How to review MF investments before redeeming the units?

If your mutual fund investment is yielding a lower return than what you anticipated, you may be tempted to redeem your units and invest the money elsewhere. The rate of return of other funds may look enticing, but be careful: there are both pros and cons to the redemption of your MF units. Let's examine the circumstances in which liquidation of your fund units would be most optimal and when it may have negative consequences.

1. Mutual Funds Are Not Stocks

2. When Your Fund Changes

3. Change in Fund Manager

4. Change in Fund Strategy

5. Change in Fund Performance

6. When Your Personal Investment Portfolio Changes

7. The need to rebalance your portfolio

8. Need a tax break

Read here to know in details about the different circumstance..

Mutual Fund industry assets up --

Source:ET

The Indian Mutual Fund industry is on front foot once again. The industry’s assets under management (AUM) have risen by about 9.5% in Jan ’09 vis-à-vis Dec ’08. This is the second consecutive monthly rise in the AUM after a series of downfalls witnessed in the last quarter of 2008. With an asset base of Rs 4,60,949 crore, the industry may still have a long way to go to regain its highest absolute peak ever of Rs 6 lakh crore. LIC Mutual Fund is once again the biggest AUM gainer in percentage terms. Other asset management companies (AMC) to have recorded significant rise in assets include IDFC, DWS Investments, Birla Sun Life, Tata, Principal, ICICI Prudential and Kotak. Each of these AMCs has recorded an increase of over 10% in their AUM.

While Reliance continues to be the largest player of the industry with an asset base of Rs 76,168 crore, followed by HDFC at Rs 51,420 crore, there has been a re-shuffling for the third position. ICICI Prudential has once again overtaken UTI to be the third largest fund house of the country.

Artbitrage funds have a greater scope in 2009--

If you are interested in investing in equities but fear the market volatility, the smartest way will be to invest in arbitrage funds. These mutual funds are the best performing funds among the equity category in 2008. In fact, with uncertainty still haunting the financial market, these funds are expected to create value for investors in 2009. The higher the volatility, higher the arbitrage opportunity .But investors not familiar with this type of scheme might just end up thinking that these are just other equity-oriented schemes with a different name. However, this is not so and rather it is a type of income scheme. These funds take advantage of the arbitrage opportunities between the cash and the futures market to generate fixed income.

Such funds are better suited for investors who want low risk profile funds but expect decent returns. What leads (or rather misleads) everyone to believe that arbitrage funds are risk-free is that, in arbitrage strategies, both the buying and selling transactions exactly offset each other, thus making it immune to the market fluctuations. But uncertainty prevails in almost all investment schemes and these funds are no exception.The equity market in 2008 has given a lot of opportunities for arbitrage and mutual funds have been able to capitalize on that.

In India, a host of AMCs, including SBI, JM Financial, Kotak, UTI and IDFC, offer such funds. In the last 12 months, the average returns from arbitrage funds are around 8.8%. Scheme-wise, arbitrage funds such as UTI Spread Fund and HDFC Arbitrage Fund have given a return of 10.57% and 9.37%, respectively.

As far as tax treatment is concerned, since funds are largely invested in the equity arbitrage funds attract a short term capital gain tax of 15%. But if you hold it for more than a year, you are not liable to pay any tax. For tax purposes arbitrage funds are treated as equity funds. Hence, they enjoy lower tax vis-à-vis debt funds.

There is no denying that arbitrage funds are relatively less risky as compared to pure equities. However, to slot them as "risk-free", amounts to mis-representation. Arbitrage funds do have an element of risk; so investors who are being told that arbitrage funds are less risky have been misled.But all funds in this category have in the past one year or so outperformed their benchmarks by a convincing margin and there is greater scope for introducing these products in the coming days. Thus, the investor community should take to this concept more seriously.

Types of mutual funds---

This guide for the various types of investment funds. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.

When it comes to investing in mutual funds, investors have literally thousands of variations. Before investing in the fund on the feasibility of investment strategy and risk funds good opportunity for you. 

The first step for the success of the investment is to determine your financial goals and risk tolerance - whether in its own discretion or professional help financially. Once you know what you do if you need money, and how much risk you can tolerate, you can choose. 

Most mutual funds fall into one of the three main categories - money market funds, pension funds (also known as the "Fixed Income" fund), and stock funds (also called the "L" Equity Fund). Each type has its own characteristics and different risks and opportunities. Typically, higher yield potential, higher risk of loss. 

Money Market Fund: 

Money Market Fund, have relatively little risk compared with other investment funds. Investor losses have been rare, but they are possible. Money Market Fund to pay dividends, which generally reflect the short-term interest rates, historically funds and money market yields are lower than in bonds and securities funds. 

Bond Fund: 

Bond funds are generally more risk than money market funds, mainly because they tend to  achieve higher yields. Because there are many different types of bonds, bond funds can be very different in their risks and benefits. 

Stock Fund:

A stock fund is a fund that invests in Equities more commonly known as stocks. The objective of an equity fund is long-term growth through capital appreciation, although dividends and interest are also sources of revenue. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.

A small information for the new investors if they have a certain objective, they can invest accordingly---

Investors interested in:	Should invest in:
Growth	Stock Funds
Income	Bond Funds
Safety of Principal	Government Bond Funds
Immediate Liquidity	Money Market Funds
Tax Relief	Municipal Funds
Maximizing Current Income	Corporate Bond Funds