Wednesday, September 14, 2011

Prajna Capital

Prajna Capital

Risk - Reward equation favours equity

Posted: 14 Sep 2011 07:16 AM PDT

There is always some risk involved in any method of deploying cash. Even if you stash it under the bed, you could lose it in a fire, or robbery. How you assess the risks associated with alternative deployments is partly subjective. Risk tolerance is definitely an individual trait.

Financial planners present simple strategies and neat risk: reward matrices for asset management. Figure out risk tolerance. Set return targets and timeframes. Find an asset allocation mix that reaches the targeted return without exceeding the risk tolerance. If there's a mismatch between risk-tolerance and targeted returns, review and adjust the factors.

In reality, these cut-and-dried methods run into psychological barriers. Risk tolerance and risk perception are fuzzy traits. Even highly-evolved investors are often less than selfaware about their own risk profiles. Many people also have flawed risk perceptions.

Risk perception involves assigning a value and probability to specific risks. This is often done comparatively, than numerically. For example, the investor may perceive that long-term debt is more risky than short-term, and debt is safer than equity, among others.

Sophisticated investors often grapple with assessing the probabilities of inflation trends, or tax-policy changes, for instance. When the risk perception is flawed, an investor who is actually exposed to high-risks, may believe he has a conservative low risk-tolerance profile. Or vice-versa.

Risk perceptions can vary between individuals even when assessing the same risk. Say, two individuals consider buying the same share. Both know the share price may fall. But one thinks that is low-probability, another thinks it's high probability.

One typical case of flawed risk perception is that of buyers in real-estate and precious metals. Both assets are widely perceived as low risk. In reality, both are volatile. Most of Wall Street went bankrupt due to flawed risk perceptions about subprime —the financial models assumed US real estate values could never go South.

Risk perceptions can also change and not necessarily in logical fashion. Right now, many people consider the stock market risky because its been falling for six months. But if it spurts up 20 per cent in the next three months, the same people will consider stocks less risky — even though there be greater potential downside.

Two related but different questions may help to clarify the difference between risk-tolerance and risk-perception. First: Do you consider the stock market very risky, somewhat risky, or not so risky? The answer is related to your risk perception with respect to the stock market. Now, suppose you are told that the stock market is somewhat risky, and then asked if you are prepared to invest in stocks. This answer will be related to your risk tolerance.

It is often difficult to change risk perception through logic. One can cite pages of historical data and statistics to assert that the stock market is not very risky for an investor with a long timeframe. Nevertheless, stocks will be perceived as risky by somebody who has previously been burnt buying dud equities.

The comparative risk-reward equations of three major asset classes is unusual in India. In most economies, debt, real estate and equity are ranked in ascending order of risk and reward. I am not sure this is entirely true for India.

Indian debt carries a lot of risk. There is no secondary market offering liquidity. There is no legal recourse in a default (or rather, legal recourse may take decades). Inflation is under-stated. Safe instruments like T-Bills and bank fixed deposits offer negative real returns.

Real estate is so localised and opaque it is difficult to assess what the risk:reward ratios are. Most rental yields are low. If you sell a given property, park the after-tax capital in fixed deposits, and rent the same property, there will be abig surplus in your favour. The black component of real estate transactions also makes it tough to assess capital appreciation. The chances of litigation and interminable lawsuits is high. You can make huge returns. You can also get stuck for years in sub-par situations.

In contrast, the risks for equity are visible upfront. So are returns. Transactions are transparent and instantaneous. Equity does yield a substantial premium over debt and it does give real returns that beat inflation.

The clincher is that equity offers excellent exposure to debt and real estate, due to the many listed stocks from those sectors. Whenever the financial sector or real estate has boomed, capital appreciation in financial stocks and realty stocks has been even higher than the returns from actually buying real estate, or investing in debt.

RISK PERCEPTIONS CHANGE. MANY PEOPLE CONSIDER THE STOCK MARKET RISKY BECAUSE it's been falling for six months. But if it spurts up 20 per cent in the next three months, the same people will consider stocks less risky, even though there would actually be a greater downside risk

Mutual Fund Review: HDFC Long Term Equity Fund

Posted: 14 Sep 2011 03:10 AM PDT

Objective
To achieve long term capital appreciation.

Option/Plan
Growth Plan,Dividend Plan. The Dividend Plan offers Dividend Payout and Reinvestment Facility.

Exit Load (as a % of the Applicable NAV)
Redemption / Switch-out from the Date of Allotment :
Upto 12 months 4%
After 12 months upto 24 months 3%
After 24 months upto 36 months 2%
After 36 months upto 48 months 1%
After 48 months upto 54 months 0.5%
After 54 months upto Maturity Nil

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Also, know how to buy mutual funds online:

 

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Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

 

Mutual Fund Review: Magnum Balanced Fund

Posted: 14 Sep 2011 01:27 AM PDT

Objective
To provide investors with an opportunity to generate regular income with high degree of liquidity through investments in a portfolio comprising predominantly of money market instruments with maturity / residual maturity up to one year and debt instruments which are rated not below investment grade by a credit rating agency.

Asset Allocation

Instrument

% of Portfolio of Plan A & B

Risk Profile

Equities

At least 50%

Medium to High

Debt Instruments like debentures, bonds,khokhas, etc.

Up to 40%

 

Securitized Debt

Not more than 10% of investments in debt

Medium to High

Money Market Instruments

Balance

Low


Scheme Highlights
1. An open-ended scheme investing in a mix of debt and equity instruments. Investors get the benefit of high expected-returns of equity investments with the safety of debt investments in one scheme.
2. On an ongoing basis, magnums will be allotted at an entry load of 2.25% to the NAV.
3. Scheme open for Resident Indians, Trusts, Indian Corporates, on a fully repatriable basis for NRIs and, Overseas Corporate Bodies.
4. Facility to reinvest dividend proceeds into the scheme at NAV available.
5. Switchover facility to any other open-ended schemes of SBI Mutual Fund at NAV related prices.
6. The scheme will declare NAV, Sale and repurchase price on a daily basis.
7. Nomination facility available for individuals applying on their behalf either singly or jointly upto three.

Minimum Application
Rs. subscription:
100 Magnums or Rs.1,000/- whichever is lower, and in multiples of Rs.500/-

Entry Load
Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and above - NIL

Exit Load
Investments below Rs. 5 crore, exit within 6 months from the date of allotment – 1%, Investments below Rs. 5 crore, exit between 6 months & 12 months from the date of allotment – 0.5%, Investments below Rs. 5 crore, exit after 12 months from the date of allotment – Nil, Investments of Rs. 5 crore and above– Nil

SIP
Rs.500/month - 12 months
Rs.1000/month - 6months
Rs.1500/quarter - 12 months

SWP
Systematic Withdrawal Plan (SWP):
A minimum of Rs.500 can be withdrawn every month or quarter by issuing advance instructions to the Registrars at any time. There is also a facility of a Monthly Pension Plan, whereby investors can withdraw a minimum amount of Rs.500/- every month.
 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Get the best out of reducing Insurance premium

Posted: 13 Sep 2011 10:30 PM PDT

 

Main reason of fall in the premium rates is the increase in life expectancy of the Indians

WHEN it comes to the issue of insurance there is always the worry of rise in insurance premium. However, there is one area of insurance where the trend is actually the opposite as individuals will find that the premium is actually going down. This is the area of term insurance.

Those looking at the area need to take the various factors that will affect the situation.
Increasing life expectancy: One of the main reasons why the individual is witnessing a fall in the premium rates is because of the fact that the life expectancy of Indians is going up. This has been seen in the figures released in the latest census and this is part of an overall trend that is taking place in the country.

This will get reflected in the workings of the insurance company and hence there will be an impact on the premium for the individual. The benefit will be t visible when the insurance company changes the premium to be paid and this is actually on the lower side, which will mean a larger amount of cover for the same amount of premium for the individual.


Changing mode of calculations: The other thing that is also being witnessed in the country is that various insurance companies are now establishing themselves in the market after operating for several years. One of the advantages of this is that the companies have a history of experience that they can use for the purpose of fixing the premium for the individuals. As the experience improves, it is but natural that this will get priced into the entire working with the end result that the premiums will start reflecting the real situation on the ground.

The other thing is that there are also various regulatory requirements like solvency margins and other factors that determine the position of the premium to be charged. If there is a reduction in some of the regulatory conditions then this can also lead to a situation where the premium will be reduced and the customer benefits. The moment this is reflected then the benefits will be visible for the individuals.


Only life cover: When it comes to the question of a term policy there is a premium being paid only for the cover for the life of the individual. There is no other factor that is coming into the picture and due to this reason there is a situation where the individual finds that just the question about the life expectancy determines the premium that has to be paid in this particular case.

This is not the case when it comes to various other types of insurance policies because there are a lot of other factors that are in play. This results from the mixture of several factors that would go into the creation of the specific insurance policy and hence the final premium that is decided would be based on several factors. This is not the case in the term policy and here the change is reflected immediately.


Re-planning: The investor has to ensure that they are aware about the changes that are taking place around them. When it comes to the reduction of the insurance premium for term policies then there has been a sharp reduction in the term premium to the extent of nearly 40-50 per cent in the last several years.

This might require some effort on the part of the investor to re-plan and rework the entire situation to see how they can ensure that they have the required amount of insurance cover and at the same time make it cost effective in terms of the premium to be paid.

 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Mutual Fund: Monthly Income Plan (MIPs)

Posted: 13 Sep 2011 09:39 PM PDT



Monthly income plans launched by mutual fund houses can be a good solution for the income needs of individuals.


These are open-ended schemes that invest a majority of their assets in fixed income instruments with a small allocation to equity and equity-related instruments. Generally, the equity allocation is capped between 5% and 25% of the total assets. Put simply, higher the allocation to equity, higher the expected returns. These funds aim at generating regular income for investors. The schemes offer various options, such as monthly and quarterly income to satisfy your income needs.


Neither the frequency nor the volume of the dividend is guaranteed. The investments made by these schemes are subject to market movements and, at times, when the markets plunge, the fund manager may choose to skip the monthly dividend.


As the scheme aims at generating regular income, the fixed-income portfolio is constructed focusing on accruals and there will not be much interest-rate risk. This ensures that in a rising interest rate scenario, the fund does not lose much. The equity component of the portfolio is also built in a rather conservative manner and typically includes blue-chip stocks with established track record. This makes these funds good option for conservative investors to invest in equities for the long term. Such investors can choose to invest in the growth option of monthly income plans. For investors keen on a fixed monthly income, growth option works well if the investor signs up for the systematic withdrawal plan, where each month, units of a pre-determined value are redeemed and the investor is paid.


As the equity exposure of these schemes is small, they are taxed like a debt mutual fund. Dividends announced by these funds are taxed at 13.52%. The long-term capital gains are taxed at a lower rate of 10.3% without indexation, or 20.6% with indexation, whichever is lower.

 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Loan against property

Posted: 13 Sep 2011 08:33 PM PDT

Generally, people accumulate assets to cocoon themselves in the safety net of financial security! However when a sudden need for funds arise and they need to borrow from a bank, they often neglect to utilize their assets to reduce the expense of their credit.

Right from education needs for your children to financing a business the first thing that would come to mind is, 'Where would I get the money from?'

One of the options available is taking a loan. You could take a personal loan for the amount required, or you could take a loan against your property.

What is a loan against property?

A loan against property (LAP) is exactly what the name implies — a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property's market value, usually around 40% - 60%. Loan against Property belongs to the secured loan category where the borrower provides a guarantee by using his property as security.

The borrower can either opt for an overdraft option where he is required to pay interest only on the amount withdrawn or a lump sum loan amount. The disadvantage of an overdraft facility is that the interest rate charged may be higher, in some cases up to 0.5% and also annual processing fees will be charged. Besides, if you want the overdraft facility, you have to take the loan only from a bank as other financial institutions do not offer a saving/current account. In case of a lump sum loan, processing fees are charged only once when the loan is taken and also the individual can approach either a bank or financial institution for the loan.

What purposes can I take a loan against property for?

Loan against Property can be taken for following purposes:

  • Expanding your business
  • Getting your son/daughter married
  • Sending your son/daughter for higher studies abroad
  • Funding medical treatments

How is LAP suitable?

Long tenure loans: For individuals requiring funding for a long period of time, LAP can come very handy because the tenure of these loans can be a maximum period of 15 years

Large Loan amount: Individuals requiring substantial funds also should consider this loan option as a large loan is possible. Of course it depends on the property value. There is no restriction as in case of personal loans where the maximum loan permissible is Rs. 10 lakhs.

Lower rate of interest: On account of the security provided in terms of the house, the rate of interest charged by banks tends to be much lower than personal loans

What kind of properties can I mortgage for a loan?

You can normally take a loan against your self-occupied or rented residential property. This could be a house or even a piece of land.

What are the eligibility criteria to get a loan against property?

These criteria will vary from one bank to another. However, of all factors, the most common are:

  • Your income, savings, debt obligations
  • Cost/value of the property mortgaged
  • Your repayment track record for other loans, credit cards etc.

What are the usual interest rates and tenure for repayment offered for a loan against property?

Interest rates on loan against property range from 13% -16% and the loan tenure can be up to 15 years.

How is a loan against property different from a personal loan?

Loan Against Property

Personal Loan

The individual takes the loan by mortgaging the house property

An individual can take a personal loan for personal use without any security or guarantor

One of the cheapest retail loans after home loans; usually in the range of 13% - 16%

Higher interest rates compared to LAP; usually issued at interest rates in the range of 14% - 24%

Since the rate of interest is lower, frequently LAP Equated Monthly Installments (EMI) turn out cheaper

Since the rate of interest is high, the Equated Monthly Installments (EMI) for personal loans are high

Maximum loan eligibility is determined primarily by the value of the property and income

Maximum loan eligibility is determined primarily by an individual's income

Maximum loan tenure for LAP is up to 15 years (180 months)

Maximum loan tenure for personal loan is up to 5 years (60 months)

Secured loan

Unsecured loan

LAP Advantages

  1. An idle asset can be utilized to aid financial comfort.
  2. Loan Processing is comparatively faster than a housing loan.
  3. You can prepay this loan without any penalty. By prepaying whenever possible you can bring down the cost of credit (some banks permit a minimum part payment of Rs.5000/- most start at Rs.10,000/-).
  4. You can increase the borrowed loan amount through a refinance option, when property value rises. This is particularly useful for expanding a growing business.
  5. You will retain property ownership. In the event of being unable to repay the property can be sold to settle the dues with the surplus cash allowing one to start afresh. This can been a boon in case of a financial crisis, as property value generally moves on the upward trend, providing you a platform to rebuild your finances.

Some disadvantages of LAP

  1. Banks generally do not provide loans beyond 60% of the value of a house property and 50% of a commercial property.
  2. New businesses generally cannot have access to LAP.

They should have been in existence for at least 3 years. Salaried individuals of course can get it if they are employed for over 1 year itself.

  1. There will be some processing charges usually in the range of 0.5% to 1% depending on the support given by the bank. Some banks may ask us to do the running around to get the encumbrance certificate and legal opinion ourselves and charge us lesser.

A loan against property is one of the best ways to raise money. Of course the most obvious disadvantage is losing your property in a bid to repay the loan. Hence, base your decision on your repaying capabilities.

 

Investing: Simple steps to build a portfolio

Posted: 13 Sep 2011 12:18 PM PDT

 

   An investor, who has never dreamt of becoming a Warren Buffet, may be impossible to find. After all, it is every investor's dream to possess a portfolio that beats the market year after year and is the talk of the town. What Mr Buffet has achieved in an investing career of over six decades may well be impossible for an average investor to replicate. But that is no reason to get disheartened. As they say "well begun is half done". If the investor is able to create a robust equity portfolio, he would have already achieved half his goal. Just like sowing a seed, it will need minimal ongoing effort to maintain and grow the portfolio and patience to wait for the fruits to ripen. Building a perfect equity portfolio is not only a science, it is also an art. The aim should always be to maximise returns while reducing risks to a minimum.


Portfolio Risk:

 

The most general definition of investment risk is "volatility in returns over a period of time". A stock's volatility is calculated with the help of a measure called 'beta', which represents the stock's tendency to respond to swings in the market. It is crucial for an investor to manage the portfolio volatility in good as well as bad times. This can be achieved through proper asset allocation and diversification.


Asset Allocation:

 

This is your most important decision when managing overall portfolio volatility. While in a broader sense this involves allocating resources to alternative investment avenues such as debt, gold, real estate and equity among others, we will mainly look at the equity angle.


Studies have shown that proper asset allocation is more important to long-term returns than specific investment choices. But since guessing which stocks or sectors will perform better at a given time is very difficult, diversification helps.

 
Portfolio Diversification:

 

Diversification means owning stocks as different from each other as possible. While individual stocks may tend to follow market movements closely, the total value of a well-diversified portfolio is not as responsive.


When it comes to how many stocks make up a really diversified portfolio, experts differ. For some around 15-16 is a good number while others say not less than 40. One thing is, however, certain — greater the diversification, lesser is the risk. However, this can not guarantee that the value of a portfolio won't fall in a market crash. But it certainly ensures that the long-term goals of the investors will be met. Mutual Funds are an easier option for investors without resources to achieve such diversification.

How To Diversify

Sectoral Diversification:

 

The sectors that are out of fashion today may well catch the market's fancy a few months later. This market leadership by various sectors rotates unpredictably. A recent example would be the revival in valuation of paper companies after the AP Paper deal. Exposure to multiple sectors ensures that not only are such opportunities captured, but the impact of a negative surprise is also low.


Diversification By Size:

 

While small and mid-cap companies have the maximum potential for high-speed growth, large caps provide the necessary stability to a portfolio.


Ownership Structure:

 

Apart from well-known business houses such as Tatas and Birlas, an investor should also have government-owned and multinational companies in her portfolio. Companies without a promoter group (L&T, ICICI Bank etc) and companies controlled by financial investors (Gokaldas Exports, etc) could be the other types.


Growth Phase:

 

The portfolio should also try to strike a balance in terms of the various growth phases that companies pass through. This could include companies expanding aggressively and those that are generating a substantial cash surplus.


Geography:

 

One may also try to take exposure to overseas equity markets to truly diversify the portfolio. Even within the country, one should ensure that the companies are not concentrated in a single geographic region. Having looked at the basic principles of building a portfolio, it will be interesting to see how we can apply it to the current economic situation.

THE DON'TS

While it is necessary to know what to do, it is equally important to define what should be avoided when building a perfect portfolio. Here are some key points:


Don't Buy On Tips


A retail investor is typically the last one to know of the tip. Hence he is most likely to invest when the stock has already run up and hence at a risk to lose money.


Don't Invest In A Company You Don't Understand


This is one of Warren Buffet's well-known principles. Only a thorough study can give an investor enough confidence not to sell at the first sign of trouble


Don't Confuse Investing And Trading


Trading is short-term and investing is long-term. Getting confused between the two can be a sure way to lose money.


Don't Panic At Short-Term Trouble When Your Goals Are Long-Term


Volatility is the basic characteristic of a stock market. Capital erosion in short-term should be considered as normal.


If You Are Going To Need Cash In The Short Term, Don't Invest In Stocks


In stock markets one can benefit only if one can hold on for a reasonably long period.


Don't Have Excessive Expectations About Returns


If a fixed deposit gives you 10% per annum, equity investments should typically give a return of 18%-20% per annum. While you can occasionally find a multi-bagger, it is unreasonable to expect every scrip to turn into a multi-bagger.


Don't Try To Time The Market


Timing the market, i.e., buying at the exact bottom and selling at the exact top, is next to impossible. Take 'Buy' and 'Sell' calls based on your views on valuations


Don't Invest Without A Plan


A well thought-out plan and discipline in implementing it can safeguard your portfolio from impulsive mistakes.

           

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

 

Credit Scores & Credit Information Report

Posted: 13 Sep 2011 11:48 AM PDT



Your credit information report (CIR) contains details of your credit history and track record in taking and repaying loans from banks and finance companies. A loan applicant with a good credit record will find access to loans easier, faster and on favourable terms. The Credit Information Bureau of India (Cibil) consolidates the information on individual borrowers' credit history sourced from different member credit institutions such as banks, credit card companies and NBFCs, into a single report called the CIR. This is then made available to its members (banks, finance companies) to facilitate their lending decisions.


A CIR typically contains personal details of the borrower, such as name, address, PAN, records of previous borrowings, past payment history, amount overdue, etc.

Accessing Your Report:

Both member banks and you can access your credit report. For you, the report will come for a fee of . 142. You will have to pay . 450 for a CIBIL TransUnion Score inclusive of the CIR. You can fill up a CIR request form, which can be downloaded from the Cibil website. You have to submit self-attested copies of address proof (bank statement, utility bill) and identify proof (PAN card, passport, or voters ID.) You then have to send documents to Cibil along with a demand draft for the fees.

Decoding Your Score:

Your score can range from a low of 300 to a high of 900. The higher the score, the more favourably it is viewed by credit institutions. There is no standard cut-off for a good score or a loan application. Different banks have different barometers.

Rectifying Information In Your CIR:

If you find any discrepancy in the CIR, you can rectify it by following the steps mentioned below:

 

STEP 1: Access your credit report from Cibil by clicking on the link 'Access Your Cibil Credit Report'.

 

STEP 2: Identify the error in your report and write to consumerqueries@cibil.com with your queries and the changes you would want to be made.


STEP 3: Contact the related bank/ lender immediately and inform them of the error. Back it up with necessary proof of having cleared your dues.


STEP 4: The bank/lender has to validate the error(s) and re-submit the updated information to Cibil . Do not approach Cibil directly as the bank/lender has to confirm the changes and update the credit bureau.

 

 

Tata Equity Fund

Posted: 13 Sep 2011 11:21 AM PDT

Objective
To provide income distribution and/or medium to long term capital gains while at all times emphasizing the importance of capital appreciation.

Option Available
Growth and Dividend

Entry Load
For investment amount greater than or equal to Rs.1 crore: Nil.
For investment amount less than Rs.1 crore: 2.25%.

Exit Load (as a % of the Applicable NAV)
For each investment amount of less than Rs. 1crore: 1% if redeemed on or before expiry of 6 months from the date of allotment;
For each investment amount greater than or equal to Rs.1 crore: Nil

Minimum Application Amount
Rs.5,000/- & in multiples of Re.1/- thereafter.

Tata Tax Saving Fund

Objective
To provide medium to long term capital gains along with income tax relief to its unitholders while emphasizing the importance of capital appreciation.

Option Available
Dividend

Entry Load
For Each Investment amount < Rs. 2 Crores - 2.25%.
For Each Investment amount >= Rs. 2 crore - Nil.
No entry load will be charged on investment made by the Fund of Fund Scheme.

Minimum Application Amount
Rs.500/- and thereafter in multiples of Rs.500/-
 

Mistakes to avoid in a falling stock market

Posted: 13 Sep 2011 10:23 AM PDT

A falling stock market, like the one being witnessed, challenges the patience and resolve of even the most seasoned investors. Needless to say, a situation like this becomes even more challenging for new as well as not-so experienced investors. The question that comes to the mind of most investors is whether this is the beginning of a bear market? Or, is it one of those phases that will last for a few months, without impacting the longterm prospects of the stock market? As has been seen, time and again in a situation like this, the first instinct of non-serious as well as short-term investors is to abandon the stock market. The steep falls in the value of holdings afflicts their mindsets, as they do not have a clear time horizon for being in the market.

For a serious long-term investor, however, the situation is different. It is not that he remains unaffected. It is just that he has mentally prepared himself to brave these downturns, and, in addition, has time on his side.

Its been historically proven that a quality portfolio always recovers ground lost. It is important, therefore, to put market meltdowns in a proper perspective. Equity investors need to understand that even though most company stock prices are impacted in such a scenario, this doesn't necessarily mean the companies themselves are faring poorly. More, short-term movements in the market do not take away the ability of equity to outperform other asset classes in the long run.

Those who continue investing regularly during these turbulent times benefit the most when the market rebounds. While a haphazard approach may work when the market is on the way up, lasting success springs only from a strategic and deliberate approach. Remember, spur-of-the-moment decisions, based on current market trends, can prove to be very costly. For example, moving money out of equity funds now can make an investor miss out on gains later, when the market rebounds.

Now, a word of caution to investors, who may get tempted to make a quick buck in the current market situation. They need to remember that even in times like these, it is vital to follow the same investment principles that one would in a normal market condition i.e. focus on suitability of the scheme, invest for the long term and go for a quality portfolio. Many investors get tempted by funds that witness maximum fall, thinking these would gain most once the market rebounds. This could prove suicidal, as those funds could be of poor quality, or the ones that are aggressive, such as mid- and small-cap funds, thematic as well as sector funds. Many of these would probably be the last to get back to their original NAVs.

Another dilemma equity investors face is whether it makes sense to switch to more conservative investments in a down market. The fall in equity portfolio value, along with the negative news flow, adds to the anxiety. While moving money from equity funds to more conservative options like fixed maturity plans and fixed deposits may seem a sensible thing to do, the fact remains that selling in a down market can prove a costly mistake. A haphazard or an extremely cautious approach can expose an investor to the risk of falling short of a long-term financial goal.

The key, therefore, is to keep focus on the long-term investment goals and to continue investing in an asset class like equity, irrespective of the market condition.
 

HDFC Multiple Yield Fund

Posted: 13 Sep 2011 10:08 AM PDT

Objective

To regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme's assets in equity and equity related instruments.

Option/Plan

Growth Option, Quarterly Dividend Option, Monthly Dividend Option. The Dividend Option offers Dividend Payout and Reinvestment Facility.

Exit Load(as a % of the Applicable NAV)

In respect of each purchase / switch-in of Units upto and including Rs. 10 lakhs in value, an Exit Load of 0.50% is payable if Units are redeemed / switched-out within 6 months from the date of allotment.
In respect of each purchase / switch-in of Units greater than Rs. 10 lakhs in value, an Exit Load of 0.25% is payable if Units are redeemed / switched-out within 3 months from the date of allotment.

Minimum Application Amount

For new investors : (Growth & Quarterly Dividend Option) – Rs.5000 and any amount thereafter under each option.
(Monthly Dividend Option) . Rs. 25000 and any amount thereafter.
For existing investors : Rs. 1000 and any amount thereafter.
 

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Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

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Investors Pull Out 3.5k cr from Infra Funds

Posted: 13 Sep 2011 09:38 AM PDT

   Infrastructure funds have been the biggest casualty of the recent stock market downturn. Bleak sector outlook and underperformance of funds have prompted investors to redeem about . 3,500 crore from core sector funds over the past one year. Industry estimates show that top funds such as ICICI Pru Infrastructure Fund, DSP Blackrock Tiger Fund, SBI Infrastructure Fund, Tata Infrastructure Fund, Reliance Infra Retail Fund and HDFC Infrastructure Fund have lost between . 400 crore and . 940 crore since June last year.


Policy inaction, higher interest rates and slow infrastructure building activity are said to be the major reasons behind the sell-off. As a sector, infrastructure has been a significant underperformer in the past 15 months. The ET Construction Index, which includes most infrastructure stocks, has fallen over 25% over the past one year. Most infrastructure funds have generated negative (annual) returns in the range of 20-30%.


Theme underperformance has resulted in strong outflows from infrastructure funds. Most funds have underperformed because of their low exposure to consumer, healthcare and pharma sectors. Higher allocation to capital goods and realty stocks have weighed heavy on infrastructure funds.


Large-caps like L&T, BHEL and Tata Power have fallen 20-30% while mid-cap infrastructure stocks like Punj Lloyd, Gammon India, Jaypee Infra, Adani Power, GVK Power and GMR Infrastructure,


among several others, are currently trading near their historically low prices.

Investors, in the days of the bullrun, had rushed to invest in companies that built roads, utilities and airports which were deficient in an economy that was growing at more than 8%. But the pace of building has slowed as the government has struggled to address issues such as land acquisition and environment clearance. Investors are reducing investments in infrastructure and allied sectors on fears of declining foreign direct investments, low government spending in 2010, buoyant interest rates and high raw material costs. High interest rate and rising project financing costs are pushing several mid-tier infra companies into a deep debt crisis situation, equity analysts said. Excessively leveraged companies like IVRCL, Nagarjuna Construction, HCC, Lanco Infratech, GVK Power and GMR Infra, among others, are likely to face lots of liquidity issues which could lead to a sharp fall in their growth, analysts said.


Fund managers expect the government to restart funding core projects once inflation is under control. NHAI's . 5,000-crore bond issuance, expected to hit the market by October this year, will improve sector sentiment, they said.

 

Tata Equity P/E Fund

Posted: 13 Sep 2011 07:47 AM PDT

Objective  To provide reasonable and regular income along with possible capital appreciation to its unitholder.

Option Available Dividend Option, Growth Option.

Entry Load
For investment amount > = Rs 5 crores or more: Nil.
For investment amount < Rs 5 crores: 2.25%.
No entry load will be charged on investment made by the Fund of Fund scheme.

Minimum Application Amount Rs.5,000/- & in multiples of Re.1/- thereafter.
 

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 
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