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Simple steps of Mutual Funds
Simple steps of Mutual Funds
How to Invest in Mutual Funds
¨ Mutual Fund
Mutual fund is the way to invest your money in stock market, bonds, Government securities etc.
Every mutual fund has one fund manager who looks after your money and invests in appropriate sectors fields etc. No
need for you to manage or worry about your money, it will be taken care by mutual funds manager. Mutual fund is
calculated in terms of NAV or unit price.
Investing types of Mutual Funds
¨ Open ended
In this method you can subscribe/buy mutual fund anytime during the year. Anytime you can buy and sell your units.
There is no lock in for your money.
¨ Closed ended
These types of funds are available only during certain period of time, not through out the year like open ended. And if you
invest/subscribe for this type of mutual fund then your fund will get locked for that particular period.
You can sell or redeem your units only after your lock in period completes.
¨ SIP (Systematic Investment Plan)
If the mutual fund, have SIP investment method they you can prefer this. In this method you have to invest in equal
monthly installment.
For example - If you want to invest 12000 per year, then you can plan to invest 1000/month. In this type of investment you
get two benefits, one is installment means instead of paying full amount you can pay in installment and second one is if
your mutual fund is related to equity market then you may get advantage of purchasing NAV when markets go down.
Mutual Funds Returns
Following are the reasons, why today most of the people choose mutual fund as the best investment method.
¨ Your money is managed by professional funds manager
Every mutual fund has a fund manager, who will be responsible for your money management, time to time he monitors the
performance of your mutual fund and if requires he do changes in the portfolio of mutual fund, so its like invest and forget.
But better to keep an eye on quarterly basis not even on monthly basis.
¨ Reduced risk
Mutual funds invest money in various stocks instead of single stock, if you choose equity link mutual fund. Even if you
choose any other mutual fund they will invest in various sectors, fields, Government securities funds etc. So your risk is
reduced and you can get higher returns. If you see past records of any top mutual fund, then minimum at least 12% to
15% returns they had declared, which is very good return as compared to any bank returns.
¨ Liquidity
Investors can buy and sell their mutual fund units any time, especially in open ended mutual funds.
¨ Affordability (cheaper to buy)
There is no compulsion for amount to invest in mutual fund; you can start investing from Rs.500. Investing in mutual fund
becomes easy for every one due to smaller amount.
¨ Convenient (easy to buy)
Now days most of the Mutual fund are offering online facilitiy. So you can view and monitor NAV’s, charges, mutual fund
plans, redeem units etc. using online facility by sitting at home or at internet café.
¨ Flexibility and variety
You have lots of varieties of Mutual fund and brand names. You can choose to invest in any sector you like, any field, any
investment pattern you like so investing in mutual fund is very flexible.
¨ Tax benefits
Very important is you get income tax benefits by investing in tax saving mutual fund and also 100% income tax exemption
on all mutual fund dividends.
Best Mutual Fund analysis
After all it’s your hard earned money, so think twice and consider following points before selecting your mutual fund,
¨ Profile of mutual fund
Understand where the mutual fund is going to invest your money. It’s very important to know the investment sectors and
fields where mutual fund is going to put your money.
¨ Don’t put all money in single mutual fund
Don’t ever try to put invest all your money in single mutual fund and also in mutual fund which are sector specific.
Because if something gives wrong with that fund then all your money will be in trouble and also if something happen to
that sector then also your money is in trouble.
So invest/put your money in such mutual fund, who is investing in diversified sectors/fields/shares etc. You can also plan
like one mutual fund of diversified equity plan, second mutual fund of balanced type and third one you can plan of debt
type etc. In this manner your money will get diversified, risk is reduced and you may get excellent profit.
¨ Find the right fund
- Look for past returns, dividend etc. the mutual fund has declared.
- Look for brand name of mutual funds like Franklin Templeton, HDFC, Reliance etc. to see more
your money will be on safer side.
- See how big is the mutual fund like market capitalization, turnover etc. Good if the mutual fund has large market
capitalization.
- If you have chosen equity or stock market related mutual fund, then you may go for SIP (Systematic Investment Plan)
method.
- Customer services (Its one of the important point) - The mutual fund company should be easily contacted i.e. you should
be able to easily contact the mutual fund company or its executive, how quickly they respond to your questions or your
fund related problems etc.
Compare Mutual Funds
¨ Diversified equity mutual funds
In this mutual fund type the money is invested in various selected shares of the stock market. It reduced the risk of
investing in single stock.
¨ Index mutual funds
This type of mutual fund gets invested in indices or index like sensex, nifty etc. This type of mutual fund has high risk and
high returns.
¨ Mid cap funds
All investment is done in various selected shares of medium scale industries. According to mutual fund mid cap stocks
have faster growth rate.
¨ Sector funds
In this mutual fund, money is invested in selected shares of specific sectors like auto, IT, pharmaceutical, FMGC etc.
Investment in this type of mutual fund is avoided as your money is invested in only specific sector.
¨ Tax saving mutual funds
Here your money may be invested in equity market, bonds etc. You get income tax benefit by investing in their type of
mutual fund.
Top companies mutual fund schemes
You may select following top mutual fund companies which are having good market
capital and name.
¨ ABN Ambro
¨ Birla mutual fund
¨ Fidelity Mutual Fund
¨ Franklin Templeton Mutual Fund
¨ HDFC
¨ ICICI
¨ JP Morgan
¨ SBI
¨ Sundaram
¨ UTI
¨ Reliance
Following is the summarization to brief you about the risk involved and returns you may get by investing
in particular type of mutual funds.
| Mutual Fund | Type of Mutual funds | Benefits you get from | |
| Low | Only in Debt | Bank/ Company FD, Debt | Liquidity, Better Post-Tax |
| Medium | Partly in Debt | Mix of shares and Fixed | Liquidity, Better Post-Tax |
| High | Only in Equity | Capital Market, Equity | Diversification, Expertise |
Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but DayTradingShares.com does not warrant or guarantee their accuracy or date.
Copyright © 2007 DayTradingShares.com All Rights Reserved
¨ NAV
It is the total asset value per unit of the fund and it calculated by Mutual Fund Company (also called as Asset Management
Company) at the end of every business. In other word NAV is the value/price of a single unit of your mutual fund.
For example, if the unit price or NAV of XYZ mutual fund is Rs.10 and if you invest Rs 500 then you will get 50 units of that
mutual fund.
¨ Charges
Generally Mutual fund charges one time fees in terms of entry load and exit load to compensate the expenses occurs for
maintaining mutual fund.
Entry load - Fees charged while purchasing/subscribing mutual fund.
Exit load - Fees charged while exit/selling your mutual fund.
The amount of entry and exit charges totally depends on Mutual Fund Company. Even some mutual funds don’t charge these
loads/charges.
Individual's Rules for investing in mutual funds
Investing is a quite a complex exercise. But when it comes to the basic principles, they are amazingly simple. Anyone can become good investor and reach your goals just by following those simple and easy rules. Here is the list of few rules for making investment in mutual funds:
Be a long-term investor:
You should have a long term horizon. Short-term trading will make brokers rich and not investors and the income tax department will also be happy. Mutual funds are diversified and therefore, their gains and losses are likely to be lower than what it would be in case you are investing in an individual security. However, major fluctuations are highly uncommon in mutual funds. So what make sense is to leave your capital in a mutual fund for a long time and let it compound. So the key point is Buy and Hold. It also requires to you do a reality check on yourselves so that you can define your goals and priorities before entering the market.
Start Early:
When you invest in the market is more important than the market timing. Always enter the market with long term thinking. Do proper researches before investing set your priorities and goals, ascertain your risk profile. Also very importantly you should keep yourself abreast with the daily market news. One should not do impulsive purchase allowing emotions overpowering the sense of reason.
Know yourself and then What You Are Buying:
The first step towards achieving your goals would be to know yourself, your risk appetite and accordingly make the investments. Once you have discovered yourself, explore the market and find out the kind of funds available in the market. Firstly, get a hang on the style and strategy followed by a fund by reading the available material. This will help in diversifying the portfolio and also in assessing potential risks. In general, large-cap value funds are less risky than small-cap growth funds.
Be A Disciplined Investor:
Once you've chosen some funds, you may stick with them. It is not necessary that one should always go with the tide. Even the unpopular groups tend to outperform in subsequent years. Investing a regular amount of money at regular intervals may add a good value to your portfolio. Make a systematic investment plan which in all probability likely to offer reasonable returns.
Know How Much You Pay:
There is one famous saying that Money saved is money earned. So it's always better to pay less than it is to pay more. Expenses are very important with your larger-cap, lower-risk funds, and less critical with small-cap funds and other higher-risk categories. You can afford to be lenient with the expense of a small-cap or a sector equity fund. Actually, the strength of the mutual fund lies in its simplicity. Don't follow the bandwagon.
Share market trading tips
Share market trading tips
¨ Don't Overtrade
First and very important is not to Overtrade - Never put all your money/savings in share market.
¨ Best Investment in different sectors
Do not invest your money in single share/company invest in multiple shares/companies and again not in same
sector. Invest in different sectors this will save you from big loss if that sector or company goes in down trend.
¨ Wait, watch and trade
Do not jump in market early. Wait, watch and trade. Make sure and confirm all your strategies like resistance and
support levels and then plan to trade/invest in share market.
¨ Study tips carefully
Do not react to tips given by anyone -
First observe that stock, check the volume, where t
Do not buy or sell blindly based on share tips.
¨ Always go with Market trend
Don’t short sell, if the market is going up and don’t buy if the market is falling down.
¨ Try to minimize your Loss and increase profit
Get ready to accept loss if you do wrong trade -
Come out of your trade if you have entered in wrong time by accepting loss, instead of waiting and running into huge
loss. Don’t Panic
Don’t make early trades and even don’t square off your trade early -
Even if you see the scrip has moved up drastically, don’t buy, confirm the volumes of buying and selling and then decide your
trade. Don’t square off /exit from your trade early if you see scrip/share has come down bit from top. If it is coming down from
top means it is cooling, if you see more buyer than seller then you should hold your position. You must know which share
has what momentum, means if the share price is Rs.120 then you can expect upside from Rs.1 to 5 and not Rs.50 to 100. If
the scrip is going up, it will go in ladder fashion, it will go up and it will come down bit and it will again continue its upward
journey.
¨ Invest in Share market for long term market
Share market returns are long term returns.
If you planning for short term, then you should keep updated yourself about your stock and share market. Some day traders
also do quite well earning on day to day basis. If you don’t know proper day trading, then you should not do its big risk
and same thing applies for short term trading. Invest in shares having good fundamental background and wait for long term,
you will get good returns as compared to any other investment methods.
¨ Wait for opportunity
If you are not sure about market movement then watch and wait for opportunity, don’t trade forcefully. Some times market
move in range bound means market move up-down in very small range at that time it becomes very difficult to judge
the market direction. Its always better to wait instead of losing money.
¨ Don’t expect too much - day traders
Don’t expect too much - Be happy in whatever profit you get, don’t try to grab too much from market. Be realistic,
and don’t expect too much.
¨ Online investment advice for high returns
Lack of Knowledge is very risky and very dangerous, so don’t do trading or investing without having proper knowledge.
Read books, refer websites and get prepared before you plan for share market trading or investing.
Investment in Long term trading in Indian share market
Investment in Long term trading in Indian share market
Short Term Trading -
Share trading done from one week to couple of months is called short term.
Companies or sectors having some breaking news will be used for short term trading
Mid term Trading -
Share trading done from one month to couple of months, say six to eight months is called mid term trading.
Companies announcements of quarterly results or some big foreign acquisitions will be used for mid term trading.
Long term trading -
Share trading done form couple of months to couple of years is called long term trading.
Companies whose fundamentals are good and have good future plans then the shares of these companies are used for long term trading.Generally traders having good capital go for long term trading.
Information and guide on Online Share trading
Information and guide on Online Share trading
What is Online share Trading ?
Trading with the help of computer having internet connection and online trading account is called Online Share Trading. Basically people use online share trading who want to trade themselves.
Essential of Online Trading -
¨ Online trading account - You have to open an online trading account with any of the bank or financial trading system like
ICICIdirect.com, 5paisa.com, Sharekhan.com etc. Their will be nominal annual charges. These charges vary from bank
to bank but should not be more than Rs.1000 annually.
¨ A computer with internet connection or can do trading in internet cafe.
¨ After successfully opening the online account you will receive the username and password with the help of which you
can login in online trading system and trade yourself.
¨ The trading system executive (with whom you opened trading account) will help you initially about how to use the
online trading system.
¨ Once you get familiar with the system then you can trade yourself at your home or in the internet cafe.
¨ Nowadays you can get internet enabled on your cell (which is called GPRS) whose speed will be sufficient to do trading
and also the charges of GPRS are very nominal.
Advantages of Online Trading
¨ No need to depend on any broker or anybody else to place the order or to square off the order. In short you are the boss
of yourself to do trading of shares.
¨ Its reliable, convenient and you can take your own decisions yourself by actual selling or analyzing the market on the
computer screen instead of calling broker all the time and getting news about the market.
¨ Its not possible or practical for a broker to update you about each and every news about the market or any news which
will influence or affect the share market. Because he may be having many other customers like you and even if he
updates you by that time the news have been affected the concerned sector or share. So if you are doing online trading
yourself, then you may save yourself from big disaster. You will get news and updates on various websites and also on
your online trading system and most of the information will be free of cost. “Always remember share market always get
influences (or affected) by the appropriate news. So get updated or be in touch with news all the time. This will benefit
you always.
¨ By doing online trading yourself, you can see and judge where market (or your share) is heading by seeing different
graphs online yourself, which is not possible if you’re trading through broker. Some online trading systems have graphs
integrated in their system, so your job is to just add those graphs and check the status of current market (or share)
(graphs will be discussed later). And depending on your analysis you can take steps towards your successfully trading.
(How to analyze graphs will be mentioned later).
¨ All your transactions and related documents can be seen online and can also be downloaded to your PC without
depending on your broker. You can also check the status of your amount on daily basis through you online trading
system.
Disadvantages of Online Trading
¨ In online trading system you may face problem of disconnection to internet due to which you will not be able to login to
your online trading system and hence you can’t do trading yourself. At such critical times you have to call trading
system executive and do trading or square off your transactions.
¨ If may face other problems such as electricity cut-off, PC problem etc during online trading then immediately you have
to contact your trading system executive and place orders or do trading.
Fundamental and Technical analysis in Indian Share Market
Fundamental and Technical analysis in Indian Share Market
The fundamental and technical analysis are widely used for share traders but use of these analysis differs from traders to traders.
First of all lets see what these analysis means -
a) Fundamental Analysis -
The name itself indicates that this analysis is totally based on companies’ fundamentals. Fundamental analysis is used for long term analysis and long term returns.
Following are the few fundamental terms used to forecast and analyze the companies’ future growth and based on this analysis transaction of shares will be done.
¨ Companies expansion or planning in coming future.
¨ Management processes and planning
¨ Meeting of Board of directors
¨ Declaration of yearly financial statements
¨ Study of past performance of the company.
¨ Study of quarterly, half yearly and annual reports.
¨ Companies involvement in foreign investment/collaboration, political or economic involvements, etc.
Depending on these factors and many others, fundamental analysts prepares certain share market and share trading related terms which will be used to forcast the company growth and prospects. The terms like
¨ Whether the share prices are overvalued or under valued,
¨ Working capital ratio,
¨ Return on equity ratio,
¨ Debt equity ratio etc.
Based on these terms and other fundamentals, the analysts predict the movement of share prices that is either bullish or bearish in coming future.
Basically fundamental analysis is meant for long term investments and not for day trading or short term investment. So traders planning to invest for long term in share market then they must go for fundamental analysis.
Always good fundamental companies give good results and returns for share holders in long term.
b) Technical Analysis -
As fundamental analysis made for long term investments, likewise technical analysis is made for day traders and short term traders. Technical analysis is nothing but study of charts, support and resistance levels, technical indicators and other parameters which are useful to analyze the share price movements in short term or in day trading. There are several factors and terms in Technical analysis which will be discussed in detail in further topics.
Different types of shares trading
Different types of shares trading
Day trading and Delivery trading are the two main types of shares trading.
¨ Day trading -
Buying and selling of shares on daily basis is called day trading this is also called as Intra day trading. Whatever you
buy today you have to sell it today OR whatever you sell today you have to buy it today and very importantly during
market hours that is
¨ Delivery Trading
In Delivery Trading, as the name say, you have to take the delivery of shares and after getting these shares in your
demat account you can sell them at anytime (or you can hold them till you want, there is no restriction). In delivery
trading you need to have the amount required to buy share for example, if you want to buy 100 shares of Reliance at
price 500 than you must have (100*500) Rs. 5000 in your account; once you purchased these shares will get deposited
in your demat account (say after basically, trading day and 2 additional days). Then you can sell these shares when
the price of these shares goes up or else you can sell whenever you want.
Please Note - First you have to buy and sell. You can’t sell before buying in delivery trading while it’s possible in day
trading.
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