A maximum investment of Rs 15,00,000 can be made by the individual in senior citizens savings scheme
SENIOR citizens have something to cheer about as they find opportunities to earn a regular income have increased with the changes in interest rate for small savings. There are new rates that have come into the picture from the start of new financial year in April, which means the investment planning can be done efficiently to get the most out of the present situation. For regular cash flows, it is vital to concentrate on areas that will offer various opportunities. Here is a look at some of such areas.
Monthly income scheme: The monthly income scheme is offered by the post office and provides one of the best routes to ensure a regular cash flow. There is a limit to the amount of investment in the scheme, which is Rs 4,50,000 for a single individual, and Rs 9,00,000 if the investment is in a joint name.
This will ensure that the total investment requirement is capped.
The amount of interest earned each month is directly deposited into the savings account of the investor, saving a lot of trouble of having to go to the post office each month to collect the amount. This becomes one of the main areas that can be looked at, as the good news here is the rate of interest on the account now stands at 8.5 per cent, though there is no bonus at the end of the time period of the investments, that is five years now.
Senior citizens savings scheme: This is another option that the senior citizens can use for their benefit. A maximum investment of Rs 15,00,000 can be made by the individual in this scheme, with a quarterly payment of interest. Since the amount of investment is higher, this becomes a figure that cannot be ignored. Also, due to the hike in rate of interest on the offering to 9.3 per cent, an investor need to be careful about how they are allocating their funds.
One of the important points here is that there can be a withdrawal of the amount in case of an emergency, which might not be possible in some other options. ------------------------------------------- Invest Mutual Funds Online Download Mutual Fund Application Forms from all AMCs Download Mutual Fund Application Forms Best Performing Mutual Funds
Mutual Fund Application Forms Download Any Applications Buy Mutual Funds Online Invest Online Infrastructure Bond Application Forms Download Applications  |
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