RandomBlog2011 | wealthymatters

Liquid Funds + USTBs Vs. FDs

July 10, 2011 3 Comments

Here is a video laying out the pros and cons of investing in liquid and liquid plus funds vs FDs.Where you invest will depend on the guarantees you seek,the amount you wish to deposit,the interest rate scenario in future,prevailing interest rates,tax liabilities,the use you wish to put your cash to in future etc.Do watch the video before you decide either way.

Personally I have found that sometimes you get short term FDs that offer better rates for senior citizens than the mutual funds.And the most important takeaway from the video is that FDs can be used to lock in high rates in a falling interest rate scenario.

Filed under Paper Assets, Theory, Tool Kit Tagged with capital guarantee, falling interest rate scenario, FD, Interest Rate, interest rate scenario, liquid fund, liquid plus, lock in interest rates, postaday2011, RandomBlog2011, short term FDs, tax liabilities, ultra short term bond funds, video

The Nuances of Liquid and Liquid Plus Funds

July 10, 2011 1 Comment

Mutual fund schemes known as liquid funds /money market funds/cash funds and ultra short-term bond funds/liquid plus funds are options for parking funds for the short term.They allow for a high degree of liquidity.They are alternatives to keeping money in a savings bank account or a short term bank fixed deposit.

Liquid funds invest in money market instruments of residual maturity up to 91 days.Liquid funds have the lowest volatility in returns among all categories of mutual funds because there is there is no mark-to-market (MTM) valuation of the portfolio on a daily basis unless there is a trade in the secondary market in the underlying security .Practically there is no trade in money-market instruments and valuation of daily NAV happens on an accrual basis, i.e., by adding the coupon accrued for the day without any mark-to-market impact. Read more of this post

Filed under Paper Assets, Theory, Tool Kit Tagged with AMC, cash funds, cash management, coupon, debt funds, dividend distribution tax, dividend option, growth option, liquid funds, liquid plus funds, liquidity, low volatility, mark to market, money market funds, money market instruments, Mutual Funds, NAV, portfolio maturity, post a day, postaday2011, RandomBlog2011, savings bank account, secondary market trade, short term bank fixed deposit, ultra short term bond funds

Why Avoid Small Cap Mutual Funds

July 10, 2011 2 Comments

Mutual funds are largely retail investment products.They are more suitable for saving money rather than make it grow at astonishing rates.They are largely targeted at middle class investors.However wealthy investors too continue to invest in mutual funds.The advantages of getting professional investment management and not having to deal with researching stocks , trading and tracking a portfolio is too much to give up. However mutual funds investing exclusively in small cap companies are not very popular with more sophisticated investors.This is because mutual funds are not the best way to invest in small cap companies.

Consider this: There are 62 funds in Value Research’s Mid and Small Cap category. Of these, no more than six are either exclusively or primarily focused on small-cap stocks. These funds have had a patchy performance with a large amount of volatility and have been unable to give attractive returns even over relatively long periods of time. Of course, volatility is a given in any small cap portfolio because smaller companies tend to react violently to any change of mood. However, the whole idea is that the investment manager will eventually be able to build a decent base of investments in a set of small-cap companies that are on their way to growing out of the category and into being mid-cap companies. Here lies the problem. If a knowledgeable and expert investor were to do this directly, he would probably identify a handful of companies and then would slowly build positions in them.

Sri Padmanabha Swamy’s Treasure

July 9, 2011 1 Comment

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Gold soothes me.Money relaxes me.So I often do the accounts when I wish to relax.Being surrounded by wealth makes me feel good .BTW I don’t have to own any of it to feel good.

The past couple of weeks I have been really stressed out.There are so many things that need to be done that it’s hard to sit down and get any one thing finished before I have to switch over to doing something else.

One of the main ways I have been relaxing,is following the news stories covering the Supreme Court ordered inventory of the treasure of the Sri Padmanabha Swamy Temple in Thiruvananthapuram.

The principal deity of the temple is Sri Padmanabhaswamy ie Vishnu in the “Ananta-sayanam” posture ie in the eternal sleep of Yoga-nidra on the serpent Ananta.Vishnu is part of the Trinity in Hinduism.He is the Preserver.Lakshmi the Goddess of Wealth is his consort.The current temple was built by the erstwhile rulers of Travancore.

Here is a list of what the newspapers have reported as having been discovered in the cellars that have been opened up so far: Read more of this post

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Shopping For NCDs on the Stock Market

July 6, 2011 7 Comments

wealthymatters.com Buying an NCD at an IPO when interest rates are high and holding it to maturity is a pretty sound idea.But buying NCDs in the secondary market can be pretty profitable too.

The prices of NCDs vary with changes in the prevailing interest rates.So careful shopping when prices fall as interest rates rise and holding on till maturity is more profitable.

If a person is good at figuring out which way the interest rates will move,he could buy NCDs cheap and exit them when their prices peak.This could potentially increase returns.