MF ADS(Dont be fooled)

Perhaps you've noticed all those mutual fund ads that quote their amazingly high one-year rates of return. Your first thought is "wow, that mutual fund did great!" Well, yes it did great last year, but then you look at the three-year performance, which is lower, and the five year, which is yet even lower. What's the underlying story here? Let's look at a real example. These figures came from a local paper: 1 year 3 year 5 year 53% 20% 11% Last year, the fund had excellent performance at 53%. But in the past three years the average annual return was 20%. What did it do in years 1 and 2 to bring the average return down to 20%? Some simple math shows us that the fund made an average return of 3.5% over those first two years: 20% = (53% + 3.5% + 3.5%)/3. Because that is only an average, it is very possible that the fund lost money in one of those years. It gets worse when we look at the five-year performance. We know that in the last year the fund returned 53% and in years 2 and 3 we are guessing it returned around 3.5%. So what happened in years 4 and 5 to bring the average return down to 11%? Again, by doing some simple calculations we find that the fund must have lost money, an average of -2.5% each year of those two years: 11% = (53% + 3.5% + 3.5% - 2.5% - 2.5%)/5. Now the fund's performance doesn't look so good! It should be mentioned that, for the sake of simplicity, this example, besides making some big assumptions, doesn't include calculating compound interest. Still, the point wasn't to be technically accurate but to demonstrate how misleading mutual fund ads can be. A fund that loses money for a few years can bump the average up significantly with one or two strong years.

MF Returns

Mutual Fund ReturnsA mutual fund's purpose is to provide you returns. Before you decide to invest or after you have invested, the critical criterion you consider is mutual fund returns. However a new entrant to mutual funds must note that mutual fund returns are not assured or guarnteed but are expected returns along a pattern.But what is mutual fund returns? You could count differently. People who invest in a monthly income plan look at their monthly income cheques ar returns, those who have invested in dividend options of funds are concerned with the dividends that they are receiving from time to time. If you have invested in a growth option of a scheme, then the returns have to be only by way of increase in the NAV -the net asset value -of your units.In all cases, the mutual fund returns are first reflected in increase in net asset value and thereafter applied to dividends or just kept as it is. So if you are in a dividend paying option whether in a monthly income plan or otherwise, you must consider both the dividend you have received, if any, along with the higher net asset value of the units. In other words the NAV increases have to be adjusted for the dividend payments received.There is nothing like a general expected rate of returns in mutual funds. Different classes of assets give different ranges of returns. So you can expect a rate of return depending on the type of mutual fund you have invested in and the asset allocation pattern of your scheme into various asset classes. For example a debt fund or an income fund will provide returns in a range which would be at much lower levels than the ranges of returns of equity funds. If you have invested in hybrid funds or balanced funds, the ranges of expected returns would be somewhere in between depending again on asset alocation of your fund.One thing which every investor comparing across countries must know that in countries like US the returns are much lower and that mutual funds are also not that popular in US because the fund managers are not able to beat the general market index because of the mature markets. However mutual fund returns in India is very attractive and because of the differences between Indian and US markets and the two economies, mutual fund opportunity is unique to India.

AMFI MEMBERS

Association of Mutual Funds in India (AMFI) Bank SponsoredJoint Ventures -

Predominantly IndianCanara Robeco Asset Management Company Limited
SBI Funds Management Private Limited
Others
BOB Asset Management Company Limited
UTI Asset Management Company Ltd
InstitutionsLIC Mutual Fund Asset Management Company Limited
Private SectorIndianBenchmark Asset Management Company Pvt. Ltd.DBS Cholamandalam Asset Management Ltd.Deutsche Asset Management (India) Pvt. Ltd.Escorts Asset Management LimitedJM Financial Asset Management Private LimitedKotak Mahindra Asset Management Company Limited(KMAMCL)Quantum Asset Management Co. Private Ltd.Reliance Capital Asset Management Ltd.Sahara Asset Management Company Private LimitedTata Asset Management LimitedTaurus Asset Management Company LimitedForeignAIG Global Asset Management Company (India) Pvt. Ltd.Franklin Templeton Asset Management (India) Private LimitedMirae Asset Global Investment Management (India) Pvt. Ltd.Joint Ventures - Predominantly IndianBirla Sun Life Asset Management Company LimitedDSP Merrill Lynch Fund Managers LimitedHDFC Asset Management Company LimitedICICI Prudential Asset Mgmt.Company LimitedSundaram BNP Paribas Asset Management Company LimitedJoint Ventures - Predominantly ForeignABN AMRO Asset Management (India) Ltd.Fidelity Fund Management Private LimitedHSBC Asset Management (India) Private Ltd.ING Investment Management (India) Pvt. Ltd.JPMorgan Asset Management India Pvt. Ltd.Lotus India Asset Management Co. Private Ltd.Morgan Stanley Investment Management Pvt.Ltd.Principal Pnb Asset Management Co. Pvt. Ltd.Standard Chartered Asset Management Company Private Limited

mutual funds investment

Buying and Selling You can buy some mutual funds (no-load) by contacting the fund companies directly. Other funds are sold through brokers, banks, financial planners, or insurance agents. If you buy through a third party there is a good chance they'll hit you with a sales charge (load). That being said, more and more funds can be purchased through no-transaction fee programs that offer funds of many companies. Sometimes referred to as a "fund supermarket," this service lets you consolidate your holdings and record keeping, and it still allows you to buy funds without sales charges from many different companies. Popular examples are Schwab's OneSource, Vanguard's FundAccess, and Fidelity's FundsNetwork. Many large brokerages have similar offerings. Selling a fund is as easy as purchasing one. All mutual funds will redeem (buy back) your shares on any business day. In the United States, companies must send you the payment within seven days. The Value of Your Fund Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in newspapers. You can basically just think of NAV per share as the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change. When you buy shares, you pay the current NAV per share plus any sales front-end load. When you sell your shares, the fund will pay you NAV less any back-end load. Finding Funds The Mutual Fund Education Alliance™ is the not-for-profit trade association of the no-load mutual fund industry.

Daily NAV

http://amfiindia.com/navreport.asp?chkhidden=go&cmbmfname=46

Gold exchange-traded funds

What are exchange-traded funds?
Exchange-traded funds (ETFs) are mutual fund schemes that are listed and traded on exchanges like stocks. ETFs trading value is based on the net asset value (NAV) of the assets it represents. Generally, ETFs invest in a basket of stocks and try to replicate a stock market index such as the S&P CNX Nifty or BSE Sensex, a market sector such as energy or technology, or a commodity such as gold or petroleum. Recently, the Securities and Exchange Board of India (Sebi) amended its regulations and allowed mutual funds launch gold exchange-traded funds (GETFs) in India. Two mutual funds, UTI mutual fund and Benchmark Mutual Fund, are set to launch GETEs in a few days. These funds would be listed on the National Stock Exchange (NSE
What are gold exchange-traded funds?
A gold-exchange traded fund unit is like a mutual fund unit backed by gold as the underlying asset and would be held mostly in demat form. An investor would get a securities certificate issued by the mutual fund running the Gold-ETF defining the ownership of a particular amount of gold. GETFs are designed to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell through trading of a security on a stock exchange. With gold being one of the important asset classes, GETFs will provide a better, simpler and affordable method of investing as compared to other investment methods like bullion, gold coins, gold futures, or jewellery. Advantages of GETFs· No risk of holding physical stock: As GETFs are issued in demat form, the risk associated with holding physical gold is reduced considerably.· Affordable: GETFs are ideal for small retain investors as they can buy a just one unit from the exchange. The minimum amount of investment during the NFO period for Cash is Rs 10,000 and in multiples of Rs 1,000 thereafter. One unit of the fund will represent one gram of gold.· High Liquidity: GETFs can be easily bought / sold like any other stock on the exchange during market hours at real-time prices as opposed to end of day prices.· Lower cost: GETFs enjoy the benefits of lower cost and higher transparency. As they are listed on the exchange, costs of distribution are much lower. Further, exchange traded mechanism helps reduce minimal collection, disbursement and other processing charges. Gold futures include the cost of carry that will be absent on a GETF.· Low tracking error: Tracking Error of GETFs is likely to be low as compared to a normal fund. Due to the creation / redemption of units only through in-kind mechanism the fund can keep lesser funds in cash. Also, time lag between buying / selling units and the underlying physical gold is much lower. Conclusion India is the world's biggest consumer of gold, consuming 700-800 tonnes annually, the majority of which is used for jewellery. Gold ETFs are expected to be popular as investment-led buying for gold has pushed aside some of the demand for gold jewellery. Buying jewellery as an investment in gold can be expensive as charges in the form of making, storage and other services tend to increase the cost, while gold-ETFs can be an effective invest tool to help one build significant wealth over time.

Systematic Investment Plan (SIP)

Systematic Investment Plan (SIP)An SIP is a method of investing a fixed sum, on a regular basis, in a mutual fund scheme. It is similar to regular saving schemes like a recurring deposit. An SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves. A SIP can be started with as small as Rs 500 per month in ELSS schemes to Rs 1,000 per month in diversified equity schemes. Buy low sell high, just four words sum up a winning strategy for the stock markets. But timing the market is not easy for everyone. In timing the markets one can miss the larger rally and may stay out while the markets were doing well. Therefore, rather than timing the market, investing month after month will ensure that one is invested at the high and the low, and make the best out of an opportunity that could be tough to predict in advance.
Why SIP?
* * Mutual Fund investments are managed by qualified and experienced professionals who have the expertise of investment techniques, backed by dedicated investment research team
* * You can purchase scheme units at a lesser cost as most of the Asset Management Companies (AMCs) charge less “entry load” (for some scheme even NIL) for SIP investments, as compared to normal purchases in the scheme.
* * SIPs make the volatility in the market work in your favour. Since a fixed amount is invested more units are purchased when a schemes NAV is low and fewer units when the NAV is high. As a result, over a period of time these market fluctuations are generally averaged. Thus the average cost of your investment is often reduced.
* * Since you invest regularly, it makes you disciplined in your savings, which leads to wealth accumulation. The SIP reduces the average purchase cost, even in volatile markets with relative ease. When you invest a fixed amount every month, the number of mutual fund units you actually buy depends on their market price. Therefore, with the money you invest each month, you can buy less units when the market moves up and more units when the market moves down. This means you are averaging out your cost. If you invest Rs 1000 a month at a price of Rs 20 a unit, you will have bought 50 units (1000/20). But at a price of Rs 10 per unit, you will have bought 100 units (1000/10). Investing a fixed sum regularly means averaging out the cost, as you get fewer units when the price goes up and more when the price goes down.