Prajna Capital - An Investment Guide

When it comes to Mutual Funds there are different schemes or funds available for an investor to choose between. One can choose a particular type of fund based on his investing needs and risk profile. The schemes can be classified as: Growth Funds : They promise pure capital appreciation with equity shares. They buy shares in companies with high potential for growth (some of which might not pay dividends). The Net Asset Value - NAV of such a fund will tend to be erratic, since these so-called growth shares experience high price volatility. They also make quick profits by investing in small cap shares and by investing in initial public. However, growth strategies may differ from one fund to another. Not all growth funds operate similarly. Income Funds : They aim to provide safety of principal and regular (monthly, quarterly or semi annually) income by investing in bonds, corporate debentures and other fixed income instruments. The Asset Management Company(AMC) in this case will also...

Exchange Traded funds (ETFs) have advantages over other mutual fund types Exchange Traded funds ( ETFs ) are a major class of mutual funds. Though not as popular among retail investors, they have numerous advantages over the straitjacket mutual fund.The genesis of this category dates back to 1989 when the first index type ETF was traded on the American Stock Exchange. The distinguishing factor that these funds have vis-à-vis ordinary mutual funds is the manner of purchases and redemptions. This is because the units of these funds are listed on the stock exchange just like the stocks of a company. An ETF can be bought or sold over the exchange through a broker on a daily basis during trading hours. In India, ETFs where first launched by Benchmark Asset Management Company, which launched the Nifty Benchmark Exchange Traded Scheme ( Nifty BeES ) based on S&P CNX Nifty Index.In the domestic market, ETFs have not yet captured investors’ favour, which is in stark contrast to more devel...

SILVER, which in European folklore, is believed to have saved the lives of many people who were attacked by vampires and monsters, now has the power to give investors good returns. And going forward, it is expected to outperform gold in terms of price appreciation. In fact, silver had been beating gold till recently. Up to 2008, silver outperformed gold in terms of one, two and three-year compound annual growth rate (CAGR). Last year on March 11, silver registered a three-year CAGR of 131% against 106% CAGR posted by gold. GOLD-MANIA HITS SILVER PRICE In the last one year, gold prices have moved up sharply and beaten silver. Since March 11 last year, gold has appreciated by around 18%, while silver prices have corrected by around 12%. This is mainly because of the global financial crisis and weak performance of most of the other investment classes. Investors have been flocking towards gold, as it provides a hedge against uncertainty, which in turn fuelled gold prices to touch new hi...

One of the ways in which the investing preferences in India are radically different from many of the first-world markets is our lack of interest in index funds. In the US, nine per cent of the money invested in mutual funds is in index funds, in India, this number is less than half a per cent, or about Rs 2,700 crore. However, among the investing community, index funds take a mindshare that is out of all proportion to their size. The reason is that the concept of index investing is important, and so is the availability of index funds as an option for investors. Index funds are mutual funds that aim to replicate the performance of a market index. Thus, an index fund that is based on the BSE Sensex should have exactly the same 30 companies’ stocks that the Sensex has in exactly the same proportion. Thus, investors who put their money in such a fund would find their money gaining and losing in exactly the same proportion as the BSE Sensex does. In some senses, an index fund completely rev...

Background There are mainly two approaches to asset allocation — The Bandwagon Approach and The Contrarian Approach. In the bandwagon approach - one chases the best performing assets and broadly follows the crowd. In the contrarian approach one focuses more on core value and enters assets that may be out of favour. The contrarian approach to asset allocation, if followed judiciously, can be rewarding. It combines a full range of fundamental and technical analysis, evaluating assets continuously — in the search for assets that are likely to reverse its past trend . It is not about just blindly doing the opposite of what the market is doing. It is about identifying assets that offer true value . Rationale One of the key reasons for using a contrarian approach to asset allocation is the cyclicality of asset classes. There are also some asset classes that are complementary to the others. For instance, when interest rates go up, it hurts the bottom line of companies and hence equitie...

When it comes to investing, there are two styles to it. They are: 1) Active 2) Passive Lets discuss these in detail: 1) Active Active investing is a strategy in which the fund manager is highly involved in buying and selling of stocks (in case of mutual fund). Here the aim of the manager is to beat the returns generated by the corresponding benchmark or an index. 2) Passive On the other hand, in the passive style of investment, stocks are bought with a long term perspective. Here the portfolio is not as frequently churned as it is in active investing and the manager does not resort to profit booking based on short term price fluctuations. Indexing is an example of passive form of investing. An index fund invests in same stocks, in the same proportion, as in an index like Sensex or Nifty.

DURING the past six months, the financial and economic scenario has undergone a sea change due to high inflation of nearly 12%, softening property prices after reaching astronomically high levels, reduction in gross domestic product ( GDP ) forecasts and consequent slower growth rate of the economy, political uncertainty, sub-prime financial crisis and slowdown in the US. In view of the above, let us review what investment strategies one can adopt. STOCKS The stock market is a reflection of psychology as well as earnings, dividends and asset value. The BSE Sensex is currently at 15,000 level, implying a price to-earnings ( P/E ) ratio of about 18 (with EPS of say Rs 850) and an earnings yield of nearly 6%. So, is this the time to buy, hold or sell stocks? This is definitely a difficult question to answer as no one can accurately predict the future direction of stock markets. Historically, a P/E ratio of 15 for the stock market is considered fair, implying a BSE Sensex of 12,750. Alth...

The domestic markets will recover if there is a drop in oil prices. The volatility seen these days is expected to continue for some more time Watch for: Crude oil prices Global cues Policy Action Political scenario The stock markets are in a bear phase. In fact, the markets are witnessing one of the worst phases in the recent past. Last week, on Monday, the bourses were in the red by $50 billion. The markets lost all the gains of the current year in market value with a depreciation of close to $50 billion on that day, amidst a fall of over 500 points in the benchmark Sensex . The Sensex plunged 506 points to close at 15,066 points - it's the lowest in the current fiscal. The cumulative market capitalisation of all the listed companies fell below the Rs 50 trillion mark. Out of this, nearly half the loss, amounting to about Rs 1 trillion, was contributed by the 30 biggest blue chips, which constitute the Sensex. The Sensex has also shed close to 6,200 points from its all-time high o...