Professional Money Management
Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. Fund managers monitor market and economic trends and analyze securities in order to make informed investment decisions.
Diversification
Diversification is one of the best ways to reduce risk. Mutual funds offer investors an opportunity to diversify across assets depending on their investment needs.
Liquidity
Investors can sell their mutual fund units on any business day and receive the current market value on their investments within a short time period (normally three- to five-days).
Affordability
The minimum initial investment for a mutual fund is fairly low for most funds (as low as Rs500 for some schemes).
Convenience
Most private sector funds provide you the convenience of periodic purchase plans, automatic withdrawal plans and the automatic reinvestment of interest and dividends.Mutual funds also provide you with detailed reports and statements that make record-keeping simple. You can easily monitor the performance of your mutual funds simply by reviewing the business pages of most newspapers or by using our Mutual Funds section in Investor’s Mall.
Flexibility and variety
You can pick from conservative, blue-chip stock funds, sectoral funds, funds that aim to provide income with modest growth or those that take big risks in the search for returns. You can even buy balanced funds, or those that combine stocks and bonds in the samefund.
Tax benefits on Investment in Mutual Funds
1) 100% Income Tax exemption on all Mutual Fund dividends2) Capital Gains Tax to be lower of - 10% on the capital gains without factoring indexation benefit and 20% on the capital gains after factoring indexation benefit.3) Open-end funds with equity exposure of more than 50% are exempt from the payment of dividend tax for a period of 3 years from 1999-2000.
What is a Mutual Fund?
A mutual fund is not an alternative investment option to stocks and bonds, rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities.Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses.
Each mutual fund has a specific stated objective
The fund’s objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance.Some popular objectives of a mutual fund are -
Fund Objective
What the fund will invest in
Equity (Growth)
Only in stocks
Debt (Income)
Only in fixed-income securities
Money Market (including Gilt)
In short-term money market instruments (including government securities)
Balanced
Partly in stocks and partly in fixed-income securities,in order to maintain a 'balance' in returns and risk
Managed by an Asset Management Company (AMC)
The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives.The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
All AMCs Regulated by SEBI, Funds governed by Board of Directors
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund’s objectives are clearly spelt out in the prospectus.In addition, every mutual fund has a board of directors that is supposed to represent the shareholders' interests, rather than the AMC’s.
Each mutual fund has a specific stated objective
The fund’s objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance.Some popular objectives of a mutual fund are -
Fund Objective
What the fund will invest in
Equity (Growth)
Only in stocks
Debt (Income)
Only in fixed-income securities
Money Market (including Gilt)
In short-term money market instruments (including government securities)
Balanced
Partly in stocks and partly in fixed-income securities,in order to maintain a 'balance' in returns and risk
Managed by an Asset Management Company (AMC)
The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives.The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
All AMCs Regulated by SEBI, Funds governed by Board of Directors
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund’s objectives are clearly spelt out in the prospectus.In addition, every mutual fund has a board of directors that is supposed to represent the shareholders' interests, rather than the AMC’s.
Stock Market Trading - Double/Triple Tops n Bottoms
Tops and bottoms are one of the favorite benchmarks for short-term aka. Swing trading. In particular Double and Triple Top and Bottom formations are the most common and widely used techniques to predict the potential stock movement.
Tops and bottoms are formed when a stock Peaks out in either direction. Tops and bottoms take quite some time to form. One of the main reason being, nobody really knows when to call it quits. Many people just keep chasing a stock, again, in either direction.
Double and Triple tops/bottoms are formed as a result of stock trying to touch and retest previous highs and lows respectively. These highs/lows are always considered a mental roadblock. And hence, every move near these levels is considered a bearish sign and investors/traders get nervous and one notices either buying or selling as the case may be.
Let us consider SBI(State bank of India) from the Indian markets to show what these Tops and Bottoms are. This is a "Picture Perfect" example on all fronts. And it not only shows double, but also Triple Tops and Bottoms. Let us dissect the chart.
Late Nov 2005 : SBI tried to break past the upper 940's, but failed. It corrected for a few sessions, until early December. Which is when it started to climb up again. Mid December 2005 : A perfect example of a double top. Once again SBI tried to pass the 940+ and failed. Traders got nervous and this prompted heavy selling. If you closely look at the volume, it was definitely heavier than normal around this time which confirms the selling and nervousness.
Early Jan 2006 : This completes the trio, a Triple top. This was the third time that SBI tried to move past the upper 940's and failed. This is where you should have sold your Long positions. Stock corrected nearly 9% from this point on.
Early Feb 2006 : Another perfect example of a double bottom, this time. As you can clearly see, once SBI started to correct since early Jan, it ended the downtrend at "exactly" the same level/point where it did earlier, around the 860's. Why did it stop here? Because, this is where it started to bounce back the first time(around late Dec 2005) and investors/traders thought this as a good buying opportunity, which it was.
Late Feb 2006 : Again, an excellent example of a Triple bottom. SBI came back to the levels where it found support the previous two times. This completed the third leg of downtrend. In fact, this would have been a definite buying opportunity.
Mid March 2006 : As you can see, this time SBI broke the 940 level with a bang. Guess what? Volume. Volume was more than 3 times the normal volume as SBI took away the 940's and marched ahead. A clear 13%+ profit in just 2+ weeks from the day it formed the triple bottom.
Tops and bottoms are formed when a stock Peaks out in either direction. Tops and bottoms take quite some time to form. One of the main reason being, nobody really knows when to call it quits. Many people just keep chasing a stock, again, in either direction.
Double and Triple tops/bottoms are formed as a result of stock trying to touch and retest previous highs and lows respectively. These highs/lows are always considered a mental roadblock. And hence, every move near these levels is considered a bearish sign and investors/traders get nervous and one notices either buying or selling as the case may be.
Let us consider SBI(State bank of India) from the Indian markets to show what these Tops and Bottoms are. This is a "Picture Perfect" example on all fronts. And it not only shows double, but also Triple Tops and Bottoms. Let us dissect the chart.
Late Nov 2005 : SBI tried to break past the upper 940's, but failed. It corrected for a few sessions, until early December. Which is when it started to climb up again. Mid December 2005 : A perfect example of a double top. Once again SBI tried to pass the 940+ and failed. Traders got nervous and this prompted heavy selling. If you closely look at the volume, it was definitely heavier than normal around this time which confirms the selling and nervousness.
Early Jan 2006 : This completes the trio, a Triple top. This was the third time that SBI tried to move past the upper 940's and failed. This is where you should have sold your Long positions. Stock corrected nearly 9% from this point on.
Early Feb 2006 : Another perfect example of a double bottom, this time. As you can clearly see, once SBI started to correct since early Jan, it ended the downtrend at "exactly" the same level/point where it did earlier, around the 860's. Why did it stop here? Because, this is where it started to bounce back the first time(around late Dec 2005) and investors/traders thought this as a good buying opportunity, which it was.
Late Feb 2006 : Again, an excellent example of a Triple bottom. SBI came back to the levels where it found support the previous two times. This completed the third leg of downtrend. In fact, this would have been a definite buying opportunity.
Mid March 2006 : As you can see, this time SBI broke the 940 level with a bang. Guess what? Volume. Volume was more than 3 times the normal volume as SBI took away the 940's and marched ahead. A clear 13%+ profit in just 2+ weeks from the day it formed the triple bottom.
So, to sum up. Double and Triple tops/bottoms, if identified early enough and correctly can give great returns in a very short time.
Earlier Articles:
Technical Analysis & Decision Making . . . . Support/Resistance Level and It's importance . . . . Trading System . . . . Fibonacci Retracements And How to Benefit From It . . . . BreaOuts & BreakDowns of Stocks . . . . MACD Indicators . . . . Volume & It's Importance . . . . Crossovers-Bullish & Bearish . . . . Stoploss-What to do . . . . Trading With Grudge
Source: stocks.dlngroup.com
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