Marketing Of Coca Cola In The Uk Nepal Marketing Essay

Marketing Of Coca Cola In The Uk Nepal Marketing Essay Coca-Cola is one of the world leading and largest Company in the sector of beverages. It was established in 1886 by Dr. John Pemberton who was a pharmacist of Atlanta, Georgia USA. The brand has since become household drink in more than 200 countries across the world. Carbonate drinks are the single largest component in Coca-Cola Company which account for nearly 78% of the total volume sold in 2008. The company has more than 3000 products of beverages and has nearly 500 brands in its portfolio includes Coca-Cola or Diet Coke family, Coca-cola enterprise (CCE). Likewise, wide range of carbonates including Fanta, Lilt, PowerAde and sprite. Coca cola in UK The market of carbonate in the UK is normally dominated by relatively few companies. These are, in the main, subsidiaries of global corporation such as the Coca Cola Company and Pepsi CO. Moreover, Coca-Cola, BSD and own label alone account for well over two thirds of the carbonates market volume in the UK. The purpose of sale of BSD, In which PepsiCo already has a 10% share, is likely to make one of the these groups even stronger in the UK market. Mainly, the major brand of Coca -Cola Company is coke or simply Coca-Cola. Other major brands of Coca-Cola UK portfolio contains Diet Coca-Cola, Cherry Coca-Cola, Fanta , Lilt, Sprite, Dr Pepper and Schweppes. Dr Pepper has been on sale in the United Kingdom since 1982, is account to more famous among the young and teenagers peoples in the UK. The operations of the Company in the UK are categorized among CCE and Coca-Cola Great Britain (CCGB), where CCE is the manufacturer and distributor, likewise CCGB belongs to the brands which have more responsibility in the field of marketing. Coca cola in Nepal At first Coca-Cola was introduced in Nepal in 1973, which was imported from its neighbour country India. Local production of Coca-cola in Nepal was started in 1979, with the establishment of Bottlers Nepal Limited (BNL). Coca-Cola Sabco was provided the right of bottling from the Coca-Cola Company to Nepal in 2004. BNL has plants in the capital city Kathmandu and Bharatpur municipality, which is only the bottler of Coca-Cola products in Nepal. The Marketing, Sales and Distribution strategy for BNL is mentioned as Refresh the Marketplace and contain a robust Consumer Response System to deal with the concerns, ideas and suggestions of the consumers. BNL is also dedicated to support the community through different programmes, mainly in the sector of health. In relationship with the local community, BNL also support by providing a Free Health Check-up Clinic at Bharatpur municipality. Facts:/strategy The Coca-Cola brand has been implemented the global marketing strategy. They are taking into account the whole world into the single market place and uniform marketing strategy was introduced by Coca-cola for many years, at present the trend is changing and various marketing campaigns are being prepared for the development of the Company in different regions of the world. Basically, decisions related to the Business are made on a domestic basis to fit in with the culture and needs of the domestic community. In 1919 Coca-Cola decided to expand its business in the global community. The Coca-Cola Company decided to take its operations around national boundaries and the research of its marketing was started in USA, china and other many countries of the global world. Due to the successful and efficient marketing research of Coca-cola, it was able to expand its business globally in different places of the global world. Advertisement   Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  If we consider on advertising perspective of Coca-Cola Company, advertising has more successful power to increase customers demand worldwide. Basically, advertising has to be in line with the domestic culture. An adapted marketing mix defines adjusting the mix with the established culture, geographic, cost-effective and other differences in different nations of the globe. Coca-Cola Advertisements in Nepal The Coca-Cola has a long history of sports marketing relationships Bottlers Nepal and Bottlers Nepal (Tarai) on lsat week announced the launch of their summer promotion campaign Coca-Cola Football great festival targeting soccer fans across the country. . According to Bottlers Nepal, customers need to purchase Coca-Cola, Fanta or Sprite and text the ten digits unique code under the bottle crown of to 4477 from mobile phone. The scheme is appropriate to all 200 ml and 250 ml returnable glass bottles or all sizes of PET bottles from April 1 to May 31, 2011. According to the Pranaya Sthapit, marketing manager of Bottelers Nepal, during the period of scheme, consumers can get a chance to win attractive Coca-Cola t-shirts, caps and free drinks (www.cocacola.com.np). Advertisement of Coca Cola in Rural Area of Nepal. Figure: 1.1 Reference: http://commons.wikimedia.org/wiki/File:Coke-nepal.jpg Coca-Cola Advertise in UK Coca cola follow integrated marketing communication theory in developed and advance country. In UK TV advert carries a particular logo, images and message, then all newspaper adverts and point-of-sale materials should carry the same logo, images or message, or one that fits the same theme. Coca-Cola uses its familiar red and white logos and retains themes of togetherness and enjoyment throughout its marketing communications. Don caster Rovers Coca Cola Advert Piccadilly Circus London References: http://www.flickr.com/photos/crispy789/2498475157 This place is the most popular and historical place in the London. More than 100,000 people visit it each day. Marketing affects perception of customer. This type of advertisements has direct effect on customer perception from multinational and multicultural tourist in UK. They have different advertisement and different type of product in the base on different demographic and behaviours people. When we compare the coca cola and other carbonate soft drinks advertisements in this time we can get totally different between each other. Coca cola only highlight its name rather than other things, the product promote itself .Coca- Cola brand image and its perception between the competitors helps to mouth publicity all over the world. Marketing Communication theory and Coca-Cola Marketing communication is the systematise relationship between business and its potential market where the marketer assembles a wide and different variety of ideas, massage, degision. Forms, media shape and colours both to communicate idea to and to stimulate a particular perception of Coca-Cola Company by individual people who have been aggregated in to their target market Coca-Cola use the number of Marketing communication tools for assemble such as personal selling, sale promotion , public relationship and advertisement. Coca Cola lunched simple wall Advertisement in Rural Area of Nepal. This has one of the simple communications strategies of Bottlers Nepal Limited. People who live in the rural area t havent any equipment of media such as TV, FM, Internet and good facilities of transport. Coca cola provides coke freeze to their consumer for selling their own product and they have strongly motivated to sell only their product. Simple communications models show a sender sending a message to a receiver who receives and understands it. Real life is less simple many messages are misunderstood, fail to arrive or, are simply ignored. Thorough understanding of the audiences needs, emotions, interests and activities is essential to ensure the accuracy and relevance of any message. Marketing System Input Processing Output Feedback Figure: Marketing communicates process in Rural place of Nepal. Market Segmentation in Nepal : Generally, Nepalese market was practiced mass marketing approach with range of product in the past. Because of the changes in socio-economic field and developments in transport and communication sector have made Nepalese marketers conscious of market segmentation. The marketing strategies of global Companies like Coca Cola have reinforced this realization. The following points describe the practices of market segmentation in Nepal. 1. Non-systematic: basically, marketing segmentation is not based on systematic market research. Previous experiences, feeling of management and strategy of competitors have influenced marketing segmentation. 2. Variables for Segmentation: Different variables mainly used for consumer market segmentation are given below Geographic Demographic Psychographic Behavioural 3. Lack of Information: Nepalese marketers lack comprehensive information about consumer characteristics. They tend to regard marketing research as a wasteful cost. This has constrained the effective evaluation of market segments in terms of their attractiveness and appropriateness. Risks are not properly assessed. 4: Government Policies: Government policies in Nepal are not very supportive of marketing. They do not regard businessmen as partners for development. Restrictions of movement of goods and controls have discouraged market segmentation. 5: Lack of Ethical Considerations: Environmental and welfare considerations are generally disregarded for market segmentation in Nepal. The above points clearly indicate that the concept of market segmentation is at an initial stage in Nepal. However, the importance of market segmentation is likely to increase in the years to come. Market segmentation in UK. The companys beverages are generally for all consumers. However, there are some brands, which target specific consumers. For example, Coca- Colas diet soft drinks are targeted at consumers who are older in age, between the years of 25 and 39. PowerAde sports water target those who are fit, healthy and do sport. Winnie the Pooh sipper cap Juice Drink target children between the ages 5-12. Positioning Positioning is the process of creating, the image the product holds in the mind of Consumers, relating to competing products. Coca cola and Pepsi both make soft drinks, Pepsi may try to compete but they will still be seen as down market from coke. Coke has been positioned based on the process of positioning by direct comparison And have positioned d their products to benefit their target markets. Most people Create an image of a product by comparing it to another product, thus evident Through the famous battles between Coca-cola and Pepsi products. Product life cycle: When referring to each and every product or service ever placed before the consumer i.e. in the long term all the existing products and services are dead. So every product is born, grows, matures and dies. So in the commercial market place products and services are created, launched and withdrawn in a process known as Product Life Cycle. To be able to market its product properly, a business must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers. Furthermore, cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. In foreign markets the product life cycle is in more of a growth trend Cokes advantage in this area is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidize the domestic Cola Wars. Insert the picture of the product lifecycle. Financial objective in UK Coca-Cola Enterprises, the worlds largest bottler of Coca-Cola products which will soon be focused purely on some of the largest but also most mature soft drinks markets in Western Europe, is optimistic about the long-term growth prospects for this territory. The group aims to achieve in currency neutral terms: revenue growth of 4% to 6%; operating income growth of 6% to 8%; earnings per share growth in a high single-digit range; and return on invested capital improvement of 20 basis points or more per year. These metrics reflect the solid growth opportunity that lies ahead in Europe, says John Brock, chairman and chief executive of Coca-Cola Enterprises. They exceed our current long-term objectives. We are committed to these financial objectives, and in turn, to creating real value for our shareowners, our customers, and our employees. Financial Market share of coca cola in UK Coca-Cola has reported strong second-quarter profits, beating market expectations, thanks to rising international sales. Total profits were $2.37bn ( £1.56bn), up 16% from a year ago and narrowly above forecasts of $2.3bn. The beverage makers share price jumped 2.3% in the first 15 minutes of New York trading. Revenues were up 4.8% to $8.67bn, thanks to rapid sales growth in Latin America, Africa and parts of Asia. Among the best growth markets were Brazil, where sales volumes were up 13%, and India, up 22% since last year. The producer of Fanta, Sprite and Vitamin Water also reported a pick-up in growth albeit at a more sedate 2% pace in its home market of North America. In Europe, however, sales were down .1 referances http://www.bbc.co.uk/news/business-10716077, 21 July 2010 Last updated at 15:42 Coca-Cola Enterprise is the UK subsidiary for the Coca-Cola Company. In 2008 UK carbonate was valued about  £6billin; with which Coca-Cola (GB) hold about 60% value in both retail and on-trade. Britvic soft drink which is UK subsidiaries of PepsiCo and is the main competitor was second place in terms of market shares of 15% retail sales according to mintel. PepsiCos flagship brands in soft drinks are Pepsi, Pepsi Max, Diet Pepsi, Gatorade and Mountain Dew, and the company also owns Tropicana and Dole, the worlds leaders in fruit juice. GlaxoSmithKline PLC, a giant in healthcare products, is the UK third largest carbonate drink and is also on a different scale from most drinks companies. The company specialised in medicines and oral care, as well as three famous drinks brands: Lucozade, Ribena and Horlicks. CCE, had a turnover of  £1.43bn in the year ending 31st December 2006, up 2.4% on the previous year whereas For the year ending 30th September 2007, Britvic PLC recorded total branded revenues of  £716.3m, up by 5.7% on 2006. According to John Sicher of Beverage Digest (2009), Coca-Cola was the number one brand with around 42.7% in 2008. PepsiCo was second, with 30.8%, however these market shares for both Coca-Cola and PepsiCo have slightly decreased from 2007 to 2008. Coca-Colas volume has also decreased 1.0% since 2007, whereas PepsiCos volume has increased 0.3%. Strong growth of Coke range in the UK is probably due to the introduction of coke zero and Diet coke product. Coke Zero is the most significant of KOs new innovations. This beverage is marketed as a calorie-free version of Coca-Cola Classic, omitting the diet label in an attempt to appeal to new demographics. This brand alone accounted for nearly one third of all 2006 growth for beverages bearing the Coca-Cola trademark. Reference; http://ivythesis.typepad.com/term_paper_topics/2009/08 strategic-analysis-coca-cola.html The Top 10 Soft Drinks Companies in 2009 by market share. Coca-Cola ( bottling partners) PepsiCo ( bottling partners). Nestle. Suntory. Dr Pepper Snapple. Red Bull. Danone. Kirin. Asahi Breweries. Ito En. Coca-cola is number one for the 11th year http://www.financenews.co.uk/uncategorized/coca-cola-still-on-top-of-the-world/ Coca-Cola has retained its spot as No 1 in annual ranking of the 100 Best Global Brands followed by IBM, Microsoft, Google and GE. The 2010 report estimates the Coca-Cola brand value at $70.5 billion, up by two per cent since 2009, said the Interbrand that uses a combination of analysts projections, company financial documents and its own qualitative and quantitative analysis to arrive at a net present value. Top 5 Global brands in 2010 Rank Company Brand Value 1 Coca-Cola $70.452m 2 IBM $64,727m 3 Microsoft $60,895m 4 Google $43,557m 5 GE $42,808m The Himalaya Times ,Added At:   2011-02-14 12:18 AM The market share of Coca Cola and its rival Pepsi might be 50-50 in many parts of the world but when it comes to Nepal, the market share structure would be 3:1. The factor which needs to be credited for this data of Coca Colas market share cannot be determined that easily. As far as I know, the factors could be, the management and the quality it has maintained. The company with the largest paper work in Nepal had Bottlers Nepal, the sole distributor for Coke in the second spot. This also proves that the management is good and the quality maintenance needs no description at all. There were ups and downs in Coke. A couple of years or so, the workers went on for a strike all over Nepal in Bottlers Company resulting the distribution and production into halt. To worsen this case, this halt was in existence in the peak season which was finally solved. The year 2008 could be different and nothing is predictable. The number one spot could be snatched by Microsoft in this present age of information technology. If only Coca Cola could come up with some beverage for chilling cold with the same brand, who knows they might still be at the number one spot for the next ten years or so. Friday, January 11, 2008 | The carbonate market in the UK is dominated by relatively few companies. These are, In the main, subsidiaries of global conglomerates such as the coca cola company and Pepsi CO.Indeed, Coca-Cola, BSD and own label alone account for well over two thirds of the carbonates market volume in the UK.The purpose sale of BSD, In which PepsiCo already has a 10% share, is likely to make one of the these groups even stronger in the UK market. Financial objectives On September 7, 2010, CCE announced updated long-term financial objectives, including the following: Revenue growth of 4 percent to 6 percent; Operating income growth of 6 percent to 8 percent; Earnings per share growth in a high single-digit range; and Return on invested capital improvement of 20 basis points or more per year. Coca cola market share by area Area NORTH AMERICA LATIN AMERICA EUROPE MIDDLE EAST ASIA AFRICA Volume 30% 25% 22% 17% 6% RANKING 1 2 3 4 5 Figure: 2 Sources: Business plan on coca-cola 8/8/2010 MARKETING STRATEGY Our local marketing strategy enables Coke to listen to all the voices around the world Asking for beverages that span the entire spectrum of tastes and occasions. What people want in a beverage is a reflection of who they are, where they live, how they work and play, and how they relax and recharge. Whether youre a student in the United States enjoying a refreshing Coca- Cola, a woman in Italy taking a tea break, a child in Peru asking for a juice drink, or a couple in Korea buying bottled water after a run together, were there for you. We are determined not only to make great drinks, but also to contribute to communities around the world through our Commitments to education, health, wellness, and diversity. Coke strives to be a good neighbour, Consistently shaping our business decisions to improve the quality of life in the communities in which we do business. Its a special thing to have billions of friends around the world, and we never forget it. Processes of Communication in a coca-cola The process of communication would be as follows: Message conceived decision made to send message and reasons why. Message encoded information for notice and what sort of layout is going to be used etc. Communications medium selected communication method selected, in this case notice. Message decoded language and knowledge used to send out the right message. Message interpreted meaning of notice, recipients view. Feedback supplied feedback supplied to sender e.g. opinions, response etc. Sample of communication process of coca-cola N N Massage . Feedback Figure: Schramm (1955) Note:Communication process copy from book http://books.google.co.uk/books?id=KKp3Hg5vmVsCpg=PA276dq=marketing+communication+theory+/coca+colahl=enei=69phTZj6G9HssgbEqKC2CAsa=Xoi=book_resultct=resultresnum=3ved=0CD4Q6AEwAjgK#v=onepageq=marketing%20communication%20theory%20%2Fcoca%20colaf=false Coca-Cola market share and sub product in Nepal Bottlers Nepal said it is planning to invest $10m in the next three years to expand its bottling operations and launch a brand of mineral water for the market. The bottler of Coca-Cola in Nepal will use the funds to modernise its bottling plants in Kathmandu and Bharatpur. The company, which posted a 20% growth in 2009, said it will start manufacturing the Kinley brand of mineral water following standards prescribed by the World Health Organization (WHO). Coca-Cola Sabco, one of Coca-Cola Companys bottling partners, has invested about $45m in the last five years, and annually produces one million bottles of carbonated soft drinks. Coca-Cola has a 67.8% market share in Nepals carbonated soft drinks business, according to global marketing research firm ACNielsen. RECOMMENDATIONS After completing our project we have concluded some recommendation for the coca cola company, which are following. à ¢Ã¢â€š ¬Ã‚ ¢Coca Cola Company should try to emphasis more on providing their infrastructure in the market to facilitate their customers. à ¢Ã¢â€š ¬Ã‚ ¢According to the survey, conducted by the international firm Nepalese people like little bit sweeter cola drink. So for this coca cola company should produce their product according to the local demand. à ¢Ã¢â€š ¬Ã‚ ¢Marketing team should try to increase the availability of Coke in rural areas. à ¢Ã¢â€š ¬Ã‚ ¢They should also focus the old people. à ¢Ã¢â€š ¬Ã‚ ¢Now young generation has a trend to drink coke 2 regular bottles at same Time, so providing more satisfaction to them company should introduce  ½ liter disposable bottle. +

Study on Mutual Funds

OBJECTIVE OF THE STUDY The main objective of the present study to understand how mutual funds function in India. Specifically the study seeks to answer the following question: 1. What is the present status of mutual funds industry in India? How does it compare with mutual funds in foreign countries? 2. How mutual funds operate to create value for their investors? 3. What consideration an investors should keep in mind while making investment in mutual funds? 4. What is the regulatory frame work for mutual funds in India? 5. What are the problems faced by mutual funds industry in India & what are its future prospects? RESEARCH DESIGN & METHADOLOGY The Present study has been completed on the basis of secondary data colleted from internet and from various books, publicity materials and brochures issued by various mutual funds co. Reference has also been made to the regulations issued by securities and exchange board of India in regard to mutual funds. The data and the resource material so collected have been analysed within the frame work of 5 sections each focusing on a particular questions the study seeks to answer. PLAN OF THE STUDY The Study has been completed within the frame work of five sections. The Section wise plan is as follows:- I. PRESENT STATUS OF MUTUAL FUND INDUSTRY II. OPERATION OF MUTUAL FUNDS III. INVESTMENT CRITERIA IV. REGULATORY FRAME WORK OF MUTUAL FUNDS V. PROBLEMS AND PROSPECTUS I PRESENT STATUS OF MUTUAL FUNDS IN INDIAN CAPITAL MARKET Retail investors usually want to participate in the capital market, but due to paucity of funds, lack of expertise knowledge and limited risk-bearing capital, they have limited access to capital market. Mutual funds provide a mechanism that helps the retail investors enter the capital market. the mutual funds manage their funds for maximum gain with minimum risk and in the most professional way and work as agent for growth and stability of capital market. Till 1964, there were no mutual funds in India. In 1963, UTI Act, 1963 was enacted for the establishment of first mutual fund. The UTI launched its first scheme, US-64; in1964 which later became the most popular unit scheme in India. In1987, the RBI issued guidelines for bank-sponsored mutual funds. The evolution of mutual funds in India is consisting of different phases as follows: PHASE I: History of mutual funds started in India in 1964 when the first mutual fund in the name of Unit Trust of India was established in July 1964. UTI launched its first scheme US-64 which eventually became the most popular scheme and could accumulate the largest corpus. After 1964, it started several other schemes also. Till 1987, UTI remained the synonym for mutual fund in India. It was a sole player and gathered shape of monolithic mutual fund with millions of investors in several schemes. PHASE II: In 1987, the Government allowed the public sector banks to establish mutual funds. SBI Mutual Fund in 1987. Other mutual funds to follow suit were Canbank Mutual Fund (1987), PNB Mutual Fund (1989), IndBank Mutual Fund (1989), LIC Mutual Fund (1989), GIC Mutual Fund (1990), etc. The position continued till 1992 and other mutual funds were also established. PHASE III: There was a historical change in 1993 when the government allowed private sector mutual funds also. The first mutual fund in the private sector was Kothari Pioneer. Thereafter, in 1994, the foreign mutual funds were also allowed to operate schemes in India, and Morgan Stanley was the first foreign mutual fund in India whose initial issue of units was overwhelmingly subscribed by the investors. In 1992, SEBI was established and it issued guidelines for the working and supervision of mutual funds. PHASE IV: In 1966 a need was felt for the modification of SEBI (Mutual Funds) Regulations. On the basis of ‘Mutual Funds-2000’ Report, SEBI framed new Regulations in 1996. There have been several amalgamations of mutual funds. After 1996, a number of foreign mutual funds as well as Indian mutual funds have been established. At the end of march 2004, there were 33 mutual funds and Assets Under Management of Rs 1,39,616 crores. After 1996, mutual funds have become very popular among retail investors. The increase in number of mutual funds and their schemes speak of the underlying strength of the investors’ confidence in them. As in April, 2005, there were 28 mutual funds operating in India. Some of the mutual funds operating in India at present are as follows (in alphabetical order): ABN AmroDSP Merril LynchJM Sahara Bank of Beroda Escorts Kotak Mahindra SBI Benchmark Fidelity LIC Standard Chartered Birls Sunlife Franklin Tempelton Morgan Sundarum Canbank HDFC Principal Tata Cholamandalam HSBC Prudential Tauras Deutsche ING Vysya Reliance UTI A large number of mutual funds have intensified competition and led go to product innovation. Each of these mutual funds has a number of schemes operating with different features and characteristics. There are more than 500 schemes in operation at present. II OPERATION OF MUTUAL FUNDS A mutual fund is a financial intermediary which acts as an instrument of investment. It collects funds from different investors to a common pool of investible funds and then invests these funds in a wide variety of investment opportunities. Small investors who are unable to participate in capital market, can access the stock market through the medium of mutual funds which can manage their funds for maximizing return. The investment may be diversified to spread risk and to ensure a good return (dividend or capital gain or both) to the investors. The mutual funds employ professional experts and investment consultants to conduct investment analysis and then select the portfolio of securities where the funds are to be invested. Thus, a mutual fund is a pool of funds contributed by individual investors having common investment preferences. FEATURES AND CHRACTERISTICS OF MUTUAL FUNDS A mutual fund is a financial intermediary and works as an investment company. It has distinct features and characteristics which differentiate it from other financial intermediaries. Some of the features of mutual funds are: (i) Mutual fund is a pool of financial resources. Investors bring their individual funds together. Sometimes, the funds which otherwise may not come for investment in the capital market, are invested through mutual funds. (ii)Mutual funds are professionally managed. The resources collected by mutual funds are managed by professionals and experts in investment. These professionals can undertake specialized investment analysis such as fundamental analysis, technical analysis, etc. , which are not otherwise expected on the part of individual investors. (iii)Mutual fund is an indirect investing. The individual investors invest in the mutual funds which in turn invest in the shares, debentures and other securities in the capital market. The proportionate funds given by an investor are represented by the units of mutual fund. Investors own these units. The shares, debentures are owned by the mutual fund. Investors have no direct claim on these securities. In case of closure or liquidation of the proceeds of these securities are proportionally distributed among the unitholders. (iv)Investment in mutual fund in not borrowing-lending relationship. Investors do not lend money to the mutual fund. Consequently, the investors have to share the gains or losses of operations of the mutual fund. (v)Mutual fund is a representative of investors. The mutual funds collect the funds from investors under a particular investment scheme. as a representative, the mutual fund has to invest these funds as per the designated scheme only. MECHANISM OF MUTUAL FUND OPERATIONS A mutual fund represents pooled savings/funds of individual investors. Professional managers of the mutual fund invest these funds in different types of securities. They have to take different decisions from time to time. The revenue returns may be distributed by the mutual funds to the unitholders. Capital appreciation in the mutual funds also belong to the investors. MUTUAL FUND SCHEMES One of the main objectives of mutual funds is to provide better returns to investors at minimum risk. Mutual funds issue units to the investors in proportion to the funds contributed by the investors. The income of the funds are shared by the investors in the proportion to the number of units held. These mutual funds offer different types of schemes from time to time to attract investors and to take care of their needs, on the basis of nature of investment, type of operations and type of income distribution. Mutual funds may launch different schemes to offer one or more of the following: (a)Regular and steady flow of income, (b)High capital appreciation, c)Capital appreciation and regular return,and (d)Return with tax benefits. There are different ways in which various mutual fund schemes can be classified. Following shows the classification of mutual fund schemes with reference to schemes being offered in India: 1. On the basis of Life Span. (a) Close-ended Schemes (b) Open-ended Schemes 2. On the basis of Income Mode (a) Income schemes (b) Growth schemes 3. On the basis of Portfoli o (a) Equity schemes (b) Debt schemes (c) Balanced schemes 4. On the basis of Maturity of Securities (a)Capital Market Schemes (b)Money market Schemes 5. On the basis of Sectors Different Sectoral Schemes 6. On the basis of Load (a) Load Schemes (b)No Load Schemes 7. Special Schemes: (a) Index Schemes (b)Offshore Schemes (c) Gilt Securities Schemes (d) Exchange Traded Funds (ETF) (e) Fund of Funds. Some of these schemes have been explained below: OPEN-ENDED AND CLOSE-ENDED MUTUAL FUNDS SCHEMES As per SEBI Regulations, 1996, open-ended scheme means a scheme of mutual fund which offers units for sale without specifying any duration for redemption. On the other hand, close-ended scheme is one in which the period of redemption is specified. The open-ended mutual fund scheme sells and repurchases the units of mutual fund on a continuous basis. Any investor can become a member (by purchasing units) or can exit (by selling these units back to the mutual fund). These sales and repurchases of units take place at a price called Net Assets Value (NAV) which is calculated periodically on the basis of the market value of the portfolio of the mutual fund. The sale and repurchase prices are announced by the mutual fund on a periodic basis. The Unit Scheme-1964 (US-64) was an open-ended mutual fund scheme. The essential feature of open-ended scheme is the liquidity. On the other hand, close-ended mutual fund scheme is only one in which the limited number of units are sold to investors during a specified period only. Thereafter, any transaction in these units can take place only in secondary market, ie, the stock exchanges. So, after the initial public offering, the mutual fund goes out of the picture and subsequent sale and purchase take place among the investors. The market price of the units of a closed-ended mutual fund scheme is determined by the market forces of demand and supply. The liquidity to investors provided by the market. However, all the closed-ended mutual fund schemes are redeemable at the end of a specified period when all the investment of the scheme are sold and the proceeds are distributed among the unit holders on a proportionate basis. There are several close-ended schemes such as Master Share Scheme of the UTI. INCOME FUND AND GROWTH FUND The mutual funds are called income funds when they promise a regular and/or guaranteed return in the form of dividends to the investors. For example, UTI launched several Monthly Income Schemes. The portfolio of these schemes is usually consisting of fixed income investments such as bonds, debentures, etc. The income schemes are also known as dividend schemes. These schemes are ideal for investors who need or seek intermediate cash flows in the form of dividend payment. A growth fund scheme is one which offers capital appreciation as well as a variable dividend opportunity to the investors. The investors may get dividend income from the mutual fund on a regular basis and the capital appreciation is available in the form of increase in market price. Growth schemes are good and suitable for investors having long-term investment perspective. In addition, there may also be income-cum-growth (hybrid funds) where the investor may be offered fixed incomes as well as growth opportunities. An example of a growth fund is UTI Growth and Value Fund which is an open-ended equity oriented scheme. The objective is to seek capital appreciation by making investments primarily in listed securities of Indian companies. A variant of income fund is known as Dividend Yield Fund. These invest funds in shares of those companies that pay high dividends. In addition, any appreciation of share price adds or subtracts investors return. DOMESTIC FUNDS AND OFF-SHORE FUNDS The domestic funds schemes are those which are open for subscription by the investors of the country of origin only. Most of the mutual funds launched in India are domestic mutual funds. The off-shore mutual funds bring funds (in the form of foreign exchange) to the capital market. At present, several off-shore mutual fund schemes have been floated in India. Ind Bank Off-Shore Mutual Fund, 1993 and Common Wealth Equity Mutual Fund, 1993 are examples of off-shore mutual fund schemes. TAX-SAVING SCHEMES These mutual fund schemes are designed to avail tax exemptions and concessions to the investors. These schemes help individual investors in their tax planning. CANPEP MEP 1994, PNB-ELSS were some of the tax-savings schemes. These schemes are also known as Equity-linked savings schemes were entitled to tax benefit under Section 88 of the Income Tax Act. Recently, private sector mutual funds have also launched these schemes such as HDFC Tax Plan, KP Tax Shields, etc. MONEY MARKET MUTUAL FUNDS (MMMF) SEBI Regulations, 1996 define an MMMF, as one which has been set up with the objective of investing in money market investments which include commercial papers, commercial bills, ‘T-Bills, etc. The funds collected by these mutual funds are invested exclusively in money market instruments. Money market mutual funds are a part of short-term pooling arrangement of funds. These are open-end funds. These funds are very liquid and risk free because of nature of their investments. MMMF provide better returns than short-term bank deposits and are often considered to be good alternative to bank deposits. The Reserve Bank of India has announced Guidelines for money market mutual fund in April 1992. However, at present, the MMMF are also regulated under SEBI Regulations, 1996. SPECIALISED SECTOR FUNDS Sector funds schemes are those under which the funds are planned to be invested in a particular region, industry or sector. For example, Pharma (D) Scheme of Franklin Templeton Mutual Fund, Technology Company Scheme of DSP Merill Lynch Mutual Fund, Banking (D) of Reliance Mutual Fund are some specialised sector schemes of mutual funds. INDEX SCHEMES In this case, the funds collected by the mutual funds are invested in the shares forming the Stock Exchange Index. These funds are also known as growth funds. The funds are allocated o the basis of proportionate weight of different shares in the underlying Index. For example, Nifty Index Scheme of UTI Mutual Fund, Index Fund (Sensex) of Tata Mutual Fund, Index Fund (D) of Principal Mutual Fund are Index Schemes. There are 13 Index Funds which use S & P CNX NIFTY as the underlying index. EQUITY FUNDS SCHEMES Under these schemes, the funds are invested primarily in equity shares only. The equity fund schemes are high on the risk scale as the share prices are volatile. These funds try to reduce the risk by diversifying the investments in different types of shares. If invested rationally and properly, these schemes may give high returns commensurate with risk taken. The choice of investee companies is made by the mutual fund. These schemes may be income schemes or growth schemes. Fidelity Equity Fund is an open ended equity growth scheme with the objective of generating long term capital growth from a diversified portfolio of equity and equity-related securities (95%) and Money Market Instrument (5%). DEBT FUNDS SCHEMES In case of debt funds, the collected funds are invested in debt securities. A variant of debt funds schemes may be in the form of government securities funds scheme wherein the funds are invested in government securities only. Debt schemes are generally income scheme. A debt fund scheme is an ideal option for investors who are averse to risk which is associated wit equity schemes. BALANCED FUNDS A balanced fund provides both growth and regular incomes as these schemes invest both in debts and equity instruments in the proportion as disclosed in the offer document. These schemes are appropriate for investors who look for moderate growth. The NAV of these schemes are likely to be less volatile than the pure equity funds. GILT FUNDS The funds of these schemes are invested exclusively in government securities. These funds are low return and low risk and popular among the risk averse investors. Some of the gilt funds operating in India are Gilt Plus (Birla Sunlife Mutual Fund), Gilt Investment (Cholamandalum Mutual Fund), FT Gilt (Franklin Templeton Mutual Fund), Gilt long-term (HDFC Mutual Fund), Gilt Treasury (Prudential ICICI Mutual Fund), etc. SCHEMES BASED ON MARKET CAPITALIZATION In recent past, mutual funds in India have launched several schemes with a focus on market capitalization of companies. For example, UTI Large Cap Fund, UTI Small-Cap Fund, Chola Multi-Cap Fund, HDFC Premier Multi-Cap Fund, etc. are schemes based on market capitalization. It may be noted that the classification between large, small and mid-cap is arbitrary and can vary from market to market. In India, the National Stock Exchange defines mid-cap companies as those having average 6-months market capitalization between Rs. 75 crores to Rs. 750 crores. In Case of multi-cap or flexi-cap schemes, the investments ar e made across companies with different market capitalization-large, small or mid. LOAN AND NO-LOAN FUNDS A load fund is one that charges a % of NAV (Net Assets Value) as entry or exit fees. Whenever an investor buys or sells the units, a fee is charged by the fund to meet the administrative expenses. On the other hand, a no-loan fund is one which does not charge any fees for entry or exit. In case of no-loan fund, all transactions of sale and repurchase of units are done at NAV while in case of load funds, the repurchase is made at a price less than NAV and sale is made at a price more than NAV. FUND OF FUNDS A fund of funds scheme means a scheme that invests primarily in other schemes of same mutual fund or other mutual funds. Benchmark Mutual Fund has started a FOF under the name of FOF Junior BeES. EXCHANGE TRADED FUNDS Exchange Traded Funds (ETFs) refers to basket of securities that are tradeable at a stock exchange. They are somewhat similar to Index Fund Schemes. The ETFs are so called because they are listed on a stock exchange and are traded as any other listed security. So, ETFs have characteristics of open-ended mutual funds as well as that of listed shares. ETFs do not sell their units directly to the investors. Rather, a security firm creates an ETF by depositing a portfolio of shares in line with an Index selected. The security firm creates units against this portfolio of shares. These units are sold to the retail investors. So, the ETF has portfolio of shares as well as a liability towards the holders of ETF units. ETFs are different from Mutual Funds in the sense that ETF units are not sold to the public for cash. Instead, the Asset Management Company that sponsors the ETF (fund) takes the shares of companies comprising the index from various categories of investors like authorized participants, large investors and institutions. In turn, it issue them a large block of ETF units. Since dividend may have accumulated for the stocks at any point in time, a cash component to that extent is also taken from such investors. In other words, a large block of ETF units called a â€Å"Creation Unit† is exchanged for a â€Å"Portfolio Deposit† of stocks and â€Å"Cash Component†. The number of outstanding ETF units is not limited, as with traditional mutual funds. It may increase if investors deposit shares to create ETF units; or it may reduce on a day if some ETF holders remeed their ETF units for the underlying shares. These transactions are conducted by sending creation/ redemption instructions to the Fund. In case of mutual funds, the portfolio of the investments made under the scheme may change, but in case of ETF, this is not so, because the ETF portfolio created once does not change. The market value of the units of ETF changes in line with the Index automatically. The funds managers are not required to actively manage the portfolio resulting in lower expense level of the fund. Consequently, the NAV of the ETF would be higher than the NAV of the Index Fund with the same portfolio. As the ETFs are listed on a stock exchange, they provide a lot of liquidity and price is determined by the demand and supply forces and the market value of the shares held. As opposed to ETF, the sale/ purchase prices of the units of a mutual fund are based on the NAV. A comparison of ETF, Open-ended funds and close-ended funds has been presented in table below: 1. Parameter Open-ended Fund (OEF) Closed-ended Fund (CEF) Exchange Traded Fund (ETF) Find Size Flexible Fixed Flexible 2. NAV Daily Daily Real Time 3. Liquidity Provider Fund itself Stock Market Stock Market/Fund itself 4. Sale price At NAV plus load, if any Significant Premium/Discount to NAV Very close to actual NAV of Scheme 5. Availability Fund itself Through Exchange where listed Through Exchange where listed/ fund itself. 6. Portfolio Disclosure Monthly Monthly Daily/Real-time ETFs have edge over the ordinary mutual funds. In case of latter, an investor cannot take the benefit of intra-day movement of price of shares because the mutual fund units can be traded at the closing NAV based rate. However, the performance of ETF is based on the underlying index and ETF can be traded through out the day taking benefit of intra-day movement in price. In India, several ETFs, have been created so for. Bench Mark Mutual Fund has created 5 ETFs. 1. Liquid BeES 2. Nifty BeES 3. Nifty Junior BeES 4. Bank BeES, and 5. FOF Junior BeES All these 5 ETFs are listed and traded at the capital market segment of the NSE. Prudential ICICI Mutual Fund has launched SPICE which tracks the Sensex. It combines features of both open-ended scheme and exchange traded share. It is listed at Mumbai Stock Exchange and can be traded in a lot of one unit. Value of one SPICE is 1/100 of the Sensex value. UTI Mutual Funds has launched SUNDERS, which is also listed at Mumbai Stock Exchange. Certain ETFs traded at American Stock Exchange are QUBES (Representing NASDAQ-100), SPIDERS (representing S&P 500), DIAMONDS (Representing Dow Jones Industrial Average), etc. NET ASSETS VALUE (NAV) OF A MUTUAL FUND Investors are the owners of the mutual fund. Funds collected under a particular scheme are invested in different securities. So the ownership interest of the unit holders is represented by these securities. Net Assets Value (NAV) refers to the ownership interest per unit of the mutual fund, i. . , NAV refers to the amount which a unit holder would receive per unit if the scheme is closed. NAV is represented as follows: An amount of Rs. 50,00,000 has been collected by a mutual fund by the issue of 5,00,000 units of Rs. 10 each. The amount has been invested in different securities. The market value of these securities at present is Rs. 56,00,000 and the mutual fund has a liability of Rs. 4, 50,000 in respect of expenses, etc. The NAV of the fund is: The units of an open-ended mutual fund scheme are sold and purchased by the mutual fund at a price based on NAV. The NAV of a mutual fund scheme is calculated by dividing the net assets of the scheme by the number of outstanding units under that scheme on the date of valuation. SEBI Regulations, 1996 provide that while determining the price of the units, the mutual fund has to ensure that the repurchase price is not lower than 93% of the NAV and the selling price is not higher than 107% of the NAV. Further that the difference between the selling price and the repurchase price shall not exceed 7%, calculated on the selling price of the units. The NAV varies from time to time and is published in newspapers so as to enable the nvestors to know the value of their investments. SEBI Regulations, 1996 require that the NAV of a mutual fund scheme shall be calculated and published at least in two daily newspapers at an interval of not exceeding one week. III INVESTMENT CRITERIA MAKING THE INVESTMENT DECISION Ones main considerations as an investor, besides choosing which vehicles are right, lie in the a reas of risk management, taxes and inflation, and asset allocation. In order to reach your financial objectives, you must choose from diverse investment alternative – all of which vary greatly in the degree and type of risk and potential return. The key to developing a sound portfolio is to strike the right balance between potential reward and risk, based on your financial objectives, financial situation and investment style. We’ve all heard the expression, â€Å"Nothing ventured, nothing gained. † Perhaps nowhere does this maxim hold truer than in the financial markets, where pursuing potentially higher returns means accepting higher levels of risk. Before you venture anything, you should determine your personal level of risk tolerance, given your needs and goals. To do this, you should familiarize yourself with the various kinds of risk and how they affect different types of investments. THE MANY OF FACES OF RISK Risk is the possibility that one may lose some or all of his investment in real terms, or that his investment may not increase in value. Several factors may influence the amount of risk one can comfortably accept, including ones age, family situation, income, time horizon and financial goals. When investing, one faces the following key risks: †¢Market Risk: This is the possibility that an investment (e. g. , a stock) will decline in value. As a result, if you sold the investment, you would receive less than what you initially paid for it. †¢Credit Risk: This is the possibility that the issuer of an investment (e. g. , a corporate bond) may not live up to its financial obligations. A default by the issuer could mean that you lose your invested capital and the expected interest payments. †¢Inflation Risk: This is the possibility that the value of a long-term asset (e. g. , a government bond) may not grow enough to keep up with inflation, reducing your purchasing power as a result. †¢Reinvestment Risk: This is the possibility that interest rates will fall as an investment (e. . , a bond) matures. If this occurs, you may be unable to reinvest matured assets at the rate of return you were accustomed to receiving. This type of risk also applies to reinvesting the coupon payments received from bonds and other fixed-income payments. †¢Liquidity Risk: This is the possibility that you will be unable to liquid ate an asset (e. g. , real estate) when you want and at the price you want. As a result, you may be forced to retain the asset or accept less than you wanted for the sake of liquidity. †¢National, International, and Political Risk: The possibility that a country’s government will suddenly change its policies. Events such as wars, embargos, coups, and the appointments of individuals with unfavorable economic policies can impact the financial markets, especially concerning investments related to that country. Possible results changes in tax structures and changes in bond or stock ratings. †¢Economic Risk: The risk that the economy will suffer a downturn as a whole. Such an event generally affects all the financial markets across the board, from product prices to the job market. †¢Industry Risk: The risk that a specific industry will suffer a downturn. Often, industries related to the one that experiences problems will suffer as well. Tax Risk: The risk that high taxes will make investments less profitable for both businesses and investors. Businesses that have no pay expand or improve. Investments that carry heavy tax baggage generally lead to lower dividends for an investor. How Much Risk Is Right? The amount of risk that is right depends upon person to person. To determine the r isk comfort level, one may ask this himself: Am I willing to tolerate greater volatility for potentially higher returns from my investments, or do I place more emphasis on quality, with less risk? Several factors may influence the amount of risk one can comfortably accept in ones portfolio, including: †¢Age †¢Family situation †¢Income †¢Financial goals In addition, the markets evolve and ones personal goals will inevitably change with time. One of the best ways to keep ones investments on target is to meet with financial professional regularly. In these meetings, the investor and his financial professional can discuss the investment objectives, determine the individual risk tolerance level and help to understand the various risks associated with an investment. The financial professional can also help an investor build a portfolio that has the potential to provide the highest returns consistent with the amount of risk one wish to assume. HOW TO CHOOSE WHICH RISKS TO TAKE? Whenever one considers a new investment, he may wish to ask his financial professional the following questions: †¢What types of risk are involved? Once the financial professional has explained the risks, one must ask how he or she can help to manage or minimize the different kinds or risk for the investment one is considering. Not all kinds of risk will apply to every investment. †¢What could happen to the principal in a â€Å"worst-case† scenario? The financial professional can explain how diversifying ones portfolio can help mitigate the effect of a downturn in any one market or industry. For example, assume you invested in the stock of a highly speculative biotechnology company. The stock’s trading price could fall substantially if the company’s only product fails to get FDA approval or is shown to be inferior to a competitor’s product. Spreading ones money across different asset classes – stocks, fixed – income investments, and cash equivalents – could help one manage the risk better than investing all his funds in this one stock. †¢How will adding this investment to the holdings help to manage the portfolio’s overall risk? Managing market risk through a balance of financial assets in ones portfolio is a significant component of long-ter m investment success. Ideally, ones portfolio should offer a measure of protection during inevitable market downturns and be positioned for opportunity when markets heat up. In addition to risk there are other factors also which need to be considered before investing, as stated below: INFLATION: Inflation taxes are two factors always on the minds of investors. Inflation is the persistent increase in the cost of goods and services, and the reason why the same loaf of bread that costs you $1. 00 today will probably cost you $1. 05 next year. For your purchasing power to grow in â€Å"real† terms, your returns must outpace the inflation rate. TAXES: Additionally, taxes must be a consideration. There are investments available that are both taxable and tax-free; others are tax-deferred or tax-deductible. The differences are significant, but not as dizzying as they seem. ASSET ALLOCATION: Asset allocation refers to the diversification of your portfolio across all the different classes of assets. The goal of effective asset allocation is to develop an appropriate mix of investments based on your specific investment objectives that maximizes performance potential with an acceptable level of investment risk. The goal is more consistent returns, lower volatility and a greater chance of achieving financial objectives. SELECTION OF A MUTUAL FUNDS There are thousands of funds to choose from, but there are some general guidelines that can help you choose a fund. †¢Define your investment time horizon and financial goals. Meeting a long-term goal (e. g. , starting a college fund for a newborn) will require different investments than in meeting a short-term goal (e. g. , accumulating money to purchase a car). †¢Understand your risk tolerance and the risk of different mutual funds. Risk tolerance is based on your comfort level in the fluctuation of price, which will affect your investment principal. Once this is determined, you can match fund types that have historically shown commensurate price movement. Keep in mind, however, that past performance is no guarantee of future results. †¢Combine your goals, time horizon and risk tolerance and find a fund category that matches these objectives. This will help in deciding what types of funds you may want to consider. You will find that there are still many funds to choose from within a specific category. Your prudential financial professional will be able to perform a comparative analysis of the individual funds to find the most appropriate choice. Check with your tax advisor prior to investing in a tax-exempt or tax-managed fund. Match the term of the investment to the time you expect to keep it invested. Money you may need right away (for example, if your car breaks down) should be in a money market account. Money you will not need until your retire in decades (or for a newborn’s college education) should be in longer- term investments, such as stock or bond funds. Putting money you will need soon in stocks risks having to sell them when the market is low and missing out on the rebound. Expenses matter over the long term, and of course, cheaper is usually better. You can find the expense ratio in the prospectus. Expense ratios are critical in index funds, which seek to match the market. Actively managed funds need to pay the manager, so they usually have a higher expense ratio. Sector funds often make the â€Å"best fund† lists you see every year. The problem is that it is usually a different sector each year. Also, some sectors are vulnerable to industry-wide events (airlines do come to mind). Avoid making these a large part of your portfolio. Closed-end funds often sell at a discount to the value of their holdings. You can sometimes get extra return by buying these in the market. Hedge fund managers love this trick. This also implies that buying them at the original issue is usually a bad idea, since the price will often drop immediately. Mutual funds often make taxable distributions near the end of the year. If you plan to invest money in the fund in a taxable account, check the fund company’s website to see when they plan to pay the dividend; you may prefer to wait until afterwards if it is coming up soon. Research. Read the prospectus, or as much of it as you can stand. It should tell you what these strangers can do with your money, among other vital topics. Check the return and risk of a fund against its peers with similar investment objectives, and against the index most closely associated with it. Be sure to pay attention to performance over both the long-term and the short-term. A fund that gained 53% over a 1-yr. period (which is impressive), but only 11% over a 5-yr. period should raise some suspicion, as that would imply that the returns on four out of those five years were actually very low (if not straight losses) as 11% compounded over 5 years is only 68%. Diversification can reduce risk. Most people should own some stocks, some bonds, and some cash. Some of the stocks, at least, should be foreign. You might not get as much diversification as you think if all your funds are with the same management company, since there is often a common source of research and recommendations. The same is true if you have multiple funds with the same profile or investing strategy; these will rise and fall together. Too many funds, on the other hand, will give you about the same effect as an index fund, except your expenses will be higher. Buying individual stocks exposes you to company-specific risks, and if you buy a large number of stocks the commissions may cost more than a fund will. The compounding effect is your best friend. A little money invested for a long time equals a lot of money later. The decision to invest in a mutual fund is one you have to make on your own. However, when you try to choose an investment, it’s usually best to seek the guidance of an investment representative. Why? Consider that there are more mutual funds than there are stocks listed on the New York Stock Exchange. While many of these funds share the same objectives, no two are exactly alike. Similarly, as an investor, your goals are unique. An investment representative can help you determine the fund that’s right for you. A mutual fund investor has more options than ever before – stock, bond, and money market funds to satisfy all outlooks, from the most conservative to the most venturesome. Generally speaking, in investment management, intelligently assumed risk creates the opportunity for greater returns. †¢A money market mutual fund aims for current income at minimal risk. †¢A municipal bond mutual fund aims for current tax-free income. †¢Government income funds aim for current income with principal security. †¢Corporate bond funds aim for a high rate of current income. †¢An income fund aims for a higher rate of current income. A balanced fund aims for current income with some capital appreciation. †¢Growth and income funds offer the possibility of more growth than a balanced fund, but probably less income. †¢A growth fund aims for the accumulation of capital, with little or no current income. †¢Aggressive growth funds offer the prospect of maximum capi tal appreciation, with more than average risk. In addition, specialized funds are available – for instance, those that invest only in certain geographic regions or in certain sectors or industries (like health care, technology, or energy). There are even funds that have adopted certain social objectives or that follow specific investment philosophies. For more complete information, including charges and expenses, obtain the mutual fund’s prospectus. Read it carefully before you invest or send money. The Securities and Exchange Commission (SEC) requires every open-mutual fund (where the fund’s managers issue new shares on demand) to provide you with a copy of its prospectus before – or coinciding with – a purchase of shares. A prospectus is a key source of information regarding a mutual fund and often is the best place to start when you are considering investing in one. It will describe the fund’s objectives, risks, and operations. TURNOVER Turnover is a measure of the amount of securities that are bought and sold, usually in a year, and usually expressed as a percentage of net asset value. It shows how actively managed the fund is. A caveat is that this value is sometimes calculated as the value of all transactions (buying, selling) divided by 2; i. e. , the fund counts one security sold and another one bought as one â€Å"transaction†. This makes the turnover look half as high as would be according to the standard measure. Turnover generally has tax consequences for a fund, which are passed through to investors. In particular, when selling an investment from its portfolio, a fund may realize a capital gain, which will ultimately be distributed to investors as taxable income. The very process of buying and selling securities also has its own costs, such as brokerage commissions, which are borne by the fund’s shareholders. The Dalbar Inc. consultancy studied stock mutual fund returns over the period from 1984 to 2000. Dalbar found that the average stock fund returned 14 percent; during that same period, the typical mutual fund investor had a 5. percent return. This finding has made both â€Å"personal turnover† (buying and selling mutual funds) and â€Å"professional turnover† (buying mutual funds with a turnover above perhaps 5%) unattractive to some people. IV REGULATORY FRAME-WORK OF MUTUAL FUNDS Immediately after its constitution, SEBI issued the Mutual Fund Regulations in 1993. However, with the growth of mutual funds, it was imperative that they should follow prepared a ‘Mutual Fund 2000 Report’ and on the basis of this report, it prepared more stringent and comprehensive regulations in 1996, known as SEBI (Mutual Fund) Regulations, 1996. ince then, there have been number of amendments in Regulations, 1996. Besides, SEBI has also issued several guidelines in respect of working of mutual funds. Some of the provisions of the SEBI (Mutual Fund) Regulations, 1996 (as amended from time to time) have been summarized hereunder: 1. The sponsor, who wants to establish a mutual fund, should have a sound track record and a general reputation of fairness and integrity, i. e. , must be in business of financial services for 5 years, and must have contributed at least 40% of the net worth of the Asset Management Company. 2. A mutual fund is constituted in form of trust. The trust shall incorporate an Asset Management Company (AMC). The trustees shall ensure that the AMC has been managing the schemes independently of other activities. 3. Two-thirds of the trustees shall be independent persons and not be associated with the sponsor. 4. The trustees shall ensure that activities of the AMC are in accordance with the Regulations, 1996. 5. The trust shall periodically review the investors’ complaints received and shall be redressed by the AMC. 6. The mutual fund shall appoint a custodian to carry out the custodial services for the schemes. The sponsor or its associates shall no have 50% or more of the share capital of the custodian. 7. No scheme shall be launched by the AMC unless the offer document contains disclosures which are adequate in order to enable the investors to make informed investment decisions. 8. Advertisement in respect of every scheme shall be in conformity with the Advertisement Code. 9. Every close-ended scheme shall be listed at a recognized stock exchange, or there will be a repurchase facility. 10. The close-ended schemes may be converted into open-ended schemes under certain conditions. A close-ended scheme may be allowed to be rolled over if necessary disclosures about NAV, etc. , are made to the unit holders. 11. In case of over-subscription for a new scheme, the applicants applying for upto 5,000 units shall be allotted full. The refund to applicants, if any, shall be made within 6 weeks from the data of closure of the list. 12. No guaranteed return shall be provided in a scheme, unless such return is fully guaranteed by the sponsor or the AMC. 13. An open-ended scheme shall be would up after the expiration of the mixed period, or in case, 75% of the nit holders decide so, after repaying the amount due to the unit holders. 14. The money collected under any scheme shall be invested only in transferable securities in money market or capital market or private placed debts or securitized debts. 15. The mutual fund shall not borrow any money except to meet temporary liquidity needs and borrowing, if any, need not be more than 20% of NAV of the scheme, and for period o f less than 6 months. 16. The funds of a scheme shall not be used in option trading or a carry forward transaction. However, derivatives can be traded by a mutual fund at a recognized stock exchange for portfolio balancing. 7. A mutual fund can enter into underwriting agreement. 18. NAV for each scheme shall be calculated by dividing the total assets of the scheme by the number of outstanding units. The NAV of the scheme shall be published in two daily newspapers at interval of not exceeding one week. 19. In case of open-ended schemes, the repurchase and sale price shall be published at least once a week. 20. The mutual fund shall ensure that the repurchase price of a unit is not less than 93% of NAV and the sale price is not more than 107% of NAV. In case of close-ended schemes, the repurchase price shall not be less than 95% of the NAV. 1. The AMC may charge the mutual fund with investment and advisory fees as per rates prescribed in the Regulations. The issue expenses and redempt ion expenses of a scheme shall not exceed the limits given in the Regulations. 22. The mutual funds are required to raise at least Rs. 20 crores or Rs. 50 crores (for close-ended and open-ended schemes respectively) or 60% of the target amount, otherwise the entire subscription be refunded. Each scheme should have a minimum of 20 investors and not single investor should account for more than 25% of the corpus of the scheme. 23. The unquoted debt instruments shall not exceed 10% in case of growth funds and 40% in case of income funds. 24. Investment in one company under any scheme should be restricted to 5% of the corpus of the scheme. Under all schemes, the investment in one company should be restricted to 5% of the paid-up capital of the company. Total investment in all securities (debts and shares) in one company shall be restricted to 10% of the corpus of the mutual fund. 25. Funds under the same AMC mutual not be lent or invest from one scheme to another, unless the funds are transferred at the prevailing market price. 26. All mutual fund must distribute a minimum of 905 of their profits in any given year. The e3arnings must be segregated as current income, short-term capital gain and long-term capital gain. 27. Trading by mutual funds shall be restricted to hedging and portfolio balancing purposes only. The securities held shall be marked to market by the AMC to ensure full coverage of the investments made in derivative products. 28. Mutual funds are permitted to participate in the Securities Lending Scheme of SEBI under certain guidelines. 29. Mutual funds are allowed to invest in ADRs/GDRs issued by Indian companies. They can also invest in foreign securities under certain conditions and within limits. 30. Mutual funds can also invest up to 10% their funds in equity of listed overseas companies which have a shareholding of at least 10% in an Indian company listed on a recognized stock exchange. 31. The AMC and the trustees are required to review and disclose the performance of their schemes. They are also required to disclose the performance of the benchmark indices. Any of the following indices may be selected for this purpose: BSE Sensex, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX Nifty 500. 32. Several Guidelines have been prescribed in respect of Advertisement to be issued by mutual funds. Any advertisement, communication, sales literature, or presentation, etc. , should not be misleading. 33. Detailed guidelines are prescribed for valuation of investments. For this purpose, the investments are classified into traded, thinly traded and non-traded investments. 34. Guidelines for identification and provisioning for NPA are also provided. For this purpose, an asset is NPA if the principal/ interest is not received for one quarter. On NPA, no interest shall be accrued. If any interest is already accrued, it shall be provided. A provision @ 10%, 20% or 25% of the book value of NPA is required depending upon the period for which it is NPA. 35. A mutual fund and the AMC shall, before the expiry of 1 month from the close of half year, shall publish its financial results in respect of that half year. MUTUAL FUND INVESTMENT AND INVESTORS’ PROTECTION IN INDIA In case of mutual funds, small investors park their funds in expectation of a suitable return and safety of their funds. Mutual funds take decisions on behalf of the investors. There is a relationship of trust between the mutual fund and the investors. Market regulators should take a cognizance of this fact. The interest of the investors should be protected by framing a comprehensive set of regulatory provision. As the first mutual fund in India, the UTI was created as a statutory body under the UTI Act, the relevant provision regarding investment policies, etc. were all given in the UTI Act itself. However, the position changed after 1992 with the constitution of SEBI. The basic objective of SEBI is to â€Å"protect the interest of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental therewith. So, the regulation of mutual funds activities was make a matter under purview of SEBI. SEBI issued the Mutual Fund Guidelines, 1993 as a first attempt to provide for a regulatory framework to give directions to the functioning of mutual funds and to protect the interest of the mutual funds investors. Keeping in view the changing scenario, SEBI issued a new set of Mutual Funds Guidelines in 1996. A detailed list of the provisions of Guidelines, 1996 is already given in this chapter. Some other provision specifically dealing with investors protection are: (i)Each mutual fund must be registered with SEBI. The sponsor must have a sound track record and experience in financial services of at least 5 years. (ii)Number of terms and conditions have been provided in respect of Asset Management Company (AMC). The Directors of the AMC should here adequate professional experience in finance and financial services. (iii)The custodian of the mutual fund should also be approved and registered with SEBI. (iv)No mutual fund scheme can be launched unless approved with the trustees. (v)Minimum and Maximum amount to be raised under the scheme should be notified. (vi)Lot of disclosures are required in respect of the scheme in the prospectus. vii)No scheme with a guaranteed return can be issued unless such return is guaranteed by the AMC or the sponsor. (viii)Periodic report in respect of each of the scheme is to be published. Any information that has an adverse bearing on the investment should also be disclosed. (ix)There are investment norms provided for mutual fund investment with a view to contain t he investment risk. Investors’ interest is protected by prohibiting mutual funds from excessive risk exposure. (x)SEBI can impose several types of monetary penalties for violations of SEBI Regulations and Guidelines.

President Obama s View Of The War On Terror - 1255 Words

President Obama’s Approach to the War on Terror After the attacks on 9/11, the â€Å"War on Terror† became President Bush’s main focus for his political agenda. After the 2008 presidential election, soon that focus belonged to President Obama. The executive actions, legislation, and controversy that resulted during Bush’s presidency would soon be inherited by President Obama. During President Obama’s campaign in 2008, he promised that he would be very different from President Bush in how he employed executive power to fight terrorism. He stated that he would try and restore the balance between liberty and security. Others have argued that President Obama has continued and expanded the policies set in place by his predecessor. I will be arguing that President Obama has not followed President Bush’s approach to the war on terror. There are two reasons why President Obama has not continued Bush’s approach. The first reason is that Presid ent Obama has rejected the inherent and unchecked power under the commander in chief authority that Bush invoked during his administration. The second reason is that President Obama has recognized the need for greater accountability and institutional checks. The first reason why President Obama has not continued Bush’s approach is because President Obama has rejected the unchecked power under the commander in chief authority. Obama has adamantly rejected this notion of unchecked power throughout his presidency. Obama views his powers within theShow MoreRelatedShould The United States Get Involved During The Middle East?1195 Words   |  5 PagesShould the United States get involved in the Middle East? President Obama stated in his Anti-Terror Strategy address, We continue to face a terrorist threat. We cannot erase every trace of evil from the world, and small groups of killers have the capacity to do great harm. That was the case before 9/11, and that remains true today† (Obama).The Middle East today is composed of very complicated religious tensions, unstable states, and rising terrorist organizations. The collapse of central governmentsRead MoreU.s. Bush And The United States1272 Words   |  6 Pages2000’s such as the signing of Bush Doctrine, creation of homeland security, Google, the successful mapping of genome, Obama becoming the first non-white president, Wikipedia was launched, all helped improve our country. Between politics, american values, foreign affairs/conflicts, popular culture, the economy, and technology/ innovation all make this century worth studying. Politics is something that has been around since the start of times and usually is the talk of the town. During the 2000’s thereRead MoreIs The Cold War Really Over?1430 Words   |  6 PagesDanny Le Mr. Frey AP US Govt. 15 Nov. 2014 Is the Cold War Really Over? Many Americans have controversies whether the Cold War is over or not. The Cold War era began with ideological battles in the West and East. Political tensions and events are growing in the current conflicts in the Middle East and varied countries. The term â€Å"cold war† has rose again as new conflicts emerged from the Cold War era. After the prolong conflict between the West and East, the two sides continued their movement toRead MoreThe War Of The Cold War1346 Words   |  6 PagesDonald Trump s praise towards the Russian President Vladimir Putin is creating controversy once again after his interview on Thursday to state-funded Russian Television. It is pretty obvious to the everyday American that the U.S. lags behind Russia in the development of intercontinental ballistic missiles (ICBMs), and that as America s global influence diminishes, a potential nuclear war with Russia could have earth-shattering effects. With these rising tensions and a nuclear war threatening on Read MoreBarack Obam A New Leader1296 Words   |  6 Pageshelp rebuild the country. The foundations of choosing a president is based on great leaders of the country over many years since the beginning. Ironically, Barack Obama does not meet any of these principles of a good leader. Obama is one of the most controversial presidents of all time because of his personal background, passed laws, and debatable decisions. Barack Obama is often questioned when talking about his background. Barack Hussein Obama II was born in August 4, 1961, in Honolulu, Hawaii. HeRead MoreInternational Relations, Realism, Liberalism, And Constructivism944 Words   |  4 Pagestheories and practices applied to the real world. When discussing the basic theories of international relations, realism, liberalism, and constructivism, we can apply these to some of the most prominent leaders in our world. In regards to Russia s President, Vladimir Putin, the theoretical perspective he best embodies is realism. According to the theory of realism, the states believe that the international system is anarchical and they believe only in their own self-interest and survival. The neededRead MoreEssay On Mental Policy892 Words   |  4 Pages17 percent were previously been diagnosed with mental health disorder PTSD. Veterans seeking mental health treatment in VA clinics, most (up to 94%) concurrently apply for PTSD disability benefits. Overview of the bill stakeholder-names. President Obama signed into law The Suicide Prevention for American Veterans Act of 2015. This law requires as independent review of all Veteran Administration and Department of Defense. Treatment for PTSD are being practiced and evaluated in a variety of venuesRead MoreThe War On The Middle East Essay1571 Words   |  7 Pages War on ISIS has been been a problem in the world today. We have been going back and forth on rather we should declare war on them for the longest. My personal opinion I think we should because they re never going to stop abusing america and kidnapping our american citizens until we bomb and kill them. Over the years different presidents have had their input on if we should declare war on them or not. For one, former president George W. Bush said yes and everybody thought that was a huge problemRead MoreTorture and America1313 Words   |  6 PagesAmerica Eric Lindsey Kaplan University Torture and America As the country goes through its tenth year of the war on terror one can look back and see some of the policy differences that has plagued this country when, as a nation, our young men are sent to war. Everything, in this author’s view needs to be on the table, and transparent. Of course, troops strength, strategy, and general war plans should be kept from the enemy, the need of informing our own people has been a tight rope that is not easyRead MoreThe American Foreign Policy Regarding Middle East2006 Words   |  9 PagesDespite the fact that the war on terror was officially launched by the White House a little more than a decade ago, the main trends in the American foreign policy regarding Middle East have changed significantly in these dozen-something years a couple of times. The issue the United States of America are dealing with in the case of ISIS is something very different, both in nature and in scale. Compared to the devotion of the Bush administration to fight eve ry single suspected organization and individual

Watching Tv Is Not So Bad - 969 Words

Do you enjoy spending your nights off work laying on the couch binge-watching your favorite show on Netflix? I know I do. Things such as â€Å"binge-watching† and â€Å"marathoning† TV series is becoming more and more socially acceptable in our day and age but there are still many people who hold the beliefs that watching TV makes you dumb, and who say things like â€Å"you should find something useful to do with your time.† Because to them, watching TV has no benefits to it at all. But what if there were actually ways to prove to those people that our binge-watching habits can actually make us smarter? As a person who loves her TV marathons, I was quite interested in this topic when it got brought up. I was pretty pleased when I learned that watching TV really is not so bad. Here are some ways how: the first is that watching TV can relieve stress. A study done by the university of Rochester found that watching TV contributes to lower blood pressure and stress relief. TV is a way to distract ourselves for a little while from the daily stresses and worries in our lives. Another way that watching TV benefits us is that watching TV can actually boost your creativity. Have you ever found it useful to have the TV on in the background while you are getting some work done? According to a study published in â€Å"The Journal of Consumer Research† the sounds of TV can boost creativity even if you are not fully engaged in watching. TV also is not all bad for young teenagers to be watching either. MostShow MoreRelated Watching TV Does More Harmful Things to People than Good Things794 Wo rds   |  3 Pages Watching TV is an experience that most people do for almost all the time. Some people believe that watching TV does more good things to people than harmful things, but other people say that it does more harmful things to people than good things. The people who say that TV does more harmful things than good things are doctors who know about things that are good and bad in people’s health and the people who say that TV is good for you are the people who watch a lot of TV. Since doctors can helpRead MoreTelevision Is Bad For Children744 Words   |  3 Pages Refute TV is bad for children With the advancement of technology, children tend to inhibit the media rich environment of multiple channel TV, the internet, computer games, and mobile phones. Today, it is not just teenagers and adults who get hooked on television, but also children. Children all over the usual world watch television. There tend to be several articles and studies done showing how television is bad for children. For instance, in an article by Vlad (2006), it states that those childrenRead MoreTelevision : A Vast Cultural Wasteland Essay1341 Words   |  6 Pagesâ€Å"a vast cultural wasteland†. Tv is supposed to be something that people use for fun and entertainment not a way to get away from your problems. Now with that being said this quote is trying to say that tv is useless. I think the reason that some people think that tv is useless is because of shows like SpongeBob and family guy. Sponge bob is a very popular kids show that has been around for years but doesn’t benefit the peo ple watching it in anyway. In fact, watching a cartoon like SpongeBob can damagedRead MoreThe Risks of Watching Too Much Television Essay844 Words   |  4 Pages TV is the most common technology device people use and they watch TV for almost all the time. Doctors who know about the advantages and disadvantages in health say that TV does more harmful performances than good performances while people who just watch a lot of TV say that doing this is good for them. Since doctors can help cure people and know what is acceptable for them, this would mean that the doctors are correct about TV harming people than on how the people who watch a lot of TV believe thatRead MoreWatching An Excessive Amount Of Television935 Words   |  4 PagesIn recent discussions of watching an excessive amount of television, a controversial issue has been whether it is good or bad. On the one hand, some argue that it affects our mental and physical health. From this perspective, it is clear that heavy TV w atching is not beneficial. On the other hand, however, others argue that a TV exposes you to important news and different cultures. In the words of Caron Andre, one of this views main proponents; â€Å"news, current events and historical programming canRead MoreThe Dangers Of Binge Watching962 Words   |  4 PagesBinge watching has started to become popular since Netflix put seasons of TV shows on its online network. This has allowed people to binge watch a whole season in a day, week, or month on their own time â€Å"This term gained traction most notably with the recent Netflix-only release of the fourth Arrested Development season, as all fifteen episodes were released simultaneously rather than, episodically† (Giuffre 2013). This bad habit is something that I have gone through; it can also be harmful to people’sRead MoreHow Does Tv Affect Children1346 Words   |  6 Pagesalways watches TV almost all the time. I also don’t know when she became addicted t o watching television. Actually, I think maybe she likes watching TV because she might have nothing to do. It could also be her grandma who always offers to turn on the TV for her. What is the real cause, though? I can understand if it is because she has nothing to do. But sitting in front of the TV all day? No way! I don’t get it. I have to see my niece cries everyday when her grandma turns the TV off. Why does sheRead MoreThe Is The Method Of Human Communication1510 Words   |  7 PagesShould infants really spend their childhood time watching useless junk that wouldn’t benefit them for later on in their life? Yes they’re children and it wouldn’t matter as much in that moment, but still it’s not beneficial and it won’t help them. They could spend their time doing something more helpful that could actually help them later in life like interacting with another kid or talking to their parents. As defined by Webster’s Dictionary, television is a system for transmitting visual imagesRead MoreEssay on Negative Effects of Tv on Family Life1130 Words   |  5 PagesNegative Effects of TV The television has many effects on family life and the individual, causing family bonds to unravel and the individual to become naà ¯ve of their surroundings. The TV keeps one hooked for hours on end, causing family relationships to diminish and personal relationships to weaken. Not only does the TV seem to be a good alternative to conversations and interactions amongst one another, but it also helps to create a gap between the fictional world of TV and reality. Since theRead MoreThe Effects Of Television On Our Health951 Words   |  4 Pagesthe eye. According to Jacoby children don’t become educated from watching TV. The more TV they watch, the less educated they usually end up. I agree with him because when I use to watch television I would feel extremely sluggish and not want to do anything else. Watching television can have some effects towards your overall health. It also can lead to bad habits and prevents you from having a better outlook on life around you. Watching too much television can have a serious effect on one s motivation