A Tool for comparing Mutual Funds
Mutual fund cost calculator can help you understand the impact that many types of fees expenses can have over time. It takes only minutes to compare the costs of different mutual funds. The cost calculator takes the mystery and match out of the cost equation, revealing how costs add up over time.
Mutual fund costs take a big chunk out of any investor’s return. That’s why it’s important for investors to know what costs they are paying, and which cost structure is best for them. By using the cost calculator investors will find answers quickly to questions like this: which is better, a no-load fund with yearly expenses of 0.90%.
The cost calculator is great understanding costs, bust costs aren’t the only thing that should be considered when investing in a mutual fund. Other things to assess include:
The number of years needed to reach an investment goal.
The type of stocks, bonds, or other securities that the fund buys.
The risk of the fund.
The fit between the fund and the investor’s portfolio(diversification)
The fund company or portfolio manager who runs the fund.
The fund’s track record or performance over time.
BENEFITS OF MUTUAL FUND INVESTMENTS :
Professional Management :
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
DIVERSIFICATION :
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through Mutual Fund with far less money than you can do on your own.
CONVENIENT ADMINISTRATION :
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
RETURN POTENTIAL
Over a medium to long term, mutual funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
LOW COSTS :
Mutual Funds area relatively less expensive way to invest compared to directly investing in the capital market because the benefits of scale in brokerage, custodial and other fees slate into lower costs for investors.
LIQUIDITY :
In open-ended schemes, the investor gets the money back promptly at net assets value related prices from the Mutual Fund. In closed-end Schemes the units cab sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund Companies.
TRANSPARENCY :
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund mangers investment strategy and outlook.
FLEXIBILITY :
Through features such as regular investment plans, regular with drawl plans and dividend reinvestment plans, you can systematically invest or withdraw funds accord to your needs and convenience.
AFFORDABILITY :
Investors individually may lack sufficient funds to invest in high-grad stocks. A mutual fund because of its large corpus allows even a small investor to take the benefits of its investment strategy.
CHOICE OF SCHEMES :
Mutual funds offer a family of schemes to suit your varying needs over a lifetime.
WELL REGULATED :
All Mutual Funds are registered with SEBI and they function with in the provision of strict regulations designed to protect the interest of investors. The operation of Mutual Funds is regularly monitored by SEBI.
DIVERSIFICATION :
Diversification is the idea of spreading out one’s money across many different types of investments. When one investment is down another might be up. The most basic level of diversification is to but multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks (even hundreds or thousands) beyond that, you can diversify even more by purchasing different kinds of stocks then adding bonds, then international, and so on. It could take you weeks to buy all these investments, but if you purchased a few mutual funds you could be done in few hours because mutual funds automatically diversify in a pre determined category of investments (i.e. growth companies, low grade corporate bonds, international small companies)
NET ASSET VALUE (NAV) :
The net asset value of the find is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which 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. However most people refer loosely to the NAV per unit as NAV ignoring the ‘per unit’.
CALCULATION OF NAV :
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net of value of assets divided by the number of units outstanding, calculating mutual fund net asset values is easy. Simply take the current market value of the fund’s net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstanding. So if a fund had net assets of $50 million and there are 1 million shares of the fund then the price per share (or NAV) IS $50.00.
HOW TO USE NET ASSET :
NAVs are helpful in keeping an eye on your mutual fund’s price movement, but NAVs are not the best way to keep track of performance. Mutual Funds are forced by law to distribute at least 90% of its realized capital gains and dividend income each year. When a fund pays out this distribution, the NAV drops by the amount paid. The most important things to keep in mind is that NAVs change daily and are not a good indicator on how portfolio is doing because things like distributions mess with the NAV.
Sampling Technique
The sampling technique used for the purpose was random technique. The funds collected are based on random pick and their performance and based on different sectors like, LIC from government based , one from banking, HDFC fund and so on.
Sample Size
The sample size used for the research was 3 years i.e July 2004 to August 2007 of month closing values of NAV and analysis is done using the Net Asset Value in the form of average returns.
Though sincere effort has been put to make the project work complete in all respect the study suffers from the following limitations.
Due to adjustment of NAV calculation sample size taken only for 38 months.
The observations given in the research are subjected to the collection of data only.
The NAV is considered on monthly basis.
The study wanted more adequate data was not available so the analysis looks incomplete at some points.
The study was limited due to lack of time.
Investment procedure for schemes in the mutual funds
Mutual funds normally come out with an advertisement in newspapers publishing the date of launch of the new schemes. Investors can also contact the agents and distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now a day, the post offices and banks also distribute the units of mutual funds. However, the investors may please note that the mutual funds schemes being marketed by banks and post offices should not be taken as their own schemes and no assurance of returns is given by them. The only role of banks and post offices is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme.
An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor’s track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.
IPO’s of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed.
Investors can access the NAVs, half-yearly results and portfolios of all mutual funds at the website of Association of mutual funds in India (AMFI). Investors can log on to the web site of SEBI and go to "Mutual Funds" section for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information non mutual funds is given. There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide the investors in this regard.
When investors send complaints to SEBI, SEBI takes up the matter with the concerned mutual funds and follows up with them till they are resolved.
Mutual fund cost calculator can help you understand the impact that many types of fees expenses can have over time. It takes only minutes to compare the costs of different mutual funds. The cost calculator takes the mystery and match out of the cost equation, revealing how costs add up over time.
Mutual fund costs take a big chunk out of any investor’s return. That’s why it’s important for investors to know what costs they are paying, and which cost structure is best for them. By using the cost calculator investors will find answers quickly to questions like this: which is better, a no-load fund with yearly expenses of 0.90%.
The cost calculator is great understanding costs, bust costs aren’t the only thing that should be considered when investing in a mutual fund. Other things to assess include:
The number of years needed to reach an investment goal.
The type of stocks, bonds, or other securities that the fund buys.
The risk of the fund.
The fit between the fund and the investor’s portfolio(diversification)
The fund company or portfolio manager who runs the fund.
The fund’s track record or performance over time.
BENEFITS OF MUTUAL FUND INVESTMENTS :
Professional Management :
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
DIVERSIFICATION :
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through Mutual Fund with far less money than you can do on your own.
CONVENIENT ADMINISTRATION :
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
RETURN POTENTIAL
Over a medium to long term, mutual funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
LOW COSTS :
Mutual Funds area relatively less expensive way to invest compared to directly investing in the capital market because the benefits of scale in brokerage, custodial and other fees slate into lower costs for investors.
LIQUIDITY :
In open-ended schemes, the investor gets the money back promptly at net assets value related prices from the Mutual Fund. In closed-end Schemes the units cab sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund Companies.
TRANSPARENCY :
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund mangers investment strategy and outlook.
FLEXIBILITY :
Through features such as regular investment plans, regular with drawl plans and dividend reinvestment plans, you can systematically invest or withdraw funds accord to your needs and convenience.
AFFORDABILITY :
Investors individually may lack sufficient funds to invest in high-grad stocks. A mutual fund because of its large corpus allows even a small investor to take the benefits of its investment strategy.
CHOICE OF SCHEMES :
Mutual funds offer a family of schemes to suit your varying needs over a lifetime.
WELL REGULATED :
All Mutual Funds are registered with SEBI and they function with in the provision of strict regulations designed to protect the interest of investors. The operation of Mutual Funds is regularly monitored by SEBI.
DIVERSIFICATION :
Diversification is the idea of spreading out one’s money across many different types of investments. When one investment is down another might be up. The most basic level of diversification is to but multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks (even hundreds or thousands) beyond that, you can diversify even more by purchasing different kinds of stocks then adding bonds, then international, and so on. It could take you weeks to buy all these investments, but if you purchased a few mutual funds you could be done in few hours because mutual funds automatically diversify in a pre determined category of investments (i.e. growth companies, low grade corporate bonds, international small companies)
NET ASSET VALUE (NAV) :
The net asset value of the find is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which 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. However most people refer loosely to the NAV per unit as NAV ignoring the ‘per unit’.
CALCULATION OF NAV :
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net of value of assets divided by the number of units outstanding, calculating mutual fund net asset values is easy. Simply take the current market value of the fund’s net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstanding. So if a fund had net assets of $50 million and there are 1 million shares of the fund then the price per share (or NAV) IS $50.00.
HOW TO USE NET ASSET :
NAVs are helpful in keeping an eye on your mutual fund’s price movement, but NAVs are not the best way to keep track of performance. Mutual Funds are forced by law to distribute at least 90% of its realized capital gains and dividend income each year. When a fund pays out this distribution, the NAV drops by the amount paid. The most important things to keep in mind is that NAVs change daily and are not a good indicator on how portfolio is doing because things like distributions mess with the NAV.
Sampling Technique
The sampling technique used for the purpose was random technique. The funds collected are based on random pick and their performance and based on different sectors like, LIC from government based , one from banking, HDFC fund and so on.
Sample Size
The sample size used for the research was 3 years i.e July 2004 to August 2007 of month closing values of NAV and analysis is done using the Net Asset Value in the form of average returns.
Though sincere effort has been put to make the project work complete in all respect the study suffers from the following limitations.
Due to adjustment of NAV calculation sample size taken only for 38 months.
The observations given in the research are subjected to the collection of data only.
The NAV is considered on monthly basis.
The study wanted more adequate data was not available so the analysis looks incomplete at some points.
The study was limited due to lack of time.
Investment procedure for schemes in the mutual funds
Mutual funds normally come out with an advertisement in newspapers publishing the date of launch of the new schemes. Investors can also contact the agents and distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now a day, the post offices and banks also distribute the units of mutual funds. However, the investors may please note that the mutual funds schemes being marketed by banks and post offices should not be taken as their own schemes and no assurance of returns is given by them. The only role of banks and post offices is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme.
An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor’s track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.
IPO’s of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed.
Investors can access the NAVs, half-yearly results and portfolios of all mutual funds at the website of Association of mutual funds in India (AMFI). Investors can log on to the web site of SEBI and go to "Mutual Funds" section for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information non mutual funds is given. There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide the investors in this regard.
When investors send complaints to SEBI, SEBI takes up the matter with the concerned mutual funds and follows up with them till they are resolved.
0 comments:
Post a Comment