Investment Information

Mutual Fund investment has been an investment avenue for the retail investor and has been very popular over the years. However it doesn’t mean that investors have become adept in selecting Funds with ease and accuracy. But the fact is that these investments are not more risky as compared to stocks, and are meant for long term horizon. Selecting a Mutual Fund from the many available in market for your investments is a tedious process. Following are the 10 pointers for investors; which can help in selecting best one.

1. Who is sponsoring the Fund?

An investor must check the sponsor’s (promoter) record in the financial services arena. Apart from a consistent and clean record in financial services, sponsor(s) should have requisite experience and background in managing mutual funds be it in India or overseas.

2. Fund Manager Profile

The fund manager must be experienced, which is best reflected in the returns he has generated on funds previously/currently managed by him.

3. What is Investment Philosophy of Fund?

Every fund manager has his own individual style and investment philosophy. While some managers are aggressive, others are passive. The investor must choose the fund that best reflects and matches his own investment philosophy.

4. Choosing a Fund that meets your objective

Funds are either open-ended or close-ended.

Open-ended funds:

An open-end fund is available for subscription throughout the year. Investors have the flexibility to buy or sell any part of their investment at any time at a price linked to the funds – Net Asset Value (NAV)

Close-ended funds:

A close-end fund begins with a fixed corpus and operates for a fixed duration. The fund is open for subscription only during a specified period. When the period terminates, investors can redeem their units. Close-ended funds may be listed on the stock exchanges to impart liquidity to the investment.

5. The correct fund category

Mutual funds offer different categories. These can be classified as:

Debt funds

They seek to provide a regular source of income by investing in fixed income securities like debentures and bonds.

Equity Funds

They aim to grow money over time (i.e. capital appreciation). Here the investment focus is mainly on stocks/shares. Historically, stocks have outperformed other asset classes like bonds, fixed deposits, gold, real estate over the long term – 10 years.

Balanced funds

The fund attempts to maintain a balance between fixed income securities and equities in a pre-determined ratio like 60:40 equity – debt for instance.

The investor must invest in mutual fund categories, which meet his criteria in terms of need for regular income, capital appreciation, and safety of principal.

6. Fees and charges

Asset management companies (AMC) charge a fee for managing investor monies. In other words, your mutual fund deducts charges and fees from the net asset value (NAV) of the fund. As an investor you must be aware of the fees and charges of the AMC. Two schemes with more or less similar performances would generate different returns if one of the two schemes charges higher fees.

7. The load

An investor may be required to pay a load either at the time of buying the units or at the time of selling the units. Again, the returns of two similar performing schemes may vary depending on the load charged by the scheme to the investor.

8. The tax implications

The investor needs to understand the tax implications before investing in mutual fund schemes. Investments in mutual funds have varying tax implications depending on whether you exit from the fund before or after 12 months from the investment date. Tax-saving funds in particular make attractive investments from a tax perspective as they offer tax relief under Section 88.

9. Investor service and transparency

Services offered by mutual funds vary across funds. Some MFs are more investor friendly than others, and offer information at regular intervals. For instance, some funds disclose the expense ratios, an important criterion for fund selection, once a year, some disclose it once every 3 months, while a few disclose it every month.

10. Evaluating Fund Performance and Track record of Fund

Every fund is benchmarked against an index. The investor must track the fund’s performance against the benchmark index. He must also compare its performance with other funds from the same category. He should also see the fund’s calendar year performances over the years.

Sundaram BNP Paribas Mutual Fund is one of the best investment companies in India. They clearly manage the funds and invest in the companies after doing good research on their potential. They have set up an internal committee that monitors the daily activities and periodical performance.

SIP – Systematic Investment Plans:

Sundaram mutual fund has launched systematic investment plans for the benefit of the retail investors. The SIP Plans have generated more returns for the investors when compared to the other schemes. This is because when you invest in SIP Plans, you will buy the units at a cheaper cost. As you are making payments monthly, you buy units at different prices. This would help you to average the price of the units. Finally you would have bought more shares at less price and less shares at more price. This is called averaging.

You can make the payments by any of the following methods:

Post Dated Cheques
SIP Auto Debit

You can issue post dated cheques for making monthly payments to the company. You can also make the payment by sip auto debit facility. For availing this facility, you have to sign a bank authorization form along with the application form. Once you have submitted the authorization form, the bank will send your payments every month to the company.

Top Performing SIP:

One of the top performing SIP Plans in sundaram mutual fund is “Sundaram BNP Paribas Select Mid Cap Fund”. This fund in SIP Plan has generated returns around 35% since the inception of this scheme.

What is the Next Step? Start Investing!!

That’s a question we routinely hear nowadays. Ever since the equity markets have been engulfed by volatility, the most frequently heard piece of advice is – invest via the systematic investment plan (SIP) route for the long-term. While regular visitors and clients of Personalfn have since long bought into the merits of SIP investing, we are rather surprised to note that it took a prolonged volatile phase for most investment experts/advisors to appreciate the importance of SIP investing.

Coming back to the original question – which is the best SIP? Thanks to all the hype around SIPs, several investors have been led to believe that the SIP is an investment avenue. Furthermore, the panacea to the present testing phase is to select the best SIP and get invested therein.

The SIP is simply an investment mode i.e. a means to invest in mutual funds and not an investment avenue. When an investor chooses to invest via an SIP, he makes investments (usually) in smaller denominations at regular time intervals as opposed to making a single lump sum investment. The underlying intention is to benefit from the volatility in equity markets by lowering the average purchase cost. In this article, we discuss the pros and cons of SIP investing.

How an SIP helps…
As mentioned earlier, the most important role of an SIP is to lower the average purchase cost of an investment over the long-term. This is possible when equity markets experience a turbulent phase. Since the investment amount for each SIP installment is fixed, the investor gains by receiving a higher number of mutual fund units. An example will clarify this better. Suppose the monthly SIP is for Rs 1,000 and the fund’s net asset value (NAV) is Rs 50; this will lead to 20 units being credited to the investor. However, in the next month on account of the volatile markets, the fund’s NAV falls to Rs 40. This will lower the average purchase cost; as a result, the investor will have 25 units credited to his account. This is how an SIP can help investors benefit from volatility in equity markets.

Lack of disciplined investing is one of the major reasons for investors not achieving their financial goals. For example, often monies that are kept aside for investments end up getting used for other purposes. As a result, the investor is even further divorced from his goals. An SIP ensures that the investor stays the course by investing in a disciplined manner.

An often heard excuse for not investing is lack of monies. SIP takes care of this problem by lowering the minimum investment amount. For example, the minimum investment amount for a lump sum investment in a diversified equity fund could typically be Rs 5,000; conversely for an SIP, it can be as low as Rs 500. As a result, investing via the SIP route is lighter on the wallet..

Timing the market is a popular pastime with several investors. Investors have an inexplicable urge for timing markets and aim at getting invested when markets have bottomed out. It’s a different matter that timing markets to perfection and doing so consistently is beyond most investors. SIPs make market timing irrelevant.

Having discussed the benefits of SIP investing, now let’s consider the situations when an SIP won’t deliver…

1. In rising markets
An SIP may not be able to lower the average purchase cost if equity markets rise in a secular manner. In such a scenario, the average purchase cost could actually rise. So in a market rally, SIPs could prove to be more expensive vis-a-vis a lump sum investment.

2. A directionless SIP
A directionless SIP is one that does not form part of an investment plan; in other words, it’s an aimless SIP. The SIP is not an ‘end’; instead, it is the ‘means’ to achieve an end. Hence an SIP in isolation does not make ‘financial’ sense. Instead, the SIP should form part of an investment plan aimed at achieving a predetermined objective (like providing for a child’s education or buying a house).

3. An SIP in a poorly managed fund
Investing via an SIP doesn’t improve the prospects of a poorly managed fund. Such a fund stays the same, irrespective of the investment mode. Its shortcomings will not be eliminated by an SIP. Hence the key lies in first selecting a well-managed fund that is right for the investor and then investing in it via an SIP.

As can be seen, the SIP mode of investing has a fair number of advantages to offer; conversely, there can be instances when it may not deliver as expected. Investors on their part should make well-informed investment decisions after acquainting themselves of both the pros and cons.

We frequently read about the stock market and the stock market prices in the newspaper. Most of us, however, do not understand fully how the stock market functions. The stock or equity market is a place for trading of shares and other equities. These markets are one of the most important features of a nation’s economy. These stocks are listed at ‘Stock Exchanges’ which provide traders with facilities to trade their stocks and other securities. Stock exchanges also provide opportunities for people who want to purchase these equities. One of the most common forms of trading at stock exchanges is actual bidding by individuals on the exchange floor which is also referred to as “open outcry”. Companies put very high value on a stock or equity market which allows them an avenue to generate money.

With the current economic situations literally on tenterhooks, investing your money wisely has become the need of the hour. There are several forms of investments that people engage in. Investing in shares and equities is one of the most noted forms due to its vast opportunities and ample returns if done well. To play on a safer ground, people prefer investing in mutual funds which are basically a form of investing where an individual collects money from several investors and then puts them wisely in opportunities that will get him the best yields.

There are 2 schools of thinking: while one group prefers individual stock investment, the other prefers investing in mutual funds. While investing in stocks definitely has its advantages, mutual funds are more popular amongst the general public. One of the primary advantages is the fact that these funds do not require any prior knowledge of the market. They are completely managed by a professional who will use his knowledge and expertise to bring the best value for your money.

‘Futures trading’ is another form of trading that people indulge in. This method of investment involved signing of a contract whereby individuals have to buy or sell a specified amount of set assets before the stipulated time. The price of futures depends entirely upon the current price of the asset in question.

This fund was launched by SBI Mutual Fund to give the investors an opportunity to invest their funds in long term growth schemes. The fund managers invest the funds in a basket of diversified equity stocks. These stocks of the companies have an market capitalization, which would be equal to or more than the market capitialization of the companies listed in the BSE 100.

NAV:

It is called as “Net Asset Value” of the mutual fund. The NAV of one unit, when the fund was launched would be Rs 10. Then based on the performance of the mutual fund, the NAV will increase or decrease. You can see the updated NAV of the fund every day after the market closes.

There are two options available for investing in SBI blue chip fund.

Dividend
Growth

Dividend:

If the investors choose “Dividend” option while investing their funds, then they get their dividends declared by the fund managers. A cheque will be sent in the name of the investor and also an updated statement for the same. Once the dividend is declared then the Net asset Value of the fund will go down. There are two choices for the investors who choose dividend option i.e. Dividend reinvest and Dividend payout. If the investor chooses for dividend payout option when he applies for the fund, then he will get the dividend when it is declared. If he chooses for “Dividend Reinvest”, then additional units will be bought in his portfolio.

Growth:

If the investors choose “Growth” option, then the dividends will be reinvested in his folio. The NAV of one unit will increase accordingly.

The latest NAV of SBI Blue chip fund – Dividend option as on 25th June, 2010 is Rs 12.32 and for the growth option is Rs 14.14. You can check the updated NAV of the SBI mutual fund online.

Saving money is very important because it will give you the power to invest in things that will make more money for you. If you do not save money, you cannot invest also since you have no money to use. The money you saved will can be used also for emergency needs that may occur in the future.

Learning how to save is the first stage to make money grow. After you saved enough money, you can invest it in several ways in order to make your money work for you. As you save and invest more, you are gradually building your wealth.

Theses days there are many ways to invest your money. You only need knowledge on how to invest wisely by careful study using the available resources like the Internet, seminars and trainings. There are no other way to make your money grow, it is only through proper investing strategy.

There are more investments types available nowadays than in the past decades. Many people in the recent years are investing in real estate, mutual funds, bonds, stock market and traditional business.

Mutual fund is a collection of money from small and private investors. The fund is administered by a private investment company who will invest the fund in stocks, treasury bills or bonds depending on the prospectus.

Stocks are the shares you buy or sell from public companies. Bonds are issued by government or public companies to raise funds for their future projects. Bonds are just like loan. Investing in real estate or business is one good way to make your money grow if you have large capital and time.

Investing is the only way to make your money grow. Several ways to invest your money include investing in mutual funds, stocks, business, bonds and real estate. As you invest money, you are building wealth gradually, making your money grow.

“Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”

• Warren Buffett, legendary investor and the third richest man in the world.

The importance of investing in creating wealth is underscored by Warren Buffett’s career. However, very few have the business acumen of the “Oracle of Omaha” and have to depend on others’ expertise for managing wealth. This has given rise to investing vehicles like mutual funds, Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs).

While mutual funds have been around for some time, REITs and MLPs are comparatively recent innovations. Both of them share some similarities and differences.

A REIT is defined as “a tax designation for a corporate entity investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90 percent of their income, which may be taxable, into the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.”

A MLP is defined as “a limited partnership that is publicly traded on a securities exchange. It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. To qualify for MLP status, a partnership must generate at least 90 percent of its income from what the US Internal Revenue Service (IRS) deems “qualifying” sources. For many MLPs, these include all manner of activities related to the production, processing or transportation of oil, natural gas and coal.”

Now, let’s talk about the similarities between a Master Limited Partnership (MLP) and a Real Estate Investment Trust (REIT).

One similarity, that has main implications for investors, is that they keep off the corporate income tax, on both a state and federal basis. finally, the investor’s share of the proceeds increases. Another major similarity that both REITs and MLPs also share with ordinary shares, pardon the wordplay, is their tradeability. Units of both REITs and MLPs are traded on stock exchanges just like common stock.

Another similarity is that both REITs and MLPs are classified into three categories each. REITs are of the following three types:

1.Equity REITs: These own real estate like offices, malls, etc.

2.Mortgage REITs: These lend money to real estate owners or buy existing mortgages or mortgages backed securities.

3.Hybrid REITs: These are basically a mixture of the above two types – own real estate and lend money to owners of real estate.

MLPS are of the following three types:

1.Roll-up: Multiple assets or small limited partnerships combined into a larger limited partnership.

2.Rollout: A large, single multiple limited partnership like a corporation spins off some of its assets into a separate multiple limited partnerships.

3.Roll-in: New assets put into a multiple limited partnership with a guarantee to combine supplementary assets in future.

As is clearly seen, there is a lot that is common between these two investment vehicles.

Of the many investment products out there, the MLP Mutual Fund has attracted a lot of interest with its recent introduction. Here is a brief review of its operations.

Master Limited Partnership (MLP) is a type of limited partnership that is publicly traded. There are two types of partners in this type of partnership.

• Limited Partner

• General Partner

The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the cash flow of MLP, whereas the general partner is the party responsible for managing the affairs of MLP and receives compensation that is linked to the performance of the venture.

If we look back at the history of MLP mutual fund, it can be observed that it is indeed a brief one. On May 12th 2010, SteelPath, a Dallas-based investment advisory firm, announced the launch of the SteelPath MLP Funds, the very first mutual fund family to provide access to the Master Limited Partnership asset class.

The SteelPath fund consists of portfolio managers and investment team with a six year track record at Alerian, the leading MLP indexing company. SteelPath uses research techniques like fundamental analysis in this emerging asset class, incorporating its bottoms-up, private-equity investment process with a risk management philosophy designed to protect capital and mitigate portfolio volatility. The mutual fund platform of firm seeks to provide high levels of current income along with portfolio diversification, protection against inflation and a low correlation to other asset classes.

SteelPath has introduced three new funds which are as follows:

MLP Income Fund – This fund provides a high level of current income with an inflation adjusted protection tool, a higher distribution yield compared to equity alternatives such as REITs (Real Estate Investment Trust) and Utilities. This feature makes the fund the lead performer amongst the three.

MLP Select 40 Fund – Consisting of 40 energy infrastructure MLPs, this fund seeks to outperform the broader equity markets. Select 40 fund portfolio provides diversification and risk elimination.

MLP Alpha Fund - The Alpha fund is a concentrated portfolio of 20 energy infrastructure MLPs that utilizes a securities selection procedure designed to unveil those MLPs with the best risk-adjusted opportunities for superior distribution growth and price performance.

These funds focus on energy infrastructure MLPs. This asset class is composed of companies that control and operate the physical assets that transport crude oil, natural gas and refined petroleum products, such as pipelines, as well as the associated storage facilities. These companies have long-term contracts with nominal exposure to commodity prices, therefore reducing volatility in income.

The SteelPath MLP mutual fund family offers options that have been designed to meet alternating investor needs while concentrating on a long-term investment tenure, diversified exposure and prudent risk management. All three funds have a Class A share asset class which can be procured by a minimum investment of $3000 by individuals, while the institutional class shares have been explicitly created to provide a cost efficient option for institutional investors from pension funds to insurance companies.

Special risk considerations are taken into account in case of these funds which are very similar to those associated with the direct ownership of energy infrastructure assets due to its policy of concentration in the securities of Master Limited Partnerships.

Saving money is a nice habit many people should practice. Most of us can have the capability to save if we have regular income from our job or business. After you saved enough money, the extra left can be used to put in different investments to make it increase.

Acquiring knowledge on how to save money is the initial step to make money grow. Once you saved adequate money, you can put it in different schemes in order to make your money work for you. While you save and invest more, you are gradually establishing your wealth.

In recent years there are different ways to invest your money. You only need knowledge on how to invest wisely by careful analysis using the available resources such as the Internet, seminars and coaching. There are no other means to make your money grow, it is only through proper investing strategy.

There are greater investments kinds accessible today than in the past decades. Many people in the current years are investing in real estate, mutual funds, bonds, stock market and traditional business.

A mutual fund is a pool of funds from nonpublic individuals. The fund is managed by a fund manager with long years of experience in investing. Usually, mutual fund corporations invest in stocks, bonds and fixed-income instruments.

Investing in stocks is purchasing shares of a general listed company. When you buy stocks, you become a stockholder of that company and you will receive dividends. Bonds are money borrowed by the government from private persons to have enough funds for their project. Meanwhile, investing in real estate such as rental apartment is one best way to invest your money because it will give you a passive earnings.

Investing is the sole course to make your money grow. There are several means to invest your money such as investing in mutual funds, stocks, business, bonds and real estate. As you invest money, you are increasing wealth gradually, preparing your money grow.

Most of what has been drilled into our heads about investing in mutual funds, CD’s paying down our mortgage and diversifying is nothing but smoke and mirrors. The financial services companies like Fidelity, Charles Schwab and financial planners are the ones making all of the money. The problem is that most people have very little financial education in order to invest for retirement properly so they hand over their money to someone they HOPE will have the right knowledge base to safely increase their wealth. The problem is that these investment types are HUGELY RISKY. These types of asset classes, paper assets, do not allow the investor control. Then during market crashes, all most can do is watch helplessly as their wealth gets whipped out along with their financial security. If you have more control over your assets then you are not affected as much by market crashes.

For example, if you invest in assets like real estate that produce cash flow through rental income after all of your expenses are covered, if the real estate market and stock market crash you are still in great shape. While everything is crashing you are still receiving your rents and do not need to sell the asset. Investing in non-paper assets (i.e. not mutual funds or CD’s) allows you to use leverage as well which increases your wealth by making your money work harder for you. Most financial planners will tell you that using leverage increases risk. That is not always the case if you have the right financial knowledge to control the investment and enable safety controls on your leverage use. They will also tell you that real estate is a risky investment. The reason for that is that financial planners typically lack the financial knowledge about how to control real estate and make it profitable. Most financial planners put people into paper assets where the investor does not have control and therefore it is hugely risky to use leverage. In real estate investments the value of the property should not be based on the “opinion” of an appraiser but on the income that it produces through rents. The value of the rental real estate is dependent on jobs, salaries, demographics, local industry, and supply and demand of affordable housing.

In a housing crash, the demand for rental units often goes up, which means rents increase causing the value of your property to increase. You can control rental real estate and which geographic areas you invest in unlike paper assets that allow no controls. Financial intelligence is the key to increasing your controls over your investments. It’s extremely important to continue to increase your financial intelligence in order to protect yourself. Unfortunately, financial intelligence is not taught in schools because such a large portion of the population, including teachers and politicians do not have a very high financial IQ. When financial advisors say that an increase in returns means an increase in risk, they are right when speaking about the paper assets they recommend to investors that they make major commissions on BEFORE showing performance.

They are wrong when speaking for all assets. Financial advisors are simply salespeople. Most people invest in paper assets such as savings, stocks, bonds, mutual funds and index funds because they do not want to take responsibility and control over their financial well being. All they want is to turn their money over to an investment advisor who hopefully does a good job. Out of sight, out of mind. If people want more control, the first thing they need to do is increase their financial intelligence and hopefully increase their financial controls and leverage ratios.

Most financial advisors recommend diversification but they do not really diversify. First they only invest your money in one asset class, paper assets. Second, mutual funds are already diversified investments which are invested in a pool of good and bad stocks which does not increase the value or decrease the risk of the investments. Professional investors DO NOT diversify. Warren Buffett put it perfectly when he said, “Diversification is a protection against ignorance. Diversification is not required if a person knows what they are doing.” So if diversification is a protection against ignorance then when you diversify whose ignorance are you protecting yourself from? Your ignorance and your financial advisors ignorance? Focus, not diversification, is the key to more sophisticated leverage, higher returns, and lower risk.

The point I am trying to make is that if you increase your financial intelligence about specific asset classes, like real estate, you will learn how to control your own financial security and wealth creation instead of relying on some financial advisor who probably does not know what they are doing. Look at the massive wealth transfer that just occurred when the market crashed while bailing out the banks (i.e. the top 1% wealthy individuals increased their wealth while the middle class and poor decreased in wealth). This happened because most people do not have the financial intelligence to protect themselves. Starting to get financially educated is the key to wealth creation. So get to the bookstore and start reading. Take classes on financial intelligence and ways to increase wealth. It is the key to your success and preserving your wealth so that financial predators (i.e. the government, financial advisors and the large mutual fund peddling companies like Fidelity and Charles Schwab) do not take all of your wealth away by investing it in asset classes that do not allow you any controls over those investments.