Jun 19, 2009

Reliance Infrastructure Fund: NFO Review & Analysis

The Reliance Mutual Fund house has come out with its latest NFO or New Fund Offer. It's called the Reliance Infrastructure Fund. Seeing the recent positive trends in the stock market and the stable government formation, it is betting on the Infrastructure growth in the country. Also, the good response received by the ICICI Prudential Target Returns Fund (Review & Analysis) where it managed to collect 800 Crore Rs. from the market, has also sent a positive message to the mutual fund industry. Hence Reliance, which is one of the big mutual fund houses of India, has come out with the Reliance Infrastructure Fund. Reliance Infrastructure Fund
What is the basic investment strategy or ideology for the Reliance Infrastructure Fund?
It's obvious to everyone now. There is going to be a stable government at the center, led by an economist. Stability so there can be progress and that will be lead by improvement in infrastructure. Hence, this Reliance Infrastructure Fund aims to generate returns by investing in the infrastructure companies under the assumption that they will benefit and give positive returns. They expect government funding, private equity investments, Public Private partnerships PPP, Foreign investments, etc. to be the source of money for infrastructure companies and hence they wish to benefit from the same.

Related: Risk Factors related to Mutual Funds

Which specific sectors and areas will the Reliance Infrastructure Fund invest in?
There is a long list available. Some of them are indicated below:
Banks, Financial Institutions & Term lending Institutions
Cement & Cement Products
Electrical & Electronic components
Energy including Coal, Oil & Gas, Petroleum & Pipelines
Industrial Capital Goods & Products
Metals & Minerals
Power and Power equipment
Road & Railway initiatives
Urban Infrastructure including Housing & Commercial Infrastructure

What are the details of Reliance Infrastructure Fund?
The Reliance Infrastructure Fund is an open ended scheme so you can buy and sell units at the NAV values every business day. 65% 10 100% of the money will be invested in equities or stocks, rest will be debt and money market instruments and cash.

Available plans for investments:
Growth Plan: Growth Option & Bonus Option
Dividend Plan: Dividend Payout Option & Dividend Reinvestment Option

Minimum investment amount for retail investors is Rs. 5000.

Which benchmark index will be tracked by Reliance Infrastructure Fund?
It will be BSE 100.

What is the load structure: entry load and exit load for Reliance Infrastructure Fund?
For retail investors upto 2 Crores of investment, 2.25% is the entry load (isn't that big???)

Exit load: 1% if redeemed/switched on or before completion of 1 year from the date of allotment
Nil if redeemed/switched after completion of 1 year from the date of allotment

However, that high entry laod of 2.25% will not be charged if the investor applies directly to the Reliance Mutual Fund House.

Is there any Systematic Investment Plan or SIP plan available for investing in Reliance Infrastructure Fund?
Yes. SIP is availble in the Retail Plan of Reliance Infrastructure Fund.

What is the NFO period or dates for Reliance Infrastructure Fund?
The NFO period is currently open - from 25th May 2009 to 23rd June 2009. Scheme to re-open on July 22nd , 2009.

What's the final summary and risk of investing in Reliance Infrastructure Fund?
The Reliance Infrastructure Fund is another simple mutual fund which is betting on the growth of infrastructure in the country. So nothing so special and exciting about the mutual fund. Like any other mutual fund, this fund will try to generate returns. The long list of areas/sectors they have provided for investing, covers almost everything in the infrastructure region.
The big question is, will this fund deliver?
That will happen only if the fund managers really identify the gems in the infrastructure sector to maximize the returns. So as like any other mutual fund or fund manager, you have to bet on the fund manager's performance.
Then there is danger for this infrastructure sector to underperform. What if the global problems continue and there is no foreign or private investment coming to infra sector. What if other internal problems block the growth of this sector. So it's the investor's call...

Also Read: How to Make money by Investing in a Mutual Fund?


Jun 15, 2009

Importance of Long Term Investments

Let's face it. You will not be able to work forever. No matter how healthy you are, there will come a time when you will not be able to work, due to health problems or simply aging. What will you do for an income when the time comes to retire? This is why planning your long term investments carefully is so important.

Maybe you think you will be able to rely on Medicare and social security to take care of you during your retirement. Well, if that is your plan, it is time to look at the news. Social security is in trouble. Politicians are trying to repair the problem, but chances are in another twenty years, or even less, there will be little to nothing left for you in the social security budget.

Finally, you never know what the future is going to hold. Will you stay healthy? Or, will you have some serious medical expenses that you will need to have finances for. Long term investments give you the security to know that in dire circumstances, money is there.

Long Term Investment Strategies
So, you realize that you need to start looking into long term investments. But where do you start? How do you know which investments are the best long term investments? Should you use a broker, or do it on your own. Here are some of the most tried and true long term investment strategies.

Start by Setting Goals
As with any other type of investing, proper long term investments start by setting proper goals. How much do you want to have when you retire? What age do you want to retire? How much should you invest monthly to reach that goal? Are you willing to do your own investing, or do you want someone to show you the ropes. Write these goals down to help guide you as you choose your investments.

Choose the Right Firm
If you decide to seek help looking for your investments, choosing the right firm is important. Make sure you choose a firm that will follow your investment goals. They should work with you to find the best investments, not against you. You should feel like you are in control, even with their help.
Also Read: How to Make Money by Investing in a Mutual Fund


Jun 14, 2009

Risk Factors related to Mutual Funds

All mutual funds are required to disclose, in their offer documents, the Risk Factors that are faced by the fund and therefore by the investors. Risk factors may be standard or scheme specific. Standard risk factors are market driven and common to all schemes.

While a regular investor will be conversant with standard risk factors, their disclosure is of particular relevance to the novice investor. Scheme specific risk factors have a direct bearing on the investor’s choice and therefore need to be carefully evaluated by the investor. Disclosure of risk factors must include the following:

Scheme specific risk factors: Arising from the scheme’s investment objective/strategy and proposed asset allocation.

Standard risk factors:
·Investments are subject to market risks such as absence of liquidity in markets or fluctuations in market prices beyond the control of the managers, resulting in investment objectives of the scheme not being achieved.
NAV can move up or down on the basis of capital market movements.
·Past performance of the sponsor/AMC/mutual fund is not indicative of the future performance of the scheme. Name of the scheme does not indicate its quality or prospects.

Risks associated with the use of derivative instruments, if the fund plans to use such instruments as permitted by SEBI.

Arising from non diversification, if any:
· Specific risk factors associated with investing in closed end schemes. For assured returns schemes, if assurance is up to the maturity of the scheme, it must be stated that this is on the basis of guarantee given by the sponsors/trustees/AMC. If assurance is for a specific period, it must be stated that there is no guarantee for sustaining the assured return for the remaining duration of the scheme.

If the AMC has no previous experience in managing a fund, a disclosure to that effect must be made.

Extension to:
How to Make money by Investing in a Mutual Fund?


Jun 13, 2009

How to Make money by Investing in a Mutual Fund?

This article lays down the basics of Mutual Fund Investing:

1. This is a pertinent question asked every now and then that which is the safest method to invest in mutual fund to make money and prior to that one must understand the basics of mutual fund.

2. A mutual fund is a tool by virtue of which it accumulates money from the investors and invests on their behalf in stocks and bonds etc; however same is undertaken with the help of professionals who are paid for the same.

3. One should choose and invest in a mutual fund as per an individual risk profile and thus one has to first of all analyse the fact that how much one is ready to take risk in life. If one is young one can afford to take more risk and thus can invest more in equity oriented funds and should move towards debt oriented funds as one grows old. A safe yardstick is to find the percentage for investment in equity by reducing the age from a figure of 100 to get the required percentage for investment in equity.

4. One must undertake the research and risk assessment before purchasing any mutual fund as past performance is no guarantee for future performance. However if one is not aware of anything about the investment or stock market than the investment through mutual fund is the best bet to avoid losing money.

Also Read: How to make money in the stock market?