What are Corporate Actions?

Corporate actions tend to have a bearing on the price of a security. When a
company announces a corporate action, it is initiating a process that will
bring actual change to its securities either in terms of number of shares
increasing in the hands on the shareholders or a change to the face value of
the security or receiving shares of a new company by the shareholders as in
the case of merger or acquisition etc. By understanding these different types
of processes and their effects, an investor can have a clearer picture of what
a corporate action indicates about a company’s financial affairs and how that
action will influence the company’s share price and performance.
Corporate actions are typically agreed upon by a company’s Board of
Directors and authorized by the shareholders. Some examples are
dividends, stock splits, rights issues, bonus issues etc.

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Difference between Growth and DIvident option in mutual funds

People are confused , really confused …

There are 3 Mutual Funds Options (Growth , dividend , dividend Re-investment) and we will discuss those today. There are lot of misconceptions and myths which add to confusion in the world of mutual funds and agents use it against investors and make them fool …

1. Growth Option

Under this option you get the units at the time of buying and you have same number of units till the end. The NAV keeps changing according to performance.

2. Dividend Option

This is the most misunderstood option in mutual fund.

Dividend option in mutual funds means that you will be repaid some amount of your investments every year and it will be called as “dividends” , this helps those people who want some regular returns every year from their investments in mutual funds.
People think that dividend is something extra which they receive other then their investments which is not true 🙂 , Dividend is declared per unit basis, if you have 100 units and MF declares dividend Rs 4 per unit , you receive Rs 400 , and you think that your earlier investments have the same worth , where as it decreases by the amount you receive as dividend , because its paid out of your investments only . The NAV of the unit goes down after paying dividend proportionately.
Example : let assume you have Rs 1 lac of units in a mutual fund with NAV of Rs 100 , you will have 1000 units . dividend declared : Rs 20 per unit
How it works : You will get Rs 20,000 and then your remaining worth will be Rs 80,000 and as you have 1000 units , the NAV will go down to 80 . So your actual worth is same as Rs 1 lac . The only advantage to you is that you are getting liquidity with your investments and getting regular cash every year, unlike growth option.
Agents generally lure investors to invest in NFO’s claiming that if company declared dividends, they will get more dividend compared to existing funds as they will have more units, Which is nothing but a idiotic myth 🙂

3. Dividend reinvestment
In this option ,the step is as follows
– Re-adjust the NAV assuming that dividend is paid.
– after that buy more units of same MF with that dividend money and allot it. So ultimately the number of units increases and the NAV goes down. In this case dividend money is not given to the investor but re-invested in the same scheme.

Example : let assume you have Rs 1 lac of units in a mutual fund with NAV of Rs 100 , you will have 1000 units . dividend declared : Rs 20 per unit
How it works : Your dividend will be Rs 20,000 , and NAV will come down to Rs 80 like it happened above. Now this 20,000 will be re-invested in same mutual fund and you will get extra 250 units (20000/80).
Your Total units = 1250
NAV = Rs 80
Worth = 1250 * 80 = 1,00,000
Which one is better Dividend or Growth ?

It depends . There is no thumb rule to decide which one is better then the other, it depends on the situation and your needs.

When is Growth Option better ?
If you are a person who earns well and does not need regular money back from your investment and if you are looking at long term investments then growth option is best for you because your investments gets compounded , which does not happen on the dividend part in dividend option as it goes back to investor and its never part of future growth .

When is Dividend Option better ?
If you are a person who need regular money every year from investments for some purpose, It may happen that you have more responsibilities and more dependents and if any small money which you get extra every year is helpful to you , in that case you can go for dividend option.

Conclusion : Different options in mutual funds are for different types of investors , before investing just see what do you want from your investments and take appropriate option.

Do you have made all the planning regarding your future expenses?

Do you have made all the planning regarding your future expenses?

Ex. : Marriage, world tour, your new home,children’s education, children’s marriages, retirement planning and many more.

Invest systematically(SIP) for smooth and worry free life!

3 easy steps to create wealth:
1) Start savings regularly
2) Invest at right time
3) Invest in right asset class

Happy Investing!!

Key benefits of Personal Loans against Fixed Deposits

The reason for the growing popularity of this option as against traditional unsecured personal loans is the host of added benefits that come with such a loan.

  • The interest rates available for personal loans against fixed deposits are lesser than conventional personal loans. The rates for such loans are generally 1 to 2% higher than the rates being paid by the bank for the fixed deposit.
  • Such a loan does not require one to liquidate the FD which in that case lesser interest for being broken midway. This way the asset remains while the immediate financial requirements are met.
  • The tenure for the personal loans against fixed deposits normally extends up to the maturity of the fixed deposits.
  • The processing is also hassle free as the bank where you already have the fixed deposit will itself provide the personal loan against it.
  • There is no prepayment penalties associated with these kinds of loans which gives the borrower the freedom to repay whenever his cash flow situation improves.

Mutual Fund

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of India) that pools money from individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as equity shares, Government securities, Bonds, debentures etc.

Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds. All the mutual funds must get registered with SEBI.

NAV
NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into
funds is done on the basis of NAV-related prices.

Link of AMCS’s in india 

http://www.amfiindia.com/mfkyc.aspx

 

 

 

What care should one take while investing?

Before making any investment, one must ensure to:

1. obtain written documents explaining the investment
2. read and understand such documents
3. verify the legitimacy of the investment
4. find out the costs and benefits associated with the investment
5. assess the risk-return profile of the investment
6. know the liquidity and safety aspects of the investment
7. ascertain if it is appropriate for your specific goals
8. compare these details with other investment opportunities available
9. examine if it fits in with other investments you are considering or you
have already made
10. deal only through an authorised intermediary
11. seek all clarifications about the intermediary and the investment
12. explore the options available to you if something were to go wrong,
and then, if satisfied, make the investment.

These are called the Twelve Important Steps to Investing.

Screen Based Trading

The trading on stock exchanges in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to provide efficiency, liquidity and transparency, NSE introduced a nationwide, on-line, fully automated screen based trading system (SBTS) where a member can punch into the computer the quantities of a security and the price at which he would like to transact, and the transaction is executed as soon as a matching sale or buy order from a counter party is found.