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...

Where should I park my money? That’s a question many are asking wealth advisors today. Looking at the current market condition it is important to invest across asset classes. With the hardening of interest rates financial advisors say over the next 6 to 12 months income funds are a good option to consider. The income funds have generated a return ranging from 5% to 15% on a one-year basis. The returns have been divergent across the schemes depending on the interest rates view taken by the fund managers. How safe are debt funds Debt funds are less volatile and the risks are lower. However, there are some risks like interest rate risk and credit risk. While interest rate risk is a macro level trigger and cannot be controlled, credit risk can be controlled by prudent portfolio construction and active portfolio management. Fund managers’ say in the current scenario both income and gilt funds are becoming popular on expectations that the interest rate would be heading lower. However, nea...

Any emerging investor, would have studied all the avenues of investments and understands cash based investments like FDs have a fixed term and a fixed return but at times the returns do not match inflation. Debt investments like income funds yield a moderate rate of return but again though there is a high level of capital protection the investment may still lose out to inflation. Equities and equity mutual funds give a superior return over time but can be highly volatile. Gold works well with high inflation but gold allocation is limited. Real estate has been an excellent investment avenue but requires higher investments and liquidity could be a problem. How to control risk and yet generate a positive return over inflation? The first step would be to determine the ideal asset allocation; this could be derived by deciding what time horizon is and how much volatility. Further concern about what would be the right strategy for investing quarterly surplus and his cash in bank. As...

Take SIP route for better long-term returns A systematic investment plan ( SIP ) is an investment option that involves investments on a systematic basis over a period of time. Under a SIP option, an investor commits making a regular investment in a particular mutual fund or deposit. Investing in mutual funds through this route is much easier, more efficient, and is one of the best ways to see your investments grow over time. In a SIP, the investor invests a specific amount of money for a continuous period, at regular intervals. By doing this, you can compulsorily save a fixed amount each month. Further, you can avail the advantage of rupee cost averaging. This is because you automatically participate in the market swings. The amount of investment remaining the same, you buy more units in a declining market and less in a rising market. By consistently investing the same amount at regular intervals, your average cost per unit will be lower than the average market price, irrespect...

A well-known fact about equity investments is that it doesn't rob you of your returns in the long run. In fact, equity has always been kind to those who have showed patience and the perseverance to be invested during tough times. While such a strategy is gainful in the long run, it also needs a careful selection of funds. Diversification of risk among different schemes is an unwritten rule for a perfect investment strategy. In addition, one has to follow a few tips for building a good equity portfolio. Diversify according to risk appetite While diversification is a prerequisite, divide your portfolio according to your risk appetite and investment horizon for the portfolio. For instance, splitting the corpus among five diversified funds will be meaningless as all funds will have similar investment strategies. Hence, diversification has to be according to your needs. One of the smarter options could be to divide the portfolio into short-term and long-term, and then choose funds accor...

This one has had a colourful history of ownership. It started off as ANZ Grindlays Mutual Fund in 2000 and was renamed Standard Chartered Mutual Fund after the takeover of Grindlays Bank by Standard Chartered Bank. This year, the AMC was sold to Infrastructure Development Finance Company Limited (IDFC) for approx $205 million, a high price indeed. A specialised debt fund house, it moved into equity in 2005. Since then, it has made a sustained attempt to increase its exposure to equity, which now stands at 23 per cent. This AMC introduced many new products in the category of debt funds, like the short-term fund and the dynamic fund. It also introduced a fund of funds which invests only in debt funds. Another first was the introduction of funds which sought to provide capital protection and stable returns. The fund house also set new service standards- it was the first one to offer same day redemption for cash funds and next day redemption for income funds. In the past, most of the deb...

In the stock market, the bulls are constrained by concerns over the macro-economic scenario domestically, the grim global scenario, persistent Foreign Institutional Investor (FII) outflows and the possibility of another round of monetary tightening. That does not mean the bears have a free hand. The correction in commodities, especially crude, provides ample ammunition for the bulls to conduct a short-term rally. Investors who flocked to gold as the 'safe asset' were disappointed at the way the price dropped in August. Real estate rates too have dropped and by all indications will continue to fall. No asset seems to be a safe haven anymore. The only asset that beckons is debt with interest rates rising. But would it make sense for an investor to move into debt? While this is a good time to reassess one's portfolio, it would not be wise to simply rush to income funds, Fixed Maturity Plans ( FMPs ) or fixed deposits. Read on to figure out how to make the best in such a bleak ...

With the upswing in the rate of inflation and the high rate of interest, investors are finding it tough to invest in instruments that give them a good rate of return. Both equity and debt market have been quite volatile for the past few months. Debt options like fixed deposits are not giving good returns and most banks on an average offers 8%-9% returns. So what should an investor do in such a scenario? Look for debt instruments that give a good return even if inflation is high or the market is down. Wealth managers feel debt funds can be a good option to invest as it help during times of high inflation since interest rates also go up at such times. Debt funds helps in preserving capital and the returns you get from it are sufficient to keep up to inflation but not beat it. Investing in debt funds also offers tax advantage compared to interest bearing instruments like deposits and bonds. The frequent fluctuation in the stock markets has led to a new interest in debt funds. A debt fund...