And hence, the returns from such schemes would be more or less equivalent to those of the Index. While these funds may give higher returns, they are more risky compared to diversified funds.
Advantages of Mutual Funds Diversification — It can help an investor diversify their portfolio with a minimum investment. Spreading investments across a range of securities can help to reduce risk. A stock mutual fund, for example, invests in many stocks. This minimizes the risk attributed to a concentrated position. If a few securities in the mutual fund lose value or become worthless, the loss maybe offset by other securities that appreciate in value.
Further diversification can be achieved by investing in multiple funds which invest in different sectors. Professional Management- Mutual funds are managed and supervised by investment professional. This eliminates the investor of the difficult task of trying to time the market.
Well regulated- Mutual funds are subject to many government regulations that protect investors from fraud. Liquidity- It's easy to get money out of a mutual fund.
Convenience- we can buy mutual fund shares by mail, phone, or over the Internet. Low cost- Mutual fund expenses are often no more than 1. Expenses for Index Funds are less than that, because index funds are not actively managed.
Instead, they automatically buy stock in companies that are listed on a specific index Transparency- The mutual fund offer document provides all the information about the fund and the scheme. This document is also called as the prospectus or the fund offer document, and is very detailed and contains most of the relevant information that an investor would need.
Choice of schemes — there are different schemes which an investor can choose from according to his investment goals and risk appetite.
The AMC is usually a private limited company in which the sponsors and their associates or joint venture partners are the shareholders. It is the AMC that employs fund managers and analysts, and other personnel. It is the AMC that handles all operational matters of a mutual fund — from launching schemes to managing them to interacting with investors.
Fund Offer document The mutual fund is required to file with SEBI a detailed information memorandum, in a prescribed format that provides all the information about the fund and the scheme. This document is also called as the prospectus or the fund offer document, and is very detailed and contains most of the relevant information that an investor would need Trust The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, by the Sponsor. The trust deed is registered under the Indian Registration Act, The Trust appoints the Trustees who are responsible to the investors of the fund.
Trustees Trustees are like internal regulators in a mutual fund, and their job is to protect the interests of the unit holders. Trustees are appointed by the sponsors, and can be either individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules mandate that at least two-thirds of the trustees be independent, i. Trustees appoint the AMC, which subsequently, seeks their approval for the work it does, and reports periodically to them on how the business being run.
Custodian A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt and delivery of securities, collection of income, distribution of dividends and segregation of assets between the schemes.
The sponsor of a mutual fund cannot act as a custodian to the fund. This condition, formulated in the interest of investors, ensures that the assets of a mutual fund are not in the hands of its sponsor. For example, Deutsche Bank is a custodian, but it cannot service Deutsche Mutual Fund, its mutual fund arm. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
The NAV is usually calculated on a daily basis. In terms of corporate valuations, the book values of assets less liability. Accrued Income: Income received from the investment made by the Mutual Fund. Liabilities: Whatever they have to pay to other companies are called liabilities. Investments: Equity shares of Various Companies.
Market Value of Shares is Rs. Sale price Is the price we pay when we invest in a scheme. Also called Offer Price. It may include a sales load. Such prices are NAV related Redemption Price Is the price at which close-ended schemes redeem their units on maturity. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered. Fund Management Actively managed funds: Mutual Fund managers are professionals.
They are considered professionals because of their knowledge and experience. Managers are hired to actively manage mutual fund portfolios. Instead of seeking to track market performance, active fund management tries to beat it. To do this, fund managers "actively" buy and sell individual securities.
For an actively managed fund, the corresponding index can be used as a performance benchmark. Is an active fund a better investment because it is trying to outperform the market? Not necessarily. While there is the potential for higher returns with active funds, they are more unpredictable and more risky. Fund styles usually fall within the following three categories. Fund Styles : Value: The manager invests in stocks believed to be currently undervalued by the market.
Growth: The manager selects stocks they believe have a strong potential for beating the market. Blend: The manager looks for a combination of both growth and value stocks. To determine the style of a mutual fund, consult the prospectus as well as other sources that review mutual funds. Don't be surprised if the information conflicts. Although a prospectus may state a specific fund style, the style may change. Value stocks held in the portfolio over a period of time may become growth stocks and vice versa.
Other research may give a more current and accurate account of the style of the fund. Passively Managed Funds: Passively managed mutual funds are an easily understood, relatively safe approach to investing in broad segments of the market.
They are used by less experienced investors as well as sophisticated institutional investors with large portfolios. Indexing has been called investing on autopilot.
The metaphor is an appropriate one as managed funds can be viewed as having a pilot at the controls. When it comes to flying an airplane, both approaches are widely used. Broad-based market index funds make asset allocation and diversification easy.
The passive nature of indexing eliminates any concerns about human error or management tenure. Low portfolio turnover. Less buying and selling of securities means lower costs and fewer tax consequences. Low operational expenses. Indexing is considerably less expensive than active fund management. Asset bloat. Portfolio size is not a concern with index funds. It is a matter of record that index funds have outperformed the majority of managed funds over a variety of time periods.
You make money from your mutual fund investment when: The fund earns income on its investments, and distributes it to you in the form of dividends. The fund produces capital gains by selling securities at a profit, and distributes those gains to you.
You sell your shares of the fund at a higher price than you paid for them IX. Risk Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money both principal and any earnings or fail to make money on an investment.
A fund's investment objective and its holdings are influential factors in determining how risky a fund is. Reading the prospectus will help you to understand the risk associated with that particular fund. Generally speaking, risk and potential return are related. Higher risks are usually taken with the expectation of higher returns at the cost of increased volatility. The school of thought when investing in mutual funds suggests that the longer your investment time horizon is the less affected you should be by short-term volatility.
Therefore, the shorter your investment time horizon, the more concerned you should be with short-term volatility and higher risk. Defining Mutual fund risk Different mutual fund categories as previously defined have inherently different risk characteristics and should not be compared side by side. A bond fund with below-average risk, for example, should not be compared to a stock fund with below average risk. Of all the asset classes, cash investments i. Bonds typically experience more short-term price swings, and in turn have generated higher long-term returns.
However, stocks historically have been subject to the greatest short-term price fluctuations—and have provided the highest long-term returns. Investors looking for a fund which incorporates all asset classes may consider a balanced or hybrid mutual fund.
These funds can be very conservative or very aggressive. Asset allocation portfolios are mutual funds that invest in other mutual funds with different asset classes. At the discretion of the manager s , securities are bought, sold, and shifted between funds with different asset classes according to market conditions. Mutual funds face risks based on the investments they hold.
For example, a bond fund faces interest rate risk and income risk. Bond values are inversely related to interest rates. If interest rates go up, bond values will go down and vice versa. Bond income is also affected by the change in interest rates. Income risk is greater for a short-term bond fund than for a long-term bond fund.
Similarly, a sector stock fund which invests in a single industry, such as telecommunications is at risk that its price will decline due to developments in its industry. A stock fund that invests across many industries is more sheltered from this risk defined as industry risk. Following is a glossary of some risks to consider when investing in mutual funds. Call Risk. The possibility that falling interest rates will cause a bond issuer to redeem—or call—its high-yielding bond before the bond's maturity date Country Risk.
The possibility that political events a war, national elections , financial problems rising inflation, government default , or natural disasters an earthquake, a poor harvest will weaken a country's economy and cause investments in that country to decline. Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Also called default risk. Currency Risk. The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.
Also called exchange-rate risk. Income Risk. The possibility that a fixed-income fund's dividends will decline as a result of falling overall interest rates. Industry Risk. The possibility that a group of stocks in a single industry will decline in price due to developments in that industry.
It is also used to measure the systematic risk. Systematic risk means risks which are external to the organization like competition, government policies. They are non-diversifiable risks. Beta is calculated using regression analysis, Beta can also be defined as the tendency of a security's returns to respond to swings in the market.
A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1. Many utilities stocks have a beta of less than 1. Conversely, most hi-tech NASDAQ-based stocks have a beta greater than 1, offering the possibility of a higher rate of return but also posing more risk.
Alpha Alpha takes the volatility in price of a mutual fund and compares its risk adjusted performance to a benchmark index. It is calculated as a return which is earned in excess of the return generated by CAPM. Alpha is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return.
A positive alpha of 1. It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The Sharpe ratio tells us whether the returns of a portfolio are because of smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk.
The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. This ratio thus measures reward to volatility. The scheme with the higher treynor Ratio offers a better risk-reward equation for the investor. Since Treynor Ratio uses Beta as a risk measure, it evaluates excess returns only with respect to systematic or market risk.
It will therefore be more appropriate for diversified schemes, where the non-systematic risks have been eliminated. Generally, large institutional investors have the requisite funds to maintain such highly diversified portfolios.
Also since Beta is based on capital asset pricing model, which is empirically tested for equity, Treynor Ratio would be inappropriate for debt schemes. This yields the risk-adjusted excess return. This, too, is a significant and useful statistic, as it measures the return in excess of the risk-free rate, which is the basis from which all risky investments should be measured.
It is calculated by dividing market standard deviation by the fund standard deviation. On the other hand leverage factor less than one implies that the risk of fund is greater than risk of market index and the investor should consider unlevering the fund by selling of the part of the holding in the fund and investing the proceeds I a risk free security, such as treasury bill in this way returns on the investment reduce somewhat, there would be an greater than proportional reduction in risk.
Standard Deviation: A measure of the dispersion of a set of data from its mean. The more spread apart the data is, the higher the deviation. Standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility risk.
The standard deviation tells us how much the return on the fund is deviating from the expected normal returns.
Standard deviation can also be calculated as the square root of the variance. Are long-term capital gains desired, or is a current income preferred? Will the money be used to pay for college expenses, or to supplement a retirement that is decades away. One should consider the issue of risk tolerance. Is the investor able to afford and mentally accept dramatic swings in portfolio value? Or, is a more conservative investment warranted? Identifying risk tolerance is as important as identifying a goal.
Finally, the time horizon must be addressed. Investors must think about how long they can afford to tie up their money, or if they anticipate any liquidity concerns in the near future. Ideally, mutual fund holders should have an investment horizon with at least five years or more. These types of funds typically hold a high percentage of their assets in common stocks, and are therefore considered to be volatile in nature. Conversely, if the investor is in need of current income, he or she should acquire shares in an income fund.
Government and corporate debt are the two of the more common holdings in an income fund. In this case, a balanced fund, which invests in both stocks and bonds, may be the best alternative. Charges and Fees Mutual funds make their money by charging fees to the investor.
It is important to gain an understanding of the different types of fees that you may face when purchasing an investment. Some funds charge a sales fee known as a load fee, which will either be charged upon initial investment or upon sale of the investment. However, one should be aware of the other fees in a no-load fund, such as the management expense ratio and other administration fees, as they may be very high. The investor should look for the management expense ratio.
The ratio is simply the total percentage of fund assets that are being charged to cover fund expenses. The higher the ratio, the lower the investor's return will be at the end of the year. The following is a list of questions that perspective investors should ask themselves when reviewing the historical record: Did the fund manager deliver results that were consistent with general market returns?
Was the fund more volatile than the big indexes it means did its returns vary dramatically throughout the year? This information is important because it will give the investor insight into how the portfolio manager performs under certain conditions, as well as what historically has been the trend in terms of turnover and return.
Size of the Fund Although, the size of a fund does not hinder its ability to meet its investment objectives. However, there are times when a fund can get too big. For example - Fidelity's Magellan Fund. Instead of being nimble and buying small and mid cap stocks, it shifted its focus primarily toward larger capitalization growth stocks. As a result, its performance has suffered. Fund Transactional Activity Portfolio Turnover Measure of how frequently assets within a fund are bought and sold by the managers.
Portfolio turnover is calculated by taking either the total amount of new securities purchased or the amount of securities sold -whichever is less - over a particular period, divided by the total net asset value NAV of the fund. The measurement is usually reported for a month time period Fund Performance Metrics Historical Performance The investor should see the past returns of the fund and should compare it with the peer group fund. Whatever the objective, the mutual fund is an excellent medium to accumulate financial assets and grow them over time to achieve any of these goals.
Every month on a specified date an amount you choose is invested in a mutual fund scheme of your choice. The dates currently available for SIPs are the 1st, 5th, 10th, 15th, 20th and the 25th of a month.
There are many benefits of investing through SIP. With the Systematic Investment Plan you commit an amount of your choice minimum of Rs. Think of each SIP payment as laying a brick. SIP is a perfect tool for people who have a specific, future financial requirement. But timing the market is timeconsuming and risky. A more successful investment strategy is to adopt the method called Rupee Cost Averaging.
We can reap this benefit by investing the amounts through a SIP. Benefit 4 Grow Your Investment With Compounded Benefits It is far better to invest a small amount of money regularly, rather than save up to make one large investment. This is because while you are saving the lump sum, your savings may not earn much interest. That is, the interest earned on your investment also earns interest. The following example illustrates this.
Imagine Neha is 20 years old when she starts working. Every month she saves and invests Rs. The total investment made by her over 5 years is Rs. Arjun also starts working when he is 20 years old. He gets a large bonus of Rs. Both of them decide not to withdraw these investments till they turn Simply give us post-dated cheques or opt for an Auto Debit from your bank account for an amount of your choice minimum of Rs. The plans are completely flexible.
You can also decide to invest quarterly and will need to invest for a minimum of two quarters. There is a constant decrease in the NAV of the fund and there is a noticeable change in the opening and ending NAV for the year This fall in market helps the investors in earning more units as the NAV is continuously going down.
As the number of units earned increases as the average unit price of the mutual fund scheme decreases. In there continuous increase in the NAV and hence lump sum investment gives more units compared to SIP investments.
Due to low number of units earned the average unit price is more compared to lump sum investment. SIP investments are beneficial to investors in obtaining more units when the market is down. By investing in small amounts but in continuous manner investors can reap benefits of market volatility. Portfolio Rebalancing Rebalancing is defined as the periodic adjustment of a portfolio to restore the original asset allocation mix of your mutual fund portfolio.
If an investor's investment strategy or risk threshold has changed, he can rebalance his investments so that asset classes in the portfolio align with his new asset allocation plan. It is the process of selling assets that are performing well and buying assets that are underperforming.
Portfolio rebalancing is one of the very few ways to generate additional returns for a portfolio without incurring any additional risk. Make sure after filling this form, click on submit button and check email for downloading link. These are the following project topic for which you can get the link. These are the below top specialization for which I have tried to mentioned all popular topics.
I have mentioned specialization wise project but it does not mean that it will not fits to other specialization. Most suited topic I grouped in the specialization for your better understanding below but you can choose your topic which are closely related to you specialization.
Disclaimer: Content on the page is just for your information, not for any kind of advice given by TopRanker4U.
So this website does not take any kind of responsibility regarding the content. If you feel that provided content is not correct, Please Report an Error , we will correct it manually. It is 2 years master degree distance education course which is offered in both January and July session. IGNOU invited applications from students to take admission in June and December month by uploading an advertisement on the university website and in local newspapers as well.
IGNOU has followed the semester system approach for this programme. Semester system is followed from January to June and July to December. Below are important features of MBA Programme :. Fee Structure : It consists 21 courses. The fees of each course is Rs. There are some thumb rules which are very important to select any topic.
0コメント