Prajna Capital - An Investment Guide

THE term ‘ risk’ is slowly finding its way back into investor lexicon. This is evident from the rising demand for capital-protection products offered by brokerage houses in their portfolio management schemes ( PMS ). Of several such products, the one which uses bonds and the recently introduced long-dated options, is the most sought after for now. What differentiates this capital-protection product from others is the use of long-dated options, that Sebi introduced in January this year. The product has been structured in such a way that a major chunk of an investor’s capital is put into highly-rated bonds, while the rest is used to buy Nifty call options, which expire 1-3 years from now. So, for instance, if a client puts in Rs 100 into such a product, the fund manager of the PMS would invest, say, Rs 90 in bonds at a fixed interest rate to protect the capital. Rest of the money is used to buy (pay the premium for) a long-dated Nifty call or put that expire in 2009, 2010 or 2011. It i...

Staying invested may not be the best option if you have chosen wrong funds or poor script If you were to take a look at the performance report of the mutual fund industry, you won't find too many impressive performers in the last couple of quarters. While the stock market in general has lost over 30-35 percent in the last two quarters, the scenario is even more ghastly in the case of mutual funds. Many aggressive funds have lost as much as 40 percent and most new funds are sitting on a loss of nearly 50 percent. The current scenario is bound to make the investor worry. For those who made an entry into equity a few years, ago, the current scene is bound to be more painful as they are faced with negative returns for the first time. The uninterrupted Bull Run from 2004-08 had made many forget the realities of risk associated with equity . In fact, many dabbled in mutual funds too like stocks . Some even thought that with mutual funds, there was no risk as the fund manager was expecte...