MONEYFRUIT - Personal Finance Blog

Diversify your portfolio by investing in DSP BlackRock's World Agriculture Fund

2011-09-29T05:35:00.000-07:00

DSP BlackRock Investment Managers announces the launch of DSP BlackRock World Agriculture Fund. The Scheme is a fund of funds Scheme investing predominantly into the BlackRock Global Funds – World Agriculture Fund, which invests in equity securities of agricultural companies globally. These are companies that form a part of the upstream and midstream portion of the value chain in the agriculture sector and operate across various geographies around the world. The New Fund Offer (NFO) will commence on September 30, 2011 and close on October 14, 2011.

Agriculture is a sector represented globally, which has sound fundamentals over the long term, given the rising imbalance between food demand and supply. We believe that agriculture is an investment opportunity with the potential for growth over a long term investment horizon. DSP BlackRock Investment Managers already has a suite of products in the international fund of funds category such as the DSP BlackRock World Gold Fund, DSP BlackRock World Mining Fund and the DSP BlackRock World Energy Fund. We feel that the DSP BlackRock World Agriculture Fund is another such diversification opportunity for Indian investors looking to access leading global and emerging agricultural companies.

A brief note on the product is mentioned below for your reference:

Why invest in DSP BlackRock World Agriculture Fund?

DSP BlackRock World Agriculture Fund provides Indian investors with a unique investment opportunity to benefit from the potential growth prospects in the agriculture sector by investing into agricultural companies globally through international funds. The unique features of this Scheme are:

¬ Low correlation of the agriculture sector of 0.6 with Indian equities (Data considered: Monthly returns of DAX Global Agribusiness Index v/s BSE100 Index from Oct 31, 2001 till Aug 31, 2011)
¬ Provides access to leading global and emerging agricultural companies through international funds.
¬ The scheme provides investors the opportunity for global diversification combined with access to the fundamentals of the agriculture sector and the growth potential of equities.
¬ The team at BlackRock, responsible for BlackRock Global Funds – World Agriculture Fund belongs to one of the stronger Natural Resources Teams in the industry, managing around US$ 47.2 billion in assets as on Mar 31, 2011.
¬ BlackRock Global Funds – World Agriculture Fund leverages on the fund managers’ investment experience in the agricultural space and the commodities sector.

Key drivers in the Agriculture sector
The agricultural cycle is often characterized by rising commodity prices driven by imbalance between food supply and demand.

The main drivers of demand in the agriculture sector are: a rise in global population which is driving food demand upwards; the rising affluence of urban population leading to an improvement in diet which increases the demand for proteins and the growth of the biofuel sector. The main drivers of supply in the agriculture sector are: The decline in the availability of arable land and a slowdown in the crop yield growth and hence a gradual decline in inventory, which results in a market that is more prone to supply shocks from adverse climatic conditions or government intervention in the global grains trade

This imbalance between demand and supply will likely cause a rise in commodity prices, which in turn will drive the increase in global farm incomes and provide farmers with the incentive to improve productivity. Companies providing goods and services to farmers would benefit from the likely investment cycle in the global farming sector. Rising grain prices lead to sound farm economics and a strong economic case for farmers to improve productivity on a global scale.

Areas into which this scheme invests
DSP BlackRock World Agriculture Fund will invest into the BlackRock Global Funds – World Agriculture Fund and other similar overseas mutual fund schemes, and will provide investors with access to the fundamentals of the agriculture sector. BlackRock Global Funds – World Agriculture Fund invests mostly in the equity securities of companies which belong to the following investment themes: Agricultural Science Companies, Fertilizers, Agricultural Equipment, Agribusiness, Food Processors, Land & Farming, Forestry etc.

To know more about the fund... click the following link
www.financialplanners.co.in/Documents/DSP BlackRock World Agriculture Fund - Single Pager.pdf

To invest in this fund online... click the following link

https://dspbronline.com/iol_purchaserequestwop.aspx?distcode=ARN-29644

Transaction Fee while buying mutual fund units

2011-08-24T03:07:00.000-07:00

The regulator has clarified that upfront commission to distributors shall continue to be paid by the investor directly to the distributor by a separate cheque

Mumbai: SEBI has allowed mutual funds to charge a transaction fee of Rs 100 on investments of Rs 10,000 and above for existing investors through a circular issued today. For roping in new investors, advisors will be entitled to Rs 150 on a subscription of Rs 10,000 and above.

AMCs will be required to deduct any charges from the subscription amount and pay the transaction charge to distributors later. There will be no charges in direct investments.

The statement of account given to investors will reflect gross investment, transaction fees deduction and the net investment. Distributors can continue to get an upfront fee through a second cheque directly from their investors.
Distributors will not be allowed to levy any transaction charges other than purchases/ subscriptions relating to new inflows. These transactional charge details will have to be printed in bold letters in application forms.

“Distributors will be able to choose to opt out of charging the transaction charge. However, the ‘opt-out’ shall be at distributor level and not investor level i.e. a distributor shall not charge one investor and choose not to charge another investor,” states the circular.

SEBI has put the onus on checking any malpractices by distributors in implementing this rule. It has asked fund houses to put in place systems to check if distributors are splitting applications in multiple funds to earn higher transaction fees. AMCs and AMFI have been authorized to take strict action against such practices.

The regulator has asked fund houses to de-duplicate folios within a period of six months.

The DAWN

2011-08-10T01:39:00.000-07:00

This is in continuation of my previous post wherein I said, I was looking for articles / views of experts subsequent to the recent US downgrade activity carried out by S&P. I came across a wonderful insight by none other than Prashant Jain, CIO of HDFC Asset Management Company, who delivers consistently. A must read for all the pessimists & the optimists too !

http://www.financialplanners.co.in//Documents/article.pdf

US downgrade

2011-08-08T22:33:00.001-07:00

It is always tempting to come up with one's views when this kind of catastrophe happens. But time and again I have personally observed that there are articles written by Experts that give more depth & knowledge than one's own views. I decided to check some of the expert opinions and in the process came up with this one as the first interesting note rather than an article. Read on

http://mobius.blog.franklintempleton.com/2011/08/08/the-u-s-debt-and-emerging-market-opportunities-2/

Mark Mobius in considered as one of the best fund managers who follows value investing. His focus is on emerging markets and he is associated with Franklin Templeton Asset Management Company.

Market View by Prashant Jain, HDFC AMC

2011-05-15T21:49:00.001-07:00

Pls find the market oulook by Mr. Prashant Jain, CIO HDFC MF.
Has the bull market started - for us to worry about its end?
Prashant Jain, CIO, HDFC AMC

Prashant Jain is known to be a voice of calm reason - a trait that is even more appreciated in stormy weather like what the stock market is witnessing right now. In a conversation with Wealth Forum, Prashant shared his simple and clear insights on the key aspects that markets are worried about : inflation, interest rates and oil. As regards the fear that markets are entering a bear phase, he poses a pointed question : has the bull market started - for us to worry about its end? Here are the excerpts of that chat ……

Inflation and stock markets

From an equity market perspective, we must appreciate that in an economy like India, inflation is more often than not a pass through. Good companies have pricing power - they should be able to pass through the impact of inflation by means of marginally higher prices. So, the direct impact of inflation on earnings is expected to be rather muted.

What would be a concern is if we see demand destruction as a result of consumers' inability to absorb this inflation. We are not seeing significant evidence of demand destruction as of now. We must look at this fear of demand destruction in context. First, the proportion of middle class household income that is spent on food has come down substantially in the last decade as incomes have risen quite rapidly. Food inflation - which has been the biggest concern - does impact the poor very severely. But, the consuming class - the middle class - has been able to absorb this impact to a large extent, thanks to rising income levels.

Then, if you look at the discretionary spends of the middle class, the story on inflation is entirely different. Consumer electronics prices today are lower in absolute terms than where they were 5 years ago, same is the case with cable TV costs, with airfares, with hotel room tariffs. Consumers have not really felt any inflationary impact on all of these items, which are increasingly becoming a big portion of their spending patterns.

Yes, power and fuel prices have gone through the roof and consumers' pockets are getting pinched by this. Is that enough to destroy demand? Will petrol and electricity bills bite so much that people start cutting down on entertainment, travel and other discretionary spends? Again, the proportion of household income spent on power and fuel has gone down over the last decade to levels where the middle class is perhaps able to absorb price hikes. But obviously, this cannot go on - if oil prices continue to rise, we will see some impact on overall consumption.

What RBI is trying to do is to postpone consumption by pushing up financing costs. If demand for consumer durables, automobiles, homes etc gets postponed and thus inflation can be cooled down, it is for the good of the economy. That consumption is most likely going to get postponed - not destroyed.

High interest rates and stock markets

High interest rates will have a negative impact on earnings. Growth can also slow down as investments get curtailed or postponed. It's possible that GDP growth rate can be knocked down by 1% - if we were projecting an 8% GDP growth, perhaps it is sensible to look at 7% now.

The Indian economy has lived through many periods of high interest rates, without it doing too much damage to the economy. Yes, some impact will be felt - but I don't think the underlying bull case for Indian equities is to be questioned by higher interest rates.

Sectoral impact of high interest rates

Auto and banking stocks have come under pressure as a result of the recent interest rate movements. Regarding automobile companies, I suppose some of these concerns are warranted, at least in the cars segment. Footfalls in car showrooms have decreased. 7 out of 10 cars in India are sold on the back of car loans. As car loans become expensive, some consumers have sought to postpone their purchases - which can impact near term earnings of these companies.

As regards banks, I am not so sure that a high interest rate environment is so bad for banks. Well managed banks have close to 40% of their deposit base in the form of low interest bearing savings and current accounts. A stable base of low cost deposits should help manage a rising interest rate environment. Banks who depend on wholesale deposits are the ones who may be impacted adversely.

Banks have corrected to fairly attractive levels. Some of the large well run PSU banks are available at close to 1 time book value on a FY 13 valuation basis. That's not really expensive.

Oil and stock markets

This is the one factor that we ought to be worried about. Last year, a robust export growth helped camouflage the impact of rising oil prices on our current account balances. If oil prices continue to rise to say $ 140, it will have a material impact on our fiscal deficit, on inflation, on aggregate consumption and therefore on growth.

If on the other hand, oil prices cool off to under $90, that will be a big positive for India and therefore for our markets.

Outlook for markets

I don't see why people should become bearish on the Indian market from a long term perspective. Let's remember that this market is where it was three years ago. And in these three years, earnings have grown and therefore valuations have become reasonable. So, when people talk about the bull market ending, my only question is: has the bull market started yet? We are only where we were three years ago! One can describe this as a flat market - not a bull market.

Markets are fairly valued - while we can't see huge room for near term appreciation, we don't see a case for a drastic fall as well. The structural case for Indian equities continues to be strong - it will play out over the next several years. One should expect markets to deliver returns in line with earnings growth, over time. But, for that, one needs patience and conviction to stay invested through volatile conditions.

DISCLAIMER: The views expressed by Mr. Prashant Jain, Executive /Director & CIO of HDFC Asset Management Company Limited, constitute the author's views as of this date. It should not be construed as investment advice to any party. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on the author's views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice and shall be fully responsible for the decisions taken. Mutual fund investments are subject to market risks, read the Offer Document carefully before investing.

Savings & Investments

2011-05-11T01:56:00.000-07:00

How Much Should I Save Versus How Much Should I Invest?

Saving always comes first. Think of it as the foundation upon which your financial house is built. The reason is simple - unless you inherit a large amount of money, it is your savings that will provide you with the capital to feed your investments or it is savings that will provide you with an emergency kitty.

•As a general rule, your savings should be sufficient to cover all of your personal expenses, including your mortgage, loan payments, insurance premia, utility bills, food, and clothing expenses for at least six months. How do you straightaway jump to this quantum of money ? May be, you can start with 3 months, then increase this gradually to 6 months of your expenses. Even you can work around on this. Keep six months of your take home income saved. That way, if you lose your job, you’ll be able to have sufficient time to adjust your life without the extreme pressure that comes from living salary credit to salary credit.

•Any specific purpose in your life that will require a large amount of cash in two years or less should be savings-driven, not investment-driven. The stock market in the short-run can be extremely volatile, losing more than 50% of its value in a single year. Purchasing a home is a great example. Only after that these things are in place, and you have health insurance, should you begin investing. The only possible exception is putting money into NPS plan at work if your company recommends you to contribute. That’s because not only will you get a substantial tax break for putting money into your retirement account, but the matching funds basically represent free cash that is being handed to you on a silver tray.

Fixed Maturity Plans - An overview

2011-03-08T00:19:00.000-08:00

What are fixed maturity plans?

Fixed maturity plans are investment schemes floated by mutual funds and are close-ended with a maturity period ranging from three months to five years. These plans are predominantly debt-oriented, while some of them may have a small equity component.

The objective of such a scheme is to generate steady returns over a fixed-maturity period and immunising the investor against market fluctuations.

How do FMPs work?

FMPs are typically passively managed fixed-income schemes with the fund manager locking into investments with maturities corresponding with the maturity of the plan. The objective is to lock into a certain rate of return on the assets at inception, thereby protecting the schemes against market fluctuations. Unless specified in the objective of a
FMP, investments are in risk- free or highly-rated assets for principal protection. FMPs with equity component will be more dynamically managed as fund managers cannot invest in equities for locking in to inception returns.

Factors influencing decision to invest in a FMP

The following are the key factors … …

1. Cash flow forecasting: FMPs are suitable for investors who require locking in funds for a particular period of time. E.g. If an individual has a certain cash outflow in three years time, investing in a debt FMP with three year maturity can be considered as the investor is only concerned with receiving the principal plus return on the investment at the end of three years.

2. Immunisation of investments: FMPs are a good investment vehicle for investors who are targeting a return on their investments over a fixed period of time and are indifferent to market volatility within that period.

3. Interest rates currently prevailing in the market: The investor should look at interest rates on government bonds, corporate bonds, commercial papers, certificate of deposits, securitised assets, bank deposits, company deposits and other short to medium term fixed income products before taking an investment decision in a FMP. This exercise will give an idea to the investor on the return one can expect on FMPs.

The investor can then use this knowledge to lock into returns through FMPs or directly through other fixed income products.

4. View on the equity market: FMPs are generally meant for investors who are indifferent to market fluctuations in the short term. However it pays to form a view on the markets for investing in FMPs with equity components as equities markets carry a higher risk in the short term than in the long term.

Risks in FMPs

The close ended nature of FMPs do not really protect them against risks including market, credit and liquidity risks.

The risks in FMPs are Market risk, Interest rate risk and Credit risk.

courtesy - DNA

RBI's monetary policy

2010-12-16T02:36:00.000-08:00

RBI keeps rates unchanged, cuts SLR to 24%

Monetary Measures:

Retain the repo rate at 6.25 per cent and the reverse repo rate at 5.25 per cent under the Reserve Bank’s liquidity adjustment facility (LAF);retain the cash reserve ratio (CRR) at 6.0 per cent of net demand and time liabilities (NDTL) of scheduled banks.

Liquidity Measures :

first, reduce the statutory liquidity ratio (SLR) of scheduled commercial banks (SCBs) from 25 per cent of their NDTL to 24 per cent with effect from December 18, 2010;second, conduct open market operation (OMO) auctions for purchase of government securities for an aggregate amount of 48,000 crore in the next one month, the schedule for which is being issued separately.

The above two measures are expected to inject liquidity on an enduring basis of the order of 48,000 crore

courtesy - HDFC

Third Party Payments for purchase of mutual fund units

2010-11-17T22:32:00.000-08:00

We advise investors to issue subscription payments only from the bank account of the first unit holder or submit additional documents as enumerated in specific situations.

Any application accompanied with third party payment is liable for rejection without any recourse to the applicant or investor.

What is a 'Third Party' payment?

When a payment is from a bank account other than that of the beneficiary investor, the same is referred to as a "Third Party Payment".

In case of mutual fund subscriptions, the first unit holder is considered as the beneficiary investor, even if there are joint unit holders.

In case of payments from a bank account jointly held, the first holder of the mutual fund subscription has to be one of the joint holders of the bank account from which the payment is made.

It is mandatory for investors to ensure the following details. (Please refer to important note below)

Mention the details of the bank account from where the payment for subscription is made in the designated area of the application form / common transaction form or on the transaction slip. The mandatory details to be mentioned are:

Bank account number,
Bank name and
The cheque / demand draft number.
Name of the first unit holder/applicant in mutual fund folio should be pre-printed as one of the bank account holders on the payment cheque.

If first unit holder/applicant name is not pre-printed on payment cheque, the investor should submit the following additional documents, with each purchase application.

Cheque Payments: If the name of the first holder is not pre-printed on the cheque, investors should submit any one of the following documents to establish that the payment is made from the bank account of the first unit holder:

Bank Pass Book copy,
Bank Statement copy, or
Letter from bank
Tip: Investor are strongly advised to avail "Multiple Bank Accounts Registration" facility and register their various bank accounts with the fund and avoid submitting additional documents every time.

RTGS / NEFT / Fund Transfers: Investors should submit a copy of the instruction to the bank containing the account title, account number and all account holders debited for the remittance.

Payments via Demand Drafts: Investors should submit a certificate from the Issuing banker, stating the Account holder’s name and the Account number debited for issue of the instrument. Click here for a draft of the certificate.

Please note that a demand draft issued against cash payment is not accepted by the fund.

Important Note: If the details and additional documents, where necessary, as mentioned above are not submitted with each subscription application, the application will be deemed to be through a “Third Party” payment and is liable to be rejected without any recourse to the applicant/investor. In case the funds are transferred to the mutual fund prior to rejection of the subscription, additional documents / details with respect to the investor and the payment may be sought prior to initiating a refund.

2010-11-12T01:52:00.001-08:00

DSP Blackrock Top 100 Equity fund is one of the top performers in the large cap space. The embedded link provides a snapshot of the fund. Invest systematically for long term capital appreciation.

DSP Top 100

Facilitating transactions in Mutual Fund schemes through the Stock Exchange

2009-11-15T19:40:00.000-08:00

The Securities and Exchange Board of India (SEBI) has transformed the world of mutual funds again.

After abolishing entry loads, the market regulator has issued orders that look to, “Facilitate transactions in mutual fund schemes through the stock exchange infrastructure”.

To know more, read the following article (courtesy : SEBI)

1. The need for enhancing the reach of mutual fund schemes to more towns and cities has
been aired through various forums/ channels. To address this issue, various models have
been debated and discussed.

2. The infrastructure that already exists for the secondary market transactions through the
Stock exchanges with its reach to over 1500 towns and cities, through over 200,000
Stock Exchange terminals can be used for facilitating transactions in mutual fund
schemes. The Stock Exchange mechanism would also extend the present convenience
available to secondary market investors to mutual fund investors.

3. Units of mutual fund schemes may be permitted to be transacted through registered stock
brokers of recognized stock exchanges and such stock brokers will be eligible to be
considered as official points of acceptance as per SEBI Circular No. SEBI/IMD/CIR
No.11/78450/06 dated October 11, 2006.

4. The respective stock exchange would provide detailed operating guidelines to facilitate
the same.

5. In this regard, you are advised that :

5.1. Empanelment and monitoring of Code of Conduct for brokers acting as mutual
fund intermediaries-

5.1.1. The stock brokers intending to extend the transaction in mutual funds through
stock exchange mechanism shall be required to comply with the requirements
specified in SEBI circular MFD/CIR/10/310/01 dated September 25, 2001
regarding passing the AMFI certification examination. All such stock brokers
would then be considered as empanelled distributors with mutual fund/AMC.

5.1.2. These stock brokers shall also comply with the requirements in SEBI circulars
dated MFD/CIR/06/210/2002 dated June 26, 2002, MFD/CIR/20/23230/02 dated
November 28, 2002 and SEBI / IMD / CIR No. 8 /174648 / 2009 dated August
27, 2009, applicable to intermediaries engaged in selling and marketing of mutual
fund units.

5.1.3. It is clarified that, stock exchanges shall monitor the compliance of the code of
conduct specified in the SEBI circular MFD/CIR/20/23230/02 dated November
28, 2002 regarding empanelment of intermediaries by mutual funds.

5.2. Time stamping
Time stamping as evidenced by confirmation slip given by stock exchange mechanism to
be considered sufficient compliance with clause 5, 6 and 8 of SEBI Circular
SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006.

5.3. Statement of Account
Where investor desires to hold units in dematerialised form, demat statement given by
depository participant would be deemed to be adequate compliance with requirements
prescribed under regulation 36 of SEBI (Mutual Fund) Regulations, 1996, and SEBI
Circulars MFD/CIR/9/120/2000 dated November 24, 2000 and IMD/CIR/12/80083/2006
dated November 20, 2006 regarding despatch of statements of account.

5.4. Investor grievance mechanism
Stock exchanges shall provide for investor grievance handling mechanism to the extent
they relate to disputes between brokers and their client.

5.5. Dematerialization of existing units held by investors
In case investors desire to convert their existing physical units (represented by statement of
account) into dematerialized form, mutual funds / AMCs shall take such steps in
coordination with Registrar and Transfer Agents, Depositories and Depository participants
(DPs) to facilitate the same.

5.6. Know your client (KYC).
Where investor desires to hold units in dematerialised form, the KYC performed by DP in
terms of SEBI Circular MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 and this would
be considered compliance with applicable requirements specified in this regard in terms of
SEBI Circular ISD/AML/CIR-1/2008 dated December 19, 2008 by mutual funds /AMCs.

6. Stock exchanges and mutual funds/AMCs, based on the experience gained may further
improve the mechanism in the interest of investors. Necessary clarifications, if any,
would be issued at appropriate time by SEBI in this regard.

7. This circular is issued in exercise of powers conferred under Section 11 (1) of the
Securities and Exchange Board of India Act, 1992, read with the provisions of
Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of
investors in securities and to promote the development of, and to regulate the securities
market.

Good times ahead for Insurance buyers

2009-09-03T07:03:00.000-07:00

Insurance buyers are likely to have good times ahead in the near future. If the Government approves the game changing recommendations put forward by the Committee headed by D.Swarup, Chairman of Pension Fund Regulatory and Development Authority (PFRDA), commission earned by agents by selling conventional and market linked products will take a serious hit. The committee has also recommended setting up of a Financial Well-Being Board (FINWEB) that will come up with common minimum standards for Financial Advisors and promote financial literacy among the general public. The commissions paid to Agents is likely to be cut to no more than 15% immediately. This is likely to fall to 7% in 2010 and become nil by April 2011. The interim period is to be used by the Insurers to develop agents to a more organised way of advising rather than selling products.

The complete details of the consultation paper could be had from the following link

http://pfrda.org.in/writereaddata/linkimages/Consultation%20Paper4825056190.pdf

Our Views : The series of regulatory measures taken by SEBI and IRDA has already evoked a knee-jerk reaction from Distributors of these financial instruments. Hence, this move if enacted would definitely rub salt on the wounds. Having said that, distributors' angst would remain a short term phenomenon and agents who had been enabling transactions for their customers and acting as a transaction point would find the situation difficult to survive. This will clean up the Financial Services Industry of all the weeds. The Industry would become more professional with a minimum set of standards to effectively practice the fee based advisory model. A welcome move that will help Advisors, End Customers and Principals in the long run and remove misselling of products.

DIVIDEND ANNOUNCEMENT IN SELECT MIDCAP FUND

2009-08-31T04:55:00.000-07:00

Sundaram BNP Paribas has announced 10% dividend in Select Midcap Fund. Record date would be 4th of Sep 2009.

To know more about the fund, click the link
http://docs.google.com/fileview?id=0B_hV0etqp34rZGFkODI3M2ItZDE3OS00ODc1LWJmMjUtOWVjMDI2N2JiOWY1&hl=en

Children's Insurance Plan Comparison

2009-08-19T00:33:00.000-07:00

Here is a simple benefit comparison of three plans from Insurance companies LIC, HDFC and Bajaj. The link is self explanatory.
Click on the link to view the details...

http://spreadsheets.google.com/ccc?key=0AvhV0etqp34rdDg0anphUXhQNTY1eTdRTFFJWF8zY1E&hl=en

DIVIDEND ANNOUNCEMENT - RELIANCE MUTUAL FUND

2009-07-22T00:43:00.000-07:00

Reliance Mutual Fund announces dividend in the following funds

1. Reliance Regular Savings Fund (Equity option) - 50% record date is 24th of July 09
2. Reliance Equity Opportunities Fund - 20% record date is 24th of July 09
3. Reliance Regular Savings Fund (Balanced Option) - 30% record date is 24th of July 09

For more details visit

DIVIDEND ANNOUNCEMENT - SBI MUTUAL FUND

2009-07-14T07:40:00.000-07:00

SBI Mutual Fund announces dividend in Magnum Sector Funds Umbrella Contra Fund. The record date is likely to be 17th of July 2009. Proposed dividend is 50% subject to availability of distributable surplus.

It is worth mentioning here that, Contra is one of the consistent performers in the Industry.

No Entry Load on Mutual Funds from 1st of August 2009

2009-07-13T07:55:00.000-07:00

From 1st of August, Investors have the benefit of no entry load on their mutual fund investments. This is a welcome move from the point of view of investors. In the short term, this may not have a huge response from the investors as penetration of MF investments in the market is very low at this point in time (approximately 6%). In the long run, this might add its value to investors. For the distributors, this is going to affect their revenue generating pattern. For example by getting a 50 lakhs investments, a distributor was pocketing 1 lakh (or even more) for which he/she cannot do justice by providing any value addition. More over, this 1 lakh goes from the investor's pocket. But that was inevitable at that point in time. Now, the investor has the option of negotiating this commission amount and ensure that he gets paid for the level of service provided. How the fund houses generate business without paying distributors is a big question mark.

Following is the text of the sebi circular....

June 30, 2009

Sub: Mutual Funds- Empowering investors through transparency in payment of
commission and load structure

1. SEBI has been taking various steps to empower the investors in mutual funds by
way of more transparency in the loads borne by the investor so that the investor
can take informed investment decisions. Towards this end, SEBI had earlier
abolished initial issue expenses and mutual fund schemes were allowed to
recover expenses connected with sales and distribution through entry load only.
Further, investors making direct applications to the mutual funds were exempted
from entry load.

2. In terms of existing arrangement, though the investor pays for the services
rendered by the mutual fund distributors, distributors are remunerated by Asset
Management Companies (AMCs) from loads deducted from the invested
amounts or the redemption proceeds. SEBI (Mutual Funds) Regulations, 1996
also permit AMCs to charge the scheme (under the annual recurring expense) for
marketing and selling expenses including distributor’s commission.

3. Further, all loads including Contingent Deferred Sales Charge (CDSC) for the
scheme are maintained in a separate account and this amount is used by the
AMCs to pay commissions to the distributors and to take care of other marketing
and selling expenses. It has been left to the AMCs to credit any surplus in this
account to the scheme, whenever felt appropriate. In order to incentivise long
term investors it is considered necessary that exit loads/CDSCs which are
beyond reasonable levels are credited to the scheme immediately.

4. In order to empower the investors in deciding the commission paid to distributors
in accordance with the level of service received, to bring about more
transparency in payment of commissions and to incentivise long term investment,
it has been decided that:
a) There shall be no entry load for all mutual fund schemes.
b) The scheme application forms shall carry a suitable disclosure to the effect that
the upfront commission to distributors will be paid by the investor directly to the
distributor, based on his assessment of various factors including the service
rendered by the distributor.
c) Of the exit load or CDSC charged to the investor, a maximum of 1% of the
redemption proceeds shall be maintained in a separate account which can be
used by the AMC to pay commissions to the distributor and to take care of other
marketing and selling expenses. Any balance shall be credited to the scheme
immediately.
d) The distributors should disclose all the commissions (in the form of trail
commission or any other mode) payable to them for the different competing
schemes of various mutual funds from amongst which the scheme is being
recommended to the investor.
Applicability

5. This circular shall be applicable for
a. Investments in mutual fund schemes (including additional purchases and
switch-in to a scheme from other schemes) with effect from August 1,
2009 ;
b. Redemptions from mutual fund schemes (including switch-out from other
schemes) with effect from August 1, 2009 ;
c. New mutual fund schemes launched on and after August 1, 2009; and
d. Systematic Investment Plans (SIP) registered on or after August 1, 2009.

6. AMCs shall follow the provisions pertaining in clause 5(2)(b) of SEBI Circular
SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008 regarding updation of
Scheme Information Document (SID) and Key Information Memorandum (KIM) in
this respect.

7. The AMCs shall bring the contents of this circular to the notice of their distributors
immediately and monitor compliance.

8. This circular is issued in exercise of powers conferred under Section 11 (1) of the
Securities and Exchange Board of India Act, 1992, read with the provisions of
Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests
of investors in securities and to promote the development of, and to regulate the
securities market.

FUND COMPARISON

2008-07-09T04:33:00.000-07:00

Here is a comparison of a select set of funds, large cap oriented. Some of the consistent performers. The comparison is as on 08th of July 2008. The funds include, DSPML Top 100, HDFC Top200, Sundaram Select Focus, Reliance Vision, Birla Top100

http://spreadsheets.google.com/pub?key=plxMZsoeADBQPJqaJlIcPJQ&output=html&gid=0&single=true

RUPEE COST AVERAGING - WHAT IS IT ?

2008-07-08T04:41:00.000-07:00

Understanding rupee-cost averaging

Some investors like to speculate on the right moment to invest. But predicting whether the market is going to move up, down or sideways is difficult even for professionals. With rupee-cost averaging you can opt out of the guessing game of trying to buy low and sell high.

With rupee-cost averaging, you invest a specific amount at regular intervals regardless of the investment's share (unit) price. By investing on a regular schedule, you can take advantage of market dips without worrying about when they'll occur. Your money buys more shares when the price is low and fewer when the price is high, which can mean a lower average cost per share over time.

The most important element of rupee-cost averaging is commitment. How frequently you invest (monthly, quarterly or even annually) is less important than sticking to your investment schedule.

Does it work when prices are rising and falling?

The purpose of rupee-cost averaging is to take the guesswork out of investing by providing you with an average cost per share that's lower over the long term.

Let's look at 2 examples to see what your average price per share would be when prices are rising and when prices are falling.

When unit price is rising. Rs.500 is invested in a mutual fund on the first of each month. The investor in this example would methodically acquire 109.89 units at an average cost of Rs.27.83 each. And there's no guesswork or worry about what the price is about to do.

Rupee-Cost Averaging when Unit Prices Rise
Month Amount Unit Price No. of Units Purchased

01-Jan Rs.500 Rs.22 22.73
01-Feb Rs.500 Rs.26 19.23
01-Mar Rs.500 Rs.26 19.23
01-Apr Rs.500 Rs.28 17.86
01-May Rs.500 Rs.31 16.13
01-Jun Rs.500 Rs.34 14.71

Total: Rs.3000 Avg Cost: Rs.27.83 Total: 109.89

For illustrative purposes only. Not intended to represent any specific fund.

When unit price is falling. Rupee-cost averaging in this scenario can reduce loss compared to making a lump-sum investment. Rs.500 is invested in a mutual fund on the first of each month. The investor in this scenario would have bought 98.63 units at an average cost per unit of Rs.30.83. The investment's value at the end of the period would be Rs.2 564.38.

By comparison, someone who invested the entire Rs.3 000 in January at Rs.38 per unit would have owned only 78.94 units, and the investment would have been worth only Rs.2 052.44 at the end of the period.

Rupee-Cost Averaging when Unit Prices Fall

Month Amount Unit Price No. of Units Purchased

01-Jan Rs.500 Rs.38 13.16
01-Feb Rs.500 Rs.31 16.13
01-Mar Rs.500 Rs.29 17.24
01-Apr Rs.500 Rs.32 15.63
01-May Rs.500 Rs.29 17.24
01-Jun Rs.500 Rs.26 19.23

Total: Rs.3000 Avg Cost: Rs.30.83 Total: 98.63

Is rupee-cost averaging right for you?

Rupee-cost averaging is popular among people who invest in volatile funds.

If a fund's share price fluctuates a lot, rupee-cost averaging can help reduce the average cost per share over time when you are investing, and increase your profit when you re systematically withdrawing your money.

It's not for everyone , but many investors believe this systematic approach to investing and withdrawing is an effective way to accumu1ate wealth over the long term.

Rupee-cost averaging doesn't guarantee a profit or eliminate risk, and it won't protect you from a loss if you sell shares at a market low. Before adopting this strategy, you shou1d consider your ability to continue investing through periods of low price levels.

The beauty of Rupee-cost averaging lies in taking a commitment towards achieving your goals by eliminating complex issues like market timing....

View on Markets

2008-05-23T08:40:00.000-07:00

Here is a snapshot of Mr Sandeep Sabharwal's, CIO of JM Mutual, view on the market condition.

Worldwide markets have been jittery over the last few days due to the relentless rise in the prices of crude oil and this particular commodity moves up on any positive cue but does not correct on negative cues. However it is critical to see the way the commodity is moving and what is likely to happen in the future.

Our technical analysis shows us that crude oil is very heavily overbought and the recent movements in crude oil price is similar to the movement of technology stocks prior to the crash in February/March 2000. As such we expect the sharp rise in the oil prices correct over the next few weeks and oil to correct to atleast USD 115 per barrel.
Except for crude oil the prices of most other commodities have stabilized and have infact seen some correction over the last few weeks. Initially we had expected that crude will lead the correction in commodities, however as things stand now crude is likely to be the last one to start falling.

As the correction in crude starts it is likely to have a positive impact on stock markets that are currently impacted by an inflationary scare. Overall we still hold the view that there is no need to be excessively bearish on the markets as a corrective move in oil prices might lead to a rally in the markets. From the current levels downside in the markets seems to be restricted to around 500 Sensex points.

LIC IS FAST LOSING ITS MARKET SHARE !

2008-05-12T04:32:00.000-07:00

Here we have critical information provided by Edelweiss, an update on the Insurance Industry. It is quite clear from the data that Private Life Insurance Companies are fast gaining market share & the Industry behemoth LIC is on the other side. It is now inevitable for LIC Agents to have a look at the Private Sector Growth and speak to their customers, rather than turning a blind eye to the Private players.

This is the snapshot of the entire story...

http://spreadsheets.google.com/pub?key=plxMZsoeADBQfZbzh_gsLKw&output=html&gid=0&single=true

Reliance FMP

2008-05-09T05:25:00.000-07:00

Reliance Mutual has launched a fixed horizon fund that gets closed on 13th of May '08

Salient Features :
The primary investment objective of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified portfolio of: -

1) Central and State Government securities and
2) Other fixed income/ debt securities normally maturing in line with the time profile of the series with the objective of limiting interest rate volatility

TYPE OF SCHEME: A close – ended income scheme

DURATION OF SERIES IN THIS FUND
395 days from the date of allotment of units

PLANS IN THE SERIES

Each Series will have the following plans;
􀂾 Institutional Plan
􀂾 Retail Plan

Each Plan will have a growth and dividend option

(There is no assurance or guarantee as to the rate and frequency of dividend distribution. Dividend distribution is subject to availability of distributable surplus in the scheme.)

ASSET ALLOCATION PATTERN

Upto 70% in money market instruments
30 to 100% in Govt securities & other fixed income debt securities*

*Debt Securities will also include Securitized Debt, which may go up to 100% of the portfolio. The average maturity of the securities will be in line with the maturity profile of the scheme.

Minimum subscription - Rs. 5000/- Entry load - Nil

FMP (Fixed Maturity Plans) - An Overview

2008-04-30T23:13:00.000-07:00

With the recent equity market volatility and rising inerest rate, it is time to think to have an appropriate balance between equity and fixed income instruments consistent with one’s risk profile and time horizon of the need.

Fund houses float new FMPs in the month of March & April, so that an investor can avail double indexation benefits with 14-15 months plan.

What is the benefit of double indexation?

Illustration ——–

Let us assume Mr A invests Rs. 1,00,000 in fixed maturity plan and Mr B invests the same amount in fixed deposit providing a return of 10.40% . We assume both Mr A and Mr B are in highest tax bracket. Now the tax is calculated at the time of maturity on the gains. The returns made thru FD would be taxed at 33.66% (assumed at max tax rate). In the case of FMP, Mr A can adjust his initial investment against the cost inflation index. Assuming that inflation index is 1.05 for the two years, the value of his initial investment under taxation would be Rs. 1,10,250 (1.05*1.05*100000 = 110250) at the end of the period as against Rs. 1,00,000 which was his initial investment

At 10.40% pa, Mr A ’s maturity value is Rs. 1,11,267
Less Rs. 1,10,250
Gain on paper for Mr A, is Rs. 1,017 for which Capital Gain tax @ 22.44% will work out to Rs. 228/-

In case of Mr B who invested Rs. 1,00,000 in Bank FD at 10.40% pa maturity value will be same as Rs. 1,11,267/- At the highest tax rate of 33.66% Mr B has to pay 33.66% on the gain of Rs. 11,267/- which will work out to be Rs. 3,792/-

Having said this, FMPs are not guaranteed return products and do not put all your eggs in one basket. FMPs will invest in bonds and hold them till maturity, it is possible to get an idea of indicative yield on FMPs. But the actual yield depends on the date of deployment. Currently all 1 year FMPs are expected to yield around 8.5% to 9% pa with indexation benefits.

Tip of the month

2008-04-27T21:13:00.001-07:00

Secret Message Scratch Cardgreat free widgetsWidgetbox

New Fund Offers from Sundaram BNP Paribas AMC - NFO details

2008-04-16T23:40:00.000-07:00

Sundaram BNP Paribas has come out with 2 new fund offerings.

1) Sundaram BNP Paribas Select Thematic Funds Financial Services Opportunities - What is this ?

Sundaram BNP Paribas Select Thematic Funds Financial Services
Opportunities is intended to benefit from the growth underpinned by the demographic dividend theme in India (with
75%+ of population below the age of 40).
A growing opportunity: The financial services sector appears set for significant growth and possibly a few landmark
changes over the next five years. The following factors will play a key role:
• the overall growth of the Indian economy & rising trend in savings and investment
• expected boom in opportunities in financial services and expanding penetration of financial services
• likelihood of a benign interest rate environment once the current turmoil is past and the emphasis on inflation
in the Indian context, to an extent linked elections on the anvil, is placed on the backburner
• quality regulation that has led to a more prudent position for banks in India
• emerging changes that will allow for a greater role for foreign players in India
• likely consolidation
• expanding universe of players in financial services across geography
• an emerging larger share for private sector participants and non-capital based incomes in overall pie
• imminent listings from insurance, asset management, commodity-trading and financial distribution spaces, to
name a few
• attractiveness of Indian stock exchanges as a platform from a systems perspective
• internet-based products/services
• scope available for a fund focused on broader financial services theme than just banking.
An Attractive Opportunity, too: Sundaram BNP Paribas Asset Management believes financial services is an
attractive opportunity. The CNX Banks Index has risen ten-fold since January 2002 and outpaced the broad market
which has risen by about six fold. We do, however, expect scope for attractive long-term returns given the size of the
emerging opportunity. The recent corrective phase linked to the global meltdown triggered by the unfolding crisis in the
U.S and the negative view on banking stocks in the wake of the loan waiver proposed by the government only make
entry point more attractive for investors

65% in the financial services theme and the flexibility to invest up to 35% outside the theme. Sundaram BNP Paribas
Asset Management has, however, adhered to the mandate of the fund in letter and spirit. In Sundaram BNP Paribas
Capex Opportunities and Sundaram BNP Paribas Rural India Fund, 90%-95% of the portfolio on an average has been
in the designated themes. A similar approach is being adopted in Sundaram BNP Paribas Energy Opportunities and
will be the basis for portfolio construction in this proposed fund, too.
Security Minimum Maximum Risk Profile
% %
Equity & equity-related securities in
the financial services theme 65 100 High
Equity & equity-related securities outside
the target theme 0 35 High
Fixed income securities 0 15 Low
Asset Allocation for Financial Services Opportunities
Portfolio Manager: J Venkatesan. He has managed Sundaram BNP Paribas Rural India Fund since launch and has
taken over as fund manager for Growth, India Leadership and Global Advantage from January 1, 2008.
Benchmark: For regulation purposes, CNX Banks Index. As a concentrated index, it may not capture the overall trend.
As is the case with all thematic funds, investors should also compare the performance with a broad market index such
as the S & P CNX 500 or BSE 500. This is also important as thematic funds by their nature, and because of the higher
risks as compared to a diversified fund, should be expected to deliver higher return than the broad market

2) Sundaram BNP Paribas Select Thematic Funds Entertainment Opportunities

Sundaram BNP Paribas Select Thematic Funds Entertainment
Opportunities is intended to benefit from the growth underpinned by the demographic dividend theme in India (with
60%+ of population below the age of 40).
An emerging opportunity: The entertainment sector appears is on the cusp of a higher growth trajectory
accompanied by improving profitability. The following aspects are relevant to this nascent story:
• Expected to growth at more than 25% on a compounded annual basis over the next five years
• High growth rates likely in the electronic medium
• Steady rise in ad spends to provide a firm underpinning for growth
• More efficient distribution platforms to deliver better value for broadcasters
• Share of television likely to become dominant with convergence as a dominant theme
• Superior growth in vernacular medium (print, television and films)
• Rising consumerism and not confined just to urban India
• Favorable FDI policy framework except in print media
• Increasing interest of global majors
• Emergence of new genres such as sports, gaming, fashion and outsourcing
Expanding universe: There is a steady expansion in the listed stocks space. From just a Zee Telefilms, there are now
several stocks of decent pedigree available for investment. The investment universe may also include players in
spaces such as broadcasting, content providers, electronic news, print media, multiplexes, web-based services, leisure
services, distribution, IT & telecom services, gaming, retailing, luxury products & services and sports businesses as
well as other new segments that may emerge on the listed space. Beneficiaries and providers of
equipment/services/turnkey solutions to such players may also be part of the portfolio. There are IT companies that
develop back-end software for the entertainment sector and to enable telecom companies provide a higher degree of
convergence. Telecom companies are also likely to play an increasing role in entertainment, as there is a convergence
between various media and distribution of content.

Fund Objective: Seek capital appreciation by investing in the target theme. The offer document provides for at least
65% in the entertainment and the flexibility to invest up to 35% outside the theme. Sundaram BNP Paribas Asset
Management has, however, adhered to the mandate of the fund in letter and spirit. In Sundaram BNP Paribas Capex
Opportunities and Sundaram BNP Paribas Rural India Fund, 90%-95% of the portfolio on an average has been in the
designated themes. A similar approach is being adopted in Sundaram BNP Paribas Energy Opportunities and will be
the basis for portfolio construction in this proposed fund, too.
Minimum Maximum Risk
% % Profile
Equity & equity-related securities
in entertainment theme 65 100 High
Equity & equity-related securities
outside the target theme 0 30 High
Fixed income securities 0 15 Low
Asset Allocation for Entertainment Opportunities
Security
Portfolio Manager: Satish Ramanathan.. He manages Sundaram BNP Paribas Select Mid-Cap, Select Small-Cap,
Equity Multiplier and Tax Saver.
Benchmark: For regulation purposes, S & P CNX Media & Entertainment Index. As a concentrated index, it may not
capture the overall trend. As is the case with all thematic funds, investors should also compare the performance with a
broad market index such as the S & P CNX 500 or BSE 500. This is also important as thematic funds by their nature,
and because of the higher risks as compared to a diversified fund, should be expected to deliver higher return than the
broad market

COMPARISON OF VARIOUS ELSS SCHEMES AS ON 8TH OF APRIL 2008

2008-04-08T21:05:00.000-07:00

Here is a comparison of various ELSS schemes available. The excel sheet shown here as a link gives crisp details.

Click to find out more....
http://spreadsheets.google.com/pub?key=plxMZsoeADBQo3BQ6_yquEg&output=html

RETIREMENT CALCULATOR

2008-04-07T07:50:00.000-07:00

Here is a simple calculator that lets you find out how much pension could be drawn on a monthly basis by investing Rs.5000/- per month with an estimated rate of 15% CAGR. To find out click the following link

http://spreadsheets.google.com/pub?key=plxMZsoeADBRcHwUI18KMVg&output=html

ULIP Vs MF

2008-04-05T23:55:00.000-07:00

Personally, I am not for comparing ULIP and MF Investments. It is unfair to compare apples and oranges. But market conditions demand one such comparison. I thought of taking a case study. A 30 year old male is looking for Insurance and Investment. He has planned to invest Rs. 1 lakh a year.

Now, he has two options 1) Take a ULIP or 2) Take a Term Insurance and invest the rest in MF scheme.
Key inputs :
Yearly contribution - Rs. 1 lakh
Insurance Cover planned - Rs. 25 lakhs (Why 25 lakhs and not less ? Average yearly income of a professional of 30 years would be 5 lakhs p.a. As a thumb rule, he should atleast have 5 times of annual income as cover for life)
Term - Maximum of 30 years
Assumed Return - 15% compounded annualised

ULIP (Option 1):
I have taken HDFC Standard Life’s Unit Linked Endowment Plus, as this is one plan which has got the least fund management charges of 0.8%. In the long run, more than the investment content rate it is the fund management charge that makes a lot of difference. Hence the selection of this particular plan. I have also assumed that the Proposer chooses “growth fund” where there is maximum equity contribution upto 100%. The allocation rate for the first year is 40% and from then on it is 99%.

ULIP Charges :
Other charges include policy administration fee of Rs.20/- per month & mortality charges for providing death benefit. These charges are absorbed by cancelling units proportionately from the chosen fund.

He chooses to invest the entire 1 lakh in this plan with an insurance cover for 25 lakhs.

(Option 2)
Term Assurance :I have taken quote from HDFC Standard Life (one among the cheapest) for a pure risk cover of 25 lakhs, without any riders as is the case with ULIP shown above. For 25 lakhs of pure risk cover, annual premium including service tax would be Rs. 9,372/-. Out of 1 lakh the balance would be Rs. 90,628/-

MF :
I have assumed that the person invests in ELSS to avail tax benefits u/s 80c for the entire contribution. This is to provide justice to the comparison. Both options 1) and 2) provide tax benefits u/s 80c as of now. Rs.90,628/- is invested in ELSS every year.
MF Charges :MF Charges taken into consideration for comparison include : a) entry load @ 2.25% b) Expense ratio @ 2%

Having decided the products, the next big question is how to compare the two ?Let us take periods of 5 years and see what happens if the person dies. In such an eventuality, What is the benefit available to the nominee / beneficiary ?

And here it is……………..
B E N E F I T A V A I L A B L E T O F A M I L YDeath Age Option 1 Option 2 Difference (%)31

Rs. 25 lakhs Rs.27.1 lakh 8.435 Rs. 25 lakhs Rs. 33.3 lakh 33.240 Rs. 25 lakhs Rs. 46.56 lakh 86.2445 Rs. 44.77 lakhs Rs. 70.62 lakh 57.7350 Rs. 93.98 lakhs Rs. 1.14 crore 21.3055 Rs. 1.89 crore Rs. 1.93 crore 2.1160 Rs. 3.25 crore Rs. 3.38 crore 4

So, I am definitely voting for Term + MF. How about you ?

Insurance needs and Investment needs are different is the verdict.

The importance of Financial Planning in India

2008-01-10T06:20:00.000-08:00

Financial Planning, as a Profession in India is more relevant now than ever. With the nifty and sensex touching new highs, with the launch of a plethora of new funds from fund houses, with the opportunity of getting exposed to emerging markets and global markets through various MF schemes - Investors have quite a number of questions to ask for. It is here that financial planners can get hold of this opportunity, guide these investors properly and differ from the crowd of product distributors.
Financial Products basket, now looks like a super market with good number of products to choose depending on an individual’s needs. There are all kinds of product pushers or promoters in the market, delivering you products for wrong reasons. They are motivated more by their commission structures. As quoted in a recently held forum “It looks like investors exist to serve intermediaries”. It should be the other way round, rather.
Since products are getting more and more complex, investors need to look for financial planners with wide knowledge, who can destructure the complex products and simplify the concepts. Financial Planners are better equipped to tell the investors that their money is well invested in the right product, for right reasons with a reasonable understanding of risk and returns.

Why should a financial planner be contacted for investments ?

1) Longevity : Average life expectancy of an individual is going up due to various improvements in the field of health industry. This makes financial planning critical and inevitable

2) Risk : The other side of return. These days, risks associated with financial instruments are borne by the investors themselves and not by any external agency. Investors need to completely understand this transfer of risk

3) Array of Products : There are a spectrum of products available, which was not the case with your parents when you were kids. Only a person with adequate knowledge, ethics and access to latest updates could do justice to choosing the right product.

Last but not the least, If Roger Federer or Tiger Woods the masters in their respective fields have some one to coach, why not for investors ?