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..

Pull yourself out of the confusion

With inflation slipping down to 0.44% which is a scenario of negative inflation or deflation, the investors are sweating and pulling their pants up inorder to foresee the effects of the same on the economic activities.Inflation drops because of increase in productivity but this is not the situation now.It is because of the fall in demand that prices are falling.But yes if deflation grounds in the economy, the repercussions will be low demand, lower production and weak economic growth.These prevailing conditions will discourage investments.The real interest rate difference between nominal interest rate and inflation becomes very high, making funds costlier. As demand goes down, capacity utilization of manufacturing units declines. This discourages investment in capacity expansion.

With a strong hit, the performances of the companies are surely going to be worsen so the investors need to pre plan while making investment decisions in the deflationary environment.The rule of the thumb suggest that invest in those companies whose products or services are not much affected by fall in demand. So, companies operating in health care, telecommunication and utilities like electricity distribution could be good bet to invest. Services of these companies will remain in demand even if the economy slows down.

Companies operating in sectors like snacks and beverages, health care, utilities and telecommunications can be included in the portfolio as the decline in prices lead to increase in demand in such sectors.Companies with strong balance sheets, which do not have much debt on their books, can also be considered for investment.One has to be cautious and avoid investing in companies that operate in capital goods as the performance of such firms is definitely going to dip further.The real estate companies should also be avoided. In deflation, the general perception is that the prices will further fall resulting in postponement in the purchasing decisions.This will lead to a cash starved situation for the real estate.

Read the report by ET here..

Investments available to NRIs--

The government gives non-resident Indians (NRI) the opportunity to open rupee-dominated accounts in India for repatriating funds. The most popular among these are the NRE and NRO accounts. Non-Resident Indians (or NRIs) are treated as a special category of investors, given their Indian antecedents and their growing importance as a significant source of foreign capital in India. The government including regulators like the Reserve Bank of India and SEBI have been formulating and regulating investments by NRIs in Indian securities. It is therefore imperative for NRIs to understand the rules that would have bearing on their investment-making process.

NRIs can invest in shares and convertible debentures of Indian companies listed on NSE/BSE under the Portfolio Investment Scheme (PIS) route.Under this route, an NRI is permitted to invest up to a maximum of 5% of the paid-up share capital / value of each series of convertible debentures of listed Indian companies on repatriation and non-repatriation basis. The aggregate investment by all NRIs cannot exceed 10% of the paid-up share capital / value of each series of convertible debentures of the company. The aggregate ceiling of 10% can be raised to 24%, if shareholders of the Indian company pass a special resolution to that effect.

NRIs may also, without any limit, purchase on non-repatriation basis dated government securities, treasury bills, units of domestic mutual funds, units of money market mutual funds. NRIs are not permitted to make investments in Small Savings Schemes including PPF.

Another indirect mode of investment available to NRIs is by investing in India-focused offshore funds that invest as Foreign Venture Capital Investor (FVCI), Foreign Institutional Investor (FII) or Foreign Direct Investor.

Time to do the financial planning for 2009--

Year 2009 has already knocked our door for future and it’s the right time to learn lessons from the current financial turmoils.We must set specific goals for personal finances as it is rather not going to cost us anything but inturn will increase ROI.Some timely goals and baby steps that can help you do your financial planning.

Control your expenses & stick to the budget:You are more likely to face financial problems, if you have been extravagant in your expenses. you need to adhere to some financial disciplines.Always remember that a rupee saved is a rupee earned. Therefore, stick to the discretionary budgets so that you can handle the uncertainty in the non-discretionary expenses.
Take control of your investments:Resolve to protect your finances as the market storm rages on. Take the time to build up your emergency fund, and set reminders to regularly review your portfolio’s asset allocation.
Turn the problems into opportunities: Look hard enough and you can find a silver lining to just about every aspect of the struggling economy, from falling home prices (lower property taxes) to bankrupt retailers (great close-out sales).Look out for bargain on all-time favourite stocks and mutual funds to accumulate for longer term.
Be debt free: In the falling interest rate scenario, it is good to repay all your debts. In recessionary periods, it is always better to be debt free and use cash more often. Be better about savingThe easiest, most painless way to build a nest egg is to choose a low-cost, diversified investment plan and authorize the plan/fund to deduct a set amount from your account every month.
Have an emergency fund in portfolio: Having an emergency fund in your portfolio is an ideal way to tide over a family crisis or meet unexpected expenses. Therefore, the need for maintaining emergency funds, particularly keeping some cash at home or in a bank account, has always been emphasized by our forefathers.
Have realistic expectations: There’s nothing wrong with hoping for the ‘best’ from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.However, it doesn’t mean that you should always expect the same kind of return from the stock markets. The current market meltdown is a case in point.

Hope you all will keep an eye on your investments and management of personal finances with the right plan of action.Wish you all a very Happy and Prosperous New Year!!

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