On observing the past trends, it can be seen that certain factors are essential for the growth of the mutual funds industry. These factors are: Investor Base: A mutual fund makes it possible for investors to earn a higher return on their capital by pooling the capital of a large number of small investors and investing the pooled sum in a diversified manner. As the small investors cannot diversify on their own, their presence acts as a catalyst for the mutual funds to grow. As different investors have different investment requirements, their presence also acts as an incentive for the mutual funds to come up with new schemes, thus helping in further evolution of the industry. Returns On Market: Mutual funds invest in a diversified manner; the returns generated by them are generally reflective of the market returns. Higher the market returns, higher the expected returns from mutual funds. Higher Continue reading
Stock Investments
How To Dematerialize Your Shares
To dematerialize your share certificates you have to: Fill up a dematerialization request form, which is available with your DP; Submit your share certificates along with the form; (write “surrendered for demat” on the face of the certificate before submitting it for demat) Receive credit for the dematerialized shares into your account in 15 days. Dematerialized shares do not have any distinctive or certificate numbers. These shares are fungible – which means that 100 shares of a security are the same as any other 100 shares of that security. The investor can dematerialize only those certificates that are already registered in his name and belong to the list of securities admitted for Dematerialization at NSDL. Shares held in street name (market deliveries) cannot be dematerialized. If the share certificates that investor wants to dematerialize do not belong to the list of securities eligible for Dematerialization specified by NSDL, he can Continue reading
Scope and Objectives of Investment Portfolio Management
Scope of Portfolio Management Portfolio management is a continuous process. It is a dynamic activity. The following are the basic operations of a portfolio management. Monitoring the performance of portfolio by incorporating the latest market conditions. Identification of the investor’s objective, constraints and preferences. Making an evaluation of portfolio income (comparison with targets and achievement). Making revision in the portfolio. Implementation of the strategies in tune with investment objectives. Objectives of Portfolio Management The objective of portfolio management is to invest in securities is securities in such a way that one maximizes one’s returns and minimizes risks in order to achieve one’s investment objective. A good portfolio should have multiple objectives and achieve a sound balance among them. Any one objective should not be given undue importance at the cost of others. Presented below are some important objectives of portfolio management. Stable Current Return: Once investment safety is guaranteed, the Continue reading
Stock Market Terminology
A Absolute Return The return that an asset achieves over a period of time. This measure simply looks at the appreciation or depreciation (expressed as a percentage) that an asset – usually a stock or a mutual fund – faces over a period of time. Absolute return differs from relative return because it is concerned with the return of the asset being looked at and does not compare it to any other measure. Actual Return the actual gain or loss of an investor. Acquisition When one company purchases a majority interest in the acquired. Allotment The number of shares allotted to a participant in IPO against the actual number of securities he had applied for. American Depository Receipt (ADR) A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated Continue reading
Short Selling
Short selling is the selling of a security which is not owned by the seller or any sale that is completed by the delivery of a security borrowed by the seller. It is the process of selling the borrowed stock in the hope that the price of the stock win fall, so that the short seller can buy-back at a profit. In other words short sellers expect to buyback the securities at a lower rate than the price at which they sold. That is, short sellers make profit when the stock price goes down. They involve a lot of risks and pitfalls. Investors purchases stocks from share markets because they believe that a company has good growth prospects, above average management, an advantage on the competition, is undervalued, or for some similar reason. Selling a security short is done for the exact opposite reasons that securities are bought (long). Stated Continue reading
Sub Categories of Active Equity Management
Some of the major sub categories of the two major style of active equity management (top down and bottom up) are listed below; Growth managers: Growth managers can be classified as either top-down or bottom-up. The growth managers are either divided into large capitalization or small capitalization. The growth managers buy securities that are typically selling at relatively high P/E ratios, due to high earnings growth rate, with the expectation of continued high earnings growth. The portfolios are characterized by high P/E ratios, high returns, and relatively low dividend yields. Market timers: The market timer is typically a set category of top-down investment style and comes in many varieties. The basic assumption is that he can forecast the market i.e. when it will go up or down. In the sense he market timer is not too distant than the technical analyst. The portfolio is not fully invested in equities. Rather Continue reading