http://getahead.rediff.com/slide-show/2010/aug/06/slide-show-1-money-mutual-fund-investment-concepts-simplified.htm#4
Showing posts with label Mutual Fund. Show all posts
Showing posts with label Mutual Fund. Show all posts
Saturday, May 31, 2014
Friday, September 20, 2013
Wednesday, August 07, 2013
Redeem Mutual funds - When to Exit Mutual funds
1. The fund loses more than it should :Suppose a bond fund loses more than 23 per cent in a year in which its average peers suffer a much slimmer loss
2. The fund gains more than it should:This might sound illogical -- after all, who complains about great returns? But if your "moderate" balanced fund posts a 60 per cent return when its average peer is up 10 per cent, maybe you don't own what you think you do.
3. The fund changes its strategy: presumably, you buy a small-cap fund because you want exposure to small-cap stocks.If the manager suddenly starts buying large-cap stocks, you may have a problem.
4. The fund underperforms for a long period: While one year of underperformance may be nothing to worry about, two or three ugly years can get frustrating. The urge to sell intensifies.Before pulling the trigger, be sure you're comparing your underperformer to an appropriate benchmark, such as its Morningstar category peers or a suitable index. Before you pass judgment, make sure the manager or strategy hasn't changed.
5. Your goals change: As your goals change, your funds should change as well. Suppose you start investing in a balanced fund with the goal of buying a house within the next five years. If you get married and your spouse already owns a house, you may decide to use that money for retirement instead. In that case, you might ditch the balanced fund for a pure stock fund.
Interesting conversation for Redeeming Mutual Funds:
Whether to Redeem HDFC Top 200
http://www.jagoinvestor.com/forum/hdfc-top-200-has-the-sun-set-now/9138/#comment-29968
2. The fund gains more than it should:This might sound illogical -- after all, who complains about great returns? But if your "moderate" balanced fund posts a 60 per cent return when its average peer is up 10 per cent, maybe you don't own what you think you do.
3. The fund changes its strategy: presumably, you buy a small-cap fund because you want exposure to small-cap stocks.If the manager suddenly starts buying large-cap stocks, you may have a problem.
4. The fund underperforms for a long period: While one year of underperformance may be nothing to worry about, two or three ugly years can get frustrating. The urge to sell intensifies.Before pulling the trigger, be sure you're comparing your underperformer to an appropriate benchmark, such as its Morningstar category peers or a suitable index. Before you pass judgment, make sure the manager or strategy hasn't changed.
5. Your goals change: As your goals change, your funds should change as well. Suppose you start investing in a balanced fund with the goal of buying a house within the next five years. If you get married and your spouse already owns a house, you may decide to use that money for retirement instead. In that case, you might ditch the balanced fund for a pure stock fund.
6. You can’t take it anymore
The point of investing is meeting financial goals, not developing mental stress. If your fund is so volatile that not even the vision of your brand new house calms you down, then by all means sell -- as long as you'd never buy the fund or a fund like it again.
The moral: Know your funds, know yourself, and never make the same mistake twice.
Interesting conversation for Redeeming Mutual Funds:
Whether to Redeem HDFC Top 200
http://www.jagoinvestor.com/forum/hdfc-top-200-has-the-sun-set-now/9138/#comment-29968
Tuesday, August 06, 2013
Thursday, July 25, 2013
Alpha and Omega, Absolute and annualised returns in Mutual Funds
Alpha and Omega in Mutual Funds
Alpha tells you if fund has produced returns justifying the risks it is taking
Alpha tells you whether the fund has produced returns justifying the risks it is taking. It does this by comparing its actual return to the one 'predicted' by the beta. Say, a fund can be expected to earn a return of 15 per cent in a year (based on its beta). However, it actually fetches you 18 per cent. Then the alpha of the fund is 3 (18 - 15 = 3). In other words, alpha is a measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return.
http://www.valueresearchonline.com/story/h2_storyView.asp?str=10351
That's why index funds always have-or should have, if they track their benchmark index perfectly-an alpha of 0.
http://www.valueresearchonline.com/story/h2_storyView.asp?str=23335
Alpha tells you if fund has produced returns justifying the risks it is taking
Alpha tells you whether the fund has produced returns justifying the risks it is taking. It does this by comparing its actual return to the one 'predicted' by the beta. Say, a fund can be expected to earn a return of 15 per cent in a year (based on its beta). However, it actually fetches you 18 per cent. Then the alpha of the fund is 3 (18 - 15 = 3). In other words, alpha is a measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return.
http://www.valueresearchonline.com/story/h2_storyView.asp?str=10351
That's why index funds always have-or should have, if they track their benchmark index perfectly-an alpha of 0.
http://www.valueresearchonline.com/story/h2_storyView.asp?str=23335
Absolute and annualised returns
'Annualised' returns are simply the annual gains that an investment has earned over a specific period of time. The difference between absolute and annual returns can be best explained with an example. If an investment of Rs 1,000 grows to Rs 1,300 over five years, then Rs 300 is an absolute gain with 30 per cent growth. This 30 per cent return is absolute return.
Annual (annualised) returns show the average gains that the investment made each year in this five-year period, if the gains were reinvested every year. In this case, the annual returns work out to 5.38 per cent. Assuming that the money grew at a constant rate, the investment of Rs 1,000 would have grown to Rs 1,053.80 by the end of first year. In the second year, it would be Rs 1,110.50 (by adding 5.38 per cent of Rs 1,053.80) and so on till the fifth year until it appreciates to Rs 1,300.
All investment instruments at Value Research state returns of less than a year in absolute terms, and over one year as annualised percentage.
Friday, March 29, 2013
Wednesday, May 30, 2012
Saturday, April 28, 2012
Thursday, April 26, 2012
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