The month of November 2009 has been one of the most important months in the evolution of PowerMF as a platform. In my earlier blog post , I had written about how the product was conceived and what we expect PowerMF to deliver as value to the investing community. We are now closer to our dream of making this platform live. We have now PowerMF signed up with 4 AMCs in order to provide the complete solutions what we wanted to for the investors:

1. SBI Mutual Fund
2. Kotak Mahindra Mutual Fund
3. Sundaram BNP Paribas Mutual Fund &
4. Tata Mutual Fund

In addition, discussions with the following mutual funds are in advanced stages:

1. IDFC Mutual Fund
2. Reliance Mutual Fund
3. UTI Mutual Fund
4. DSP Black Rock Mutual Fund
5. Franklin Templeton Mutual Fund
6. ICICI Prudential Mutual Fund
7. HDFC Mutual Fund

We are confident that in the next few weeks these AMCs and many more would be live on the PowerMF platform.

Further, this month also saw the launch of our new homepage which brings in the best of the world features in order to make navigation and usability simple and clean.

On November 30, 2009 NSE launched its Mutual Fund transaction engine MFSS. This is expected to make the process of investment by a person having a demat and broking account an easier affair. Interestingly, PowerMF incorporates all these ‘ease of transacting’ in addition to a comprehensive ‘analytical tool’ for its customers.

The documentation required for the purpose of opening an account with PowerMF also got finalized after being vetted by the legal advisors during this month and the same is available for starting to sign up customers for a live account, which will be active from the first week of December 2009.

PowerMF also is in talks with service providers in order to enable a network of branches to support the online platform. It is expected that during December 2009, this will also expected to be live soon. We also have a call center in the final stages of being set up.

With these exciting new developments, we are eagerly look forward to the month of December when the product will become live for customers to transact. We are planning to have our commercial launch very soon.

Stay tuned!

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For investing in a mutual fund scheme, choosing the right scheme is very important. The following 6 parameters will be useful in order to idenfity a right scheme.

1. Scheme Objective and its suitability to you

The ‘Objective of the Scheme‘ ( detailed info in earlier blog post ) is the goal the scheme wants to achieve by investing in various securities. Generally, this also provides for the length of investment that is ideal in the scheme. One should necessarily take this into consideration while deciding on the scheme he is interested in investing. One of the ways to look at the schemes is through grouping the schemes with similar objectives . Generally schemes are categorized in various categories and sub categories. PowerMF segregates the schemes under various categories depending on the asset class the scheme invests in and sub classes based on investment objective of the scheme under these asset classes

Equity Schemes:

Schemes which have investment in equities as the main objective.  There are various sub categories under equity schemes, some of which are: Diversified Schemes; Mid Cap Schemes, Small Cap Schemes, Schemes focusing on specific sectors like Banking, Technology etc. Theme based schemes like Infrastructure, Service Industries etc. ELSS Schemes, ETFs, International Equity etc.

Debt Schemes:

Schemes which invests mainly in various debt securities. Some of the sub categories under this category are: Gilt Schemes, Floating Rate Schemes, Liquid Schemes, Fixed Maturity Plans etc.

Hybrid Schemes:

Schemes which invests in both Equity and Debt securities. Some of the sub categories under this category are: Balanced Schemes, Arbitrage Schemes, Monthly Income Plans etc.

2. Scheme Structure & Parameters

One of the key objectives of an investor in an investment, in addition to returns and risk is the ease with which you can sell back your mutual fund units once you’ve bought it (also known as liquidity), Scheme structure (ie., if the scheme is open ended or close ended) is an important consideration when someone invests in a particular scheme. Also, it is important to understand if the scheme has any lock in period. When you are looking at easy liquidity, it is always better to look at an open ended scheme which provides the necessary liquidity.

Other parameters about the scheme which have to be considered include minimum amount of investment, lock in period if any, periodicity of declation of NAV, Portfolio etc.

3. Past performance of the scheme

There are various ways by which the performance of a scheme can be analysed.

Standalone Performance of the scheme

One of the most common ways to analyse the performance of the scheme is to look at the returns of the scheme as on date over various periods. Ideally, you should look at the performance of a scheme over the period for which the scheme is recommended and planned to be invested for.

It’ll also be useful to check the performance of the scheme over a period of time. The performance of a scheme across various periods will help you understand the impact of different market conditions on the performance of the mutual fund. Also, this will ensure that the impact of recent development in the market does not unduly influence your decision. For this reason, PowerMF provides not only returns as on date for various periods, but also the quarter wise returns over the past 8 years or since the commencement of the scheme whichever is later.

Performance vis-a-vis Benchmark & Other Similar Schemes

Another important factor in identifying a scheme is the relative performance of the scheme. Each scheme has a benchmark which is generally an Index whose performance can be tracked. Also, one important factor is to ensure that the comparison is done only along with schemes of similar nature.

In most cases, schemes are put in various quartiles depending on its ranking amongst other similar schemes. However, more than just the ranking, it is the absolute returns which is more important. Hence, on the PowerMF platform, the performance of the top scheme as well as the bottom scheme in this group along with the performance of the benchmark is provided. This will provide clear understanding on the comparative performance of the scheme.

Risk Adjusted Returns

When comparing performance of a scheme, it is important not to get too caught up only with the returns and the ranking. It is also important to see the risk taken for getting the returns. There are various measures that are there to check the risk adjusted returns. Some of the measures are: Beta, Sharpe Ratio, Beta Square etc.

4. Scheme Portfolio

A scheme gets its returns based on the portfolio in which the funds collected have been invested in. Hence, it is important to look at the portfolio of the scheme. Some of the key parameters to look at are:

Asset Allocation

Exposure of the Scheme to various asset classes like Equities, Derivatives, Debt and Cash.

Stock and Sector Concentration

This provides for the concentration of the portfolio. One of the objectives of investing in a mutual fund is to get diversification across various stocks and sectors. Hence, one should look at the concentration of the portfolio among top 5 stocks and industries in order to understand the true diversification a scheme offers.

The portfolio and its analysis

The recently declared portfolio of various schemes is available on the PowerMF platform. Further, analysis of the equity portfolio across Sectors as well as across index groups is available and similarly, for the debt portfolio, type of securities as well as rating wise analysis are available. This will provide a complete understanding of the portfolio.

5. Brand

In addition to the performance of the scheme, the AMC and its brand also have its say while selecting a scheme. While good brand alone does not mean good performance, a good brand helps the AMC in its ability to attract the right talent and manage the performance. Hence, a product from a well known and more importantly well managed and consistently performing brand both in terms of AMC brand and in terms of the fund manager will provide the necessary comfort to the investor. Also, generally a brand name gets built over consistency of performance and acceptance of the market of its products. A few areas which need to be focused are:

1. AMC (Asset Management Company) background and its promoters
2. Assets Under Management of the AMC, Fund Manager and the Scheme
3. Awards and recognitions won by the Scheme, Fund Manager / AMC

6.   Cost

Cost also plays an important role in the identification of the scheme. (Refer our previous blog post to understand the costs associated with Mutual Fund Schemes ) as the costs get accounted for in the NAV (Net Asset Value), the returns comparison generally takes in to consideration the cost. However, it is still important to understand the costs in the scheme in order to understand the impact of costs in the schemes performance. As the costs directly impact the returns in a scheme, higher cost will eat in to the returns for the customer. This needs to be kept in mind while deciding a scheme for investment.

While there are maximum allowed expenses that can be debited to the scheme by an AMC, each scheme has a different cost structure. The details are available in the Scheme Performance Snapshot in PowerMF.

If you consider all the above 6 points while deciding a scheme for investment you will be able to identify the right scheme to invest in.

Hope you found this post useful. Do let me know your comments.

–

Fundu Vishy

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Hello! My name is Fundu Vishy – Your “Mutual”  friend in the ‘often considered complicated but not actually so’ world of Mutual Funds in India.

In this first blog post, I will take the opportunity to introduce PowerMF and how it is going to ‘empower you’ – the investor to easily manage your mutual fund investments on this platform.

Over the past few months, there have been many developments in the Mutual Fund Industry. The recent ‘No Load’ guidelines by SEBI, implemented with effect from August 1, 2009, will probably go down as one of the most important developments in the mutual fund industry since the rules that allowed private players to enter the Fund Management business. This new development is expected to have a major impact in the way Mutual Fund Distribution happens in the market, and more importantly, how the investors are going to invest and manage their Mutual Fund investments in the coming days.

As brought out by AMFI in its AGNI guidelines, there are two types of distributors – one who provides basic service, and the one who provides value-added services, including advice. These distributors have, over the past 15 years, taken the industry to the nook and corner of the country and believed to have brought in over two crore investors into the Mutual Fund Industry. However, with the advent of this new ‘No Load guidelines’, it is very clear that only those distributors who are able to demonstratively provide value added services will be able to survive in the market place. The impact, it is understood, is clear, as the industry has been seeing diminishing interest by distributors in the Mutual Fund product and thus reduced procurement of Mutual Fund investment by AMCs. This shows the shift of Mutual Fund from being a darling of distributors to an add-on service along with various other products offered by a distributor like equities and insurance.

On the other side, looking at the current developments from the investor’s point of view, there are a lot of positives. The ‘no load’ provides the customers with reduced cost of investments and hence, improved returns. This makes mutual fund investments much more ideal for the investor, more than what it has been so far. Just because there is a reduced interest by the distributors, owing to the shrinking revenues in the business of distribution of mutual funds, an investor should not lose out on the benefits that the Mutual Fund industry offers.

Now the PowerMF Project was conceived and developed in order to provide the ‘No Load Benefit’, even before the new guidelines were introduced. The whole idea was to explore  the possibility of providing No Load Investment by tying up with AMCs and ‘Empowering Investors’ to manage their investments effectively using technology.

Through PowerMF, the future of personal finance investment in general and Mutual Fund investment in particular is going to be based on how aware and empowered the investor is, and only those who are empowered will be able to benefit from the industry. This was brought out clearly by the evolving regulatory position.

As the first step in the path of empowering the investor, PowerMF will enable the investor to have access to the best of the information on mutual fund schemes and their performance along with comprehensive analytical tools. One of the most comprehensive, yet easy to use, platforms for any product in general and Indian Mutual Funds in particular.

You can now register on PowerMF.com and do a test run of its features . Connect with me on Facebook or Twitter for the latest updates from this blog and on the latest news from the world of Mutual Funds.

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