Prajna Capital - An Investment Guide

After bringing good returns for investors late last year, gold exchange traded funds ( ETFs ) and gold funds are making a slow retreat. With prices of the yellow metal softening, returns from gold ETFs and funds have declined in the last two months. While gold ETFs have declined by 2.2% to 2.4%, gold funds that invest in stocks of gold mining companies have fallen by 3% to 7.8%. Gold is in a consolidation phase now. Trends are favouring the dollar on a short-term basis and so there is some sluggishness in gold. After hitting a record high of $1,226.1 an ounce in December, gold prices have come down to around $1,100 now. Even though gold has had a good run recently, economic recovery has started picking up and this means the yellow metal can give only little more than " inflation plus " returns. While a large number of diversified equity MFs and broader market indices have given more than 100% returns since March - the beginning of the current rally - gold ETFs have ...

Mutual funds schemes which can now be transacted through stock exchanges should not be confused with exchange traded funds ETFs allow exposure to different indices which reflect specific stocks, sectors, countries, fixed income or commodities. Mutual funds schemes have a specific investment objective based on which allocation to a particular asset or security is made. In fact, ETFs do not sell individual shares directly to investors and only issue their shares in large blocks (blocks of 50,000 shares, for example) that are known as “Creation Units.” (Source: Securities Exchange Commission). The portfolio composition of ETFs will be available to investors on a daily basis unlike mutual funds where you get to see a monthly factsheet. ETFs are traded on a real time basis which means that the prices change throughout the day as determined by the market forces while mutual funds have a Net Asset Value ( NAV ) at the end of each business day. The SEBI circular does not mention whether the NA...

The stock market is on a down hilll trek & the sentiment is gloomy. You may be looking for better options, but there are some segments you should steer clear from at the moment AVOIDING bad investments is as important as finding good ones. Post market crash, portfolio’s worth toady is not even a third of investments. With some genuine advise, people could have saved from investing at a wrong time. To make sure that you don’t fall into the same trap, we prepare a list of five segments you should refrain from investing in right now. REALTY & TECH STOCKS Stock market is a place where people with experience get money and people with money get experience. Words of wisdom, undoubtedly. But what should be your approach when it comes to where not to invest on Dalal Street? If analysts are to be believed, realty and technology sector stocks should be treated with extreme caution. The key to investing in the stock market is to avoid relying on hearsay. Given the volatility in the rupe...

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...

THE EVENTS of the last few days have caused almost everyone to reflect on the security provisions that are available in the country. In retrospect, the sheer lack of preparedness to cope with acts of terror like that experienced in Mumbai hits you in the face. The realisation, however, has only come after the dastardly event took place. Retrospection on your portfolio may not be the first thing on your mind currently but in a sense, investors need to be reminded that preparations need to provide a certain degree of stability to your portfolio. And diversification is clearly the mantra that financial experts recommend. One step towards achieving this diversification could be by investing in Exchange Traded Funds ( ETF ). WHAT ARE ETFs? Technically speaking, ETFs are collective investment funds , which have underlying assets such as gold, stocks etcetera. However, what is significantly different about ETFs is that they are traded on the stock exchange in the same way that a share is t...

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...

Benchmark AMC might have dared to tread on the unbeaten path and establish itself as an ETF player, but is probably ahead of its time. Though Exchange Traded Funds (ETFs) are popular abroad, they still have to catch on in India. As a result, Benchmark Mutual Fund has remained a small entity. The fund house offers eight funds, its most popular being Banking BeES. Banking as a sector was coveted by Foreign Institutional Investors (FIIs) but due to the ceiling on FII ownership they had to resort to the BeES fund as the alternative to playing the banking story. As the price of gold surged in the past two years, Gold Benchmark ETF has also gained in popularity. As sector and thematic funds garner significant investor interest, the AMC is coming out with four global theme-based ETFs - Global Clean Fund, Global Private Equity Fund, Global Commodity Fund and Global Water Fund. All these funds (combined offer document with SEBI) would invest in ETFs linked to indices whose constituents are the ...

Although gold ETFs and gold mutual funds belong to two asset classes, both offer good investment options This article gives you a low down on how to buy Gold Exchange Traded Funds ( ETFs ) and gold mutual funds. DIFFERENT ASSET CLASSES The basic difference between gold ETFs and gold mutual funds are that they belong to two different asset classes. Gold ETFs give the investor the opportunity to invest in units of gold, which are then traded on the exchange as a single stock. The units issued under the scheme represent the value of gold held in the scheme. Gold ETFs hence fall into the category of commodities. Gold mutual funds, however, fall into the equity category as they invest in equity and equity-related securities of gold mining companies. Since gold mining companies are not listed on Indian stock exchanges, the gold mutual funds invest in world gold funds that invest in gold mining companies across the world. RETURNS AVAILABLE The predominant criterion for all investment remain...

MAJOR emerging market fund groups recorded outflows during the fourth week of August with EMEA (Europe, Middle-East, Africa) equity funds hit the hardest in percentage terms, according to Emerging Markets Portfolio Funds Research. Investors pulled money out of the diversified Global Emerging Markets ( GEM ) Equity Funds for a fifth-straight week and extended Latin America Equity Funds’ losing run to 12 weeks and $4.1 billion. Since the second week of June, EPFR Global-tracked Emerging Market Funds have surrendered a net $23.1 billion, the note said. Appetite for exposure to emerging markets has been eroded by a sharp correction in commodity prices during the current quarter, a string of downward revisions to economic growth forecasts and painfully high inflation rates in several key markets including Russia, India, South Africa and Argentina. Investors still have appetite for direct exposure to China, although the $175 million they committed to China equity funds was more than offset b...

CRUDE oil prices in recent times threatened to breach the $150 per barrel mark, and later fell to $123 levels, clocking an appreciation of almost 30% in the year. In fact, higher oil prices have been sending shivers down the stock markets worldwide, as if the recent global financial crisis was not enough to unnerve them. Back home, Indian stocks are down by around 30% in the current year. Inflation has already reached double digits at 11.98% and is showing no signs of respite, adding fuel to the fire. I would start with an interesting conversation I heard recently. I happened to be at an oil trader’s dealing room. I asked the chief dealer, “What’s happening to oil? It is down 20% from its peak. Will you buy now?” He answered: “Oil’s down due to speculative unwinding of long positions and a growth scare in developed countries, which might result in lower demand for the scarce commodity.” He then called someone in Iran, a member of OPEC , an association which controls around 40% of the g...

DSPML World Gold Fund invests in stocks of companies engaged in gold mining & production. The fund's assets have more than doubled in a span of 6 months, all thanks to the returns it earns... DSPML Gold Fund's returns have given investors reasons to cheer The previous year gave investors of the DSPML World Gold fund many reasons to smile. The fund, which listed in September, last year, has delivered 42 per cent returns since its launch. This year (till February 1, 2008), the fund, which is part of the Equity Specialty category has delivered around 8 per cent returns compared to the category's 11 per cent loss during the same period. The Sensex and Nifty were down 10 per cent and 13.4 per cent respectively during this period. In the December 2007 quarter, the fund's returns at 16 per cent were much ahead of the benchmark FTSE loss of 0.15 per cent. However this is less than the Sensex's gain of 17 per cent in that quarter. The DSP World Gold fund does not buy gol...