Mutual fund is an investment vehicle that pools together funds from investors to purchase stocks, bonds or other securities. An investor can participate in the mutual fund by buying the units of the fund. Each unit is backed by a diversified pool of assets, where the funds have been invested. A closed-end fund has a fixed number of units outstanding. It is open for a specific period. During that period investors can buy it. The initial offer period is terminated at the end of the pre-determined period. The closed-end schemes are listed in the stock exchanges. The investor can trade the units in the stock markets just like other securities. The prices may be either quoted at a premium or discount. In the open-end schemes, units are sold and bought continuously. The investors can directly approach the fund managers to buy or sell the units. The price of the unit Continue reading
Investment Options
International Commodity Exchanges
Recent years have witnessed a steep rise in the creation of the commodity exchanges along with a consistent expansion of the existing ones. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. Worlds Major Commodity Exchanges 1. The New York Mercantile Exchange (NYMEX) The New York Mercantile Exchange is the world’s biggest exchange for trading in physical commodity futures. It is the primary trading forum for energy products and precious metals. The Exchange has been in existence for 132 years and performs trades through two divisions, the NYMEX divisions, which deals in energy and platinum and the COMEX division which trades in all the other metals. A major contribution of the Exchange has been to develop and launch energy futures and options contract in 1978 to facilitate price transparency and risk management in this key market. Exchange has Continue reading
Convertible Issues – Explanation and Significance
A convertible issue is a bond or a share of preferred stock that can be converted at the option of the holder into common stock of the same company. Once converted into common stock, the stock cannot be exchanged again for bonds or preferred stock. Issue of convertible preference shares and convertible debentures are called convertible issues. The convertible preference shares and convertible debentures are converted into equity shares. The ratio of exchange between the convertible issues and the equity shares can be stated in terms of either a conversion price or a conversion ratio. Convertible Preference Shares: The preference shares which carry the right of conversion into equity shares within a specified period, are called convertible preference shares. The issue of convertible preference shares must be duly authorized by the articles of association of the company. Convertible Debentures: Convertible debentures provide an option to holders to convert them into Continue reading
Governance of the demutualized stock exchanges
In the past, in almost all the stock exchanges, the broker members of the governing boards have been critical in the governance of the stock exchanges. The reconstitution of the governing boards of the stock exchanges by SEBI, which reduced the broker representation on these boards to 50%, had helped in making the boards more independent and minimized the influence of brokers. However, in most stock exchanges on account of the brokers retaining posts of the officer bearers of the stock exchanges till recently viz. president, vice-president and treasurer, they continued to play a dominant role in the management of the stock exchange. The fall-out of this practice has been that most stock exchanges have failed to develop good corporate governance practices and strong management teams. This has not only been a perception but also a reality in most stock exchanges. Conflicts of interest have bedeviled the operations of the Continue reading
Formula Plans in Portfolio Management
The investor uses formula plans to facilitate him in making investment decisions for the future by exploiting the fluctuations in prices. The formula plans have sketched the basic rules and regulations for purchasing and selling of investments. The formula plans make the average investors superior to others. These formula plans in portfolio management are based on the fact that the investors will not have the problem of forecasting fluctuation in stock prices and will continue to act according to formula. So, formula plans are a type of investment strategy that makes use of pre-determined rules for the nature and timing of change in one’s investment portfolio as the market rises or falls. Rules for Formula Plans These plans work according to a methodology which is related for the working of each plan These plans cannot be used for short periods of time. The longer the period of holding the investments, Continue reading
Different Types/Categories of Mutual Fund Products
Investment companies or investment trusts obtain funds from large number of investors through sale of units. The funds collected from the investors are placed under professional management for the benefit of the investors. There are a variety of ways in which mutual funds are created to accommodate varied risk and return requirements of investors. Depending on the investment portfolio that is created and the segments of the various markets in which funds are invested, there is a choice of funds to investors. Mutual funds can offer further broad choices to the investors in terms of: Nature of participation: Open and close-end funds. Nature of income distribution: Dividend, growth and reinvestment of dividends. Mutual Fund Products based on the Nature of Participation 1. Open-Ended Mutual Funds An open-ended mutual fund remains open for issue and redemption of its shares throughout its unlimited duration. As an open-ended mutual fund is required to Continue reading