关于印度的共同基金业
时间:2016-04-17 12:43:56 来源:www.ukthesis.org 作者：英国论文网 点击:161次
共同基金
该报告的后半部分包含了印度共同基金的历史。在本报告中讨论了印度共同基金以来已发生的事态发展。在不同的阶段，共同基金的历史已被讨论过。在后历史部分，报告讨论了不同的基金表现。 一部分的重要组成部分是资产净值的一部分。在这段报告中详细研究了净资产价值（NAV）基金。资产净值是如何计算的，投资者心目中的误解，这是多么重要的共同基金，当事人对这一部分的解释已报告。就在这一段之后，有一个共同基金会提到税收问题。如何相互基金的征税，以及在市场上可获得的免税的共同基金已被讨论。
Later part of the report contains the Mutual Fund history in India. The developments that have taken place since the start of Mutual Fund in India have been discussed in this part of the report. The history of Mutual Fund has been discussed in here under different phases. After the history part, the report discusses about the different fund performance. One of the important parts of the part is the NAV part. In this section of report, a detailed study has been done on Net Asset Value (NAV) of Mutual Fund. How the NAV is calculated, its misconception in the minds of investors, how important it is for the parties of Mutual Fund has been explained in this section of the report. Just after this section, there is a mention of Taxation in Mutual Fund. How Mutual Funds are taxed and what are the tax-free Mutual Funds available in the market has been discussed. This part has been discussed with examples, so as to make the investors understand, how they can be benefited with the buying of Mutual Funds. The different terminologies in Mutual Fund namely, SIP, SWP, ARP, AWP, etc has been discussed in this report.#p#分页标题#e# The last section of the report discussed about the risks involved in the mutual fund. The different methods through which the risks involved in mutual fund, has been discussed in this section. Also discussed are the advantages and disadvantages of buying a mutual fund. There has also been a comparison made between the returns that can be earned from mutual fund as compared with fixed deposit in banks, in post offices and investment in stock markets.
The basic idea behind a mutual fund is that individual investors generally lack the time, the inclination or the skills to manage their own investments. Thus, mutual funds hire professional managers to manage the investment for the benefit of their investors in return for a management fee. Then Mutual Funds came as a solution to benefit investors who had little or no idea about the working of stock market but were eager to create some money out of it. It was created for the benefit of investors who were not able to understand the complicated functioning of the stock market but had money to invest in it. The basic purpose of any mutual fund is to put the money of the investors into various scrip in the stock market by creating a portfolio (a collection of various shares) and making investors understand the benefits and drawbacks of each and every scheme. The benefit to the customers is that they can invest in various stocks, can get help from professional people and that their money is being managed by professional who have clear understanding of the market. The organization that manages the investment is the Asset Management Company (AMC). Employees of the AMC who perform this role of managing investments are the fund managers.
The organization which mange this mutual funds are called
Asset Management Company Fund Mangers
Personal treatment with which an individual investor manages their investment and how much risk they want to be decided is done by professional managers is referred as Portfolio Managements Schemes#p#分页标题#e#
(PMS).
Money in trust Account of income and expenditure (revenue Account) Account of asset and liabilities (Balance Sheet) To insure fairness in investment, SEBI regulates the expenditure that can be charged to a scheme.
Who are the Parties Involved?
risk profile or risk appetite.
Trustees
Asset Management Company Every AMC asset under management because cost can not be reduced below some fixed level after that it becomes viable.
Distributors It is AMC decision whether to bear cost fully on distributors or partially. On financial and physical resources distributors could be: Tier 1 - who have their own franchised network reaching out to the investors all across the country. Tier 2- who are generally regional players with some reach within their region. Tier3 - who are small and marginal players with limited reach.
Registrar
Custodian/Depository
Schemes and units:- People invest in a company by acquiring its share and disinvest by selling its shares. The total outstanding shares of a company multiplied by the face value of each share, Constitute the share capital of a company. Shares are represented in a company and units are represented in a mutual fund scheme.
Types of schemes
Open End Schemes Investors who wish to exit from an open end scheme can offer their unit to the mutual for redemption, generally called repurchase. Similarly mutual fund can sell new units to investors who want to participate in schemes generally called sale. Additionally a mutual fund can choose to provide liquidity by listing in stock exchange, in that case investor can either trade schemes or opt for above mentioned route.
Closed End Schemes Liquidity in such case is available through listing in stock market. Trade alters change in ownership but don't change in schemes unit capital. Occasionally closed end schemes provide a re purchase option to investors. Either by a specified period or after a specified period normally up to a total limit for all investors together, or limit per investors. Such repurchase would reduce the unit capital of the schemes.
Asset Class Growth stock where earning growth is expected to be attractive Momentum stock that can go up and down with line market Value stock where the fund manager is of the view that current valuation in the stock market does not reflect intrinsic value Income stock that can earn high returns through dividends. Debt or income schemes GILT schemes These invest in government securities. Apart from being the most liquid schemes in the debt market, government securities are eligible for liquidity support.
Bond Schemes
BondSchemes Junk bonds can be identified through the lower grades assigned by rating services (e.g., BBB instead of AAA for the highest quality bonds). Because the possibility of default is great, junk bonds are usually considered too risky for investment by the large institutional investors (mutual funds) that provide U.S. corporations with much of their investment capital. Junk bonds are often issued by smaller, newer companies.#p#分页标题#e#
Money Markets Instruments include: 2. Commercial bills 3. Treasury bills 4. Government securities having an unexpired maturity up to one year 5. Call or notice money 6. Certificate of deposit 7. Usance bills 8. Permitted securities under a repo / reverse repo agreement 9. Any other like instruments as may be permitted by RBI / SEBI from time to time.
Liquid/Money market schemes: Even salaried individuals can use them in the short term, since they offer better returns than savings accounts. Some funds even offer cheque-writing facilities. Risk comes from money market volatility - which also creates the possibility of gain due to a sudden increase in rates. Balanced Schemes——平衡的方案 Balanced schemes invest in both equity and debt. The debt investment ensures a basic interest income. Which fund managers hope to top up with capital gains on the investment portfolio. However loses can eat into the basic interest and the income. Big advantage of these schemes is that market risk is more palatable Capital Protected Schemes——资本的保护方案 It is a kind of balanced schemes, where a part of the initial issue proceeds is invested in gilts that would mature to a value equivalent to the unit capital of the schemes. Thus the investor's capital is protected. Physical Asset——实物资产 Technically said that mutual fund can invest in any asset whether it can be real asset, precious metals, other metals (aluminium, steel) oil and commodities. In India regulatory framework does permit investment in real asset. Schemes by Position Philosophy. Sector Funds——产业基金 Regulator equity funds invest in a mix of equities that are spread across different sectors so they are called diversified equity funds. Sectors funds on other hands invest in a particular sector, Like energy funds. Index Funds——指数基金 These funds create and replicate according to the specified index such as BSE, NSE, etc. and such position can be created by two methods It can be done by maintaining an investment portfolio that replicates the composition of a chosen index. Weight is same according to the index weight. This replicating style is called the passive investing. Investment fund are called passive funds. And funds that are not passive are called managed funds. Index schemes are also called as unmanaged schemes(since they are passive) or tracker schemes(since they track index)#p#分页标题#e# Another is by doing research and identifying a basket of securities and derivatives whose movement is similar to that of index. Schemes that invest in such basket are called as active index funds.
Enhanced Index Funds
Exchange Traded Funds (ETF) ETF different from index funds in following respect A single NAV in case of open end and in case of ETF is traded in the market place. so its price keeps changing during day The AMC of an ETF does not offer sale and re purchase price of the units. Unique feature is that beside secondary market it also has primary market.
Fixed Maturity Plans When a series of FMP are issued for different maturities they are called serial funds. These funds can chose exclusively to invest in government securities and called Serial gilts, alternatively they can invest in non government securities in which case they become Serial Bond Schemes. Non government securities have risk of default (credit risk) which does not exist in case government securities.
Schemes by Geography These invest in securities from a specified country or region. This is based on the fact that a particular country or region will show a higher growth or returns on the equity market. Offshore funds- these mobilize the money from investors for investment outside their country.
The principle of time diversification has given rise to the concept of
(SIP)
(SWP)
(STP) Thus it is clear that SIP tempers with the gain or loss from the investment SIP does not offer protection from losses. If the market turns adverse then you can lose money even in SIP. SIP ensures that your acquisition cost approximate the average NAV. Therefore this investment style is also called rupee cost averaging. Value averaging ensures that investors book profit in rising market and invest in loosing market.
For e.g.
For e.g It occurs in two situations On investment or disinvestment (here SIP and SWP is useful) On change in value of securities in market. In case of mutual funds such rebalancing can be achieved by systematically moving money between schemes. Mid-Cap Fund——中型基金 Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies as small or medium, each mutual fund has its own classification for small and medium sized companies. Generally, companies with a market capitalization of up to Rs 500 crore are classified as small. Those companies that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as medium sized. Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in mid caps now a day because the price of large caps has increased substantially. Small / mid sized companies tend to be under researched thus they present an opportunity to invest in a company that is yet to be identified by the market. Such companies offer higher growth potential going forward and therefore an opportunity to benefit from higher than average valuations. But mid cap funds are very volatile and tend to fall like a pack of cards in bad times. So, caution should be exercised while investing in mid cap mutual funds. Growth Option——成长期权 The Scheme will not declare any dividends under this option. The income earned by the scheme will remain invested in the scheme and will be reflected in the NAV. This option is suitable for investors who are not looking for current income (but who have invested with the intention of capital appreciation). Moreover, if units under this option are held as capital asset for a period of at least one year, from the date of acquisition, unit holders should get the benefit of long term capital gains tax. Dividend Option——红利分配选择权 This option is suited for investors seeking income through dividend declared by the scheme. Only unit holders opting for the dividend option will receive dividends. An investor on record for the purpose of dividend distributions is an investor who is an unit holder, as of the record date. In order to be a unit holder, an investor has to be allocated units representing receipt of clear funds by the scheme. The scheme may be at the discretion of the trustee, declare annual dividends in its dividend plan subject to availability of distributable profits. Dividends will be declared on the last business day of March. If March 31st is a non business day, the previous business day will serve as the record date. Interim dividends may be declared at the discretion of the trustee. Unit holders also have the option to reinvest their dividend at the ex-dividend NAV. The trustee, in its sole discretion, may also declare interim dividends. It should be noted that actual distribution of dividends and the frequency of distribution indicated above, are provisional and will be entirely at the discretion of the trustee and depend, inter alia on the availability of distributable surplus to the extent the entire net income and realized gains are not distributed, the same will remain invested in the scheme and be reflected in the NAV.#p#分页标题#e# Payout Dividend——支付股息 As per the regulations, the fund shall dispatch to the unit holders, the dividend proceeds within 30 days of declaration of the dividend. Dividends will be payable to those unit holders whose names appear in the register of the unit holders on the date (record date). Dividends will be paid by cheque; net of taxes may be applicable. Unit holders will also have the option of direct payment of dividend to the bank account. The cheques will be drawn in the name of the sole/first holder and will be posted to the registered address of the sole/first holder as indicated in the original application form. The fund will endeavor to dispatch the dividend cheques within 30 days of the record date. To safeguard the interest of the unit holders from loss or theft of dividend cheques, investor should provide the name of their bank, branch and account number in the application form. Dividend cheques will be sent to the unit holder after incorporating such information.
Reinvest Dividend——红利再投资 Revocation of any such decision also must be made in writing and signed by all the registered holder(s) of the units and also sent to the registrar. The additional units issued under the sub-option “Reinvest Dividend” under option B and held as capital asset would get benefit of long-term capital gains tax if sold after being held for one year. For this purpose one year will be computed from the date when such additional units are issued. Effect of Dividend: The NAV of the unit holders in dividend option will stand reduced by the amount of dividend declared. The NAV of the growth option will remain unaffected. Mutual fund industry in India——在印度共同基金行业 The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it reached the height of 1,540 bn.#p#分页标题#e# Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling. The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.
First Phase -1964-87
Second phase1987_1993 (Entry of Public Sector Funds)
Third Phase- 1993-2003 (Entry of Private Sector Funds) The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase- since February 2003 The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. Performance of Mutual Funds in India
Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.
The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes.#p#分页标题#e# The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and don'ts of mutual funds. Drawbacks of Mutual Funds Mutual funds have their drawbacks and may not be for everyone:
No Guarantees:
grown by about 20 per cent Excluding Unit Trust of India (UTI), however, the growth has been a staggering eight-fold in just under five years, from Rs 15,200 crore as at March 1999 to Rs 1, 20,300 crore at December 2003, CRISIL said. The gradual change in the investors' risk profile and the Association of Mutual Funds of India's (AMFI) efforts for an appropriate regulatory environment have also contributed to growth of MF industry, the CRISIL study said.#p#分页标题#e# There is a huge latent growth potential as industry size is only
four per cent of the country's gross domestic product (GDP)
(a) By structure - Open ended scheme - Close ended scheme - Interval fund (b) By investment objective - Growth fund - Income fund - Balanced fund - Money market fund ( c) Other schemes - Tax-saving fund - Sectoral scheme - Index scheme - Foreign securities fund Open ended scheme - An Open-ended Fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. When the investors redeems the units, the fund repurchases the units from the investor. Close-ended Funds - A Close-ended Fund has a stipulated maturity period, which generally ranges from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the Stock Exchanges, if they are listed. The market price at the stock exchange could vary from the scheme's NAV on account of demand and supply situation, unit holders' expectations and other market factors.
By Investment Objective: The aim of Income Funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. Capital appreciation in such funds may be limited, though risks are typically lower than that in a growth fund.#p#分页标题#e# Balanced Funds The aim of Balanced Funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. This proportion affects the risks and the returns associated with the balanced fund - in case equities are allocated a higher proportion, investors would be exposed to risks similar to that of the equity market. Balanced funds with equal allocation to equities and fixed income securities are ideal for investors looking for a combination of income and moderate growth. Money Market Funds - The aim of Money Market Funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call Money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.
Other Equity Related Schemes: These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws, as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction under Section 80 CCC of the Indian Income Tax Act, 1961. Index Schemes - Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE S&P CNX 50. Sectoral Schemes - Sectoral Funds are those which invest exclusively in specified sector(s) such as FMCG, Information Technology, Pharmaceuticals, etc. These schemes carry higher risk as compared to general equity schemes as the portfolio is less diversified, i.e. restricted to sector(s) / industry (ies). Foreign Securities Funds These funds invest in equities in one or more foreign countries thereby achieving diversification across the country's borders. However they have additional risks such as the foreign exchange rate risk- and their performance depends on the economic conditions of the countries they invest in. FSE funds may invest in a single country (hence riskier) or many countries (hence more diversified). Exchange Traded Fund's An Exchange traded Fund (ETF) is a mutual Fund Scheme, which combines the best features of open and closed end structures. It tracks a market index and trades like a single stock on the stock Exchange. its pricings is linked to index and units can be bought /sold on the stock Exchange.
Fund structure and constituents Mutual funds have a unique structure that is distinct from the other entities such as companies or firm's .it is imp. for employees and distributors to be familiar with special features of the structure of mutual fund, because it determines the rights and responsibilities of the fund's constituents viz., Sponsor,trustee,custodian,transfer agents, and fund/assets management company(AMC).the legal structure also drives the inter- relationships between these constituents.#p#分页标题#e#
(a)
The constituents of mutual funds in the USA are
Equivalent to AMC - Management group - Family of mgmt .cos owned by a group of people. - Custodian - The Entity that holds the fund's assets on behalf of mgmt.co. All the MFs irrespective of their structure, including a of the constituents described above, are regulated by Securities Exchange Commission (SEC).
(b)
(c) -The fund sponsor -MF as trusts. -Trustees -The asset management company(AMC) >-Independent directors and trustees -Custodian and depositories -Banker -Registrars & transfer Agents -Distributors
Sponsor -Eligibility - He is a person of ability, integrity and standing; - Has not been found guilty of moral turpitude; - Has not been convicted of any economic offence or violation of any securities law; - Have furnished particulars as prescribed in from C.
Two third trusties shall be independent persons and shall not be associated with the sponsors or be associated with them in any manner whatsoever. - An appointment of AMC can be terminated by majority of trustees or by seventy five percent of the unit-holders of the MF scheme. Any change in the appointment of an AMC shall be subject to prior approval of the board and the unit- holders.
Role of Self-Regulatory Organizations Agencies like RBI or SEBI are regulators with legal powers to set rules and enforce them on market participants over whom they have jurisdiction. For exp- SEBI regulates the merchant bankers, stock brokers, and mutual funds. However, at times regulator grants power to market participants for self regulation. A Self Regulatory Organization (SRO) is an association representing groups of market participants, which is specially empowered by the apex regulatory body to exercise pre-defined authority over the regulation of their members. Stock Exchange in most countries is granted the status of SROs. Normally, the SROs facilitate decentralization in the regulatory structure, involve the market players in the regulatory process and ensure that the regulatory policies and procedures do not ignore market realities or become unmanageable for apex regulatory body. It has to be noted that everybody representing a group of market participants does not automatically become a SROs; it has to be granted specific powers and approvals to become a SRO by the govt., appropriate laws and recognition of by regulatory authority. Hence ,a brokers' or banks' or ‘mutual funds' industry association may choose to remain just that - a trade body without any specific powers as SRO.
SROs in India#p#分页标题#e# Association of Mutual Funds in India (AMFI) As in the USA, where the investment co. institute plays a role as an industry association for the mutual fund industry, the Association of Mutual funds in India (AMFI) plays similar role in India. AMFI is not a SRO, though it is conceivable that it may choose to apply for that status and become one in future. AMFI was incorporated in 1995 with the objective of representing the MF industry collectively.
Its principal objectives are:
(1)Rights to Proportionate”Beneficial ownership”
(6) Right to terminate the AMC.
Limitation to investors ‘Right' The offer documents issued by mutual funds serve the same purpose of inviting investor and giving them the information about the new fund offer. The prospectus of a closed -end fund is issued only once at the time of issue, as the units are normally not repurchased from investors. Investment in a closed-end fund is like investing in a co issuer's new shares. Open-ended fund MFs could issue and repurchase units on an ongoing basis. this means that the offer document of open-ended funds is valid for a the time, until amended, though it will be 1st issued at the time of launch of the scheme. SEBI requires the offer doc. of an open-end fund to be revised every two years.#p#分页标题#e# Importance for the investor——投资者的重要性
The offer doc. is one the most imp. Sources of information from the perspective of prospective investor considering investment in a new mutual fund. Apart from the scheme details, the offer doc. also gives much valuable information that is relevant for investor's decision making on whether he should consider subscribing to the new scheme being proposed.
Detail of sponsor and AMC. DISTRIBUTION AND SALES CHANNELS——分销和销售渠道 In a vast country like India ,taking the message of investing through MFs is big mktg.challenge.Investors need to be educated about the benefits and intricasis of mutual fund investing. This challenges can be solved by large no. of intermediaries ao distributors working throughout the country. This “fund distributors” are clearly the most important link between the fund management industry and the investors. WHO CAN INVEST IN MFs IN——谁能在MFs投资
INDIA MFs in India are open to investment by-
Types of distribution Channels What is NAV? Simply put, NAV is the sum total of all the assets of the mutual fund (at market price) less the expenses (fund manager fees, audit fees, registration fees among others); divide this by the number of units and you arrive at the NAV per unit of the mutual fund. An illustration should help us better understand the same. The value of a mutual fund share. Calculated by dividing the total net asset value of the fund bythe number ofshares outstanding.
NAV calculation 51,000 Expenses (Rs) 1,000 No. of Units 5,000 NAV (Rs) 10 So when you wish to invest in a mutual fund, you invest in it at its existing NAV (adjusted for the entry load), i.e. you buy the units at a price (i.e. NAV), the calculation of which is based on the current market price of all the assets that the mutual fund owns. In other words, the NAV represents the fund's intrinsic worth.
This is quite evident from the fact that Mutual Fundshad beenrecently collecting huge corpus in their New Fund Offers or NFOs, whereas the collections in the existing schemes were negligible. In fact, investors sold their existing investments and invested inNFOs. This switch makes no sense, unless the new fund has something different and better to offer. This situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 or Rs 100. However, this perception is totally wrong and investors would be much better off once they appreciate this fact. Two funds with same portfolio are same, no matter what their NAV is. NAV is immaterial. Why people carry this perception is because they assume that NAV of a MF is similar to the market price of an equity share. This, however, is not true. NAV vs Price of an equity share In case of companies, the price of its share is ‘as quoted on the stock exchange', which apart from the fundamentals, is also dependent on the perception of the company's future performanceand the demand-supply scenario. And hence the market price is generally different from it's' book value. There is no concept as market value for the MF unit. Therefore, when we buy MF units at NAV, we are buying at book value. And since we are buying atbook value, we are paying the right price of the assets whether it be Rs 10 or Rs.100. There is no such thing as a higher or lower price. NAV & it's impact on the returns We feel that a MF with lower NAV will give better returns. This again is due to the wrong perception about NAV. An example will make it clear that returns are independent of the NAV.#p#分页标题#e# Say you have Rs 10,000 to invest. You have two options, wherein the funds are same as far as the portfolio is concerned. But say one Fund X has an NAV of Rs 10 and another Fund Y has NAV of Rs 50. You will get 1000 units of Fund X or 200 units of Fund Y. After one year, both funds would have grown equally as their portfolio is same, say by 25%. Then NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y. The value of your investment would be 1000*12.50 = Rs 12,500 for Fund X and 200*62.5 = Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the NAV. It is quality of fund, which would makea difference to your returns. In fact for equity shares also broadly this logic would apply. An IT company share at say Rs 1000 may give a better return than say a jute company share at Rs 50, since IT sector would show a much higher growth rate than jute industry (of course Rs 1000 may ‘fundamentally' be over or under priced, which will not be the case with MF NAV). The following illustration will clearly establish the irrelevance of NAV while making an investment decision.
NAV: Does size matter? 146.17 43.57 Franklin Bluechip (G) 138.10 39.09 Pru ICICI Power (G) 84.51 38.67 HSBC Equity (G) 74.42 37.63 Kotak 30 (G) 72.06 36.54 HDFC Equity (G) 153.79 35.50 (Data sourced from Credence Analytics. NAV as on February 09, 2007)
(To insure a fair comparison we have only considered open-ended equity funds from the predominantly large cap segment.) Kotak 30 with a lowest NAV of Rs 72.06 has clocked a return of 36.54% and performed better then HDFC Equity which has the highest NAV of Rs 153.79 but recorded an NAV appreciation of 35.50%, which is the lowest in our sample. This table clearly indicates that there is no correlation between the NAV and the performance of the mutual fund. It is evident that the fund's current NAV and its expected performance are unrelated and therefore making an investment decision based on the NAV would be misguided. As an investor you need to consider factors like your own risk profile, the fund's management style and performance.
Who calculates a mutual fund's NAV? How would we know if the mutual fund is giving an incorrect picture to delay dividend distribution?#p#分页标题#e# NAVs are calculated by the mutual fund housesthemselves or through independent entities. Reliance Mutual Fund and ABN Amro Mutual Fund, for instance, get the calculations done by Deutsche Bank. The market watchdog and mutual fund regulator, the Securities and Exchange Board of India, has laid down the regulations and guidelines with regard to how the funds must value their investments. The above valuations may also be subject to audit on an annual basis. Moreover, there is no advantage that a mutual fund can derive by disclosing incorrect NAVs in relation to dividend distribution. No mutual fund isobliged to make dividend distributions at specific intervals of time or at the attainment of a specific NAV. They do so purely at their own discretion. Therefore, an investor should have no apprehension as to the calculation of NAVs. CUSTOMISATION OF MUTUAL FUND AS PER THE TYPE OF INVESTOR:——定制的共同基金按照投资者的类型 There are three kinds of investors who have been witnessed, i.e.:
High-risk takers - Invest in Equity funds. Equity fund An equity mutual fund would try to achieve a higher long-term appreciation or growth of your capital. But then you had better be prepared for a certain amount of volatility (fluctuation in value of investment). An equity mutual fund identifies and invests in shares of high quality companies whose businesses are sound and have good, steady growth. The share price of such companies should show an increase over a period of time, although it can fluctuate substantially in the short term. Thus, one can achieve higher growth if one were to invest for a long term (usually 2-3 years at least). In the short term, the prices may come down, causing a temporary reduction in value of the investment. Debt fund This one would aim to achieve steady income at low risk to the invested principal. To achieve this the mutual fund would invest in what are called fixed-income instruments. These are similar to the fixed deposits of banks, but are usually issued by private and public sector companies as well as by the Indian government as a means to borrow money. Some of the money with the fund may be lent to various banks and other institutions for a very short term (call money and money market instruments). The value of these securities increases steadily as the interest associated with them accrues to the fund. Further fluctuations may also come about due to a change in the government or RBI interest rates, which may affect the value of your investments, or if one of the debtors is faced with an inability to return the money borrowed.#p#分页标题#e# Therefore, although the actual returns cannot be guaranteed due to such fluctuations, debt funds usually are a very safe way to invest money and achieve superior returns to conventional bank deposits.
Balanced fund A balanced fund is geared toward investors who arelooking for a mixture of safety, income and modest capital appreciation. The amounts that suchamutual fund invests into each asset class usually must remain within a set minimum and maximum.
Why you must invest in a balanced fund By investing in both shares and fixed-return investments, balanced funds seekthe best of both worlds. They includethe power of equities (shares) and the stability of debt market instruments (fixed return investments like bonds) and are most likely to take you to your goal safely. They are the best hope for those who want to benefit from the stock market but don't have the stomach for volatility. We believeall sorts of investors should have at least some portion of their investments in balanced funds. What makes balanced funds such a power investment tool is their inherent design, which allows them to maintain an effective balance between debt and equity. Performance Balanced funds have concentrated more on equity in recent times and the reward has been substantial. On an average, balanced funds have gained 43.58% in the last one year. Among the top gainers, Magnum Balanced has given areturn 71.01% and hasoutperformed the average returns of a diversified equity fund (average of a diversified equity fund: 67.37%). Kotak Balance (59.81%), HDFC Prudence (59.73%) and BoB Balanced (57.92%) too have done well. The laggards have not done bad either, with the worst performing LICMF ULSI gaining 25.14%. Know where yourmoney is going If the fund manager plays his cards right, returns follow. However, getting the balance right is tricky.That is why your fund managers' ability becomes all the more crucial. An average balanced fund maintains a 60:40 equity debt ratio. That means 60% of their total investment is in equity and the balance in debt. But, in a booming market (like the current bull run we are facing now), funds cross this 60% limit in the search of higher returns. And, if the fund manager makes a few wrong investments, the fund's returns may go for a toss. The debt market is not doing too well right now, so most funds have been making optimum use of their equity component to earn returns. In the past year, mostof the top performers in this category have kept their debt allocation below 30%.#p#分页标题#e# Take BoB Balance, for instance. The fund has a one-year return of 57.92% but has got it by completely ignoring the debt market for the last four months. Of all the money the fund manages, 60.79% is in shares and 39.21% is in cash (as of investments declared on June 30, 2005). Magnum Balanced has kept half of its equity investments in mid-cap and small-cap stocks in the last year. HDFC Prudence, BoB Balance and Kotak Balance too have huge amounts invested in these kinds of stocks. While large-caps, the returns they have provided are much higher. A majority of balanced fund performers have not done well simply because they have stuck to their large-cap holdings A good investment to consider——一个好的投资需要考虑 Balanced funds have proved their worth time and again and rewarded investors with superlative returns and stability. The returns may not be as flashy as diversified equity funds, but balanced funds are the ultimate vehicle for long-term growth for conservative investors. They will save you from bumpy rides and ensure a soft landing. TAXATION IN MUTUAL FUND——税收在共同基金 Impact of tax on income from mutual funds Income earned from mutual funds falls under two heads -
dividend and capital gain. So, if you were to receive Rs 100 as dividend from a debt mutual fund, it is equivalent to Rs 112.5 being paid out, the incremental Rs 12.5 having been paid to the government as distribution tax. In case of equity funds however, as mentioned, there will be no such implication. Investors who fall in the highest tax bracket should opt for the dividend option in mutual fund schemes. However, they should consider the fact that the tax on dividend paid to them has been paid by the mutual fund company itself in so far as debt schemes are concerned.
Let's now consider the second head of income from mutual funds - capital gain. Step I: Compute Capital gains with indexation Sale Proceeds xxx Less: Indexed Cost of Acquisition xxx ---- Long term Capital Gains xxx ---- Tax payable will be 20% of capital gains as compute above Formula for calculation of indexed cost of acquisition Cost of acquisition ------------------------------------------------------- x Cost inflation index for the year in Cost inflation index for the year in which asset is transferred which asset is acquired Step II: Compute Capital Gains without indexation Sale Proceeds xxx Less: Cost of Acquisition xxx ---- Long term Capital Gains xxx ---- Tax payable will be 10% of Capital Gains as compute above Compare the tax payable under both the options. Lower of the two will be tax payable.
Example——实例 The capital gains will be calculated as follows Step I: Compute Capital gains with indexation Sale Proceeds (5,000 units x Rs 12 ) 60,000 Less: Indexed Cost of Acquisition** 52,185 ------------
Long term Capital Gains 7,815 Tax payable will be 20% of Rs 7,815 i.e. Rs 1,563. ** Indexed cost of acquisition: 50,000 x 406 / 389 = Rs 52,185 Step II: Compute Capital Gains without indexation Sale Proceeds (5,000 units x Rs 12) 60,000 Less: Cost of Acquisition (5,000 units x Rs 10) 50,000 -----------
Long term Capital Gains 10,000 Tax payable will be 10% of Rs 10,000 i.e. Rs 1,000 Compare the tax payable under both the steps. Lower of the two will be tax payable. Therefore the tax payable will be Rs 1,000 Tax liability on mutual fund investment can be reduced either by choosing the dividend option or by holding the investment for more than 365 days. Set off and carry forward of capital gains. Long term capital loss can be set off only against long term capital gains. Short term capital loss can be set off against any capital gains, whether short term or long term Long term capital loss can be carried forward for 8 years to be set off only against long term gains. However, a short term capital loss can be set off against any income under the head, capital gains (whether short term or long term) and such carry forward is permitted for 8 years. If indexation benefit is opted, then the rate of tax is 20%, if indexation benefit is not opted, then the rate of tax is 10%. The assessee can calculate the tax under both these methods and can adopt any method which is more beneficial. In other words, the assessee can choose the method in which the tax burden will be lesser than the other method. However this option of opting for the indexation or not opting for the indexation is available only in cases where the securities are listed in a recognized stock exchange in India. If such securities are not listed then the assessee will have to necessarily opt for the method using indexation benefit.#p#分页标题#e# Note: In all the cases, surcharge and education cess will be charged additionally over and above the given tax rate. E.g.: LTCG on Listed securities (STT not suffered): Sale consideration is Rs.5,00,000/-, cost of acquisition is Rs.25,000/-. The shares were purchased in 1994-95 and their sale took place in 2005-06. The cost inflation index for the both years is 259 and 497 respectively. Option 1 (With indexation): Indexed cost is Rs.25000 * 497/259 = Rs.47,973/-. Capital gains = Rs.4,52,507/-. Capital gains tax = Rs.4, 52,507*20% = Rs.90,501/- Option 2 (Without indexation): In the above case the capital gains will be Rs.5,00,000 minus Rs.25,000 = Rs.4,75,000/-. Capital gains tax = Rs.4,75,000 * 10% = Rs.47,500/-. The assessee can opt for Option 2 because the tax payable is lesser than that in Option 1.
What is Cost Inflation Index (CII)? This is a five-fold growth in about quarter of a century. The base year for the index is 1981-82. In the first few years, CII grew only by single digits. The latest jump is of 22 points, from 497 in 2005-06. The biggest increase thus far was in 1999-2000, when CII vaulted by 38 points to reach 389. How does CII help in capital gains computation? Capital gain, as you know, arises when the net sale consideration of a capital asset is more than the cost. Since `cost of acquisition' is historical, the concept of indexed cost allows the taxpayer to factor in the impact of inflation on cost. Consequently, a lower amount of capital gains gets to be taxed than if historical cost had been considered in the computations. An explanation in Section 48 defines `indexed cost of acquisition' as an amount which bears to the cost of acquisition the same proportion as CII for the year in which the asset is transferred bears to the CII for the first year in which the asset was held by the assessee or for the year beginning on April 1, 1981, whichever is later. For instance, an asset of value Rs 1 lakh on April 1, 1981 can be reckoned to cost Rs 5.19 lakh, were it to be sold now. If the assets sold had been acquired before April 1, 1981, the taxpayer has the choice of substituting the actual cost with market value as on April 1, 1981. Formula for computing indexed cost is (Index for the year of sale/ Index in the year of acquisition) x cost. For example, if a property purchased in 1991-92 for Rs 10 lakh were to be sold now for Rs 40 lakh, indexed cost = (519/199) x 10 = Rs 26.08 lakh. And the long-term capital gains would be Rs 13.92, that is Rs 40 lakh minus Rs 26.08 lakh.#p#分页标题#e# Mutual funds and tax benefits What are the tax benefits available to those who invest in mutual funds? What are the tax liabilities, if any? Since, April 1, 2003, all dividends, declared by debt-oriented mutual funds (i.e. mutual funds with less than 50% of assets in equities), are tax-free in the hands of the investor. A dividend distribution tax of 12.5% (including surcharge) is to be paid by the mutual fund on the dividends declared by the fund. Long-term debt funds, government securities funds (G-sec/gilt funds), monthtly income plans (MIPs) are examples of debt-oriented funds. Dividends declared by equity-oriented funds (i.e. mutual funds with more than 50% of assets in equities) are tax-free in the hands of investor. There is also no dividend distribution tax applicable on these funds under section 115R. Diversified equity funds, sector funds, balanced funds are examples of equity-oriented funds. Amount invested in tax-saving funds (ELSS) would be eligible for deduction under Section 80C, however the aggregate amount deductible under the said section cannot exceed Rs 100,000.
Is a capital gain on sale/transfer of units of mutual fund liable to tax? If yes, at what rate? Long-term capital gains on debt-oriented funds are subject to tax @20% of capital gain after allowing indexation benefit or at 10% flat without indexation benefit, whichever is less. Short-term capital gains on debt-oriented funds are subject to tax at the tax bracket applicable (marginal tax rate) to the investor.
Section 112: 'Units' are included in the proviso to the sub-section (1) to Section 112 of the Act and hence, unit holders can opt for being taxed at 10% (plus applicable surcharge, education cess) without the cost inflation index benefit or 20% (plus applicable surcharge) with the cost inflation index benefit, whichever is beneficial. Under Section 115AB of the Income Tax Act, 1961, long term capital gains in respect of units, purchased in foreign currency by an overseas financial, held for a period of more than 12 months, will be chargeable at the rate of 10%. Such gains will be calculated without indexation of cost of acquisition. No surcharge is applicable for taxes under section 115AB, in respect of corporate bodies.
Is it possible to offset the capital loss on a mutual fund investment after a dividend declaration? If you haven't adhered to this guideline then you cannot offset the capital loss arising from a dividend declaration.
How can I avoid payment of capital gains on mutual fund investments? Specified asset means any bond redeemable after 3 years:
Issued on or after April 1, 2000 by NABARD (National Bank for Agriculture and Rural Development or NHA (National Highways Authority of India INVESTMENT PLANS/OPTIONS IN MUTUAL FUND——在共同基金投资计划/选项 Following are the different investment plans available in Mutual Fund:
Systematic Investment Plan How does a SIP works An SIP allows you to take part in the stock market without trying to second guess its movements. It meansyou commit yourself to investing a fixed amount every month. Let's say it is Rs 1,000. When the NAV is high, you will get fewer units. When it drops, you will get more units.
Date 10 100 Feb 1 10.5 95.23 Mar 1 11 90.90 Apr 1 9.5 105.26 May 1 9 111.11 Jun 1 11.5 86.95 Within six months, you would have 5,894 units by investing just Rs 1,000 every month. This disciplined approach to investing will provide you with the following benefits:
Power of Compounding Power of Compounding - The benefit of investing NOW
Most of usdelay investments until the last moment. Needless to say, the longer you delay, the greater will be the financial burden on you to meet your goals. On the other hand, you would be surprised what you could achieve by saving a small sum of money regularly at an early age. Moreover, the earlier you invest, the longer your money works for you and greater will be the power of compounding. Clearly, the power of compounding can have a significant impact on your wealth accumulation, especially if you remain invested over a long period of time. Rupee Cost Averaging - The power of disciplined investment . Investing would be simple if you could always pick the best time to buy and sell. However, timing the market consistently can be a difficult task and you could be hit with a loss sooner or later. What you need is an automatic market-timing mechanism like Rupee Cost Averaging (RCA) that eliminates the need to time your investments. In other words, with RCA, you don't have to worry about where share prices or interest rates are headed. You simply invest a fixed amount at regular intervals, regardless of the NAV. The idea is that you buy fewer units when the NAV is high and more when it is low - automatically. This is in line with our natural desire to buy low and sell high.
For instance, you could opt for a Systematic Investment Plan (SIP) by investing Rs 1000 every month into an open-ended equity scheme with an NAV of Rs 10.
Convenience You do not have to take time out from your busy schedule to make your investments. Enroll for the SIP by starting an account and providing post-dated cheques of periodic investments (monthly, quarterly) based on your convenience. You can relax once you have sent in your cheques with the completed Enrolment Form. We shall bank your cheques on the requested date and credit the units to your account. The SIP facility is available in the Principal Income Fund, Monthly Income Plan, Child Benefit Fund (Career Builder Plan only), Balanced Fund, Index Fund, Growth Fund, Equity Fund and Tax Savings Fund. Systematic Withdrawal Plans——系统的撤军计划 Systematic Withdrawal Plans (SWPs) allow the investor to withdraw money from a debt or an equity fund in equal instalments at periodic intervals. Just like a systematic investment, a systematic withdrawal plan reduces the impact of timing when you liquidate your investments in a fund. Each instalment is generated by redeeming the necessary number of units from the investment. An SWP allows you to choose the quantum and periodicity of withdrawals from the fund. You will need to leave instructions with the fund on the periodicity of withdrawal, a date for each withdrawal and the delivery instructions for the money. You can use SWPs to set up a stream of monthly or quarterly incomes to see you through monthly expenses. Or you can use them to book profits periodically on investment to lock into a period of high returns from the equity or debt markets. The SWP could be a good alternative to the dividend option of a mutual fund, because payouts can be timed to your convenience, instead of having to wait for the fund to declare dividends.
Variations: Under the Fixed SWP, the investor can choose to receive a fixed sum, say, Rs 1000 a month, over a specified number of months by way of systematic withdrawals. Under the Appreciation option, you can leave instructions with the fund to redeem units only to the extent of the capital appreciation, if any, earned on the units. Fund houses have some limitations on how and when you can avail yourself of the SWP facility. Franklin Templeton requires a minimum balance of Rs 25,000 in a fund. Funds may also specify the minimum size of the monthly instalment under the SWP. Templeton sets a minimum instalment of Rs 1,000 for the Fixed SWP, while in Birla Sun Life it is Rs 500. The rules for the Appreciation option differ from fund to fund. For instance, Birla Sun Life allows withdrawals up to 90 per cent of the appreciation in a particular month or a quarter.#p#分页标题#e# Others allow you to specify a particular amount; withdrawals will be made only if the fund earns capital appreciation over the specified limit. Trigger options——触发选项 A few fund houses such as PruICICI Mutual Fund and UTI Mutual Fund offer a Trigger facility that is a variant of the Appreciation SWP. The Trigger facility saves you the bother of having to keep track of your investment; you can leave instructions on booking profits on fund holdings when a specified `trigger' is reached. For instance, with PruICICI you can choose among four Trigger options. `Appreciation' Trigger allows you to book profits when a certain NAV level is reached. You can have a `Stop-loss Trigger', by specifying certain lower NAV level at which the fund is to redeem units on your behalf. You can also specify a Trigger that will be activated after certain tenure or on a particular date. PruICICI also allows use of the option with a switch facility that enables the investor to switch investments from, say, equity to a debt fund, when a certain target return is reached. Systematic Transfer Plans——系统的转移计划 Suppose you have made big money on equity fund investments over the past year and want to plough the capital gains into safe investment avenues. A Systematic Transfer Plan (STP) could be the answer. A STP allows you to make periodic transfers from one fund into another managed by the same fund house. As with an SWP, you have to specify the instalment and the periodicity of the transfer. Fund houses usually offer monthly and quarterly STPs. But a few funds, such as PruICICI, allow systematic transfers even at weekly intervals. The STP can be a useful facility to re-balance your portfolio or to phase out investments in a fund over a period. You can invest a lump sum in a liquid or floating rate fund and leave instructions to transfer Rs 1000 every month into an equity fund. Or you can transfer a fixed sum every month from a debt to an equity fund. While many fund houses permit STPs from debt to equity funds, only a few allow the reverse. Franklin Templeton, PruICICI and Birla Sun Life allow systematic transfers out of their debt schemes and into their equity funds, but not the reverse. Kotak Mutual Fund permits two-way STP. Therefore, if you own Kotak products, you can make regular transfers from equity to debt funds, or vice versa. This can be useful for an investor who would like to re-balance his equity investments, and contain them within a desirable limit. STPs, too, offer a choice between a Fixed and an Appreciation option. A Fixed option STP allows you to sweep a fixed sum at periodic intervals into another fund. The Appreciation STP is activated only when the capital appreciation on your investment crosses a limit you have set.
Dividend Transfer Plan——红利转移计划#p#分页标题#e# A useful feature for investors looking to acquire a marginal equity exposure or benefit from an `equity kicker' to their debt returns. Limitations——局限性 Useful as many of these facilities are, the value-adds are not without limitations: These facilities are useful only when you own two or more products from the same fund house, not when your investments are diversified across fund houses. Fund houses have a shortlist of specific funds that are eligible for SWPs, STPs and DTPs. You will have to run a check on whether the fund in your investment shortlist offers each facility. Fund houses may have limitations on the simultaneous use of two add-on features. For instance, Franklin Templeton disallows the use of SIPs and SWPs at the same time, from a single fund. PruICICI stipulates that the Trigger facility is not available on investments made through the SIP or STP route. Fund houses usually have specific days in a month, when all STP and SWP requests will be given effect. This is inconvenient if you like to time each transaction. Types of risks——风险的类型 All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation will rise faster than your earnings, leaving you with less real purchasing power than when you started (Rs. 1000 gets you less than it got your father when he was your age). Consider these common types of risk and evaluate them against potential rewards when you select an investment. Market Risk——市场风险 At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to "market risk".
InflationRisk In short, how stable is the company or entity to which you lend your money when You invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures? Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting" which way rates will go is rarely successful. A Diversified portfolio can help in offsetting these changes.#p#分页标题#e# An industries' key asset is often the personnel who run the business i.e. Intellectual properties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability of qualified, trained and motivated personnel is very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invests. A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund. The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities.
Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. Understanding Volatility Measurements——理解波动性测量 When considering a fund's volatility, an investor may find it difficult to decide which fund will provide the optimal risk-reward combination. Many websites provide various volatility measures for mutual funds free of charge; however, it can be hard to know not only what the figures mean but also how to analyze them. Furthermore, the relationship between these figures is not always obvious. Read on to learn about the four most common volatility measures and how they're applied in the type of risk analysis that is based on modern portfolio theory. Optimal PortfolioTheory and Mutual Funds—— 最优投资组合理论和共同基金
One examination of the relationship between portfolio returns and risk is the efficient frontier, a curve that is a part of the modern portfolio theory. The curve forms from a graph plotting return and risk indicated by volatility, which is represented by standard deviation. According to the modern portfolio theory, funds lying on the curve are yielding the maximum return possible given the amount of volatility.#p#分页标题#e# Note that the modern portfolio theory and volatility are not the only means investors use to determine and analyze risk, which may be caused by many different factors in the market (see the tutorial R
#1: Standard Deviation The standard deviation essentially reports a fund's volatility, which indicates the tendency of the returns to rise or fall drastically in a short period of time. A security that is volatile is also considered higher risk because its performance may change quickly in either direction at any moment. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return, the average return of a fund over a period of time. A fund that has a consistent four-year return of 3%, for example, would have a mean, or average, of 3%. The standard deviation for this fund would then be zero because the fund's return in any given year does not differ from its four- year mean of 3%. On the other hand, a fund that in each of the last four years returned -5%, 17%, 2% and 30% will have a mean return of 11%. The fund will also exhibit a high standard deviation because each year the return of the fund differs from the mean return. This fund is therefore more risky because it fluctuates widely between negative and positive returns within a short period.
A note to remember is that, because volatility is only one indicator of the risk affecting a security, a stable past performance of a fund is not necessarily a To determine how well a fund is maximizing the return received for its volatility, you can compare the fund to another with a similar investment strategy and similar returns. The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired. Consider the following graph: With the S&P 500 Fund B, the investor would be acquiring a larger amount of volatility risk than necessary to achieve the same returns as Fund A. Fund A would provide the investor with the optimal risk/return relationship.#p#分页标题#e#
#2: Beta If, for example, a fund has a beta of 1.05 in relation to the S&P 500, the fund has been moving 5% more than the index. Therefore, if the S&P 500 increased 15%, the fund would be expected to increase 15.75%. On the other hand, a fund with a beta of 2.4 would be expected to move 2.4 times more than its corresponding index. So if the S&P 500 moved 10%, the fund would be expected to rise 24%, and, if the S&P 500 declined 10%, the fund would be expected to lose 24%. Investors expecting the market to be bullish may choose funds exhibiting high betas, which increase investors' chances of beating the market. If an investor expects the market to be bearish in the near future, the funds that have
betas less than 1 are a good choice 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2 it's theoretically 20% more volatile than the market. Many utilities stocks have a beta of less than 1. Conversely most high-tech Nasdaq-based stocks have a beta greater than 1, offering the possibility of a higher rate of return but also posing more risk. Be aware of the fact that beta by itself is limited and can be skewed due to factors other than the market risk affecting the fund's volatility.
#3: R-S quared R-squared values range between 0 and 100, where 0 represents the least correlation and 100 represents full correlation. If a fund's beta has an R-squared value that is close to 100, the beta of the fund should be trusted. On the other hand, an R-squared value that is close to 0 indicates that the beta is not particularly useful because the fund is being compared against an inappropriate benchmark.#p#分页标题#e#
If, for example, a bond fund was judged against the S&P 500, the R- squared value would be very low. A bond index such as the Lehman Brothers Aggregate Bond Index would be a much more appropriate benchmark for a bond fund, so the resulting R-squared value would be higher. Obviously the risks apparent in the stock market are different than the risks associated with the bond market. Therefore, if the beta for a bond were calculated using a stock index, the beta would not be trustworthy.
#4: Alpha A measure of a mutual fund's risk relative to the market. The formula for alpha is the following: [ (sum of y) - ((b)(sum of x)) ] / n Where: n = number of observations (36 mos.) b = beta of the fund x = rate of return for the market y = rate of return for the fund 1. 2. If a CAPM analysis estimates that a portfolio should earn 10% based on the risk of the portfolio but the portfolio actually earns 15%, then the alpha of the portfolio would be 5%. This 5% is the excess return over what was predicted in the CAPM model. For example, if a fund has an alpha of 1, it means that the fund outperformed the benchmark by 1%. Negative alphas are bad in that they indicate that the fund underperformed for the amount of extra, fund-specific risk that the fund's investors undertook.
#5: Sharpe Ratio Say a growth fund has a Sharpe ratio over the last five years of 0.57 and the recent range of Sharpe ratios for global equity funds went from as low a -1.11 to a high of 0.94. A positive Sharpe ratio means the fund did better on a risk- adjusted basis than the 91-day T-bill rate. In other words, the higher the Sharpe ratio, the better. The Sharpe ratio tells you about history but it does not tell you anything about the future. Just because a fund has a positive Sharpe ratio for the last five years does not mean it will outperform money market instruments for the next five years. A ratio developed by Bill Sharpe to measure risk-adjusted performance. It is calculated by subtracting the risk free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.#p#分页标题#e# Rp-Ri = -------- S.D.p Where Rp= Expected Portfolio Return Ri= Risk Free Rate S.D.p= Portfolio Standard Deviation The Sharpe ratio tells us whether the returns of a portfolio are because of smart investment decisions or a result of excess risk.
Keeping in mind, the above points, this report was prepared to educate all the parties involved in the mutual fund. Hopefully, our aim of preparing this report has been met after going through this report. All possible details about the mutual fund have been discussed here. The language that has been used here is also very simple to be understood even to a layman. (责任编辑：www.ukthesis.org) |