A Guide to Open Ended Funds

A fund that is not restricted to the number of shares issued especially during the conditions when the demand is high or low is known as an Open Ended Fund. Also, it is quite flexible since an investor is free to sell it back; thus, a majority of funds are known to be open-ended and are extremely convenient in terms of being an investment vehicle. If the investment manager realizes that the total assets have become too large to manage and execute, he/she will open the investment for newer investors rather than continuing with the existing ones.

In the meanwhile, a close-ended fund is one of the mutual funds in India that is fixed and only sells a particular number of units and the existing investors cannot exit the term until the scheme ends. The price is also affected by the demand and supply of fund units. Close-ended funds offer to repurchase the units which results in an avenue for more liquidity.

Although close-ended funds are free from worries related to the fund size and regular redemption, open ended funds are still better to deal with and have performed better than their counterpart. The average return of a close-ended fund is about 7.38, 6.28 and 2.83 percent whereas open-ended funds have generated about 6.54, 8.86 and 3.36 percent of returns (same time period, i.e., a year).

The most preferred fund: Open-ended

A few examples would help you identify the kind of fund you would invest in. On the 22^nd of March, HSBC Unique Opportunities Fund, a close-ended fund converted into an open-ended fund due to the fact that it was unable to return the principal amount against the greater returns provided by an open-ended fund.

Performance issues

Open-ended funds have always outperformed its counterpart and peers especially during the market fall in the year 2008 all the way up to 2009.

NFO

The main purpose of launching close-ended fund schemes were to maximize investment and receive gains in a short duration after which one could make a hasty exit as soon as the scheme reopens for subscription. This was due to the fact that long term investors had to pay heavy duty; therefore, open ended funds were a way to eradicate the high costs.

Premature withdrawals

One of the sole reasons for the suffering and near demise of close-ended funds was the fact that there arose monthly redemption's and premature withdrawals were penalized which resulted in withdrawals from the investors. If there is a rush for redemption, then mutual funds managers need to sell liquid stocks and the market only constitute of illiquid stocks, which require some time recover. Due to the premature redemption's, close-ended fund suffer because new money is not allowed to enter the fund.

Also, a lack of monitoring affects close-ended funds, turning open-ended funds into a more desirable option for investors.  Also, there is nothing unique to offer from a close-ended fund’s point of view, therefore it is advisable to choose an open-ended fund.

Tips to Buy Used Cars in India

Many people, while buying a car decide to opt for a used car. Used cars are bought when the driver is less experienced and want to have more experience before they invest in a brand new car.

Buying a brand new car can put a lot of financial burden than buying a used car. Moreover, there are several used car finance options available that make this a favorable option. However, it is highly important to keep in mind certain factors before making the final decision that will help you get a steal deal.

Follow some of the below mentioned tips which will ease your challenging task of buying a car.

• Budget – Always fix your budget and then start looking for a car. This will help you narrow down the search and reduce the hassle for yourself and the agent. Make sure you discuss your budget with the agent and ask him to look for cars that exactly fit the budget.
• Type of Car – Once you have decided the budget, the next task is for you to decide the type of car you wish to buy. Analyse your requirements and select car that fits into it perfectly. It is really important for you to decide whether to go for a petrol car or a diesel car.
• Fuel Economy – India is country which is obsessed with the concept of fuel efficiency. With petrol prices rising every moment it is extremely necessary to select a car which offers you decent fuel efficiency.
• Seller – It is always necessary to buy the car from an authorized dealer. Almost all major car companies have a separate wing which purely concentrates on selling used cars.  Purchasing car from such a dealer will ensure that the after sales and services will be taken care of.
• Physical Check – Once you are done selecting the model, make sure you do a physical check of the vehicle. You can check the history of the car, the distance travelled, age of the vehicle, original papers, and certificates.

How to successfully prepare for your CFP Examination

The Certified Financial Planner examination is undertaken for people aiming to become finance professions and investors. This examination will ensure that a student is professionally competent for these designations while also ensuring an increase in business. So if you wish to pursue a career in stock broking, insurance agency, to become a tax professional, a loan officer, a banker, etc. this examination should be on your priority list.

There are certain things to keep in mind while preparing for these certified financial planner examinations.

They are:

• Preparation techniques

Well if you have passed our school and college by simply taking tests in order to display one's retention skills, and then think again. This examination demands much more than retention of the material studied, it requires you to merge your syllabus and your reasoning skills in planning department of finance. So memorizing the syllabus only is not an option for those who wish to score in this examination.

• Special kind of reasoning

The CPF board has special methods for its reasoning questions and one may find difficulty in deciphering their methods and how they came to a conclusion for a particular question. Hence you need to solve the previous years' question papers in order to broaden your horizons and pass the examination.

• Minimum passing marks

You do not receive a percentage such as a 50% or a 60% for the examination undertaken. You only receive a ‘pass’ or ‘fail’ response for the test/examination.

• Do not leave out any question

You should ensure that you attempt every question since there is no negative marking. Even if it means that you guess a few answers that you aren't sure of, but it is highly advised that you should attempt every question.

• Ensure you provide more weightage to studying tax

According to most, the tax section is the most difficult to learn, memorize and apply. Hence you need to spend more time on that subject.

• Try enrolling into a class for courses related to the examination

These courses are ways and means to ensure you avail help in order to avail and assimilate all possible information about the course work through the help of an instructor.

FDI (Foreign Direct Investment) in the Indian Insurance Sector

FDI or Foreign Direct Investment in the insurance sector has been a political hot topic for almost six years now. So, what does FDI in insurance mean? To answer this, we first need to understand what FDI is and what happens when a country like ours accepts direct investments from another country.

FDI, simply put, is a direct investment, by an individual or a company of another country, into business or production services of a country. This could be done in two ways viz. by either expanding the business in or by possibly buying a company in India.

Let's examine the condition of India's insurance sector. The Indian insurance sector has been in a state of constant unrest. It is facing a lot of problems due to reasons like rising costs, political reforms being stopped, etc. Thus, even though the insurance industry in India grew significantly in past decade, the Indian market still remains largely untapped. The Indian insurance industry needs to revived, and hence, the Indian government proposed to hike the foreign holding in joint insurance ventures from the 26% to 49%.

So, what are the benefits of increasing FDI in the insurance sector? There are plenty, but let’s take a look the four important ones:

1.  More money coming in will help new insurance companies to enter the market
2. Companies will be able to offer better and wide range of insurance products at extremely competitive prices
3. Companies will get product and technological expertise from their foreign counterparts
4. Companies will have to improve their infrastructure and better their operations to tap into the uninsured markets, which will lead to an increase in jobs

The good news is that, after going back and forth for almost six year, the government has finally given a go ahead to increase the FDI limit. With this happening, the insurance sector is looking at a capital inflow of nearly Rs. 60, 000 Crore in 2015.

Top Three Ways to Assess Your Funds Performance

Mutual funds are collective investment vehicles that offer substantial capital gains over investments. They are professionally managed by experts, or group of experts who are well-versed with the working of financial markets. They tap lucrative opportunities to earn profits over the underlying investments, and thus guarantee capital appreciation for the amount invested.

Mutual fund's performance plays a key role in determining the return rate of any scheme. It is a crucial factor that investors assess and verify before shortlisting a scheme. So, emphasis is laid on the funds' performance while selecting a scheme.

There are several factors that are known to affect the performance of a scheme.

The top three factors that directly influence the performance include :-

• NAV Rates

NAV stands for Net Asset Value. It is defined as the per unit value of mutual fund scheme. It is calculated by dividing the total asset value of the scheme to the total number of units. Latest Mutual Funds NAV are computed on daily basis. The closing price of the underlying securities is utilized to calculate the NAV of a scheme. Thus, higher the NAV, better is the performance of the fund.

• Yield

This is defined as the income generated by any mutual fund. It is independent of the capital value of the underlying assets. This makes it almost independent off the NAV rates of any scheme. The yield of a scheme is directly dependent on the dividend payments of the underlying securities. Thus, if some of the underlying stocks provide heavy dividend, then the Yield of the scheme will increase significantly.

• Total Gain

This is determined by assessing the performance of a fund for a particular period of time. Generally, investors consider a time frame of 1 month, 3 months, 6 months, 1 year, and 3 years. This gives investors a better picture on the performance of fund.

Home Loan Interest Rates Options Offered by Various Banks

It's obvious that when you decide to take a loan for, say, education, going abroad, or else if you wish to buy a home, you research about the best options available in the market, since repaying the loan is a major ordeal. So you need to weigh in the advantages and disadvantages of the kind of loan you select. There are two kinds of loans, i.e., Fixed Interest Rate loans and Floating Interest Rate loans.

Fixed Home Loan Interest Rates

This one is limited as banks do not allow or encourage fixed interest home loans; it is limited to only the first two to three years. A fixed home loan interest rates entitles you to a fixed rate of interest at monthly installments throughout the tenure of the loan. Thus, the interest rate remains the same irrespective of the market changes.

The major benefit of this loan is the fact that even if the market rate becomes higher, your interest rate remains the same. This in turn brings about a certain predictability to the market scenario and also a certain sense of relief to those who have to repay the loan.

The major drawback to this form of loan system is that the interest rate is a bit higher than the floating form of home loan, and even if the market prices decrease, our interest rate remains the same. So you cannot avail the benefit of the decrease in market rate, i.e., a lower interest rate. Thus you should plan carefully and check for the market rates. If you think the market rates are going to go higher, then it is beneficial to select a fixed loan than a floating loan.

Floating home Loan Interest Rates

In this case, the interest rates are not really fixed but fluctuate at certain intervals, i.e., as and when the market prices go higher or are low.

The biggest benefit of making use of a Floating home Loan is the fact they are less expensive as compared to a fixed loan. The percentage difference is about 1 to 2 percent but it does make a difference. Also the fact that you can enjoy the benefits of paying a lower interest rate whenever the market rates tend to fall.

The major drawback of this sort of a loan is the unevenness of payment every month since there is no fixed rate at which the repayment needs to be done.

Top Four Small and Mid Cap Funds to Choose This December

Savings play an indispensable role in your life and as a result many of you may look forward for different avenues of investments. Among the commonly purchased investment products are bank term deposits. However these products offer conservative returns. So, several investors are always looking forward for lucrative opportunities of investments.

Small and mid-term funds offer the privilege of lucrative investments while hedging investment risk. With the changing economic conditions in India, such schemes are becoming popular among masses. After comparing several schemes we have managed to shortlist the top four small and mid-cap funds.

DSP BlackRock MicroCap Fund

With a consistent double-digit return rate for the last five years, DSP BlackRock has managed to captivate the attention of investors since a long time. Though the Assets under Management for this scheme are less than 2,000 crores, still it offer better redemption as well as growth to investors. Courtesy to the capabilities of Vinit Sambre and Jay Kothari, this scheme has managed to perform so well.

HDFC MidCap Opportunities Fund

This fund has completed a positive track record of seven long years and holds top growth and value stocks in its portfolio.  The fund manager focusses on the stocks that have the ability to multiply their earnings by 15 to 20 percent. With assets under management of almost 2802.96 crore, this fund has become popular among masses not only for better gains, but also for versatile redemption facility.

ICICI Prudential Discovery

This began its functions in the year 2004 and has had a remarkable run in the market. This company has a good cash flow and low leverage while the fund manager tries to strategize and capture the bullish economic cycle of the underlying companies. With more than Rs. 2830 crores of assets under management, this fund has been offering consistent positive results for the last five years.

Franklin India Prima Fund

It has a corpus of Rs 867. 36 crore and has been generating a positive cash flow across all business cycles.  Managed by popular fund manager R Janakiraman since 2008, this fund has been offering positive returns with almost consistent growth rate of 15%. With 61 stocks under the roof, this fund is one of the most popular funds among investors.