Prajna Capital - An Investment Guide

What is Net Asset value? The Net Asset Value of a mutual fund is the total market value of the holdings of the mutual fund less its liabilities, such as expenses, management fees, etc. This is calculated on a daily basis. What this means is, if the mutual fund were to be dissolved or liquidated, by selling off all the assets in the fund, on that specified date, the Net Asset Value is what all the holders of the mutual fund will collectively own and will be given this amount in proportion to their holdings. You can estimate your share of the holding of the mutual fund by the Net Asset Value per unit. This is the value represented by the ownership of one unit in the fund. It is calculated simply by dividing the Net Asset Value of the fund by the number of units. Commonly Net Asset Value is always referred by its unit value rather than by the total Net Asset Value of the fund. How is Net Asset value calculated? Net Asset Value is calculated as follows: Net Asset Value = (Market value of...

What is a Mutual Fund? A mutual fund is a pool of money put together by a group of investors, who stand to benefit or loose from that pool to the extent they have invested. This pool is created since small individual investments have limited power and ability to influence the outcome of the investment. On the other hand, when the investment is large, the investor can have greater control on the outcome of the investment. Thus, many small investors gather their individual small investments into a larger investment to take advantage of the opportunities offered by large investments. This is called a mutual fund. What does the Mutual fund invest in? Mutual funds can be created for investing in anything. The investments that the mutual fund is going to make are discussed in the mutual fund's offer document. Typically, mutual funds invest in investment opportunities that have a trading market around it, such as stocks and shares, bonds and debentures, etc. How does the investors benefit...

Some stocks, especially blue chips, pay dividends. This means that for every share you own, you are paid a portion of the company's earnings. For example, for every share of AT&T you own, you will get sent $0.15 every year. Most companies pay dividends quarterly (four times a year), meaning at the end of every business quarter, the company will send a check for 1/4 of $0.15 for each share you own. This may not seem like a lot, but when you have built your portfolio up to thousands of shares, and use those dividends to buy more stock in the company, you can make a lot of money over the years.

Where can an investor get a form for applying/ bidding for the shares? The form for applying/bidding of shares is available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue. These are also available with your friendly neighborhood news paper vendors and sub brokers. How are offer documents prepared? The offer documents such as prospectus etc. are prepared by an independent entity know as Merchant Banker, which is registered with regulatory authority SEBI. They are required to carry out due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. Is it compulsory for an investor to have a Demat Account? All the public issues of size in excess of Rs.10 crore, are to made compulsorily in the demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the...

A RIGHTS issue is a way by which a listed company can raise additional capital. However, instead of going to the public, the company gives its existing shareholders the right to subscribe to newly issued shares in proportion to their existing holdings. For example, 1:4 rights issue means an existing investor can buy one extra share for every four shares already held by him/her. Usually the price at which the new shares are issued by way of rights issue is less than the prevailing market price of the stock, i.e. the shares are offered at a discount. Why does a company go for it? The basic idea is to raise fresh capital. A rights issue is not a common practise that a corporate organisation resorts to. Ideally, such an issue occurs when a company needs funds for corporate expansion or a large takeover. At the same time, however, companies also use rights issue to prevent themselves from being conked out. Since a rights issue results in higher equity base for the organisation, it also prov...