Art of Investing in MF

#1
Mutual Fund (MF) is an ideal investment vehicle. understanding this simple product sometimes become complicated due to excessive loads of information.
To make it simple, MF is like your provision item that you buy every month. Whenever you spend some money, save some money as well to compensate for the unusual expenses. SIP is the best tool to participate and MF makes it easy to achieve it. But SIP is not a magic wand and MF managers are not magicians to generate quick returns as one would expect. Allow it to grow from a sapling to plant and then a tree so that you will own an orchard at the end of period. Will keep sharing more as we go by...
 
#2
FMP is another big fad in the investment world of MF. The Key highlights are...


[*]It gives a fixed portfolio of Debt as it signifies a fixed maturity
[*]You dont run duration risk unlike other open-ended fund
[*]The yield at the time of portfolio creation will be the yield net-off expenses
[*]Benefit the most when the yields remains the same or rises after investing since the bonds are held to maturity
[*]Benefits the least when yield falls since it does not capture much of capital gains
[*]Suffers from liquidity since practical exit option do not exist even though they get listed in exchange.

[*]Scores well when compared to FD for tax payers since FMP enjoys lower tax incidence when held ofr > 1 year

In the current scenario, FMP is a good option if you are interested in capital protection and optimum yield through debt portfolio
 

poortrader

Well-Known Member
#3
FMP is another big fad in the investment world of MF. The Key highlights are...


[*]It gives a fixed portfolio of Debt as it signifies a fixed maturity
[*]You dont run duration risk unlike other open-ended fund
[*]The yield at the time of portfolio creation will be the yield net-off expenses
[*]Benefit the most when the yields remains the same or rises after investing since the bonds are held to maturity
[*]Benefits the least when yield falls since it does not capture much of capital gains
[*]Suffers from liquidity since practical exit option do not exist even though they get listed in exchange.

[*]Scores well when compared to FD for tax payers since FMP enjoys lower tax incidence when held ofr > 1 year

In the current scenario, FMP is a good option if you are interested in capital protection and optimum yield through debt portfolio
I have a few queries
I understand that HTM means if a debt instrument is 2 years duration you hold it till 2 years. Now suppose in this period the debt is traded and interests rise and debt price falls. Now suppose the situation remains same till the date of maturity. So by holding it to maturity date does not guarantee that you will get the face value of the debt? please clarify
 
#4
HTM bonds will ensure no price risk. Lets assume that we bought a bond with coupon of 11% maturity 2015 at a price 101 (current yield is 10.40%). This bond will tend to maturity as it nears the maturity and even if the interest has been rising the bond will get redeemed at Rs100/. The current yield factors in that the price on redemption is Rs100/ and hence you will get your yield (that you locked in at the time of buying) when the bond matures for payment.
 

Mr.G

Well-Known Member
#5
I have a few queries
I understand that HTM means if a debt instrument is 2 years duration you hold it till 2 years. Now suppose in this period the debt is traded and interests rise and debt price falls. Now suppose the situation remains same till the date of maturity. So by holding it to maturity date does not guarantee that you will get the face value of the debt? please clarify
You will get full value if you redeem bond from company. But if you sell it in secondary bond market, then you will have to pay market price.

The Family Fund Manager who you insulted very deeply. :)
 
#6
To add a point, all issuer government or corporate will redeem the bond at par value or face value (typically Rs100/) on maturity. Even though interest rises and bond prices can fall in line with it, the bond will tend towards face value as time decays especially when it is close to maturity. This phenomena will ensure that the bond price will move up towards face value if in case it is below that. Also the fact that since redemption is done by the issuer, you still dont have to track the market prices since he is contracted to give the face value say Rs.100/. Hope this clarifies the issue
 

Mr.G

Well-Known Member
#7
To add a point, all issuer government or corporate will redeem the bond at par value or face value (typically Rs100/) on maturity. Even though interest rises and bond prices can fall in line with it, the bond will tend towards face value as time decays especially when it is close to maturity. This phenomena will ensure that the bond price will move up towards face value if in case it is below that. Also the fact that since redemption is done by the issuer, you still dont have to track the market prices since he is contracted to give the face value say Rs.100/. Hope this clarifies the issue
Are you an investor?
 

Mr.G

Well-Known Member
#9
I suggest that you run away from this forum as fast as you can. Traders here are idiots and will do anything to insult you and tell you that Fundamental analysis doesnt work and they are the gods of the stock market. Trust me run away from here or else you will go mad like me too. I get daily insults from these people. They will ruin your mindset completely.
 

poortrader

Well-Known Member
#10
You will get full value if you redeem bond from company. But if you sell it in secondary bond market, then you will have to pay market price.

The Family Fund Manager who you insulted very deeply. :)
I have not called you family fund manager, check the facts before writing.

Secondly, I asked you the purpose of your website, if you are not sending any reports to client (you yourself told that you dont need to send any report to your clients who are family friends). Learn to acknowledge constructive queries.
 

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