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Monday,
October 1, 2001, Chandigarh, India
  
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How to invest in mutual funds Afghanistan may influence market Think, before you leap into seller’s net
Debt funds: a good option |
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How accurate are digital devices
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How to invest in mutual funds A
Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as few thousand rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy. The money thus collected is thus invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme’s objectives. The income thus earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus Mutual Funds is the suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at relatively low cost. There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial position, risk tolerance and return expectations. Mutual Fund schemes can help you meet your financial goals. There are different types of mutual fund schemes. Open ended schemes
These do not have a fixed maturity. You deal directly with the Mutual Fund for your investments and redemptions. The key feature is Liquidity. You can conveniently buy and sell your units at net asset value (“NAV”) related prices. Close-ended schemes
Schemes that have a stipulated maturity period are called close ended schemes. You can invest directly in the scheme at the time of initial issue and thereafter you can buy or sell the units of the schemes on stock exchanges where they are listed. The market price at the stock exchange could vary from scheme’s NAV on account of demand and supply situation,
unit holder's expectations and other market factors. One of the characteristics of the close ended scheme is that they are generally traded at a discount to NAV. But closer to maturity, the discounts narrows. Growth schemes
These schemes aims to provide capital appreciation over the medium to long term. These schemes normally invest majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short term.
Income schemes
Balanced schemes
These schemes aims to provide both growth and income periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents. In a rising stock market the NAV of these schemes may not normally keep pace, or fall equally when the market falls.
Money market schemes
These schemes aims to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short term instruments, such as treasury bills, certificates of deposit, commercial paper and inter bank call money. Returns on these schemes may fluctuate, depending upon the interest rates prevailing in the market.
Tax saving schemes
These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is made possible because the govt offers tax incentives for investment in specified avenues. For example Equity linked saving schemes (ELSS) and pension schemes.
Special schemes
This category includes index schemes that attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50, or industry specific schemes or sectoral schemes. Index funds are ideal for investors who are satisfied with a return approximately equal to that of an index. Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or segment. Keep in mind that any one scheme may not meet all your requirements for all time. You need to place your money judiciously in different schemes to be able to get the combination of growth, income and stability that is right for you. Remember, as always, higher the return you seek higher the risk you should be prepared to take. Identify your investment needs
You financial goals will vary, based on your age, lifestyle, financial independence. Family commitments, level of income and expenses among many other factors. Therefore, the first step is to assess your needs. Begin by asking yourself these questions: 1 What are my investment objectives and needs? Probable Answers: I need regular income or need to buy a home or finance a weeding. 2 How much risk am I willing to take? Probable Answers: I can only take a minimum amount of risk or I am willing to accept the fact that my investment value may fluctuate or that there may be a short term loss in order to achieve a long term potential gain. 3 What are my cash flow requirements? Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a specific need after a certain period or I don’t require a current cash flow but I want to build my assets for future. By going through such an exercise, you will know what you want out of your investment and can set the foundation for sound Mutual Fund investment strategy. Choose the right Mutual Fund
Once you have a clear strategy in mind you now have to choose which Mutual Fund and scheme you want to invest in the offer document of the scheme tells you its objectives and provides supplementary details like the track record of other scheme managed by the same fund manager. Some factors to evaluate before choosing a particular mutual fund are:
Invest regularly
For most of us, the approach that works best is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. With many open ended schemes offering systematic investment plans, this regular investing habit is made easy for you. Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return. The final step
All you need to do now is to get in touch with a Mutual Fund or your agent/broker and start investing. Reap the rewards in years to come. Mutual Funds are suitable for every kind of investor.
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Afghanistan may influence market THE tragic events in the USA on September 11, 2001, which shook the world are destined to leave a lasting impact on the world economy. The already floundering economy is being put through another spate of turmoil. The fear of the USA slipping into deeper recession has aggravated in the wake of these attacks. Most economists have postponed the impending global economic rebound to the second or possibly third quarter of 2002. Despite fewer linkages between the USA and India, the Indian economy is going to be severely affected. Though the sudden crash in oil prices by about 25 per cent since the crisis has broken out may provide some cushion to this country’s oil import bill. Nevertheless the crashing stock market and a threat or war in our neighbourhood will lead to lower revenue for some consumer goods companies. On the back of stable Nasdaq and Dow Jones in the USA last week our markets made a strong recovery and the BSE sensex has closed with a gain of about eight per cent over the previous week’s closing of 2600.13. The recovery has been largely led by old economy stocks such as Reliance, Reliance Petroleum, Ranbaxy and ACC. Reliance Industries was the major gainer in big cap stocks and it ended the week at Rs 265.85 up by 22.7 per cent over the last week’s closing. The new economy stocks displayed a mixed trend during the week. Infosys and Satyam gained during the week, while HCL Technologies was mauled at the start of the week and it touched Rs 103.6 (its all time low) on Wednesday. Bargain hunting and the company’s hope of 25 per cent growth rate in the current fiscal led to a recovery in the stock and it closed the week at Rs 129.85, still down by seven per cent from last weekend. In the PSU segment CMC was the major gainer and it was up by Rs 49 to close the week at Rs 300 on the favourable news of its disinvestment. In the near-term the direction of the market will be guided by events in the USA and Afghanistan. In case the USA decides to strike, the market will become subdued. Technically, the market faces resistance at 2820-2850. Its support levels are at 2788 and 2720. In the medium-term, with the near recessionary conditions in the economy, the stock market is likely to remain lackluster in the fiscal 2001-02. Investors are cautioned to stay away from the technology stocks till the time results for the second quarter are announced and fresh guidance, in wake of terrorists’ attacks, is provided by the companies for the current fiscal. As for corporate news, Suzuki sold out its entire holding in TVS Suzuki to its joint venture partner, Chennai based Sundaram Clayton, at Rs 15 per share, which works out to a whooping 83 per cent discount to its current market price of Rs 88. The agreement signed between the partners also bars Suzuki from pursuing any business interest in India for a period of 30 months. Pfizer reported a 14 per cent growth in net profit to Rs 14.7 crore on a sales of Rs 82.2 crore. On its equity of Rs 23.44 crore, earning per share works out to Rs 21.1. Interestingly, there has been an improved volume growth in the commercial vehicles segments in the last two months despite the slow down in the country’s economy. The growth has been more pronounced in the medium and heavy commercial vehicle segment, where the replacement demand has led to recovery. In this segment the volume in the first five months (April-August 2001) declined on the year on year basis by one per cent. This was an improvement over the initial quarter and the reversal is reflected in 10.6 per cent increase in sales the last two months. The lower base and replacement demand has led to this growth. Going ahead, the recovery is expected to continue, especially in the higher tonnage multi-axle segment, as organised operators continue to replace their existing fleet with new fuel-efficient vehicles. Moreover there is also going to be off take from the Compressed Natural Gas (CNG) segment of vehicles. This all bodes well for the automobile industry and the investor can pick up TELCO shares at the current price of Rs 69.2. |
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Think, before you leap into seller’s net AFTER liberalisation, the large business houses have been given green signal to enter the market. There is no restriction on them. So under the pretention of expanding production, even the illegally set up industrial capacity was regularised. In order to compete with the other industries they produce similar goods with different brands, names, styles colour and shapes etc. For example detergent powder, tooth paste, soap, facial cream, lipsticks and other eatables, as sweets, toffees, chocolates etc. These big business houses use those practices which are sometimes harmful and injurious to the consumers when they sell their products under the false statement of quality, standard, trade, usefulness etc, or they produce their goods and services with false warranty or guarantees or misleading advertisement for sale or supply at bargain price of goods and services. For example “Take 2, get I free” or “Buy tooth paste, get tooth brush free” or 250 gm free on the pack, etc, like scheme. So if there is a trade practice for the promotion of sale, resort to the supply of any goods or for the provision of any service which adopts any unfair or deceptive practice is called unfair trade practice. It is covered under section. U/S-37A and includes following practices: (1) False statement. (2) False publication of advertisement for a bargain price. (3) Offering gift prizes etc. (4) Non-standard goods. (5) Hoarding or destruction of goods or refusing sale of goods. If the manufacturer or the producer uses the false statement either orally or in writing under the representation of standard, quality, quantity, grade, composition, style or model of goods or makes false publication of advertisement for materially misleading the public about the price of products, goods and services, then all these representations are considered as “unfair practices”. If any person offers gifts, prizes or other items but without any intention to do so or if he creates an impression that something is being given without any price, then it also comes in to the category of unfair trade practices. You must be well aware of the schemes introduced by different brands of soft drinks like Coke....... has introduce and Pepsi........ like scheme. These are the schemes which these big manufacturers introduce in order to attract the consumers because the consumers are unaware of the real game and are destroyed by these schemes. As they never get any prize nor any gift after scratching the portion of the commodity e.g. the Boroplus Scheme. So it is the duty of the consumer to check and re-check the commodity before purchasing and he should be very well aware about it. Sometimes the consumers have an impression that company did not send the toy-gift. Under sale promotion scheme it was happened recently with a consumer who participated in the Number “Milao Prize Pao” schem with Big Babool, in which it was “sale promotion scheme under which 4 number combination was printed behind each Big Babool wrapper, like add the 4 number printed inside the Big Babool wrapper and check for winning number as under: Sum of 4 numbers
7
It does not mean that after getting the 4 number, total of which is 7, one will be entitled for trip to USA. Because in every prize winning scheme, it is not too easy to understand that those who are having that type of wrapper will get the chance. It is not clear on the coupon specially on the prize winning coupon to collect the ticket for USA. Because it was only mentioned on the Big Babool wrapper that if you get that number you will win the chance, Is it clear? No, it is not clear, because you should know what is written on the coupon or prize winning wrapper. For example, there are three wrappers before you and you can yourself decide that which will be the prize winning coupon. For example: (1) coupon having the combination of 7 number but with a simple quotation mentioned under these numbers such as “you may help your friends in trouble” or (2) with combination of 7 number “Trip to USA” fax this with your name and address to that phone number or (3) combination of 7 number “Trip to USA” fax to that phone No condition valid up to this date etc. So you can think your best. |
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Debt funds: a good option MR Rajdeep Singh is a retired bank manager from Punjab and Sind Bank. He opted for Voluntary Retirement Scheme (VRS) after 28 years of service earlier this year. Though not a very conservative investor, he started investing in equities only after putting in more than ten years of service. And that is when he thought of options other than bank where he can invest his money. Investment in equities
Excessive greed is bound to make you a looser in the share market. Not that I did not earn from equities, but I could have made higher profits had I taken decisions regarding selling of equities, at the right time. For instance I had shares of Wipro, Satyam, Silver line — the rates of which multiplied by even more than ten times, but that time I kept thinking they would fetch me even higher profits. Last year I ended up selling them at much lower profits than what I could have made at that time. There is no dearth of manipulators in the market. During boom there are companies who tend to befool gullible investors and during recession one has to select the potential market winners. It is ones own experience only which can help one learn. Studying market trends, the market leaders and most important the company management — are must before an investment in equities.
Initial investments
Tax saving was my priority at least for the first ten years of my service. During this period, I started with Recurring Deposit (RD) which develops a habit of savings and PPF. Of my annual savings then which used to be around Rs 40,000 more than half were put in the bank, one fourth in equity linked saving scheme and some money also in Jiwan Suraksha (long term) policy and National Savings Certificates (NSCs). This helped me save maximum tax. It was in 80s when I bought few shares of GNFC and Tata Power. It was a small investment though, I kept it for almost five years and did earn profits out of these. Thereafter, I got interested in the equity market and started reading about companies and investing my money there. However, one thing which I feel really helped me was that I was a regular investor, but the amount of money I put in there was small . That saved me from major losses. Moreover, I always used to take out my basic investment and used to re-invest the profits. I never considered gold as an investment and real estate also, was not for trading .
Managing VRS money
My post VRS investment is less than 10 per cent in equities. I have also put money in debt funds. Kothari Pioneer in which I had earlier also invested money had given good returns, as high as 80 per cent dividend once. So I preferred investing my money in this fund only. Moreover, return income is tax free. One also gets regular dividends. Debt funds these days are a good option but one must study about the company. Other source of income is Bima Nivesh and interest income from fixed deposits in banks. I feel a softer tax regime would come in another five to ten years, long term investment would thus, bear fruit. Insurance policies like annuity scheme (Jeevan Dhara, Jeevan Akshay) offer assured returns. If one wants his money to grow, risk element has to be there, but that has to be taken cautiously. (As told to Shveta Pathak — Tribune News Service) |
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by Pushpa Girimaji How accurate are digital devices I do not know how many of you have seen a glucometer, but from the name I am sure you have guessed what it is — a medical device meant to measure blood sugar in people with diabetes. And like a thermometer or a blood pressure measuring device, here too the accuracy of the reading is most crucial. However, 67-year old Mr P.L. Garg’s experience with a glucometer that he bought for Rs 4,620 has been vastly different, raising questions about the quality and safety of such devices sold in the market. Mr Garg found that the instrument was not functioning satisfactorily and so he compared its readings with a glucometer of another company and found a difference of 27.6 per cent between the two readings. He also compared its reading with that obtained in a local laboratory and with another glucometer of the same company as the one bought by him. There was a difference of 13.6 and 14 per cent, respectively. Says Mr Garg: A non-diabetic could well get treated for diabetes by relying on this device. Dissatisfied with the company’s explanation about the wide variations in the readings, Mr Garg has now filed a complaint before the Consumer Disputes Redressal Forum in Bathinda. I quote this case to talk about the need for ensuring stringent quality control in the manufacture of certain commonly used vital medical devices on whose accuracy could depend the health and life of a person. Obviously competition in the marketplace alone is not adequate to force all manufacturers to ensure strict quality control. So the only option is to bring them under mandatory quality certification, as one cannot take chances with the quality of these instruments. Let’s look at another important medical device: Sphygmomanometer meant to measure arterial blood pressure. (Or the BP measuring apparatus as it is commonly known) Recognising the need for ensuring stringent quality control in the manufacture of these instruments, the Government in 1995 brought them under mandatory certification. Accordingly, the Standards of Weight and Measures Rules prescribed standards for mercury manometers and manometers with an elastic measuring receiver and manufacturers were required to get it calibrated and certified for accuracy from the department of weights and measures, which was the implementing agency. The rules also prescribed subsequent and periodical verifications. But as is the case with many consumer protection measures, this particular rule was never enforced. State governments, which were responsible for implementation of the rules, said they neither had the necessary equipment nor trained manpower to take up calibration and certification work. However the plan is to get doctors and not manufacturers, to send the instruments used by them for verification at a nominal fee at these laboratories. Such voluntary testing by doctors would not only create quality consciousness among medical professionals and manufacturers, but also help the department assess the quality of these instruments available in the market today and take a view on whether to bring them under mandatory quality control, says the government. As of now, six manufacturers of mercurial manometers, five of them from Delhi, have voluntarily taken the ISI quality mark from the Bureau of Indian Standards which has formulated separate standards for sphygmomanometer, mercurial and aneroid types. However, it does not have a standard for the digital BP measuring that are now in the market and therein lies another problem because unlike the mercury and aneroid type manometers which are used mostly by health professionals, these digital instruments are being sold for use of consumers. And in the absence of an independent agency to certify the accuracy of these digital BP measuring devices, they could themselves be instrumental in blood pressures going up!.. And now with the markets opening up, we are bound to have a large variety of such medical devices, home-test kits, being imported into the country. And in the absence of standards to measure their quality and an agency to certify their accuracy, we would only be inviting imports of doubtful value. So it’s time the Ministries of Health and Consumer Affairs got together to take a critical look at this issue in its entirety and come up with adequate measures to protect consumer interest. |
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Inflation falls Campco SHCIL Dr J.J. Irani |
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