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Mutual funds ,its advantages and disadvantages

admin — Sat, 09 Apr 2011 03:02:50 +0000

A mutual fund is a professionally-managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.

Advantages and disadvantages of mutual funds

Mutual funds have advantages compared to direct investing in individual securities. These include:

Diversification
Ability to redeem daily at net asset value (the value of a proportional share of the fund’s assets)
Professional investment management
Ability to participate in investments that may be available only to larger investors
Government regulation

Mutual funds have disadvantages as well, which include:

Fees
Less control over timing of recognition of gains and losses
Less predictable income
No opportunity to customize

Performance of Mutual Funds in India,2010

According to the Association of Mutual Funds in India (Amfi), the industry’s average asset under management (AAUM) stood at Rs 6,58,914 crore (SBI MF did not declare its AUM till the copy was released), as against Rs 7, 47, 204 last year.

Industry experts say the primary reason for the dip could be outflows from the ultra-short-term funds after the mark-to-market norms were introduced in the middle of the last financial year.

The Securities and Exchange Board of India (Sebi) had mandated that debt securities with maturity of up to 182 days be valued at their weighted average market price from August 1 rather than the earlier practice of valuation on the basis of amortization. Ultra-short term funds or liquid-plus schemes have a maturity of over 91 days.

Liquid-plus funds were favoured by firms and banks as they generated annual returns of 5.5 per cent, while liquid schemes and banks’ short-term fixed deposits could give just 4.25 per cent.

Almost half of the 43 players in the industry reported decline in assets.

Among the top five players which control 70 per cent of the total assets, UTI MF was hit the hardest as its AAUM plunged over 16 per cent.

Common Economic Terms

admin — Wed, 30 Mar 2011 18:24:49 +0000

Floating Debt: Generally, any short-term debt, specifically, the part of the national debt that consists of short-term borrowing.Fringe benefits: Rewards for employment over and above the wager paid. e.g. goods at a discount, subsidized meals, arrangements, etc.

Fiscal Policy: that part of government policy which is concerned with raising revenue through taxation and deciding on the level and pattern of expenditure.

Fixed Costs: Costs which in the short run do not vary with outputs. These costs are borne even if no output is produced.

Asset: Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on)

Base year: In the construction of an index, the year from which the weights assigned to the different components of the index is drawn. It is conventional to set the value of an index in its base year equal to 100. Bear: An investor with a pessimistic market outlook; an investor who expects prices to fall and so sells now in order to buy later at a lower price. A Bear Market is one which is trending downwards or losing value.

Bid price: The highest price an investor is willing to pay for a stock.

Bill of exchange: A written, dated, and signed three-party instrument containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. Also known as a draft. It is the most commonly used financial instrument in international trade.

Bond: A certificate of debt (usually interest-bearing or discounted) that is issued by a government or corporation in order to raise money; the bond issuer is required to pay a fixed sum annually until maturity and then a fixed sum to repay the principal. Bonds guide.

Collateral security: Additional security a borrower supplies to obtain a loan.

Compound interest: Interest paid on the original principal and on interest accrued from time it became due.

Consumer Surplus is the difference between the price a consumer pays and what they were prepared to pay.

Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as tariffs and business taxes. The income tax is a direct tax, as are property taxes. See also Indirect Tax.

Double taxation: Corporate earnings taxed at both the corporate level and again as a stockholder dividend

Exchange rate: The price of one currency stated in terms of another currency, when exchanged.

Inflation is the percentage increase in the prices of goods and services.

Repo rate: This is one of the credit management tools used by the Reserve Bank to regulate liquidity in South Africa (customer spending). The bank borrows money from the Reserve Bank to cover its shortfall. The Reserve Bank only makes a certain amount of money available and this determines the repo rate. If the bank requires more money than what is available, this will increase the repo rate – and vice versa.

Revenue expenditure: This is expenditure on recurring items, including the running of services and financing capital spending that is paid for by borrowing. This is meant for normal running of governments’ maintenance expenditures, interest payments, subsidies and transfers etc. It is current expenditure which does not result in the creation of assets. Grants given to State governments or other parties are also treated as revenue expenditure even if some of the grants may be meant for creating assets.

Subsidy : Financial assistance (often from the government) to a specific group of producers or consumers.

Inflation-What is Inflation,Its effects on an Economy

admin — Sat, 19 Feb 2011 13:24:07 +0000

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.

Inflation’s effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring central banks can adjust nominal interest rates (intended to mitigate recessions), and encouraging investment in non-monetary capital projects.

Inflation and the Money Supply

We can also have inflation and deflation by changing the amount of money in the system. If the government decides to print a lot of money, then dollars will become plentiful relative to oranges, just as in our drought situation. Thus inflation is caused by the amount of dollars rising relative to the amount of oranges (goods and services), and deflation is caused by the amount of dollars falling relative to the amount of oranges. Thus, as shown by the article “Why Does Money Have Value?”, inflation is caused by a combination of four factors:

1. The supply of money goes up.
2. The supply of other goods goes down.
3. Demand for money goes down.
4. Demand for other goods goes up

Stock Market Terms

admin — Wed, 22 Sep 2010 05:18:49 +0000

Blue-Ship :
Stock of well known companies with stable business.

Bonds :
Bond holder is the creditor of the company and normally bonds are issues with a minimum of 3 years time frame with specific interest rate.

Bonus Shares :
Bonus shares are shares given to share holder at no extra cost.

Book Value :
It is the value at which you carry the asset into the balance sheet. The book value is calculated by dividing the equity reserve of the company by the number of shares issues for the same.

Brokerage :
Brokerage is the commission charged by the broker for a transaction which can be upto 2.5% as per SEBI.

Bull Market :
Continuous phase of rising share prices.

Buyback :
Repurchase of its own company or bonds from the holders.

Carry forward :
The process of postponement of purchase from one settlement to other by paying a charge.

Circuit :
The limit imposed by exchanges to control the fluctuation of share prices.

Closing price :
Last traded price of a stock.

Close Ended Funds :
Close ended funds are funds where investors can subscribe only during the New Fund Offer (NFO) period only.

Demat trading :
Demat trading is trading of shares in electronic or dematerialized form.

Dividend :
Dividend is the amount of money that any company gives to the share holders for each share held.

Equity / Stock / Share :
Representation of ownership of a company.

ETF :
Exchange Traded Fund: A mutual fund that is traded on a stock exchange and holds a basket of securities like mutual funds. They can be traded like a stock in trading hours of the day. Price movement is like stock varying on a trading basis and not like Mutual Fund which is once everyday.

Face Value :
The nominal value of share. This is the actual price of the share. Many west countries allow the face value to be consistent and of Re. 1 but in India we have Face value in range of Re. 1 to Rs 10.

Forward Trading :
The Scrip is traded today would be settled at future date which can even be settled or carried forward.

IPO :
Initial public offer which refers to the first offering of equity shares to the general public. Top 5 Indian IPO’s

Nifty :
Nifty is the Index of National Stock Exchange.

Open Ended Funds :
Investors can purchase and sell units even after the New Fund Offer (NFO) period.

Open Interest :
Open interest are open contracts which refers to the total number of contracts, that have not been settled or squared off. For each buyer there must be a seller. So when either of the buyer or seller opens the contract and till he does not square off the contract, it is open and sum total of all such open contracts is called open interest.

P/E Ratio :
Price of the stock divided by the net earning of the company.

Resistance :
Resistance, is the point at which sellers (bears) take control of prices and prevent them from rising higher.

SEBI :
Securities and exchange board of India.

Sensex :
Sensitive Index is a value-weighted index composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE.

Settlement and Settlement Date :
The date at which transaction between users is settled by deliver of shares.

Share Premium :
Premium paid over the face value for acquiring the share in the company.

Support :
Support is a level at which bulls (i.e., buyers) take control over the prices and prevent them from falling lower.

Undervalued Shares :
Shares which are traded lower than the book value.

Volume :
The number of shares or contracts traded in a security or an entire market during a given period of time.

Stockmarketstoday.in is a premier online web portal for stock market news,day trading tips,bse,nse news in India : for more details about stock market and trading methods www.stockmarketstoday.in

What is Margin Trading?

admin — Wed, 18 Aug 2010 02:52:12 +0000

Margin trading is a special service offered by broking companies to its customers, wherein you can subscribe and get easy finance to buy winning stocks when faced with a shortage of funds. With Margin trading, you can get upto 50% of the value of the stocks.

For instance, if you choose to buy 1000 shares of Company X at Rs. 1,000 each, then the total valuation will be Rs. 10 lakhs. Through this scheme, you can get upto 50%, i.e. Rs. 5 lakhs at 16% rate of interest.

Economic,Commercial,Trade,Banking Terms

admin — Wed, 07 Apr 2010 02:51:13 +0000

ARBITRATION	Referring dispute to disinterested party called arbitrator for decision, which will be binding.
ANNUITY	Payment of a fixed amount periodically for a limited time. It is an investment on which the owner receives not only interest on his money but also return of his capital.
BALANCE OF TRADE	The difference between the value of imports and exports. It is favourable when the value of exported goods exceeds the value of imported goods. If it is reverse balance is unfavourable.
BALANCE SHEET	Statements of accounts, generally os a business house prepared at the end of a year, showing debits and credits under broad heads, in order to find out the profit and loss positions in the outgoing year.
BARTER	Exchange of commodity with other commodities without the interface of any form of currency.
BOND	Document by which a government, a company or a person agrees to pay a sum of money in a certain time.
BUDGET	Annual estimate of expenditure and revenue of a country or a subordinate authority like a corporation.
BILL OF EXCHANGE	Written order by a drawer to pay sum on given date ot named payee.
BUYER’S MARKET	An economic phenomenon where there are more goods in market than demanded and so the buyers can dictate the prices of goods.
CLEARING HOUSE	Place where officials of the banks meet daily to exchange cheques drawn on the respective banks and settle the account by the payment of balances only.
COOPERATIVE FARMING	Joint farming wherein farmers pool their land, capital and resources and divide the produce at the end of the harvest in proportion to their land put in the pool. The farmers retain their proprietary rights.
CEILING ON LAND AND HOLDING	Imposition of a maximum limit of the land which an individual should have. Its purpose is rational distribution of land.
DEATH DUTY (ESTATE DUTY)	A sort of tax imposed on the property inherited at death of its previous owner.
DEVALUATION	Government’s step to reduce the value of its own currency relatively to a foreign currency. It aims to increase exports and reduce imports.
DEFLATION	A monetary state characterised by decrease in the supply of money and bank deposits and falling profits, wages, incomes and employment accompanied by unemployment and falling prices.
DEMONETISATION	The governmental measure of depriving metallic coins or paper currency od specified denominations of its status money. It is meant to unearth the hidden money which is unaccounted for purpose of income tax assessment.
EXCISE DUTY	Duty levied on goods manufactured within the country.
FOREIGN EXCHANGE	Transfer of money of one country to another.
INFLATION	Increase in the quality of money in circulation without any corresponding increase in goods; so, it leads to rising prices spiral.
LAISSEZ FAIRE	An individualistic theory advocating private initiative in trade and non-interference by State in commercial or business ventures.
LOCKOUT	Closure of a factory by owners to force the workers to accept the imposed terms.
MALTHUSIAN THEORY OF POPULATION	It states that the food supply increase in arithmetical progression while population increase by geometrical progression resulting in over-population.
OCTROI	Tax imposed on articles coming inside a city.
PUBLIC SECTOR	Applies to State enterprises or undertaking.
RECESSION	An economic phenomenon characterised by excessive production, less demand, tight money market.
SOFT CURRENCY	Currency of a country with which we have favourable balance of trade.
STERLING AREA	Group of countries of Commonwealth (except Canada) keeping their reserves in sterling and not gold or dollars.
TARIFFS	Measures undertaking by one country to protect industry against trade competition from outside.

GK Series -Ecomomic Facts

admin — Mon, 06 Apr 2009 02:59:42 +0000

1. Which one of the following is not manufacturing mobile telephone handsets?
a. Samsung
b. Nokia
c. Videocon
d. Sony
Ans : C

2. Which is the largest tea producing country in the world?
a. Kenya
b. Indonesia
c. China
d. India
Ans : D

3. Recession in the market implies
a. Slump in trade & industry due to fall in demand
b. Increase in trade industry due to rise in demand
c. No change in trade and industry due to stability in demand
d. None of these
Ans : A

4. ’Bottle neck inflation’ means
a. No rise in prices despite increase in aggregate demand
b. Rise in prices without increase in the aggregate demand
c. Decline in prices due to increase in aggregate demand
d. None of these
Ans : B

5. Nandan Nilekani is associated with which company?
a. Satyam Computers
b. Wipro
c. Infosys
d. Polaris
Ans : C

6. Which is South Korea’s largest car manufacturing company?
a. Hyundai
b. Honda
c. Suzuki
d. Toyota
Ans : A

7. Ashok Leyland is owned by the
a. Tatas
b. Birlas
c. Hindujas
d. None of these
Ans : C

8. NABARD stands for
a. National Bank of Agriculture and Regional Development
b. National Bank for Agriculture and Rural Development
c. National Bureau of Aeronautical Research and Development
d. None of these
Ans : B

9. The part of profit or other surpluses of a company distributed proportionately among shareholders is called
a. Preference Share
b. Equity Share
c. Face Value
d. None of these
Ans : B

10. Which brand/company uses the ad line “We know India better”?
a. Max New York Life Insurance
b. LIC of India
c. Amul
d. Bajaj
Ans : B

11. Zero Coupon Bonds are that variety of loans
a. which fail to yield an income for the creditors
b. which are issued at a discount and redeemed at par
c. on which the entire interest income is paid at the time of purchase
d. the market price of which may fall suddenly and heavily
Ans : B

12. The term ‘Third World’ refers to
Economically developing nations

13. ADB was setup in the year
1966

14. National Stock Exchange (NSE) was established in the year
1992

15. SEBI was established in the year
1988

16. Bombay Stock Exchange (BSE) was setup in the year
1978

17. GIC was setup in the year
1973

18. LIC was established in the year
1956

19. HDFC was established in the year
1977

20. HUDCO was setup in the year
1970

21. NABARD was established in the year
1982

22. SIDBI was setup in the year
1990

23. IDBI was setup in the year
1964

24. Industrial Finance Corporation of India (IFCI) was established in the year
1948

25. Industrial Credit and Investment Corporation of India (ICICI) was established in the year
1955

26. Reserve Bank of India was established in the year
1935

27. The oldest oil refinery in India is located in
Digboi (Assam)

28. Command Area Development Program was launched to
Ensure better utilization of irrigation potential

29. Which two iron and steel plants have been setup in collaboration with the former Soviet Union
Bokaro and Bhilai

30. Which city is known as the silicon valley of India
Bangalore