ICICI Prudential Mutual Fund is one of India's leading AMCs. They manage a lot of money (AUM) and are innovative in their product offerings. They also have a good track record of technology use. Their web site was one of the first to offer direct purchase of Mutual Fund units as well as portfolio tracking.
The Economic Times reports that leading AMCs have joined ranks to oppose the SEBI's move to scrap Entry Loads on direct fund investments, i.e., investments that do not go through a broker.
What SEBI is trying to do here is to ensure that when an investor approaches an AMC directly to purchase units or set up an SIP, he or she should not be charged an entry load. Quantum AMC is the only Indian AMC that allows investors to purchase funds directly and does not charge an entry load. Investors can create an account on their web site and transact directly. That amounts to a 2.5% saving every time you purchase mutual fund units, either through a bulk purchase or via the SIP route.
If an investor is capable of making their investment choices then why should they pay an entry load? SEBI's move makes perfect sense. Then why are the AMCs opposing this move? Or is it the brokers who are opposing the move and hence the AMCs are under pressure? I suppose the latter is the case because most AMCs pay out the entire 2.5% charge to the brokers.
The argument is that brokerage houses have spent huge amounts of money to set up investment centers across the country and AMC will have a very difficult time replicating this reach.
What? Does that argument make sense? Not to me!
We are talking about direct investments here. I don't talk to a broker anyway. I do my own research on web sites like Value Research Online and make my own decisions. On my own time. So why am I paying an 2.5% entry load?
Quantum AMC has a solution. You can either do all your transactions online if you have Internet banking facilities from your bank (like ICICI, HDFC, SBI etc). Otherwise you can download their application form, print it, fill it in and post it along with a cheque. Simple. Total cost is about 30 rupees even if you have to use a cyber cafe to access the Internet and print the form. Plus postage.
Do the math people. 2.5% of your money is lost every time you buy an mutual fund. That 2.5% would have earned the same return as the rest of your money.
ICICI Mutual Fund has removed exit loads from three of it's funds with effect from August 1, 2007. That is investments made in these funds on or after August 1, 2007 will not pay an exit load on redemption. Other than investments made via SIPs or STPs.
Article in Economic Times about this.
One Hundred Kilograms , the size of a large Pizza!
Minted by the the Royal Canadian Mint, this gold coin has $1 million of Gold bullion, with Maple leaf on one side & Gueen Elizabeth II on the other. The coin is on auction at TeleTrade.
Current bid (7.08 am IST, July 3, 2007) - $1,000,000 ....
The following email was sent to an internal mailing list in my organization. I think it is worth reproducing it here.
If you are holding an HDFC Value plus credit card and have in past few months seen something like an excess cashback billed to your card , please get in touch with HDFC customer care people asap .I too had experienced the same in 2 of my past months card statements .Infact my roommate and some of my friends were also charged for the same thing .We talked to thee HDFC people and finally after putting in some efforts were successful to get our money back.To add to that I had personally asked them to send me an apology letter for the same , which , though I got is in a very sugar coated language,but nevertheless I got my money back..I told them that I have a number of friends who were confronted with the same issue , so they gave me a POC for this issue whereby if anybody among you has come across the similar problem ,you can talk to this POC and he'll get your problem resolved .The POC is : Sai Rupendra.. (U can call HDFC customer care and ask the person taking the call to directly connect you to Sai Rupendera).So folks , please utilise the services of this person to claim back your hard earned money from HDFC .
In this post I will provide links to some of the best web sites for Indian Mutual Fund information.
Value Research is an independent provider of investment information. It was started by Dhirendra Kumar and is your best source of reliable information about Indian Mutual Funds. If you are serious about investing in Mutual Funds then you should take a look at these guys. They have a superb print magazine called Mutual Fund Insight. You can read a sample issue online. MFI is an investment that is worth it's weight in gold.
PersonalFn is a personal finance and investment web site from the Quantum Group. They have another interesting web site called Equity Master.
Money Control is a financial web site from the TV18 folks. Tons of useful stuff and tons of irritating adverts.
Money Control has a ton of tools and articles. Do spend a little time on their web site. I use FireFox with the AdBlock Plus plugin to nuke the advertisements on their web site. As a result their pages load faster and I don't have to deal with irritating adverts flashing all over the page. Heaven! I love FireFox!
AMCs
Links to the AMC web sites. Good for Fund information etc. Do check what Value Research says about a fund before you buy.
Phew! 33 AMCs currently in India!
Much has been written about building a mutual fund portfolio. You can try Money Control, Rediff, Value Research, PersonalFn etc for tons of good articles on the subject. However, there is a common problem with all these articles. They give you a ton of funda but don't really tell you how to go about building a portfolio.
This post is the first of a series of posts I will do on the subject. In these we will look at the various factors involved and we will actually build a portfolio(s).
To start, we will assume the following:
Investing for:
Lets look at each investment target:
Retirement
Assuming a retirement age of 60, we have 25 years to go. This is a very long time! So we can have a pure equity (diversified) portfolio. More on this later.
Children's College & Higher Education
Assuming two children with say a difference of 5 years between them, we are looking at a time range of 10 & 15 years (say). Again a long enough time frame for a pure equity (diversified) portfolio. More on this later.
Floating Fund for Periodic Large Expenses
This one is trickier. Let us break it down a bit. Let us assume we will use this portfolio to build up a corpus over a fixed period and then empty it, starting again for the next block. Let us assume we will use blocks of 3 years each. Now 3 years is a short time frame but still adequately long enough to have a significant equity exposure. But we are definitely not talking about a 100% equity exposure here. Also, this would typically be our least priority among the three portfolios we want to setup.
Given the above we can settle for a 60 - 40 or even a 70 - 30 equity - debt distribution. This is easier said than done! We will have to do some homework for this one!
____________________________
Now lets us look at some concepts:
Risk
I have not spoken of "Risk" so far. Risk is a relative term. It varies from person to person. And risk is a perception rather than an quantifiable entity. That is, we cannot say something like "my risk appetite is 25%" or "my risk appetite is low / medium / high" because it does not make sense. What is low risk? No such thing exists!
So what are we talking about here? Risk to me is about calculation. Note that one of our key assumptions is about the quantum of money that is available for investment every month. If you are squeezing your finances to come up with this amount, then you are taking risk. If this amount is coming from your income after your regular expenses (household, tax saving, insurance, loan payments, financial buffer etc), then your risk is low. Low mind. There is still the risk of losing the money you are investing. But that does not put your family and lifestyle at immediate financial risk. Rather the risk is spread out over a longer period and hence more manageable.
Return
Okay. Now for the interesting part. And the dangerous part. One of the first things we need to understand when designing a portfolio is what kind of return we can generate. The euphoria of the last few years has people dreaming of "doubling their money in a little while". This is only a pipe dream. Pleasant to dwell on but a chimera nevertheless. It is very important that we understand the kind of returns we can expect from our portfolios.
Historically the BSE SENSEX has returned about 18% per year. This is an average value of course. There have been bad years and good years. However this 18% figure is good estimate of the kind of returns we could expect. But then "past performance is no guarantee..." etc etc. So for our purpose let us assume a return of 15% per annum.
Targets
Ah!. How much? Big question. No straight answers. All I will say at this time is that we need to have a target before we can proceed. For the time being let us throw some numbers out:
Do these numbers make sense? Not at this time. They are just numbers. But we will go with them for the time being. Later I will revisit the topic of setting targets and show you how to do a good job of setting reasonable targets.
Last Words
So far I have only laid out some assumptions and touched upon three items, namely Risk, Return & Targets. I have made some statements about portfolio structure but have not elaborated further. I will come back to each of these topics later.
In the next post we will look at stitching these things together.
Simplifying Personal Finance, one of my favorite blogs, has a very good post about calculating EMI. There is a follow up post about using MS Excel for the same calculation.
I have created a simple Excel sheet for this purpose. Just enter the loan details and the EMI figure will be calculated for you.
The web site of Oriental Bank Of Commerce is down again! Some time ago they had exceeded their band width and their service provider had shut down the site. This morning I am receiving a 502 error!
When will these stupid banks realize that their web site is as important as their branches?
Yet another crappy Rediff.com article "Unable to decide which mutual fund to invest in?". This one is the transcript of a chat session with a so called personal finance guru (T Srikanth Bhagavat).
You have to read the damn thing to understand what I am talking about here. Go do it! There are no better ways to waste your time.
The Oriental Bank Of Commerce is a public sector bank in India. It used to be primarily a North India bank till it took over Global Trust Bank a few years ago. Now it has a pan India presence.
They have good service and a decent internet banking portal. I use this bank because it has a branch next to my flat and a decent ATM network. I am well know in the local branh and get very good service.
Yesterday I tried accessing the bank's web site and got a rude shock. It seems OBC has exceeded it's bandwidth quota on the web server and the service provider has shut the site down. All that comes up is a terse message saying "bandwidth exceeded" (see screenshot below).
The screen shot was taken today. So the web site has been down for at least 24 hours, maybe more. And nobody from the bank seems to have noticed.
Bad for business guys. Most of your customers will not notice since they do not use the internet. However the fact that you have exceeded your quota means that the number of your customers using net-banking is on the rise. Spend some of that profit you are making and give us a better web site!
Rediff.com's Get Ahead Money section published a good article on Credit Cards in India on Feb 5, 2007.
I have heard of Credit Card issuing banks like ICICI, HSBC, CitiBank, etc harassing customers but I haven't had that experience. I use a number of cards but I use them for their ease of use, never for credit. I always pay the full amount pending on my cards at the end of the cycle. Credit Card interest rates are much too high for my pocket :-)
Anyway, the article in question ends with four points:
I recently bought a Honda Activa for Padmaja. Cost, approx Rs. 44,000/-, including accessories, tax, registration fees, insurance etc. We had already decided on the Activa before I went to the Pratul Honda show room In Raj Bhavan Road, Hyderabad. I had also decided to pay cash for the transaction rather than take a two wheeler loan. But I wanted to see what was on offer on the loan front. So I asked about loans and was directed to the loans section.
There I met a couple of chappies representing ICICI Bank who walked me through the process. I spoke to them about two wheeler loans and learned how the banks are ripping off people by playing to their lack of awareness about matters financial.
This is what the loan agents told me:
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
![[Most Recent Quotes from www.kitco.com]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tbsUC8u5O1j-1Ry4iFFeUvdjzH9SId-5P_2dt_IZnGHB8rVBjZ1rAut51FCgjHYklk9MTrBsUaByWyu6fIYfFsyRJVxoBb8mAJpD5eOHa4=s0-d)
![[Most Recent Quotes from www.kitco.com]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vXLNfdLKb_BSNc754z7PZKoN7OYe8wZeNWZCrr2Smx2c4vgMaw5SdU9lImGV1Hg8Op4W8V9Un-5IKuOp0FlA4JE-uO4lMngM5KPz0E_cy0XE4=s0-d)
Opinions expressed here are entirely my own and do not reflect the position of my employer or any other entity.
The views and opinions expressed by visitors to this blog are theirs and do not necessarily reflect mine.
This work is licensed under a Creative Commons license.
![[Most Recent Quotes from www.kitco.com]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_ugcbmpoh8k8fp-TWhc6FYKaNClReGmXrEXZlDv1aIUNRA-BWwxbEwbx8eSiFjFu-OPzMKyam1I5TntEtRbByEHDUKdh_h-hMAo7Vc=s0-d)
