Skip to main content

Mutual Fund IPOs

When there are no stock Initial Public Offerings(IPOs) hitting the market, Mutual Fund IPOs seem attractive to investors, Since they often tend to think of Mutual fund IPOs in the same vein as they do of stock IPOs. However, there are some fundamental differences that they need to take into consideration. The price of a stock is based on its supply and demand. IPOs often get listed at a premium because when a stock opens, its demand is sometimes much larger than its supply. This is not true for mutual funds, where a separate unit is created at the time of investment, which is destroyed at the time of redemption.

Thus, the supply of mutual fund units is unlimited and so any appreciation in the value of a Mutual Fund's NAV can never be due to an increase in the demand for a fund's units. Moreover, in case of funds, your gains depend on how well the fund manager invests.


All things considered, it is generally a good idea to stay out of Mutual fund IPOs. A new fund is an untested entity without any track record. Your investment call will have to be made purely by looking at the fund manager and the Asset Management Company(AMC). Another issue is that of a possible opportunity loss. Your investments may be locked in for up to a month. This money could instead be kept in a liquid fund for a month and then invested once the fund opens for daily sale and repurchase post its IPO.

There are some exceptions to this. An obvious one is closed-end funds. Even though these are no longer in vogue, there are special funds called fixed maturity plans, which are similarly structured. If you want to invest in one of these, then the IPO may be the only option available.

Investors need to understand that fund IPOs are purely a marketing device that creates some excitement. AMCs always communicate strongly during an IPO. A discerning investor should absorb this information carefully and invest later when the fund opens for sale and repurchase on an ongoing basis. This is the same case for GOLD Funds also. They just reflect the international price of GOLD prices at prevailing international rate. All the gold mutual funds perform more or less the same. Investors can purchase these units on an ongoing basis.
Tags

Comments

Post a Comment

Popular Posts

Your Bill Amounts Are Going To Increase From June 1, 2016

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. Union Finance Minister, Arun Jaitley, in his budget announcements proposed to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. The present rate of service tax will be hiked to 15 per cent from June 1, 2016, from 14.5 per cent. Take a look at what gets expensive:



Phone Bills: Your phone bills are going to go up. So, pay a good 15 per cent now on service tax on phone bills.

Restaurant Bills :If you are dining in a restaurant that already has service tax applicable, you are going to pay more on your eating out. Though 0.5 per cent on a single bill may not mean much, frequent diners may end-up paying a lot during the year.

Travelling: You will have to pay more for air travel, as there is a service tax on tour operators and travel agents.

…
Post a Comment
Read more

Moneycontrol Terminal - Streaming Live Quotes

Moneycontrol has introduced a new feature Moneycontrol Terminal - an enhanced version of real time price updates. Though there were live quotes provided by the website previously, the present form  gives a better update of live quotes of indices and stocks.

This terminal provides live streaming quotes for both NSE and BSE free. It also provides quotes for most of the indices and also the constituents/stocks of the indices in BSE and NSE.  The terminal also provides live news and other market news, which might be useful for traders. The hardware recommended is minimum of 1 GB RAM.

It would be better if stock of any choice could be added ( market watch of a set of stocks ), which would be easier to track one's trading positions. Anyway, this is a better alternative for people who don't have access to any trading software, to view live action of the markets.




You could just try the same here at Moneycontrol Terminal


11 comments
Read more

NSE Level 3 Data

Before we get into details of NSE Level 3 Data, it is important to first understand the basic operations of the stock market.  All publicly traded equities have a bid price and an ask price when they are bought and sold. The bid is the highest price a trader( or an investor) is willing to purchase a stock. The ask is the lowest price in which he is willing to sell a stock.


Depth of the Market(DOM):Looking at a Level 1, Level 2 or Level 3 quotes can give a trader, a basic idea of how a stock is performing at any given time.

Level 1 Market Data provides the basic market data which includes Bid price, Bid size, Ask price and Ask size.

Level 2 Market Data provides more information than Level I data. Mainly, it doesn't just show the highest bid and offer, but also shows bids and offers at other prices. Now level 2 provides market depth data upto 5 best bid and ask prices.

Level 3 Market Data provides market depth data upto 20 best bid and ask prices .  This primarily used by brokers and ma…
Post a Comment
Read more