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Himadri Buch Redemptions from top 20 fund houses have risen to the second highest level in FY18, despite the industry#39;s AUM touching record highs
Wed, 19 Jul 2017 15:22:08 +0530


Top 14 stocks which some MF bought for the first time in June; do you hold any? After one way rally on D-Street so far in the year 2017 retail investors preferred to book some profits off the table from Gold ETFs, liquid funds etc. as the asset under management (AUM) of the mutual fund industry dipped slightly for the month of June.
Sat, 15 Jul 2017 09:33:02 +0530


Morningstar upgrades rating of ICICI Prudential Value Discovery Fund to #39;Silver#39; Morningstar believes ICICI Prudential Value Discovery Fund has the wherewithal to outperform its benchmark index over the long term.
Wed, 12 Jul 2017 09:48:43 +0530


Fund managers are reducing weight in IT sector; time to be cautious or value buys? Aptech rose 200 percent, followed by Mastek which rallied 93 percent, Datamatics up 89 percent, and TVS Electronics rose 87 percent in last one year.
Fri, 16 Jun 2017 15:36:43 +0530


Bluechip bets! Top 10 stocks in which fund managers raised their stake in May The total category wise asset under management (AUM) of the mutual fund (MF) industry slipped by 1.2 percent or Rs 22,327 crore to Rs 19.03 lakh crore for the month of May 2017, but equity funds saw an increase of 2.7 percent in the same period.
Fri, 16 Jun 2017 07:36:45 +0530


MF investor base grows 19 lakh in Apr-May to record 5.72 cr In the two years, investor accounts went up following robust contribution from smaller towns.
Thu, 15 Jun 2017 14:13:11 +0530


​Global Space Technologies SME IPO to open on July 26, issue price at Rs 66/sh The issue and the net issue will constitute 26.48 percent and 25.14 percent, respectively of the post issue paid-up equity share capital of the company.
Tue, 25 Jul 2017 11:59:16 +0530


Subscribe to Keerti Knowledge and Skills : Khambatta Securities Khambatta Securities has come out with its report on Keerti Knowledge and Skills . The research firm has recommended to “Subscribe ” the IPO in its research report as on July 24, 2017.
Mon, 24 Jul 2017 17:08:48 +0530


HDFC Life files IPO papers with insurance regulator IRDA The draft of IPO papers did not mention anything about Max Life merger in any form.
Thu, 20 Jul 2017 11:35:21 +0530


Godrej Agrovet files IPO papers with Sebi Godrej Industries arm Godrej Agrovet on Wednesday filed draft papers with markets regulator Sebi to raise an estimated Rs 1,000-1,200 crore through an initial public offering.
Wed, 19 Jul 2017 20:11:34 +0530


Shanti Overseas (India) ltd SME IPO To open on 21st july- HEM securities HEM securities have come out with the research report on Shanti Overseas
Tue, 18 Jul 2017 15:55:14 +0530


Captain Technocast Ltd SME IPO To Open On 20th July- HEM Securities HEM securities have come out with the research report on Captain Technocast
Tue, 18 Jul 2017 15:39:23 +0530


Hemant Kanoria NULL
Tue, 18 Jul 2017 11:27:53 +0530


Salasar Techno Engineering IPO oversubscribed 273 times The IPO received bids for 90,63,94,500 shares against the total issue size of 33,21,000 shares, data available with the NSE till 1930 hours showed.
Mon, 17 Jul 2017 20:45:25 +0530


SBI Life gets ready for a big IPO this year, may raise Rs 8500-9000 cr Once listed, this would be the second life insurer after ICICI Prudential Life Insurance to be listed on the stock exchanges.
Mon, 17 Jul 2017 19:54:58 +0530


SBI Life Insurance files DRHP, to issue up to 12 cr shares via IPO SBI Life Insurance is a joint venture between State Bank of India (SBI) with 74 percent stake and BNP Paribas Cardif with the remaining 26 percent.
Mon, 17 Jul 2017 14:46:05 +0530


Subscribe to Salasar Techno Engineering: Choice Broking Choice Broking has come out with its report on Salasar Techno Engineering. The research firm has recommended to “Subscribe ” the IPO in its research report as on July 13, 2017
Thu, 13 Jul 2017 13:41:35 +0530


Subscribe to Salasar Techno Engineering: Nirmal Bang Nirmal Bang has come out with its report on Salasar Techno Engineering. The research firm has recommended to “Subscribe ” the IPO in its research report as on July 13, 2017.
Thu, 13 Jul 2017 13:19:35 +0530


Subscribe to Salasar Techno Engineering: HEM securities HEM securities has come out with its report on Salasar Techno Engineering. The research firm has recommended to “Subscribe ” the IPO in its research report as on July 12, 2017.
Wed, 12 Jul 2017 10:06:17 +0530


Solid listing: AU Small Finance Bank ends near day#39;s high, up 51% over issue price The bumper listing was on expected lines, given the overwhelming response to public issue and the hefty grey market premium.
Mon, 10 Jul 2017 16:07:23 +0530


AU Small Finance listing hit by NSE tech glitch; trading starts late AU Small Finance Bank touched an intraday high of Rs 540 and low of Rs 523.70.
Mon, 10 Jul 2017 14:07:09 +0530

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Mutual Fund

The Definition

A mutual fund is nothing more than a collection of stocks and /or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund.

You can make money from a mutual fund in three ways:

v  Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.

v  If the fund sells securities that have increased in price, the fund has a capital gain. Most of the funds also pass on these gains to investors in a distribution.

v  If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.


Advantages of Mutual Funds:

Professional Management – The primary advantage of funds is the professional management of your money. Investor purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.

Diversification – By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn’t be possible for an investor to build this kind of portfolio with a small amount of money.

Economies of Scale – Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.

Liquidity – Just like an individual stock, a mutual fund allows you to request that your units be converted into cash at any time.

Simplicity – Buying a mutual fund is easy. Mutual fund companies own a line of schemes, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as Rs.500 can be invested on a monthly basis.

 

Mutual Funds: Different Types of Funds

No matter what type of investor you are, there is bound to be a mutual fund that fits your style. According to the last count there are more than 40 mutual funds companies in India selling more than 200 mutual fund schemes.

It’s important to understand that each mutual fund has different risks and rewards. In general, the higher the potential return, the higher the risk of loss. Although some funds are less risky than others, all mutual funds have some level of risk – it’s never possible to diversify away all risk. This is a fact for all investments.

Each fund has a predetermined investment objective that tailors the fund’s assets, regions of investments and investment strategies. At the fundamental level, there are three varieties of mutual funds:

v  Equity funds (stocks)

v  Fixed- income funds(bonds)

v  Money market funds (T-bills, call money market)

 

All mutual funds are variations of these three asset classes. For example, while equity funds that invest in fast-growing companies are known as growth funds, equity funds that invest in companies of the same sector or region are known as speciality funds.

Let’s go over the many different flavours of funds. We’ll start with the safest and then work through to the more risky.

Money Market Funds:

The money market fund consists of short-term debt instruments, mostly treasury bills. This is a safe place to park your money. You won’t get great returns, but you won’t have to worry about losing your principal. A typical return is twice the amount you would earn in the regular checking/savings account and a little less than the average certificate of deposit (CD).

Bond/Income Funds:

Income funds are named appropriately: their purpose is to give current income on a steady basis. When referring to mutual funds, the terms “fixed-income,” “bond,” and “income” are synonymous. These terms denote funds that invest primarily in government and corporate debt. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cash flow to investors. As such, the audience for these funds consists of conservative investors and retirees.

Bond funds are likely to pay higher returns than certificates of deposits and money market investments, but bond funds aren’t without risk. Because there are many different types of bonds, bond funds can vary dramatically depending on where they invest. For example, a fund specializing in high-yield junk bonds is much more risky than a fund that invests in government securities. Furthermore, nearly all bond funds are subject to interest rate risk, which means that if rates go up the value of the fund goes down.


Balanced Funds: 

The objective of these funds is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed income and equities. A typical balanced fund might have a weighting of 60% equity and 40% fixed income. The weighting might also be restricted to a specified maximum or minimum for each asset class. 

A similar type of fund is known as an asset allocation fund. Objectives are similar to those of a balanced fund, but these kinds of funds typically do not have to hold a specified percentage of any asset class. The portfolio manager is therefore given freedom to switch the ratio of asset classes as the economy moves through the business cycle. 

 

Equity Fund:

Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. There are, however, many different types of equity funds because there are many different types of equities. A great way to understand the universe of equity funds is to use a style box, an example of which is below. 

 


The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. The term value refers to a style of investing that looks for high quality companies that are out of favour with the market. These companies are characterized by low P/E and price-to-book ratios and high dividend yields. The opposite of value is growth, which refers to companies that have had (and are expected to continue to have) strong growth in earnings, sales and cash flow. A compromise between value and growth is blend, which simply refers to companies that are neither value nor growth stocks and are classified as being somewhere in the middle. 

For example, a mutual fund that invests in large-cap companies that are in strong financial shape but have recently seen their share prices fall would be placed in the upper left quadrant of the style box (large and value). The opposite of this would be a fund that invests in start-up technology companies with excellent growth prospects. Such a mutual fund would reside in the bottom right quadrant (small and growth).

Global/International Funds:

An international fund (or foreign fund) invests only outside your home country. Global funds invest anywhere around the world, including your home country. 

It’s tough to classify these funds as either riskier or safer than domestic investments. They do tend to be more volatile and have unique country and/or political risks. But, on the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by increasing diversification. Although the world’s economies are becoming more inter-related, it is likely that another economy somewhere is outperforming the economy of your home country. 

Specialty Funds:

This classification of mutual funds is more of an all-encompassing category that consists of funds that have proved to be popular but don’t necessarily belong to the categories we’ve described so far. This type of mutual fund forgoes broad diversification to concentrate on a certain segment of the economy. 

Sector funds are targeted at specific sectors of the economy such as financial, technology, health, etc. Sector funds are extremely volatile. There is a greater possibility of big gains, but you have to accept that your sector may tank. 

Regional funds make it easier to focus on a specific area of the world. This may mean focusing on a region (say Latin America) or an individual country (for example, only Brazil). An advantage of these funds is that they make it easier to buy stock in foreign countries, which is otherwise difficult and expensive. Just like for sector funds, you have to accept the high risk of loss, which occurs if the region goes into a bad recession. 

Socially-responsible funds (or ethical funds) invest only in companies that meet the criteria of certain guidelines or beliefs. Most socially responsible funds don”t invest in industries such as tobacco, alcoholic beverages, weapons or nuclear power. The idea is to get a competitive performance while still maintaining a healthy conscience. 

Index Fund:

The last but certainly not the least important are index funds. This type of mutual fund replicates the performance of a broad market index such as the NIFTY 50 or BSE Sensex. An investor in an index fund figures that most managers can”t beat the market. An index fund merely replicates the market return and benefits investors in the form of low fees.