Balanced/Hybrid – Stocks + Fixed Income Securities (1-3 years)
Tax Saving Schemes
Draw up your asset allocation
Financial goals & Time frame (Are you investing for retirement? A child’s education? Or for current income? )
Risk Taking Capacity
Identify funds that fall into your Buy List
Obtain and read the offer documents
Match your objectives
In terms of equity share and bond weightings, downside risk protection, tax benefits offered, dividend payout policy, sector focus
Check out past performance
Performance of various funds with similar objectives for at least 3-5 years (managed well and provides consistent returns)
Think hard about investing in sector funds
For relatively aggressive investors
Close touch with developments in sector, review portfolio regularly
Look for `load' costs
Management fees, annual expenses of the fund and sales loads
Does the fund change fund managers often?
Look for size and credentials
Asset size less than Rs. 25 Crores
Diversify, but not too much
Invest regularly, choose the S-I-P
MF- an integral part of your savings and wealth-building plan.
1.Mutual Funds Offer Diversification The beauty of a mutual fund is that you can buy a mutual fund and obtain instant access to a hundreds of individual stocks or bonds.
2. Mutual Funds are Professionally Managed Many investors don’t have the resources or the time to buy individual stocks. Investing in individual securities, such as stocks, not only takes resources, but a considerable amount of time. By contrast, mutual fund managers and analysts wake up each morning dedicating their professional lives to researching and analyzing current and potential holdings for their mutual fund.
3. Mutual Funds Offer Automatic Reinvestment An investor can easily and automatically have capital gains and dividends reinvested into their mutual fund without a sales load or extra fees.
4. Mutual Funds Offer Transparency Mutual fund holdings are publicly available (with some delays in reporting), which ensures that investors are getting what they pay for. 5. Mutual Funds Are Liquid If you want to sell your mutual fund, the proceeds from the sale are available the day after you sell the mutual fund. 6. Mutual Funds Have Audited Track Records A mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual fund’s stated returns. 7. Safety of Investing in Mutual Funds If a mutual fund company goes out of business, mutual fund shareholders receive an amount of cash that equals their portion of ownership in the mutual fund. Alternatively, the mutual fund’s Board of Directors might elect a new investment advisor to manage the mutual fund.
Mutual Funds and Poor Trade Execution
Managing a Portfolio of Funds
No control over costs
Domestic Mutual Funds (MF) Industry will grow at CAGR of 30% in next 3 years to touch its level at Rs. 9.50 lakh crore from Rs.4.67 lakh crores in July 2007 with contributions of private, public and joint sector mutual funds players, staying around respectively 70%, 20% and 10%, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). Indian mutual funds’ assets under management (AUM) grew by Rs.860 billion in the month of July, to a corpus of Rs.4.89 trillion, according to crisil. Growth of this magnitude in a single month has rarely been seen in the Indian mutual fund industry. According to CRISIL, “The large number of new fund offerings, the sharp rally in the equity markets, and liquid fund inflows, drove these levels of AUM growth.”
Reliance Mutual Fund continued to top the AUM chart with AUM in excess of Rs.660 billion, while ICICI Prudential Mutual Fund took the second spot with AUM of Rs.487 billion. UTI Mutual Fund was third with AUM of Rs.425 billion. In the secondary market, mutual funds were net sellers to the extent of Rs.9 billion in July, after being net buyers of Rs.7 billion in June.
12/06/09 IILM Risk Hierarchy of Mutual Funds Type of Fund Risk Level Money Market Funds Gilt Funds Diversified Debt Funds Balanced Funds Equity Funds