The investment pattern in a mutual fund depends on investment objective. The Asset Management Company (AMC) team includes the research analysts, fund managers and dealers appointed by AMC itself. The fund manager is held responsible for all the investment decisions taken and also takes decision on the investment pattern, of the scheme based on the objectives of the scheme. Information with regard to various investment opportunities are provided by the research team and the dealers implement the decision of the fund manager. The fund manager uses both primary and secondary markets for actually investing the funds. The deals are placed through the fund’s brokers and the custodians take care of the back office operations involved in the investment decisions. The research team evaluates the features of the stocks and recommends the same to the find managers. The various types of equity research include the following: A study of the earnings Continue reading
Investment Management
PESTEL analysis of Indian capital market
POLITICAL: The capital market of India is very vulnerable. India has been politically instable in the past but it is a little politically stable now-a-days.the political instability of the country has a very strong impact on the capital market. The share market of India changes as the political changes took place. The BSE Index, SENSEX goes up and down with any kind of small and big political news, like, if there is news that a particular political party has withdrawn its support from the ruling party, and then the capital market will go down with a bang. The capital market of India is too weak and is based on speculations. The political stability of the country is very important for the stability and growth of capital market in India. The political imbalance or balance of the country is the major factor in deciding the capital market of India. The political Continue reading
The Clients of Asset Management Firms
Typically, asset management firms are categorized according to the kind of clients they serve. Clients generally fall into one of three categories: (1) mutual funds (or retail), (2) institutional investors, or (3) high net worth. Some firms specialize in one of the three components, but most participate in all three. Asset management firms usually assemble these three areas as distinct and separate divisions within the company. It is critical that you understand the differences between these client types; job descriptions vary depending on the client type. For instance, a portfolio manager for high-net-worth individuals has an inherently different focus than one representing institutional clients. A marketing professional working for a mutual fund has a vastly different job than one handling pensions for an investment management firm. 1. Mutual Funds Mutual funds are investment vehicles for individual investors who are typically below the status of high net worth (we will discuss Continue reading
Bonus Issue of Shares – Meaning, Benefits and Motives
BONUS ISSUE OF SHARES When we invest the share capital in a business, we do so with the expectation of getting back not only our invested capital, but also a proportionate share of the surplus generated from operations, after all the other stakeholders have been paid their dues. Thus, collectively the business owes its shareholders, their invested capital as well as the surplus generated from operations. But in reality, while the business may pay us annual dividends, seldom is this surplus fully distributed away as dividends. Thus, the surplus which is retained in the business is still owed to us. This retained surplus is also reflected as retained earnings or reserves in the Balance sheet of a company. Together, share capital and reserves are known as equity or the net worth of a company. Over a period of time, the retained earnings of a firm Continue reading
Portfolio Diversification with a Number of Securities
The benefits from diversification increase, as more and more securities with less than perfectly positively correlated returns are included in the portfolio. As the number of securities added to a portfolio increases, the standard deviation of the portfolio becomes smaller and smaller. Hence an investor can make the portfolio risk arbitrarily small by including a large number of securities with negative or zero correlation in the portfolio. But in reality, no securities show negative or even zero correlation. Typically, securities show some positive correlation, which is above zero but less than the perfectly positive value (+1). As a result, diversification (that is, adding securities to a portfolio) results in some reduction in total portfolio risk but not in complete elimination of risk. Moreover, the effects of diversification are exhausted fairly rapidly. That is, most of the reduction in portfolio standard deviation occurs by the time the portfolio size increases to Continue reading
Difference Between Defined Benefit and Defined Contribution Pension Schemes
Pension is a fund that is built during the working life of the employee and then used to secure the income after retirement. These funds can be operated by employer (occupational pension) who invests over time or alternatively employee can invest in a fund of their choice (private pension scheme). Both of these schemes generate income after retirement. Pension schemes are of two major types: Defined Benefit Scheme Defined Contribution Scheme 1. Defined Benefit Scheme Defined benefit scheme is a type of pension scheme which ensures a particular level of income/benefit after retirement. Most of the cost of the benefit and risk of the investment is borne by the employer however in the contributory define benefit scheme employees also make compulsory contributions. The pension amount is either calculated on the bases of the final salary of the employee or depend upon the average earnings of the employee throughout his employment Continue reading