SBI Mutual Fund Launched Micro SIP

SBI Mutual Fund has launched equity based Micro Systematic Investment Plan (Micro SIP). The launch is targeted to generate investments from low income group households in rural and semi rural areas. It is named as Chota SIP to provide the benefit of long term investment in equity to low income class of people. As per news SBI Mutual Fund is planning to promote micro SIP through the help of intermediaries like NGO's Self Help Groups and other micro financial institutions.

Initially in Chota SIP or Micro SIP of SBI Mutual Fund the investor can opt to invest in any of four equity fund which are Magnum Balanced Fund, MMPS 93, MSFU Contra Fund, and SBI Blue Chip Fund. Later more funds will be added under Micro SIP facility

Mutual Funds: An Investment Tool For Small Investors

Human beings from their very inception want to earn and save something for unwanted situations. In the earlier stage, he puts his earnings under the soil to keep it safe from being stolen. Later banking system was developed and subsequently different kind of instruments for investment is being used. 

Nowadays, investments in share market instruments are much preferred by big as well as small investors. Everyone wants to earn extraordinary returns from share market booms. And Mutual Funds are one of such ways through investments in share markets are being carried out by small and marginal investors. A Mutual fund is an investment company that issues shares to the public. The money it receives from shareholders is pooled and invested in a wide range of stocks, bonds, or other money market instruments to meet specific investment objectives. The various instruments included in a fund's portfolio are handled by professional money managers in line with the stated investment policy of the fund.

The essential purpose behind the Mutual Fund is to secure two important benefits for small and retail investors, viz. 

(i) minimization of risk through diversification, and 

(ii) professional management of invested funds. 

The risk associated with investment can be minimized by spreading the investment over a dozen, or even hundreds of companies, which seems to be impossible for small investors. Thus, diversification of investment reduces risk. 

Professional money management is required to become successful in the game of investment. Most of small investors can not devote the time and resources required for managing their investments. This is easily carried out by fund managers, thus producing better results.

Mutual funds in India are structured as follows:

Each mutual fund has a Board of Trustees, an Asset Management Company (AMC or the manager) and unit holders. In India, we also have a promoter or sponsor who takes the initiative of starting a mutual fund but has no active role after the fund has been launched. The sponsor remains only a shareholder of the AMC. 

As per the Securities and Exchange Board of India (SEBI) guidelines, the effective control of the AMC is not with the sponsor but with the Board of Trustees. SEBI guidelines provide the framework within which mutual funds in India have to operate. Maximum limits have been prescribed for management fees and other chargeable expense; SEBI also regulates many other aspects of mutual funds' operations and policies.

Major types of mutual funds are:

(1) Equity Schemes: investing primarily in equities with several plans such as growth plan, dividend plan, and dividend reinvestment plan; (2) Bond Schemes: invest in government and corporate bonds of minimum and long duration, thus arising their income from interest. (3) Balanced Schemes: invest in both equity and bonds based upon the specified policies and investment objectives; (4) Money Market Schemes: a relatively recent phenomenon in India, such funds invest in very short term money market instruments at lesser risks.

Once a mutual fund scheme has been floated, the buying and selling prices of its shares, known as units, from day to day are related to the Net Asset Value (NAV) of the units. A mutual fund is required to calculate the NAV once a day based on the closing market prices by valuing all assets and liabilities at their current values.

NAV per unit = (Market Value of Assets - Portfolio Liabilities)/No. of shares outstanding

SIP: an emerging trend

A systematic investment plan (SIP) commits the investor to invest a specified amount every month (or every quarter) in the units of a fund's equity scheme. The number of units bought each month for the investor under the plan will depend on the ruling price: fewer units are bought when the price is high, and more units are bought when the price is low. This is a built-in advantage of SIPs. It averages out investor's buying price over the entire period of holding. The SIP resolves a dilemma often facing investors due to ups and downs in the market price. The investors find it difficult when to invest in the equity scheme.

The investors should not take it for granted that SIP is always advantageous. The price level at the starting point is particularly important. The price level at the end of the period chosen is also critical. The rigidity of most SIP schemes can be both inconvenient and disadvantageous to investors. The investors should avoid a situation of forced redemption of accumulated units at unduly low price by building some flexibility in the choice of redemption date.

Hence, an investor should choose from among the mutual funds those which have a record of consistently good performance and possess characteristics (e.g. industry composition of investments) which will help to achieve good long-term performance of investments.

Happy Investing

Mutual Funds Investment Basics

Almost everybody has the ambition to get rich without lifting a finger - that's because there's plenty of us out there that are driven by laziness and greed. We like to find ways for having our cash work for us, or apply the Law of Leverage, which is to multiply our efforts through others. A classic example of that would be an Egyptian Pharaoh having his slaves build infrastructure or gather the rice grains which he uses for sale/trade - he doesn't do anything, but gets all the work done and gets richer and richer. You're not a Pharaoh, so how do you get rich? Well one way would be putting your money in a median that can help you reach that particular financial goal.

One "vehicle" that can get you there are mutual funds, how does this work? Simple: what you do is buy mutual funds from a mutual fund company or broker. From there, the company that you've entrusted your cash with invests it into a variety of short term investments, like the following: assets, bonds, stocks and securities. What happens next, if all does go well, is you receive dividends for each of the mutual funds you've purchased, which is your share of the profit made off it. Some people (many perhaps) find the whole process scary because they have no idea what to do first or feel that it's too much risk to take.

Fear not old friend, your investment is being managed by the company's team of investment professionals - these guys know exactly what they're doing and find the best ways possible to ensure that you make money. It's like having a symbiotic relationship with them: if they do good, you do good, heck all of you do good. Usually an investment manager does the buying and selling on your behalf, making sure all goes in your favor. As the investments diversify, the risk of loss gets lower and lower, which is clearly what everybody wants. There are three types of mutual funds, the first being: equity funds - which is basically investing in common stocks.

This is considered to be very risky, but it can also mean lots of money for you. The second type are the fixed income funds, which is a lot safer due to the fact that they're basically government and corporate securities. Here you don't take that much risk, which in some cases could mean that you don't earn that much (as compared to investing in equity funds). Lastly, we have balanced mutual funds, which consists of stocks and bonds. This type of investment is the safest amongst the three stated here, but it also is the "slowest earner" of all.

The discussion of the three kinds of mutual funds brings up an old saying: "no risk, no reward" - I forgot who said it, but I do know that it does apply to the basic "operating principle" of mutual funds. Important reminder: your shares can be sold back to the broker or to another customer at your will. If your interested in getting into this game, then I suggest you do more research about the different companies you could invest in.

The author of this article Rick Goldfeller is an underground Financial Analyst who has been successfully running campaigns for several wealthy clients. Rick finally decided to go public and share his knowledge and experience through his website http://www.finanzine.com. You can sign up for his free newsletter and join his coaching program.

Reliance Mutual Fund expects 80% growth.

Despite of so much volatility in stock market Reliance Mutual Fund is expecting 80% growth in his assets base and 100% growth in number of investors. Sandeep Sikka, Dy CEO of Reliance Asset Management Ltd told to news agencies that company’s compounded annual growth rate (CAGR) for the last 2 years was 80% and is hopeful to maintain the same gowth rate this financial year also. Asset under management of RAMC for the year 2006-2007 was 26,000 crore, which grew to 92000 crore in 2007-2008. As on 31^st may 2008 total asset under management of Reliance Mutual Fund were 98,340 crores.

Mr. Sikka said that retail investors have now started investing for long term and they have remained invested even in present bad market condition, and have seen no fear and doubt in investors. He is hopeful to see 100% growth in number of investors.

It is worth mentioning that Reliance Asset Management Ltd had 35 lac total investors in 2006-2007 which grew to 67 lac in 2007-2008. The company has reach in 300 cities in India and is planning to increase its number to 500 this year.

What is Mutual Fund?

A Mutual Fund is a pool of money collected from small investors having a fund manager who manages the fund with predetermined investment objective. The fund manager invest the pool of money in specific Securities (stocks and bonds). When a person invest in mutual fund he becomes a unit holder or share holder of the fund and units are alloted to him. When the fund generate profits it is passed to unit holders of the funds.

Investment in Mutual Funds are considered as one of the best investment option as it is very cost effective and it is also easy for investor to invest because a large fund has to pay a lower trading cost as compared to retail investor.

The best part of Mutual Fund is its diversification which minimizes the risk and maximize the returns.