FLAME Newsletter - November 06, 2013


QUOTE OF THE WEEK:

“In India, VIPs get access to subsidies and infrastructural services first, and there is little concern for whether or not it reaches the poor and needy. We should stop this culture from becoming a moral hazard” - Dr KC Chakrabarty, Deputy Governor, RBI

YOUR FINANCE DEMYSTIFIED:

What is mutual fund benchmark & its importance

While investing in mutual funds or any other financial products, we seek opinion from our relatives or friends and then invest. Hardly do we understand the importance of making informed decisions. Most of us do not understand the significance of using a benchmark for the purpose of effective comparison. Capital market regulator SEBI (Securities and Exchange Board of India) has made it mandatory for fund houses to declare a benchmark index.

Benchmark returns will give you a standard by which to make the comparison. It basically indicates what the fund has earned against what it should have earned. One can say that the benchmark’s returns are the MF schemes target and the scheme is expected to have done well if it manages to beat its benchmark... Read more

What does your MF account statement include?

When we receive our mutual fund account statement, most of us hardly understand anything about the statement. We just briefly go through it and keep it aside on our table or store it in one of our folders. Some of us check if our names are mentioned clearly on the account statement. This is the maximum which we do while reading the statement. The MF statement includes terms like NAV (net asset value), load, folio number, etc. We hardly bother to verify these details.

Basically a MF account statement offers all transaction details carried out within a defined time period. The statement is also available online and indicates account changes whenever there is a redemption, additional investment or dividend declaration. Let’s understand some of the important details in the MF statement, which we need to check regularly... Read more

Understanding the basics of mutual fund deadlines

Before an asset management company (AMC) launches a scheme, it has to file a draft offer document with market regulator SEBI (Securities and Exchange Board of India) and get its approval.

The draft offer document is available on the SEBI website for public comments for 21 days from the filing of the document with SEBI. The regulator may specifies changes, if any, in the draft offer document and the AMC or the lead merchant banker shall carry out such changes in the draft offer document before filing the offer document with ROC (Registrars of Companies) / stock exchanges.

However in reality, if SEBI doesn’t give feedback in 21 days, then it is likely to take more time to approve the scheme. Hence, the AMC should wait for the regulator’s approval... Read more

DID YOU KNOW?

Addendums and notices in MF schemes

When an asset management company (AMC) launches a mutual fund scheme, it issues an offer document that contains details of the scheme.

An offer document covers all the relevant information to help an investor to make his/her investment decision. Draft offer document means the offer document is in the draft stage. It includes information about the AMC, its sponsor company, trustees and registrar and transfer agents. The document also includes details of the risk factors about the fund, fund manager, benchmark of the product, among other things... Read more

TERM OF THE WEEK

Applicable NAV: The applicable NAV, is the NAV at which the mutual fund transaction is executed, if the application is received before the cut-off time on a day as set by the fund. All investments or redemptions are processed at that particular NAV. A different NAV holds if received thereafter.

IN THE NEWS THIS WEEK

MFs investment in bank stocks account for 15.75% of total AUM

MFs offload equities worth Rs. 2,801 cr in Sept 2013

MFs report net outflow of Rs. 33,910 cr in Sept 2013

Installment under reverse mortgage would be tax exempt: NHB

ABOUT FLAME

FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India’s spectacular growth story.

In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation’s economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL’s FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.

Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity.

This portal is but one of the various IIFL initiatives that would be part of FLAME.



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