What Is The Meaning Of Mutual Funds ?

Mutual funds are basically investment funds where the investment companies collect money from the investors and invest the same in various stocks of different companies and government bonds. Mutual funds are also affected by the market fluctuations and different mutual funds have different prices which vary as per the variations in the stock market. But the key advantage of mutual funds is that they are less risky than stocks because the investment in mutual funds is generally diversified. The investors have the option of selling off their units or their share in the mutual fund as and when they wish. There are certain types of stocks where there may be a certain lock in period or a fixed duration during which the sale may not be allowed. Investors of mutual funds prefer to sell their units when the prices of the same have increased to more than the purchase price and at a time when they are sure to get profits. While investing in mutual funds the investors need to check where the mutual fund is investing the money because there may be some funds that invest only in stocks while some may invest only in fixed income securities and there may be some other fund which invests partly in stocks and partly in securities. One thing is for sure, that these investments are not decided by just anybody in the company, but instead there are professionals who are hired to decide where all the funds will invest their money and there is a lot of research and analysis that goes into these decisions.

Financial Statement Anaylsis Of Mutual Funds Financial statement analysis is a very important tool in selecting a proper mutual fund. There are several things that have to be kept in mind while looking at a financial statement analysis of mutual funds. Mutual fund analysis includes qualitative as well as quantitative analysis where quantitative analysis is about the background and experience of the mutual fund company, whereas quantitative analysis is about factors such as performance and style of the manager, risk adjusted performance etc.

One of the most important things in the analysis of a mutual fund is benchmarking. This is what enables us to evaluate the historical performance and based on such benchmarks we can also identify funds that may give a higher return. By using a wrong benchmark one may end up selecting a wrong mutual fund. Also, now days it is not difficult to do correct benchmarking as there are some software also available to do this. Apart from benchmarking, end point bias may also be of great importance. But unfortunately the most common mistakes that are made are the recent performance of the fund is what is taken into consideration. Once there is a good performance in recent times, there is an illusion that the performance of the fund is very consistent and has been outperforming. However one needs to look at the returns for one, three, five, and seven years so that the performance of the mutual fund is properly evaluated and that is how the actual performance of the mutual fund may be obtained. More Articles :

Income Tax Laws On Mutual Funds Inherited A common man always has tax woes and sometimes is in a fix as to whether he has to pay tax on the money that he has or whether he can claim benefits on something and so many other issues. However, the best way to get the tax queries sorted out is to seek the guidance of a tax expert. One such query that most tax payers have is whether there is any tax payable on mutual funds inherited. The answer to this is no. There is no tax on the mutual funds that are inherited however whatever income is gained out of such mutual funds is taxable. This means that whatever interest is earned on the mutual fund or whatever gains are made after selling the mutual fund, such amounts are taxable. The amount of the tax will depend on the kind of gain and the amount of the gains. Hence, inheritance by itself does not lead to any tax liabilities, but gains from such inheritance do. The only immediate liability that these inherited funds may incur is the title transfer costs. Hence, one can be relieved of the tax issues when one inherits some type of assets. Since the tax laws have different additions each year, it is best to get the tax issues handled by an accountant, rather than handling in on ones own and end paying up a penalty. An accountant is the best person to guide someone regarding the tax liabilities and the various options thereof. More Articles :

growth mutual fund

Definition Equity stock (shares) fund that invests in fastest growingfirms (typically growing at an average rate of 10 percent peryear) with capital appreciation as its primary objective. Suchfunds take more risk and pay a premium for stocks with above average earnings. When a stockmarket declines, agrowth fund's earnings decline faster than the overall rate, and when the stockmarket rallies its earnings grow faster the overall rate.

NAV
Definition
Net Asset Value. The dollar value of a single mutual fund share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.
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Capital Market

Any market in which securities are traded. Capital markets include the stock and bond markets. Companies and governments use capital

markets to raise funds for their operations; for example, a company may issue an IPO while a government may issue a bond in order to conduct new or expand ongoing activities. Investors purchase securities in the capital markets in order to extract a return and earnprofit on the securities. Capital markets include primary markets, such as IPOs that are placed with investors through underwriters, and secondary markets, in which all subsequent trading takes place. Government agencies in different countries regulate local capital markets, though some, especiallyexchanges, play some role in regulating themselves.
Farlex Financial Dictionary. 2009 Farlex, Inc. All Rights Reserved

capital market The market for long-term funds where securities such as common stock, preferred stock, and bonds are traded. Both the primary market for new issues and the secondary market for existing securities are part of the capital market.

Initial Public Offering

The first price for which a company offers to sell stock in itself when it moves from private ownership to public trade. More generally, it refers to the actual first sale of stock to the public. Small companies looking for a new source of financing offer most IPOs, but large companies who wish to be publicly traded can offer them as well. An IPO is generally a risky investment, because one does not know how much demand will exist for the stock after its initial offering; the risk comes from the uncertainty about the stock's resalevalue. See also: Publicly-traded company.
Primary Market

The first group of investors to whom a new issue of a security is sold. The primary market consists of theissuer and the first buyers of the issue. All subsequent trading takes place on the secondary market.Underwriting is the process by which the primary market functions, that is, how issues are sold to the primary buyers. The primary market can at times be more volatile than the secondary market because it is difficult to determine the underlying value of new issues. In any case, the primary market accounts

for only a portion of trade on a given trading day. See also: Rights issue, Preferential issue, Initial public offering.
Secondary Market

The market for all investors in a security, except for the first ones to whom a new issue of a security is sold. The secondary market consists of all sellers and buyers, except for the issuer and the first group of investors who bought the issue. The secondary market is often less volatile than the primary marketbecause it is easier to determine the underlying value of a security after it has already begun trading. Nearly all trading of a security occurs on the secondary market.

stock split
Definition
An increase in the number of outstanding shares of a company's stock, such that proportionate equity of each shareholder remains the same. This requires approval from the board of directors and shareholders. A corporation whose stock is performing well may choose to split its shares, distributing additional shares to existing shareholders. The most common stock split is two-for-one, in which each share becomes two shares. The price per share immediately adjusts to reflect the stock split, since buyers and sellers of the stock all know about the stock split (in this example, the share price would be cut in half). Some companies decide to split their stock if the

price of the stock rises significantly and is perceived to be too expensive for small investors to afford. also called split.

Reverse stock split

Definition A decrease in the number of a companys shares outstanding. A 1-for-3 reverse stock split would reduce the amount of shares owned by a shareholder to one, for every three shares owned before the split. A company will generally use a reverse split to boost its stock price, which is sometimes instituted by companies to avoid being delisted from an exchange. Reverse splits are usually not looked at positively by investors. See also Stock split.
Re: what is corporate action? wt is the purpose and tpes of corporate actions? Answer A corporate action is an event # 1 initiated by a public

company that affects the securities (equity or debt) issued by the company. Some corporate actions such as a dividend (for equity securities) or coupon payment (for debt securities (bonds)) may have a direct financial impact on the shareholders or bondholders; another example is a call (early redemption) of a debt security. Other corporate actions such as stock split may have an indirect impact, as the increased liquidity of shares may cause the price of the stock to rise. Some corporate actions such as name

change have no direct financial impact on the shareholders Purpose:1).Return profits to shareholders 2).Influence the share price 3).Corporate Restructuring Types:1).Mandatory Corporate Action(ex: its includes stock splits, mergers, and spinoffs) 2).Voluntary Corporate(it includes rights issue, making buyback offers to the share holders while delisting the company from the stock exchange etc.)

corporate action
Definition
Any event initiated by a corporation which impacts its shareholders. For some such events, shareholders may or must respond to the corporate action or select from a list of possible actions. Examples include mergers, spinoffs, stock buyback, and stock splits.

merger

Definition
The combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger.

purchase acquisition
Definition
Accounting method used in any merger which is not treated as a pooling of interests. The purchasing company treats the acquired as an investment, adding the acquired's assets to its own balance sheet, and recording any premium paid above market price as goodwill, to be chargedagainst future earnings.

pooling of interests
Definition
One method of accounting for a company merger, in which the balance sheets of the two companies are combined line

by line without a tax impact. Only allowed under certain circumstances.

spinoff
Definition
An independent company created from an existing part of another company through a divestiture, such as a sale or distribution of new shares.

corporate action
Definition
A situation affecting company stakeholders that typically willproduce some type of change to the company such as astock split or a change to dividend payments.

Mergers & Acquisitions 1. Definition: Acquisition is a corporate action where one company overtakes the operations of other company. The acquired company thus becomes a part

of the acquiring company. Merger is the corporate action where two companies decide to combine their operations. Both the companies involved in the merger cease to exist resulting into a combined new company 2. Example: There are numerous examples of acquisitions and mergers in the current times. Tata Steel acquired Corus in April 2007. Corus ceased to exist independently after that and became a subsidiary of Tata Steel. Two major oil companies Exxon and Mobil decided in 1999 to merge their operations. As a result of the merger, these companies ceased to exist independently and a new entity Exxon Mobil was formed. 3. Reasons for M&A There are generally three reasons stated for the Merger & Acquisition (commonly termed as M&A) actions 1) Vertical Integration: A company can backward integrate by acquiring its vendors/suppliers while it can forward integrate by acquiring its business customers/distributors 2) Horizontal Integration: A company can take M&A route to expand in the same market or to grow/enter in other markets 3) Diversification: Conglomerates take M&A route to diversify their holdings 4. Points to Ponder: 1) Are M&A actions always motivated by the company welfare? 2) Can you cite some failed M&A's? What are were reasons for their failure?
what is the meaning of derivative. Answer DERIVATIVES IS A PRODUCT WHOSE # 2 VALUE IS DERIVES FROM THE

VALUE OF THEIR UNDERLINE ASSETS.

what is the meaning of derivative. Answer Derivatives are financial # 1 instruments whose value changes

in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps. The main use of derivatives is to

reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a huge range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) see inflation derivatives or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs.

Meaning Derivatives Market

The Derivatives Market is meant as the market where exchange of derivatives takes place. Derivatives are one type of securities whose price is derived from the underlying assets. And value of these derivatives is determined by the fluctuations in the underlying assets. These underlying assets are most commonly stocks, bonds, currencies, interest rates, commodities and market indices. As Derivatives are merely contracts between two or more parties, anything like weather data or amount of rain can be used as underlying assets.The Derivatives can be classified as Future Contracts, Forward Contracts, Options, Swaps and Credit Derivatives.

The Types of Derivative Market

The Derivative Market can be classified as Exchange Traded Derivatives Market and Over the Counter Derivative Market. Exchange Traded Derivatives are those derivatives which are traded through specialized derivative exchanges whereas Over the Counter Derivatives are those which are privately traded between two parties and involves no exchange or intermediary. Swaps, Options and Forward Contracts are traded in Over the Counter Derivatives Market or OTC market. The main participants of OTC market are the Investment Banks, Commercial Banks, Govt. Sponsored Enterprises and Hedge Funds. The investment banks markets the derivatives through traders to the clients like hedge funds and the rest. In the Exchange Traded Derivatives Market or Future Market, exchange acts as the main party and by trading of derivatives actually risk is traded between two parties. One party who purchases future contract is said to go long and the person who sells the future contract is said to go short. The holder of the long position owns the future contract and earns profit from it if the price of the underlying security goes up in the future. On the contrary, holder of the short position is in a profitable position if the price of the underlying security goes down, as he has already sold the future contract. So, when a new future contract is introduced, the total position in the contract is zero as no one is holding that for short or long. The trading of foreign exchange traded derivatives or the future contracts has emerged as very important financial activity all over the world just like trading of equity-linked contracts or commodity contracts. The derivatives whose underlying assets are credit, energy or metal, have shown a steady growth rate over the years around the world. Interest rate is the parameter which influences the global trading of derivatives, the most.

Derivative Market and Financial Risk

Derivatives play a vital role in risk management of both financial and non-financial institutions. But, in the present world, it has become a rising concern that derivative market operations may destabilize the efficiency of financial markets. In todays world the companies the financial and non-financial firms are using forward contracts, future contracts, options, swaps and other various combinations of derivatives to manage risk and to increase returns. It is true that growth of derivatives market reveal the increasing market demand for risk managing instruments in the economy. But, the major concern is that, the main components of Over the Counter (OTC) derivatives are interest rates and currency swaps. So, the economy will suffer surely if the derivative instruments are misused and if a major fault takes place in derivatives market.

derivative
Definition
A financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives tomanage the risk associated with the underlying security, to protect against fluctuations in value, or

to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky.

bank reconciliation
Definition
Analysis and adjustment of differences between the cash balance shown on a bank statement, and the amountshown in the account holder's records. This matchingprocess involves making allowances for checks issued but not yet presented, and for checks deposited but not yet cleared or credited. And, if discrepancies persist, finding the cause and bringing the records into agreement.