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.

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

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.

1- The RBI Governor reviews the Annual Monetary and credit policy every time after a gap of ———months?

three

2- Reserve Bank of India keeps changing the ratio which regulates the minimum reserve each bank must hold to customer’s deposits. What this ratio called?

Cash Reserve Ratio

3- Which bank has the punchline”Much more to do with YOU in focus”?
Andhra Bank

4- A new field of banking system made up of large-scale banks that operate extensive networks of branches and provide different services. This new termed emerged in the banking field is —————?

Universal Banking

5- Providing credit and other financial services and products of very small amount to the poors in rural / semi-urban area is callled as …………..?

Micro Finance

6- What are Basel Norms?

Norms specially designed to control various risk factors in bank operations