How to file a mutual fund complaint with SEBI?

Often many investors ask how to file a mutual fund complaint with SEBI after their numerous attempts to resolve their mutual fund related queries. OnlineMF tries to explain to the entire process of filing a online mutual fund complaint form with the mutual fund regulator SEBI.

USE THIS AS THE LAST MEANS OF PROBLEM SOLUTION

All investors should knock on the doors of the regular SEBI only after all the other means of finding a resolution for investor complains are not met. Mutual Fund Complaints should be addressed with the respective Mutual fund companies before you adopt this route.

SEBI INVESTOR COMPLAINT WEBSITE http://scores.gov.in/default.aspx

SEBI SCORES (SEBI Complaints Redress System)

 
ONLINE MODE

1] Log on to SEBI SCORES (SEBI Complaints Redress System)

http://scores.gov.in/default.aspx

2] Select Complaint Registration under Investor Corner

Update all the below information like

  • Name of Investor  :  
  • Complaint Lodged by  :  
  • Address of Correspondence of  Investor  :    
  • City/Location  :  
  • Pin Code  :  
  • State/UT :
  • PAN of Investor  :  
  • Phone Number  :  
  • Mobile Number (For receiving SMS)
  • E-mail Address of Investor 

Ensure the highlighted information are accurately filled up in your mutual fund complain to SEBI.

 3] Select Appropriate Category

  • Listed Companies/ Registrars & Transfer Agents
  • Brokers/Stock Exchanges
  • Depository Participants/Depository
  • Mutual Funds
  • Other Entities
  • Information to SEBI

Click on Mutual Fund Category to register investor complaint

4] Complete the Online Complaint form

Selected Category :   Mutual Funds 

*Complaint Against  : 

*Nature of Complaint Related to  :  MutualFunds 

 Select the appropriate nature of your complaint for any of the below options:

  •  Delay/Non-receipt of dividend on Units 
  •  Delay/Non-receipt of Interest on delayed payment of Dividend
  •  Delay/Non-receipt of Redemption Proceeds 
  •  Delay/Non-receipt of Interest on delayed payment of Redemption
  •  Non-receipt of Statement of Account/Unit Certificate 
  •  Discrepancy in Statement of Account 
  •  Non receipt of Annual Report/ Abridged Summary
  •  Wrong Switch between Schemes
  •  Unauthorised Switch between schemes
  •  Deviation from scheme attributes
  •  Wrong or excess charges/load
  •  Non updation of changes viz.address, PAN, bank details, nomination, etc
  •  Non receipt of Annual Account
  •  Others 

5] Select the mode of your Mutual Fund holdings

  •  Physical Mode
  •  Demat Mode

6] Complete the image verification

Verify and complete the image verification by tying in the numbers/alphabets provided in the image into the comments box in the same format.

7] Click on Submit Button

Once you complete the online mutual fund complaint you would be provided with a registration number. Do remember to store carefully this complaint registration number for future reference.

An email is generated instantaneously acknowledging the receipt of the complaint and allotting a unique complaint registration number for future reference and tracking.

PHYSICAL /OFFLINE MUTUAL FUND COMPLAINT

If you are facing issues registering your online mutual fund complaint form OR you do not have access to Computer or Internet Connection you can register your complain by calling on the phone number of SEBI at 022-26449188/26449199. Investors can also send the complaint physically by post to any of the Offices of SEBI.

 USEFUL MUTUAL FUND RELATED INFORMATION

SEBI TOLL-FREE PHONE NUMBER

SEBI helpline Number: Use the SEBI Mutual Fund helpline number 1800-22-7575 and 1800-266-7575 for your investor related questions.

SEBI INVESTOR’S WEBSITE

Before you register mutual fund complaints to SEBI check the investor website for more details. SEBI INVESTOR’S WEBSITE http://investor.sebi.gov.in

Back to Basics Series II : This article is in response to SEBI’s Public Appeal for following the right approach to Mutual Fund Industry.

SEBI Investor Education
©OnlineMF

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Is Reliance Mutual Fund giving up the AAUM race for profitability?

Reliance Mutual Fund  is changing its strategy of chasing the AAUM, to now focus on increasing its bottomline. The AAUM of Reliance Asset Management Company (Largest Mutual Fund Manager in India) is slowly tapering off. Does this mean it has given up its self-styled race for size to now focus on making its balance sheet stronger?

Reliance the Undisputed Leader in AAUM: Reliance held the No 1 spot in assets under its management for past many years. Its was originally Reliance’s idea to aggressively market various schemes and garner biggest chunk of new assets under its control. It launched innovative products, schemes and offered large incentives to market its funds. It redefined the Indian Assets Management business by taking a sizeable lead ahead of its rivals. With sustained efforts and aggressive posturing it reached indomitable position in the Indian Mutual Fund Industry in a very short time.

Knowledge, Products, Marketing and Timing: Reliance Group has a firm understanding of the Indian Markets. It has always kept pace with the changing demographics of its consumers. In one of the fastest growing market of the world, it is of utmost importance to connect with your investors and stay ahead of the curve. SIP for just 100, ATM Card for Mutual Fund Investors, First SIP in Gold Fund are few recent examples of innovative concepts by Reliance Capital.

Reliance Mutual Fund

Good management, excellent and timely PR, stable fund managers are a few qualities associated with Reliance Mutual Fund. It managed volatility and downtrends in markets with gusto by being in the public eye when it mattered the most. Able Fund Managers were available in public domain(effectively and efficiently doing a  Public Relations job) to calm investor’s nerves when their portfolios were bleeding. Such hand holding is often the need of the hour in volatile markets.

Rivals made it easy for Reliance: While Reliance was in race with itself, others like HDFC Mutual Fund had different ideas about the whole concept of increasing the AAUM. It regularly doubted Reliance claims of ever-increasing investors and assets. The measurement of company’s size is a difficult task in a complex Indian financial market. Absence of clear and strict guidelines to calculate various parameters of AAUM made it easier to tweak numbers. Rivals were left with playing the catch-up game to the market leader, Reliance. Many asset management companies, baring few like Quantum AMC and Benchmark AMC failed to offer a different product than the one which Reliance already had in its portfolio.

Continue reading

We dont need no ULIP’s anymore.

Now various mutual fund houses have introduced Funds with insurance cover. And the product seems to a good match to ULIP. If product such as RELIANCE SIP, Century SIP from Birla MF catch on, the insurance agent might well be history.

Ganpat Bhai is an insurance agent. Be it the wedding of his friend’s daughter or a relative’s friend never misses a chance to sell a unitlinked insurance plan (Ulip) or two. Ganpat Bhai has sold them for years, playing on the twin emotions of fear and greed commonly found in human beings. For those who feared the future, he sold Ulip as insurance. And, for thhose who wanted their money to multiply, he sold them as investments.
Never mind the fear of mis-selling, client profiling which required, he managed to sell same product to all.
Mutual Funds often lost out because Ulip had this liquid-like property, where they took the shape of whatever vessel they were poured into. MF’s were rigid-they were purely investment products and did not provide for worldly happenings such as death.
Then, fund houses suddenly woke up. Take a leaf out of the insurance companies’ book, they started offering plans that offered insurance, too. DejaVu, the life of insurance agents turned into nightmares all of a sudden. The sky high commissions, mis-selling that they were used to all seemed to disappear in thin air.

Reliance SIP and Birla Sun Life Mutual Fund’s Century SIP is the latest in that line. Birla’s SIP is a systematic investment plan (SIP) that is optional. The plan should not be confused with a mutual fund scheme. While a scheme has a specific investment objective, an SIP is just a mode of investment that can be applies to any of the various schemes offered by a fund house. At present, Century SIP will be available on all 18 open-ended equity scheme offered by the fund house.
To participate in this plan, an investor needs to invest a minimum of Rs.1,000 every month. There is no upper limit for this investment. Under this plan, an MF investor will get insurance cover on his life 45 days after paying the first instalment. While some fund house charge a fee for this cover, Birla MF is offering it free of charge. In the first 45 days, only accidental deaths will be compensated.
The cover will be available to the investor till he or she turns 55. So the tenure of the cover under Century SIP will be 55 years minus the current age of the investor.
For an investor aged 40 years and five months, the tenure of the Century SIP insurance cover will be 14 years and seven months. Let’s say an investor starts an SIP of Rs 5,000 per month. If he dies within the first year of paying his instalments, his nominee is eligible for a cover of 19 times the SIP amount- Rs 50,000. If he dies during the second year of SIP payments, the nominee get 50 times the SIP amount as the life cover – Rs2.5 lakh. And if he dies any time in the third year or after that, the nominee gets 100 times the monthly SIP amount Rs5 lakh. Here again, thecover is subject to a maximum of Rs20 lakh.
The cover cannot be claimed if the SIP is discontinued before the completion of three years or if the investor defaults on payments of instalments on two consecutive occasions.
Investor who can afford to set aside at least Rs. 1,000 every month for equity investments can take this offer, depending, of course, on the underlying scheme’s compatibility with your investment goal. Thus, if none of the Birla schemes fits your needs, you should not take one just because it offers free insurance. But if one does, the Century SIP is a good reason to make that switch.
Ganpat Bhai still believes only insurance companies can offer good insurance. But, sooner or later, as the trend catches on, be sure even he will come around to seeing sense.

KYC for Mutual Funds.

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Know-your-client (KYC) process – Query bank.

Updated on: December 20, 2007

Sr No Issue Response

1. After obtaining a KYC acknowledgment, will the KYC compliance be updated in the folios automatically? Will CVL inform the mutual funds for updation of KYC in the investor folios?

KYC Compliance will not get automatically updated in the folios in mutual

fund. The investors have to separately inform the fund/RTA about their KYC Registration along with KYC acknowledgements. Your KYC compliance status will be updated across all folios where your PAN number is registered and for any other folios you request.

2. How can an investor update his KYC compliance status in his folios?

Investors can update their KYC compliance status in their folios by:

a. Making a written request to update their KYC process to each fund

house attaching a copy of their acknowledgements.

b. enclosing KYC acknowledgement with additional purchase

KYC compliance status will be updated across all folios where your PAN

number is registered and for any other folios you request

Please be advised that all holders in a folio must be KYC compliant in

order to be able to invest Rs 50,000 or more in that folio.

3. Can investor provide KYC compliance

details with redemptions and switch

transactions

Investors are requested not to provide KYC compliance details with

redemption or switch transaction, as it is possible the same may not be

updated in the folio.

Investors are requested to make a written request as noted in question 2

above

4. In case of schemes investing in other MF

schemes (like ULIPs etc), who is to

complete the KYC process

Mutual Fund to complete KYC.

5. Clarification in a similar scenario for

Insurance companies which invest under

various scheme names

Insurance Company to complete KYC.

6. Clarification in case of Venture Funds which

invest under various scheme names.

Main Venture Fund to complete KYC.

7. FII clarification to Custodians. Proof of ID: SEBI registration for FII and letter of approval for the sub

account.

Proof of address: POA between Sub account/ FII and Sub custodian.

Sub Custodian Registration number.

List of authorised signatories duly attested.

The sub custodian can sign the KYC application form.

In addition, the Gross Income details requested for will be the Gross Net

Assets in India as of the last month end.

8. Address proof in respect of Army personnel,

who provide ’56 APO’ etc. as address for

correspondence

For Individuals with an Army Address (’56 APO’), Letter from Commanding

Officer / Photo copy of Army Id card duly attested can be accepted as proof of address.

9. What are the constitution documents required

in case of unregistered Partnerships, Trusts,

etc.

Alternate documents in case the Partnership is not registered.

In case of unregistered Partnership firm, following two documents to be

taken:

1. The Managing Partners’/Trustees’ name to be mentioned under

contact name in the MAF. Any officially valid document viz.

Passport copy, Driving license, PAN card, etc. of the person whose

name is stated under contact name to be obtained.

2. Copy of the bank statement which will have the name and the

address of the Partnership firm/Trust.

Both the above documents to be verified with the original or produced as

attested true copy.

10. Spouse/Child/Dependent of an NRI/PIO with

“NRI/PIO” who does not have a proof of

address

Can produce the proof of address of the sponsoring husband with

documents supporting the relationship such as marriage certificate/Visa,

etc

We have now extended this to all, not just NRI / PIO

In case you desire to register an address in India for communication you

must provide proof of address in your own name or that of an immediate

relative with an additional document evidencing the direct relationship with

such person i.e. Parent/Spouse/Child.

11. Attestation of corporate documents

Corporate documents can be self attested by Director/Company

Secretary. All other entities’ documents to be attested by a Notary, etc.

12. Identity document in case of an NRI should

necessarily be a Passport or does he have a

choice of giving any of the other docs

suggested Proof of Address – are

international DL, Electricity bill, Bank statement etc acceptable in case of

NRI/PIOs?

Passport copy and PAN are mandatory.

For attestation: The documents can be attested by a Consular Officer or

an authorized official of overseas branches of scheduled commercials

banks registered in India. Apart from this, if any of the documents

(including attestations / certifications) towards proof of identity or address

are in a foreign language, please have them translated into English and

submit them.

13. Can any document issued by the local

authorities (eg: foreign bank, utility bills,

international driving license) be acceptable as

address proof for NRIs?

Yes

14. Address proof for both Indian and overseas

address to be provided by an NRI – Do both of

them need to be in the NRI/PIOs name. (In

some cases the Indian address proof will

generally be in the relatives name as NRI

does not stay at the address).

Local address not mandatory. If given, the name has to match, or must be

of a relative as per qs 10 wth proof of relationship?.

15. In case of Merchant Navy NRIs, the overseas

address proof is not available. What is the

alternative documentation that can be taken?

Mariners’ declaration or Certified Copy of CDC (Continuous Discharge

Certificate) is to be produced.

16. Also what is the acceptable

notarization/attestation for the NRI/PIOs e.g.:

an embassy or a bank abroad.

For attestation: The documents can be attested by a Consular Officer or

an authorized official of overseas branches of scheduled commercials

banks registered in India. Apart from this, if any of the documents

(including attestations / certifications) towards proof of identity or address

are in a foreign language, please have them translated into English and

submit them

17. Additionally, which pages on MOA and AOA

need to be attested? is each page to be

attested? same for partnership deed etc.-

The page giving details of the registration of the entity has to be attested.

In case of Partnership deed, the first page (which will bear the stamp and

the registration details) and the last page (which will have the signatures)

have to be attested.

18. Document evidencing authority to invest” in

partnership firm – will a letter signed by all

partners authorizing one or more partners to

invest on the firm’s behalf do?

Yes

19. What about proprietorship firm documents? Individual.

Which application form to be filled hereindividual

or non-individual

20. Is there a standard format for deed of

declaration for HUF or any format stating HUF

members and co-parcenors will suffice

Alternate documents to be obtained for HUF in case of non availability of

deed of declaration:

HUF Pan Card

Karta’s name to be written under the contact name in the non-individual

MAF.

Any officially valid document of the Karta whose name is mentioned in the

MAF under contact name.

Bank Pass book with the name and address of the HUF.

21. All docs for non-individuals need to be on a

letterhead or a letter format with

firm/company stamp suffice

Any one

22. PAN is mandatory for all investors. What

does one do for a person where PAN is not

available?

Cannot complete KYC or invest in Mutual Funds. If the PAN number is

available and the PAN card is lost, investor to attach a copy of the

acknowledgement for request of duplicate PAN card.

23. If client does not possess the KYC

acknowledgement, can a query be done

online for enquiries and a screen print of the

same be attached for investment?

Please call the CVL Helpdesk at : 022 3246 2767/2559, 022 272

1261/2008 for assistance

24. Will CVL intimate client independently of the

KYC Compliance status – e.g. via a separate

letter?

No. In the event of any KYC Application Form being found deficient for

lack of information / insufficiency of mandatory documentation, CVL will

write to the investor stating that the KYC process is incomplete for want of

information/document.

25. Is a proof of entity required for a sole

proprietorships

Which application to be used for

proprietorship firm – Individual or non

individual? Can a Proprietor use his own

individual KYC for his firm’s investment like

PAN?

No. In case of sole proprietors, sole proprietor must be KYC compliant in

his individual name & capacity.

Proprietorship firm is under the Individual Category and the applicant has

to give his/her own PAN. Investment application may be in the name of

the firm – the details on how to apply would have to be obtained from

AMC. But the PAN of the sole proprietor in the capacity of an Individual

would have to be used for such investment

26. Will something like a attested college identity

card suffice

NO

27. Is a Proof of Address required for non

individuals

For HUF, Bank pass book copy will be the address proof. For others,

Constitution document will suffice

28. Can the same document double up as ID and

address proof e.g. driving license?

Not relevant now as PAN can be the only proof of identity. However, for

non-photo PAN Card, investors could give an alternative photo identity like

a Passport, Driving license, Voters’ identity card.

29. KYC application with Thumb Impressions

POS would accept applications carrying thumb impression in lieu of

signature provided the signature is attested by a Notary or a Gazetted

officer.

30. Application under discretionary Portfolio

Management Services which operates

through Pool account. Should the entity

complete KYC as POA?

No. Entity is investing in its legal capacity and should be KYC compliant

and quote PAN as an investor. For an AMC running PMS business, they

will quote the entity’s PAN for their own investment and investment done

for PMS clients thru Pool account.

31. Will Channel Distributors need to quote their

PANs as POA.

No. We need to record offline that KYC of channel partners done through

agreements, etc.

32. What would be the address proof for

residents of countries like UAE where the

addresses are P.O. Box addresses or C/O

addresses? Are these accepted in the first

PO box address is acceptable provided the proof is given in the form of

bank statements, etc.

place? In UAE, the PO Box is a genuine issue.

33. Can US residents apply for KYC completion? US based NRIs/PIOs can apply, but investments into funds will be subject

to fund houses’ internal guidelines.

34. In case the client provides the PAN no., but

doesn’t have a PAN card, can the allotment

letter of PAN be accepted in place of the

photocopy of the PAN?

Only copy of PAN card will be accepted as proof of identity. In case the

PAN card is lost or misplaced, investor to produce a copy of the

acknowledgement of the request to IT department for issuance of a

duplicate PAN card.

35. As per the operating guidelines, the present

address in the KYC Application Form would

be the correspondence address. The

guidelines clearly state that the permanent

address for NRI/POI has to be the overseas

address. However, for PIO it is explicitly

stated that the present address has to be the

overseas address.

Does that mean that for PIOs, no

communication can be made to the local

address, even if it is supported with a valid

Address proof ?

While the space for providing overseas address is the same as permanent

address, it does not mean that the applicant cannot give an overseas in

the space provided for Correspondence address.

For registering a local communication address, the NRI/PIO has to give a

proof of address of self or a immediate relative with an additional

document evidencing the direct relationship i.e Parent/Spouse/Child.

May need to be modified now that we are treating PIO / NRI on par?

37. Can an OCI (Overseas Citizen of India) card

be taken instead of PIO?

Yes. Either an OCI card or a PIO card will be required.

Can be deleted?

38. In case of Partnership firm, Trusts Any

officially valid document in respect of holding

a power of attorney to transact (ASL and

resolution / authority to invest) is mandatory.

Please confirm who all need to sign on the

document. Do all partners need to sign?

A letter listing the authorized people to transact signed by all

partners/trustees would suffice.

39. Would a bank certificate (with a photo of the Yes

investor) be a valid identity proof?

40. Board resolution that is required is the

resolution to invest or a specific resolution

to apply for a KYC

Resolution to invest

41. Investors who are required to travel

frequently and stay away in foreign countries

by nature of their profession and therefore

becoming NRI but they do not have any

permanent address for their stay abroad as

they normally stay in hotel. However, they

have residential address in India. Clarification

is therefore requested as to which documents

they should attach as a evidence of address,

particularly in case of Cricketers who are

traveling abroad.

An NRI client is staying in an accommodation

provided by the company he is working for

and so he has no overseas address proof in

his name which can be provided along with

the KYC. Can you please confirm what can be

done in this scenario?

Our earlier FAQ has this answer: Investor’s who travel frequently by

nature of their profession and stay away in foreign countries in company’s

accommodation or hotels (who become NRI and do not have a permanent

address) but have a residential address in India, may provide such Indian

address with proof. In addition, please also provide a letter of confirmation

from your employer / business on company letterhead as an additional

proof of address.

42.

In case of investments through POA or

through channel distributors, there is a

requirement that all communications should

go to the address of the POA or the channel

distributor. If the address of the POA/Channel

Distributor has to be given in the KYC form,

what is the proof to be submitted.

This is not relevant as Mutual Funds are now required to obtain and verify

the address of their investors. MFs are writing to such distributors to

provide the address of the investors.

43. Whether a rent agreement can be accepted as

an overseas address proof

Yes

44. Documents accepted as address proof in

regional languages need to be translated.

Yes. Ration card accepted as valid proof. We expect the local POS to do

the translation of documents and state the same along side the “verified”

Does the translation need to be attested? If

yes, Who all can attest the translated

document? eg: Ration card accepted as

address proof

stamp. In case of foreign languages, these need to be translated into

English.

45. Can a power of attorney sign the KYC

applications (individual), also what are the

requirements in terms of documentation

(client & POA)?

POA submitting application on behalf of

investor and submitting POI & POA of self.

No. KYC Application form must be separately applied by the investor and

his POA. POA’s PAN / KYC acknowledgement also to be quoted on the

Mutual Fund transaction form, if applied through a POA.

46. Is there a particular stamp format, for

attestation?

Name, Designation, Bank branch, Employee no. State “Verified with

Original”

47. Do originals require attestation? if yes, is self

attestation also required on those ?

All documents must be submitted in original along with a self-attested

copy. The original will be returned across the counter after verification.

Alternatively, investors may submit notarized copies of the requisite

documents. On submission of the KYC form and documents to CVL,

investors will receive an acknowledgement across the counter, a copy of

which must be submitted to us as proof of having completed the

formalities related to PAN verification and KYC

48. Is the address proof (where the address is in

the name of an immediate relative) along with

the relationship proof valid for all NRI

customers or only UAE residents? –

This is valid for all clients, resident and non-resident

49. Is this address proof along with relationship

proof applicable for local addresses as well.

For e.g. For a recently married woman, who

does not have a Bank A/c ( not even in her

maiden name ) , relocated to a different

location, not having a Voter ID Card with

updated address , not having a driving

license what is the way out to complete the

KYC process? Her every document is in her

husband’s name and can provide a Marriage

Certificate for your information

Yes. A Woman, as in this example, should give marriage certificate as the

proof of relation along with the address proof of her husband.

50. Alternate PIO proof / OCI card (if PIO card /

OCI card is not available).

Proof of Indian Origin:

􀂃 Copy of foreign passport with place of birth as India OR

􀂃 Indian passport copy of Self / Parents/ Grandparents(with proof of

relationship) OR

Documents issued by a Government authority specifying place of birth as

India.

Can be deleted since we are treating NRI / PIO / OCI all as Non

Residents?

51. US citizen who holds an Overseas Citizen of

India card but does not have US or overseas

address and cannot furnish any proof. Apart

from this he has stated Nationality as US and

status as Resident Indian and PIO. At present

he has furnished following as proof of

identity and Proof of address.

1) Pan card copy 2) Photocopy of

Telephone bill

Should we show him as an Indian Citizen i.e.

Nationality and status as Resident Individual

only as he has being investing from local

savings bank+Pan Card copy +has provided

us with local address proof. OR

Should we take him as USA citizen with PIO

or Overseas Citizen Indian attested copy with

only correspondence address i.e. only

section B1.

He should be categorized as a Foreign Citizen and Resident Indian.

Therefore, he has to submit his proof of ID (PAN card) and a proof for

local correspondence address. His passport copy, citizenship card / social

security card will have his foreign address which can be captured as a

permanent address.

(Not sure when and how this scenario would arise..)

52. In case of investment from executor to the

estate of a person whose settlement is

pending in Court, please confirm whether the

executor has to fill a individual or nonindividual

form.

Individual Form

(Should this not depend on who the executor is…?)

53. Is there a requirement for the custodian to

complete KYC formalities. Can the custodian

sign the KYC application form on behalf of

FII/sub-account (without completing KYC) for

itself as a custodian)

Custodian can sign on behalf of the FII and sub accounts. No need to

complete KYC for the custodian for this purpose.

I would propose that the FII should also complete KYC as even authorized

signatories need to be KYC compliant…

54. For a PIO or NRI, foreign address is

mandatory. However, Indian Address is not

mandatory. I.e. both the correspondence and

permanent address can be overseas – they

may be same or different.

Yes.

55. in some cases the bank managers refuse to

give employee code (SBI Versova), such

attestations were also rejected

In case of Banker attestation with round seal

and with out name seal and emp.code no.

No need for the bank manager to put his employee code. Stamp of the

bank, Name, Designation and signature is mandatory.

(Wouldn’t it be better to change the operating instructions and point 46

rather than having this as an exception?)

56. If a person is submitting both PAN card and

Passport and ticking both in the photo

identity proof column it is being rejected

since 2 places have been ticked.

As long as the POI is from the admissible list, the POS should accept the

form. In cases where the Applicant has ticked multiple items, the POS

should be instructed to enter any one from these and scan the relevant

document.

Should be deleted since PAN is the only acceptable POI?

57. Attestations by SEO, Police Inspector,

Cosmos Bank (Scheduled) Manager were

rejected. –

Attestation only by a Notary/Judicial Authority or a Bank Manager of a

Scheduled Commercial Bank (excluding Gramin and Cooperative banks)

acceptable.

58. In POI names are like Prasantbhai Rajeev

Thakkar and in the application it is mentioned

Prasant Rajeev Thakkar – Have asked to

accept this variation in name

Minor variations acceptable, provided some other information like the

name ( should this not be DOB / PAN or something else) or the signature

matches.

59. PANCARD taken on minor name which is

having guardian signature and submitted for

POI and the investor is major as per the KYC

application.

Not acceptable.

60. Permanent address if blank in case of

Individual. ?

Accept and leave the Permanent Address blank. It would also mean that

NRIs may only give their overseas address.

61. If the applicant submits PoI and PoA with the

attestation of any Gazetted officer/ Notary,

can we accept without self attestation ?

Attested copy is to be given in original and hence, it is similar to the

original document. It does not need self-attestation by the applicant

62. For non individuals – what are the documents

to be submitted as address proof? Can we

accept the application without POA?

For non-individual applicant, mandatory documents for each category are

specified. Hence, no additional POA is required for non-individual

applicant except in the case of HUF not having a Deed of declaration???

63. Which application to be used for

proprietorship firm – Individual or non

individual ? Can a Proprietor use his own

individual KYC for his firm’s investment like

PAN ?

Proprietorship firm is under the Individual Category and the applicant has

to give his/her own PAN. Investment application may be in the name of

the firm – the details on how to apply would have to be obtained from

AMC. But the KYC done in the capacity of Individual would have to be

used for such investment

64. POS have reported cases where applicant

brings original Demat A/C statement or Bank

statement as POA (and leaves the same with

the POS for storing by CVL). There are two

categories in these.

1. The statement is stamped and signed

by the issuer. – In such cases, the POS should

accept the same as valid POA since the

authenticity is established by the stamp &

signature. – However there are no means of

checking the authenticity of the stamp &

signature.

2. In second case, the documents do not

bear any signature or stamp from issuer. In

some cases it has a remark like “This is a

computer generated statement and does not

need signature”. Can the POS accept such

documents as POA and take them on record?

I am personally not comfortable with this

since in principle, anyone with access to a

computer can print such a statement.

If the statements are on the letterhead of the Bank/DP, the same can be

accepted. Even a copy of the same can be accepted after verifying with

the original.

If not on entity letterhead, the same needs to have the seal of the bank

and signature.

Cannot accept statements printed on plain stationery without the bank

seal and signature.

(appears to be a repeat)

65 What is Money Laundering?

Money laundering broadly means the conversion or “Laundering” of

money that is illegally obtained, so as to make it appear to originate from a

legitimate source.

It was originally used in the context of terrorist, criminal, smuggling and

drug-dealing activities. In a wider context, tax-evaded money is also

covered.

66 What is the Prevention of Money Laundering

Act (PMLA)?

As part of a global initiative, a Financial Action Task Force (“FATF”) was

created to help member countries draw up Anti-Money Laundering

(“AML”) legislation which would help implement the policies, techniques

and counter-measures to combat money laundering.

In India, The Prevention of Money Laundering Act, 2002 (“PMLA”) was

created under the aegis of FATF.The PMLA forms the core of the legal

framework put in place by India to combat money laundering to be

followed by banking companies, financial institutions and intermediaries by

administering KYC and other reporting requirements such as suspicious

transactions reporting, etc

67 What is FIU?

The Government of India set up Financial Intelligence Unit – India (FIUIND)

on18th November 2004 as an independent body to report directly to

the Economic Intelligence Council (EIC) headed by the Finance Minister.

FIU-IND has been established as the central national agency responsible

for receiving, processing, analyzing and disseminating information relating

to suspect financial transactions. FIU-IND is also responsible for

coordinating and strengthening efforts of national and international

intelligence and enforcement agencies in pursuing the global efforts

against money laundering and related crimes

68 Are Mutual Fund Investors also covered by

PMLA?

Yes, the PMLA covers all Financial Intermediaries, and this includes

Mutual Funds. As such, all investors are required to submit necessary

documentation that will help the Mutual funds complete the KYC

procedure.

69 What is KYC?

KYC is an acronym for “Know your Customer”, a term commonly used for

Customer Identification Process. SEBI has prescribed certain

requirements relating to KYC norms for Financial Institutions and Financial

Intermediaries including Mutual Funds to ‘know’ their customers. This

could be in the form of verification of PAN Number, identity and address,

financial status, occupation and such other personal information.

70 What are the KYC requirements for a Mutual

Fund Investor?

An Individual investor will have to produce copy of his PAN card as proofof-

identity and a separate document as proof-of-address. Non-Individual

Investors will have to produce certain documents pertaining to their

constitution / registration to fulfill the KYC process. A list of documents can

be found on the reverse of the KYC application form

71 Why am I asked to prove my identity, if I have

done no wrong?

As has been discovered in some recent terrorist acts such as the 9/11

bombings in New York or the attack on our Parliament in Delhi, white

collared crime has arrived. Seemingly innocent people have been

involved. It is also observed that had the checks, as now proposed by the

PMLA, been in place, the detection or even pre-emption of the crime could

have been possible. In this context, you will appreciate that providing your

identity / address proof and information about your occupation and

financial status will only help the Government in isolating the few who are

involved in money laundering.

72 All this seems quite scary. Do I need to take

any precautions?

Yes. You should be prudent in your money matters, just as you are in

following some rules such as – say – not carrying unknown articles from

unknown persons when you are traveling across cities. You should not

receive or pay money on behalf of others, unless it is for a genuine

transaction in which you have participated. You should also take care that

you only deal with known individuals or companies which are registered

with or regulated by SEBI, RBI, etc for all financial transactions. Please

also ensure that you fill out forms completely and strike out any portions

which you do not use or need.

73 How do I submit PAN and complete the KYC

formalities?

The process for submission of PAN and completion of KYC formalities

at CVL / Franklin Templeton Investor Service Centres is as follows:

Investors will need to submit a completed KYC application form

affixing a copy of their recent passport-size photograph along with the

following documents at any designated ‘Point of Service’ Centres of

CVL (CDSL Ventures Ltd) or any of the Franklin Templeton Investor

Service Centres.

Documents required

PAN Card (which will also serve as a proof of identity) and

Proof of Address

We have tied up with M/s CDSL Ventures Limited (CVL) to accept

applications for PAN verification and KYC on our behalf. A list of CVL

‘Point of Service’ Centres and our Investor Service Centres is available at

http://www.franklintempletonindia.com under the ‘Contact Us’ section.

All documents must be submitted in original along with a self-attested

copy. The original will be returned across the counter after verification.

Alternatively, investors may submit notarized copies of the requisite

documents. On submission of the KYC form and documents to CVL,

investors will receive an acknowledgement across the counter, a copy of

which must be submitted to us as proof of having completed the

formalities related to PAN verification and KYC.

a) CVL will not separately accept PAN verification documents or KYC

documents. Both procedures must be completed together.

b) CVL will not accept a Distributor-attested copy of the PAN card.

However, the same would be accepted at Franklin Templeton Investor

Service Centres.

For instructions on how to fill the form the please refer to the reverse of

the KYC application form.

74 Does the investor have to approach every

Mutual Fund separately to fulfill these

requirements?

This is not required. For your convenience, we have up with M/s CDSL

Ventures Limited (CVL) to accept applications for PAN verification and

KYC on our behalf, as have a majority of Mutual Funds in India. By

approaching CVL for this process, you only need to complete these

formalities once

The acknowledgement issued by CVL can be submitted by investors to

any mutual fund as proof of PAN verification and KYC compliance.

A list of CVL ‘Point of Service’ Centers and our Investor Service Centres is

available at http://www.franklintempletonindia.com under the ‘Contact Us’

section.

75 Is it necessary to submit the KYC application

and documents / provide acknowledgement

for every transaction?

This is not required. You need to complete these formalities only once by

submitting a copy of the KYC acknowledgement to us. Please ensure to

provide us with a complete list of folio numbers where you are a Holder,

Guardian or Power of Attorney Holder to enable us to verify and update

our records.

76 What happens if I have multiple You can inform the Mutual Fund to register your PAN & KYC compliance

folios/accounts with a Mutual Fund?

against all the folios/accounts where you are a unit holder. However, each

of the holders/guardian/POA in these folios should register their KYC

compliance by submitting a copy of their KYC acknowledgement.

77 How long does it take to get the KYC

formalities completed?

When the KYC application and documents are submitted at the

designated Points of Service, after preliminary verification of documents,

the KYC acknowledgement will be issued across the counter. The

acknowledgement is valid 10 working days from the date of issue.

However, based on final verification of the documents, the same may be

cancelled / rejected in case of deficiency of documents or incomplete

information observed in the final verification. A separate communication

intimating you about the cancellation / rejection of acknowledgement will

be sent by CVL if your application cannot be processed for any reason. If

you do not receive any communication from CVL 10 working days after

you have submitted your documents, you may use the acknowledgement

to register your PAN and KYC status with Mutual Funds.

78 To whom is KYC applicable? Is there any

exemption?

KYC is applicable to all unit holders (including NRI’s), guardians and any

Power of Attorney Holders. There is no exception to the rule. KYC is not

required for Minor applicants and in such cases Guardian need to be KYC

Compliant

79 I do not have a PAN card. Can I get a KYC

acknowledgement without submitting the

PAN card?

No. Submission of copy of PAN card is mandatory while submitting the

KYC application.

80 I already have a KYC number. Do I need to get

a fresh KYC acknowledgement? What will

happen to the number?

If you have a KYC number where you have provided your PAN number

with proof, then you need not approach CVL for a fresh KYC

acknowledgement. Please submit the same to Franklin Templeton. If you

have not submitted your PAN with proof at the time of applying for KYC,

please approach any POS with your existing acknowledgement and

submit your PAN card with Proof to any of the POS. You will receive a

fresh acknowledgement which you can then use for submission to Mutual

Funds. Only acknowledgements from CVL where PAN is quoted will be

accepted for KYC compliance.

81 I have given a Change of Address to CVL.

How long will it take to reflect in my FT

mutual fund?

It will generally take 10 working days for your address to be updated in our

records.

82 I have lost/misplaced my KYC

acknowledgement. What do I do?

If you have misplaced your KYC acknowledgement, please contact CVL’s

Helpdesk on 022-3246 2767/2559 or 022-2272 1261/2008 who will advice

you further.

83 What are the consequences of KYC

acknowledgement cancellation/rejection?

Folio locked, no further investments permitted under that PAN till the KYC

process is completed

85 Is KYC compliance required for a minor

attaining majority?

Upon a minor attaining the age of majority (on completion of 18 years of

age), he/she must complete the KYC process in his/her own name. The

acknowledgement received should be registered with the mutual funds

where he/she holds investments, along with other Bank Details, Signature,

etc as per the requirements of the Mutual Fund.

86 Does the KYC acknowledgement have an

expiry date?

Generally, the KYC process once completed does not have an expiry

date. However, a KYC acknowledgement can be cancelled in certain

circumstances (e.g. if you do not register your acknowledgement with

Mutual Funds for a long period of time). You will be intimated of any such

changes or cancellations by CVL.

However, Mutual Funds reserve the right to request additional information

and documents or perform additional verification as a part of ongoing KYC

compliance.

87 I have printed my Bank Statement online

which contains my address. Can I use it as a

valid Proof of Address?

Bank/DP statements provided as proof of address must be on the

letterhead of the Bank/DP. If not, they should carry the stamp of the bank

and signature of an authorised person. We regret we cannot accept

statements printed on plain stationery without the bank stamp and

signature.

88 My Passport is expiring this month. Will it

cause any problem in getting a KYC

acknowledgement?

When documents such as Passports, Driving Licenses, etc carrying an

expiry date are submitted as proof of address, the document must be

current on the date of submission.

89 I haven’t received my latest Bank Statement.

Can I use my last statement which was sent

out 3 months before?

Electricity /Telephone bill, Bank passbook, Bank statement, demat

account statement submitted as proof of address should not be more than

3 months old as on the date of submission

90 How will I know that the KYC compliance is

registered in my Mutual fund?

KYC compliance for an investor in the folio will reflect in the account

statement stub portion as “KYC Registered”.

91 Do I have to visit a POS personally to obtain

an acknowledgement?

No. If you are not in a position to visit a POS personally, you may send the

form duly filled in along with the necessary documents through your

distributor or representative, who can arrange to obtain the

acknowledgement for you from a POS

92 Is there a charge I need to pay to obtain the

acknowledgement?

Currently, KYC acknowledgements are issued free of cost.

93 If all members in my family invest, can I get a

single KYC acknowledgement?

No. Each individual investor must apply separately for completion of PAN

verification and KYC. This however does not apply to minors, where the

Guardian must have completed these formalities on behalf of the minor.

94 I invest in my minor child’s name? Do I need

to get a KYC acknowledgement for my minor

child as well?

KYC compliance is not mandatory for minors. The guardian must be KYC

compliant.

95 Whom do I inform about change of

Name/Address/Status/Signature etc?

All the above requests must be made via CVL for investors who have

completed their KYC process. A KYC modification form is available with

the POS. You can make a request for change of address / correction of

name / change of status / signature update etc in the form and submit the

same. You need to enclose a copy of your previous KYC

acknowledgement and provide necessary address proof in case of a

request for change in address. You should provide for at least 7 days for

these changes to take effect with all the Mutual Funds with whom you are

invested. Please note that you should not write to the Mutual Fund or its

Registrar for the change of address (unless as a designated POS). The

specified form can be obtained form the AMFI or Mutual Fund website.

96 In case of transmission (in case of death of

the unit holder) cases what are the extra

documents required to be obtained?

If the deceased is the sole applicant, the claimant should produce his/her

KYC acknowledgement along with the other relevant documents to effect

the transmission in his/her favor

97 My income status has now changed form

what I have provided earlier in the KYC

application form. Do I need to request for the

change to reflect in my details submitted?

How do I request for the change

Yes a change in income status must be intimated if such change results in

a change in the income bracket you declared in the application form.

Please apply to any POS in the specified form. No proof is needed for

such change.

98 What if the address in an investors existing

folio is different from what he/she has

registered at the time of KYC?

When investors produce the KYC acknowledgement for an existing folio,

all address details of the holder and the signature will be replaced with the

details as registered in the records of CVL


99 For signature difference in investor request,

Mutual Funds generally ask for a banker’s

attestation. Since a signature is now available

with identity proof, will you still insist on

banker attestation for signature difference?

Signature verification is an important safeguard to ensure the security of

your investments with us. As such, Mutual Funds may conduct extra duediligence

in cases where signatures do not match, including procedures

such as requesting Bank attestation for such transactions. This could be

independent of the KYC procedure.

100 Why do I need to give my Income details?

How can I be sure that it will not be misused?

As per PMLA, it is mandatory for Mutual Funds to obtain financial status details from their investors. The information given by you in the KYC. It may be reported to the FIU, if required by law.

Mutual-Funds-Glossary(Part 2)

Amortization

The systematic repayment (e.g., monthly, quarterly, or yearly) of a debt or loan, such as a bond or mortgage, over a specific time period.

Annual Report

The corporate financial statement that shareholders eagerly receive each year. It includes financials of the company’s performance over the previous year.

Annual Return

The percentage of change in a mutual fund’s net asset value over a year, after factoring in dividend receipts, capital gains, and reinvestment of these distributions.

Arbitrage

The simultaneous purchase and selling of a security in order to profit from a differential in the price. This usually takes place on different exchanges or marketplaces. Asset Anything that has monetary value. Typical personal assets include stocks, real estate, jewelry, art, cars, and bank accounts. Corporate assets are found on the company’s balance sheet and include cash, accounts receivable, short- and long-term investments, inventories, and prepaid expenses.

Asset Allocation

Dividing investment dollars among various asset classes, typically among cash investments, bonds, and stocks.

Asset Classes The three major asset classes are cash, bonds, and stocks.

Average Maturity

The average of all maturity dates for securities in a money market or bond fund. The longer the average maturity, the more volatile a fund’s share price will be, moving up or down as interest rates change.

Balanced Funds

Funds that invest in both stocks and bonds. The relative weightage may differ with fund manager.

Balance Sheet

A company’s financial statement that reports its assets, liabilities, and net worth at a specific time.

Basis Point

Most often used relating to changes in interest rates. One basis point is 1/100 of a percentage point, therefore 100 basis points make 1 %.

Bear Market

When the overall market loses value over an extended period of time. There is no “official” definition of what makes a bear market.

Benchmark

A standard to which the performance of something can be compared. Beta A measure of the relative volatility of a stock or other security as compared to the volatility of the entire market. A beta above 1.0 shows greater volatility than the overall market, and a beta below 1.0 is less volatile.

Blue-Chip Stocks

Really good, large companies that have been around long enough to have a solid history of rewarding shareholders. Think Hindustan Lever Ltd.
Bond

A debt instrument issued by a company, state or the central government (or its agencies), with a promise to pay interest at regular intervals and return the principal on a specified date.

Bond Rating

An evaluation of the possibility of default by a bond issuer, based on an analysis of the issuer’s financial condition and profit potential. Bond rating services are provided by, among others, CRISIL and Fitch.

Book Value

A company’s assets, minus any liabilities and intangible assets. Book value is literally the value of a company that can be found in the accounting ledger and is often represented as a per-share value by taking the company’s shareholder equity and dividing by the current number of shares outstanding.
Broker

One who sells financial products. Whether in insurance, real estate, stocks, or mutual funds.

Bull Market

A market that has been gaining value over a prolonged period.

Capital

The amount of money invested by an investor.

Capital Appreciation

One of the two components of total return, capital appreciation is how much the underlying value of a security has increased. If you bought a stock at Rs.10 per share and it has risen to Rs.13, you have enjoyed a 30% return or appreciation on the original capital you invested. Dividend yield is the other component of total return. Capital Gain/Loss The difference between the price at which an asset is sold and its original purchase price (or “basis”).

Cash Flow

A measure that tells an investor whether a company is actually bringing cash in to the company’s coffers.

Certificate Of Deposit (CD) An insured, interest-bearing deposit at a bank, requiring the depositor to keep the money invested for a specific length of time.

Closed-End Fund

A mutual fund that has a fixed number of shares and is typically listed on a major stock exchange. These funds often trade perpetually at a discount to their net asset value (NAV).

Commercial Paper

A promissory note issued by a large company to secure short-term financing. Commission

A fee charged by a broker for executing a securities transaction. Compounding When an investment generates earnings on reinvested earnings. Consumer Price Index (CPI) An inflation tracker, much followed by the mainstream media. It is the measure of the price change in consumer goods and services.

Coupon/Coupon Rate

The interest rate that a bond issuer is obligated to pay the bond holder until the bond matures. Cyclical Stock Stock of a company whose performance is generally related (or thought to be related) to the performance of the economy as a whole. Paper, steel, and the automotive stocks are thought to be cyclical because their earnings tend to be hurt when the economy slows and are strong when the economy turns up. Food and drug stocks, on the other hand, are not considered “cyclicals,” as consumers pretty much need to eat and care for their health regardless of the performance of the economy.

Debenture

A debt obligation that is not backed by collateral, but usually rated by a credit rating agency.

Derivative

A financial contract whose value is “derived” from an another underlying asset, such as stocks, bonds, commodities, or a market index such as NSE 50. The most common types of derivatives are options, futures, and mortgage-backed securities.
Discount

The difference between the lower price paid for a security and the security’s face amount at issue.

Diversification

Investing in separate asset classes (stocks, bonds, cash) and/or stocks of different companies in an attempt to lower overall investment risk. Dividends Realized profits that a mutual fund distributes to unitholders.

Earnings Per Share (EPS)

A company’s earnings, also known as net income or net profit, divided by the number of shares outstanding. Equities Shares of stock in a company. Because they represent a proportional share in the business, they are “equitable claims” on the business itself.

Ex-Dividend Date

The date during the quarter by which you must own a stock to receive its quarterly dividend payout. The term “ex” means out or without in Latin. So, on the ex-date, you buy the stock without the dividend. Obviously, the company needs some time to get its records straight; it cannot pay the dividend to someone who buys the stock the morning the checks go out.

Expense Ratio

The percentage of a mutual fund that is taken out of the pockets of shareholders to pay. If you are investing in mutual funds, look for funds with a low expense ratio.

Fiscal Year

A 12-month accounting period. From April 1st to March 31st.

Floating Rate Bond

A bond with a variable interest rate. Adjustments to the interest rate are usually made every 6 months and are tied to a certain money-market index. Example MIBOR.

Gilt Funds

Funds that invest in government securities, which may be short or long-term in nature. Higher the maturity of the portfolio, greater will be the volatility when interest rates change. Growth Funds Funds which invest a majority of their corpus in equity.

Income Fund

A mutual fund that invests in bonds with higher-than-average dividends.

Index Fund

A passively managed mutual fund that seeks to match the performance of a particular market index. Partially due to lower expenses, index funds outperform the majority of actively managed mutual funds. Inflation A rise in the prices of goods and services.

Initial Public Offering (IPO)

A company’s first offering of common stock to the public. Institution Investors Institutions investors include pension funds, insurance funds, mutual funds, and hedge funds. Investment Adviser An entity that makes the recommendations and/or decisions regarding a portfolio’s investments. Alternatively called a portfolio manager. Issued Share Capital The portion of a corporation’s equity obtained from issuing shares in return for cash or other considerations.

Liabilities Outstanding debts

LIBOR (London Interbank Offer Rate) This is the rate of interest at which banks borrow funds from other banks, in marketable size, in the London interbank market. Liquidity A measure of how quickly a stock can be sold at a fair price and converted to cash. Illiquid stocks are stocks that don’t trade in high volume. Thus, having too many shares of a stock that doesn’t trade frequently would make for a position that cannot necessarily be sold. Load A sales commission paid when purchasing shares of a mutual fund (called a front-end load) or when redeeming shares of a mutual fund (called a back-end load).

Management Fee

The money paid to the manager(s) of a mutual fund, annuity subaccount, or other type of professionally managed investment. Also called an advisory fee. Maturity/Maturity Date The date on which the issuer of a certificate of deposit or a bond agrees to repay the principal to the buyer. MIBOR (Mumbai Interbank Offer Rate) This is the rate of interest at which banks borrow funds from other banks, in marketable size, in the Mumbai interbank market. Money Market Fund Mutual fund that invests typically in short-term government instruments (treasury bills) and commercial paper (CPs) and Certificates of Deposit (CDs). These funds tend to be lower-yielding, but less risky than most other types of funds.

Net Asset Value

The worth, in market terms, for each unit of the fund. It is calculated as the market value of all investments in the fund less liabilities and expenses divided by the outstanding number of units in the fund. Most schemes announce their NAVs on a daily basis. Net Worth The amount by which a person’s assets exceed their liabilities.

Open-End Fund

A mutual fund that has an unlimited number of shares available for purchase. Most mutual funds are open-ended. Operating Expenses The cost of doing business. Operating expenses are deducted from revenues, and the result is, hopefully, profits. Option A call option is a contract in which a seller gives a buyer the right, but not the obligation, to buy the optioned shares of a company at a set price (the strike price) for a certain period of time. If the stock fails to exceed the strike price before the expiration date, the option expires worthless. A put option is a contract that gives the buyer the right, but not the obligation, to sell the stock underlying the contract at a predetermined price (the strike price). The seller (or writer) of the put option is obligated to buy the stock at the strike price.

Portfolio

All the securities held by an individual, institution, or mutual fund. Preferred Stock Preferred stock pays a dividend on a regular schedule and is given preference over common stock in regard to the payment of dividends or — heaven forbid — any liquidation of the company. Their share prices tend to remain stable, and will generally not carry the voting rights that common stock does. Premium The difference between the higher price paid for a security and the security’s face amount at issue. Price-To-Earnings Ratio (P/E) The share price of a stock, divided by its per-share earnings over the past year.

Rate of Return

The difference between the price paid for a security and the security’s sale price including any cash distribution expressed as a percentage. Record Date The date on which a company’s books are closed in order to identify share owners and distribute quarterly dividends, proxies, or other financial documentation.

Risk Tolerance

The measurement of an investor’s willingness to suffer a decline (or repeated declines) in the value of investments while waiting and hoping for them to increase in value. Generally investors are risk averse. Rupee Cost Averaging Strategy of making regular investments into a mutual fund and having earnings automatically reinvested. This way, when the share price drops, more shares are bought at lower prices.

Sector Fund

A mutual fund that invests its shareholders’ money in a relatively narrow market sector, e.g., technology, energy, the Internet, or banking. Securities A fancy name for shares of stock, bonds, or any kind of financial asset that can be traded. Spread The difference between the bid and ask price, i.e., the highest price offered and the lowest priced asked for a security.

Time Value Of Money (TVM)

The basic principle that money can earn interest, and so something that is worth Rs. 1 today will be worth more in the future if invested. This is also referred to as future value Total Return The rate of return on an investment, including reinvestment of distributions. Tracking Error A divergence between the price behavior of a position or portfolio and the price behavior of a benchmark. Trustee An individual who holds or manages assets for the benefit of another.

Underwriter

A brokerage firm that helps a company come public in an initial public offering. The firm underwrites (vouches for) the stock. When a company has been brought public, the shares have been underwritten. V Volatility The degree of movement in the price of a stock or other security.

Y

Yield Interest : or market earnings on a bond or a fixed-income instrument.

Yield Curve

A line plotted on a graph that depicts the yields of bonds of varying maturities, from short-term to long-term. The line, or “curve,” shows the relationship between short- and long-term interest rates.

Zero-Coupon Bond

These bonds are so named because the coupon rate (the amount of interest paid) is zero. Rather than paying interest on a periodic basis, these bonds are issued at a fraction of their par value and increase in value as they approach maturity (e.g., U.S. savings bonds). Also known as an accrual bond.

Mutual Funds Glossary.

1. Abnormal Return: The return earned on a financial asset in excess of that required to compensate for the risk of the asset.

2. Account Executive (alternatively, Registered Representative): A representative of a brokerage firm whose primary responsibility is servicing the accounts of individual investors.

3. Accounting Beta: A relative measure of the sensitivity of a firm’s accounting earnings of the market portfolio.

4. Accounting Earnings (alternatively, Reported Earnings): A firm’s revenue less its expenses. Equivalently, the change in the firm’s book value of the equity plus dividends paid to shareholders.

5. Accrued Interest: Interest earned but not yet paid.

6. Active Efficient Set: The combination of securities that offer investors both maximum expected active return for varying levels of active risk and minimum active for varying level of expected active return.

7. Active Management: A form of investment management that involves buying and selling financial assets with the objective of earning positive abnormal returns.

8. Active Position: The difference between the percentage of an investor’s portfolio invested in a particular financial asset and the percentage of a benchmark portfolio invested in the same asset.

9. Actual Margin: The equity in an investor’s margin account expressed as a percentage of the account’s total market value (for margin purchases) or total debt (for short sales).

10. Adjusted Beta: An estimate of a security’s future beta, derived initially from historical data, but modified by the assumption that the security’s “true” beta has a tendency over time to move towards the market average of 1.0

11. Adverse Selection: A problem in pricing insurance in that persons with above average risk are more likely to purchase insurance than are those with below average risk.

12. Aggressive Stocks: Stocks that have betas greater than 1.

13. Allocationally Efficient Market: A market for securities in which those firms with the most promising investment opportunities have access to the needed funds.

14. Alpha: The difference between the security’s expected return and its benchmark return.

15. American Depository Receipts (ADRs): Financial assets issued by U.S. banks that represent indirect ownership of a certain number of shares of a specific foreign firm. These shares are held on deposit in a bank in the firm’s home country.

16. American Option: An option that can be exercised at any time until and including its expiration date.

17. Annual Percentage Rate (APR): With respect to a loan, the APR is yield-to-maturity of the loan, computed using the most frequent time between payments as the compounding interval.

18. Anomaly: An empirical regularity that is not predicted by by any known asset pricing model.

19. Approved List: A list of securities than an investment organization deems worthy of accumulation in a given portfolio. In an organization that uses an approved list, typically, any security on the list may be purchased by the organization’s portfolio managers without additional authorization.

20. Arbitrage: The simultaneous purchase and sale of the same, or essentially similar, security in two different markets for advantageously different prices.

21. Arbitrage Portfolio: A portfolio that requires no investment, has no sensitivity to any factor and has a positive expected return. More strictly, a portfolio that provides inflows in some circumstances and requires no outflows under any circumstances.

22. Arbitrage Pricing Theory: An equilibrium model of asset pricing that states that the expected return on a security is a linear function of the security’s sensitivity to various common factors.

23. Arbitrageur: A person who engages in arbitrage.

24. Asked or Ask Price (alternatively, Offer Price): The person at which a market-maker is willing to sell a specified quantity of a particular security.

25. Asset Allocation: The process of determining the optimal division of an investor’s portfolio among available asset classes.

26. Asset Class: A broadly defined generic group of financial assets, such as stocks or bonds.

27. Asymmetric Information: A situation in which one party has more information than another party.

28. At the Money: An option whose exercise price is roughly equal to the market price of its underlying assets.

29. Automated Bond System (ABS): A computer system established by the New York Stock Exchange to facilitate the trading of funds.

30. Average Tax Rate: The amount of taxes paid expressed as a percentage of the total income subject to tax.

B

31. Bank Discount Basis: A method of calculating the interest rate on a pure discount fixed income security that uses the principal of the security as the security’s cost.

32. Bankers’ Acceptance: A type of money market instrument, It is promissory note issued by business debtor, with a stated maturity date, arising out of business transaction. A bank, by endorsing the note, assumes the obligation. If this obligation becomes actively traded, it is referred to as bankers’ acceptance

33. Basis: The difference between the spot price of an asset and the future price of the same asset.

34. Basis Point: 1/100 or 1%.

35. Basis Risk: The risk to a futures investor that the basis will widen or narrow.

36. Bearer Bond: A bond that has attached coupons representing the rights to receive interest payments. The owner submits each coupon on its specified date to receive payment. Ownership is transferred simply by the seller’s endorsing the bond over the buyer.

37. Benchmark Portfolio: A portfolio against which the investment performance of an investor can be compared for the purpose of determining investment skill. A benchmark portfolio represents a relevant and feasible alternative to the investor’s actual portfolio and, in particular, is similar in terms of risk exposure.

38. Best-Effort Basis: A security underwriting in which the members of the investment banking group serve as agents instead of dealers, agreeing only to obtain for the issuer the best price that the market will a pay for the security.

39. Beta (alternatively, Beta Coefficient or Market Beta): A relative measure of the sensitivity of an asset’s return to changes in the return on the market portfolio. Mathematically, the beta coefficient of the security’s covariance with the market portfolio divided by the variance of the market portfolio.

40. Bid-Ask Spread: The difference between the price that the market-maker is willing to pay for a security and the price at which the market-maker is willing to sell the same security.

41. Bidder: In the context of corporate takeover, a firm making a tender offer to the target firm.

42. Bid Price: The price at which a market-maker is willing to purchase a specified quantity of a particular security.

43. Block: A large order (usually 10,000 shares or more) to buy or sell security.

44. Block House: A brokerage firm with the financial capacity and the trading expertise to deal in block trades.

45. Bond Rating: An indicator of the creditworthiness of specific bond issues. These ratings are often interpreted as an indication of the relative likelihood of default on the part of the respective bond issuer.

46. Bond Swapping: A form of active bond management that entails the replacement of bonds in a portfolio with other bonds so as to enhance the return of the portfolio.

47. Book Value of the Equity: The sum of the retained / earnings and other balance sheet entries classified under shareholders’ equity, such as common stock and capital contributed in excess of par value.

48. Book Value per Share: A corporation’s book value of the equity divided by the number of its common shares outstanding.

49. Bottom-Up Forecasting: A sequential approach to security analysis that entails first making forecasts for individual companies, then for industries, and finally for the economy. Each level of forecasts is conditional on the previous level of forecasts made.

50. Broker: An agent, or “middleman”, who facilitates the buying and selling of securities for investors.

C

51. Call Market: A security market in which trading is allowed only at a certain specified times. At those times, persons interested in trading a particular security are physically brought together and a market clearing price is established.

52. Call Money Rate: The interest rate paid by brokerage firms to banks on loans used to finance margin purchases by the brokerage firm’s customers.

53. Call Option: A contract that gives the buyer the right to buy a specific number of shares of a company from the option writer at a specific purchase price during a specific time period.

54. Call Premium: The difference between the call price of the bond and the par value of the bond.

55. Call Price: The price that an issuer must pay bondholders when an issue is retired before its stated maturity date.

56. Call Provision: A provision in some bond indentures that permits an issuer to retire some or all of the bonds in a particular bond issue before the bonds’ stated maturity date.

57. Capital Asset Pricing Model (CAPM): An equilibrium model of asset pricing that states that the expected return on a security is a positive linear function of the security’s sensitivity to changes in the market portfolio’s return.

58. Capital Gain (or Loss): The difference between the current market value of an asset and the original cost of the asset, with the cost adjusted for any improvement or depreciation in the asset.

59. Capitalization of Income Method of Valuation: An approach to valuing financial assets. It is based on the concept that the “true” or intrinsic value of a financial asset is equal to the discounted value of future cash flows generated by that asset.

60. Capital Market Line: The set of portfolios obtainable by combining the market portfolio with risk free borrowing or lending. Assuming homogeneous expectations and perfect markets, the capital market line represents the efficient set.

61. Capital Markets: Financial markets in which financial assets with a term to maturity of typically more than one year are traded.

62. Cash Account: An account maintained by an investor with a brokerage firm in which deposits (cash and proceeds from security sales) must fully cover withdrawals (cash and the cost of security purchases)

63. Cash Matching: A form of immunization that involves the purchase of bonds that generate the stream of cash inflows identical in amount and timing to a set of expected cash out-flows over a given period of time.

64. Certainty Equivalent Return: For a particularly risky investment, the return on a risk free investment that makes the investor indifferent between the risky and risk free investments.

65. Certificate of Deposit: A form of time deposit issued by banks and other financial institutions.

66. Characteristic Line: A simple linear regression model expressing the relationship between the excess return on a security and the excess return on the market portfolio.

67. Charter (alternatively, Certificate of Incorporation): A document issued by a state to a corporation that specifies the rights and obligations of the corporation’s stockholders.

68. Chartist: A technical analyst who relies primarily on stock price and volume charts when evaluating securities.

69. Circuitbreakers: Established by the New York Stock Exchange, a set of upper and lower limits on the market price movements as measured by the Dow Jones Industrial Average. Depending on the magnitude of the price change, breaking through those limits, particularly on the downside, results initially in restrictions on program trading and ultimately in closing the exchange.

70. Clearinghouse: A cooperative venture among banks, brokerage firms and other financial intermediaries that maintain records of transactions made by member firms during a trading day. At the end of the trading day, the clearing house calculates net amounts of securities and cash to be delivered among the members, permitting each member to settle once with the clearing house.

71. Closed-End Investment Company: A managed investment company, with an unlimited life, that does not stand ready to purchase its own shares from its owners and rarely issues new shares beyond its initial offering.

72. Closing Price (alternatively, Close): The price at which the last trade of the day took place in a particular security.

73. Closing Purchase: The purchase of an option contract by an investor that is designed to offset, and thereby cancel, the previous sale of the same option contract by the investor.

74. Closing Sale: The sale of an option contract by an investor that is designed to offset, and thereby cancel, the previous purchase of the same option contract by the investor.

75. Coefficient of Determination (alternatively, R-Squared): In the context of the linear regression, the proportion of the variation in the dependent variable that is related to (that is, “is explained by”) variation in the independent variables.

76. Coefficient of Nondetermination: In the context of linear regression, the proportion of the variation in the dependent variable that is not related to (that is, “is not explained by”) variation in the independent variables. Equivalently, one minus the coefficient of determination.

77. Coincident Indicators: Economic variables that have been found to change at the same time that the economy is changing.

78. Collateral Trust Bond: A bond that is backed by other financial assets.

79. Commercial Paper: A type of money market instrument It represents unsecured promissory notes of large, financially sound corporations.

80. Commission: The fee an investor pays to a brokerage firm for services rendered in the trading of securities.

81. Commission Broker: A member of an organized security exchange who takes orders that the public has placed with brokerage firms and see that these orders are executed on the exchange.

82. Commodity Fund: An investment company that speculates in futures.

83. Commodity Futures Trading Commission (CFTC): A federal agency established by the Commodity Futures Trading Commission Act of 1974 that approves (or disapproves) the creation of new futures contracts and regulates the trading of existing futures contracts.

84. Common Factor: A factor that affects the return on virtually all securities to a certain extent.

85. Common Stock: Legal representation of an equity (or ownership) position in a corporation.

86. Comparative Performance Attribution: Comparing the performance of a portfolio with that of one or more other portfolios (or market indices) in order to determine the sources of their differences in their returns.

87. Competitive Bidding: With respect to selecting an underwriter, the process of an issuer soliciting bids on the underwriting and choosing the underwriter offering the best overall terms.

88. Complete Market: A market in which there are enough unique securities so that for any given contingency an investor can construct a portfolio that will produce a payoff if that contingency occurs.

89. Composite Stock Price Table: Price information provided on all stocks traded on the national exchanges, the regional stock exchanges, the Nasdaq system, and the Instinet system.

90. Compounding: The payment of interest on interest

91. Computer-Assisted Trading System (CATS): A computer system for trading stocks on the Toronto Stock Exchange that involves a computer file containing a publicly accessible limit order book.

92. Consolidated Quotations System: A system that lists current bid and asked prices of specialists on the national and regional stock exchanges, the Nasdaq system and the Instinet system.

93. Consolidated Tape: A system that reports trades that occur on the National Stock Exchanges, the regional stock exchanges, the Nasdaq system and the Instinet system.

94. Constant-Growth Model: A type of dividend discount model in which dividends are assumed to exhibit a constant growth rate.

95. Consumer Price Index: A cost-of-living index that is representative of the goods and purchased by U.S. consumers.

96. Contingent Deferred Sales Charge: A fee charged by a mutual fund to its shareholders if they sell their shares within a specified time after initially purchasing them.

97. Contingent Immunization: A form of bond management that entails both passive and active elements. Under contingent immunization, as long as favorable results are obtained, the bond portfolio is actively managed. However, if unfavorable results occur, then the portfolio is immediately immunized.

98. Continuous Market: A security market in which trades may occur at any time during business hours.

99. Contrarian: An investor who has opinions opposite those of most other investors, leading to action such as buying recent losers and selling recent winners.

100. Convertible Bond: A bond that may, at the holder’s option, be exchanged for other securities, often common stock.

101. Convexity: The tendency for bond prices to change asymmetrically relative to yield changes. Typically, for the given yield change, a bond will rise in price more if the yield change is negative than it will fall in price if the yield change is positive.

102. Corner Portfolio: An efficient portfolio possessing the property that, if it is combined with any adjacent corner portfolio, the combination will produce another efficient portfolio.

103. Correlation Coefficient: A statistical measure similar to covariance, in that it measures the degree of mutual variation between two random variables. The correlation coefficient rescales covariance to facilitate comparison among pairs of random variables. The correlation coefficient is bounded by the values +1 and -1.

104. Cost of Carry: The differential between the futures and spot prices of a particular asset. It equals the interest forgone less the benefits plus the cost of ownership.

105. Cost-of-Living Index: A collection of goods and services, and their associated prices, designed to reflect changes over time in the cost of making normal consumption expenditures.

106. Counter party Risk: The risk posed by the possibility that the person or organization with which an investor has entered into a financial arrangement may fail to make required payments.

107. Coupon Payments: The periodic payment of interest on a bond.

108. Coupon Rate: The annual dollar amount of coupon payments made by a bond expressed as a percentage of the bond’s par value.

109. Coupon Stripping: The process of separating and selling the individual cash flows of Treasury notes or bonds.

110. Covariance: A statistical measure of the relationship between two random variables. It measures the extent of mutual variation between two random variables.

111. Covered Call Writing: The process of writing a call option on an asset owned by the option writer.

112. Cross-Deductibility: The arrangement among federal and state tax authorities that permits state taxes to be deductible expenses for federal tax purposes and federal taxes to be deductible expenses for state tax purposes.

113. Crown Jewel Defense: A strategy used by corporations to ward off hostile takeovers. The strategy entails the target company’s selling off its most attractive assets to make itself less attractive to the acquiring firm.

114. Cumulative Dividends: A common feature of preferred stock that requires that the issuing corporation pay all previously unpaid preferred stock dividends before any common stock dividends may be paid.

115. Cumulative Voting System: In the context of a corporation, a method of voting in which a stockholder is permitted to give any one candidate for the board of directors a maximum number of votes equal to the number of shares owned by that shareholder times the number of directors being elected.

116. Current Yield: The annual dollar amount of coupon payments made by a bond expressed as a percentage of the bond’s current market price.

D

117. Date of Record: The date, established quarterly by a corporation’s board of directors, on which the stockholders of record are determined for the purpose of paying a cash or stock dividend.

118. Day Order: A trading order for which the broker will attempt to fill the order only during the day on which it was entered.

119. Day-of-the-Week-Effect: (alternatively, Weekend Effect): An empirical regularity whereby stocks returns appear to be lower on Mondays than on other days of the week.

120. Dealer (alternatively, Market-Maker): A person who facilitates the trading of financial assets by maintaining an inventory in particular securities. The dealer buys for and sells from this inventory, profiting from the difference in the buying and selling prices.

121. Dealer’s Spread: The bid-ask spread quoted by a security leader.

122. Debenture: A bond that is not secured by specific property.

123. Debit Balance: The dollar amount borrowed from a broker as a result of the margin purchase.

124. Debt Refunding: The issuance of new debt for the purpose of paying off currently maturing debt.

125. Dedicated Portfolio: A portfolio of bonds that provides its owner with cash inflows that are matched against a specific stream of cash outflows.

126. Default Premium: The difference between the promised and expected yield-to-maturity on a bond arising from the possibility that the bond issuer might default on the bond.

127. Defensive Stocks: Stocks that have betas less than 1.

128. Delist: The process of removing a security’s eligibility for trading on an organized security exchange.

129. Demand-to-Buy-Schedule: A description of the quantities of the security that an investor is prepared to purchase at alternative prices.

130. Demand Deposit: A checking account at a financial institution.

131. Depository Trust Company: A central computerized depository for securities registered in the names of member firms. Member’s security certificates are immobilized and computerized records of ownership are maintained. This arrangement permits electronic transfer of the securities from one member to the another as trades are conducted between the members’ clients.

132. Discount Broker: An organization that offers a limited range of brokerage services and charges fee substantially below those of brokerage firms that provide a full range of services.

133. Discount Factor: The present value of $1 to be received in a specified number of years.

134. Discounting: The process of calculating the present value of a given stream of cash flows.

135. Discount Rate: The interest rate used in calculating the present value of future cash flows. The discount rate reflects not only the time value of money but also the riskiness of the cash flows.

135. Discretionary Order: A trading order that permits the broker to set the specifications for the order.

136. Disintermediation: A pattern of funds flow whereby investors withdraw funds from financial intermediaries, such as bank and savings and loans, because market interest rates exceed the maximum interest rates that these organizations are permitted to pay. The investors reinvest their funds in financial assets that pay interest rates not subject to ceilings.

137. Distribution (12b-1) Fee: An annual fee charged by a mutual fund to its shareholders to pay for advertising, promoting and selling of the fund to new investors.

138. Diversification: The process of adding securities to a portfolio in order to reduce the portfolio’s unique risk, and thereby, the portfolio’s total risk.

139. Dividend Decision: The process of determining the amount of dividends that a corporation will pay its shareholders.

140. Dividend Discount Model: The term used for the capitalization of income method of valuation as applied to common stocks. All variants of dividend discount model assume that the intrinsic value of a share of common stock is equal to the discounted value of the dividend forecast to be paid on the stock.

141. Dividends: Cash payments made to stockholders by the corporation.

142. Dividend Yield: The current annualized dividend paid on a share of common stock, expressed a percentage of the current market price of the corporation’s common stock.

143. Dollar-Weighted Return: A method of measuring the performance of a portfolio over a particular period of time. It is a discount rate that makes the present value of cash flows into and out of the portfolio, as well as the portfolio’s ending value, equal to the portfolio’s beginning value.

144. Domestic Return: The return on an investment in a foreign financial asset, excluding the impact of exchange rate changes.

145. Double Auction: Bidding among both buyers and sellers for a security that may occur when the specialist’s bid-ask spread is large enough to permit sales at one or more prices within the spread.

146. Duration: A measure of the average maturity of the stream of the payments generated by a financial asset. Mathematically, duration is the weighted average of the lengths of time until the asset’s remaining payments are made. The weights in this calculation are the proportion of the asset’s total present value represented by the present value of the respective cash flows.

E

147. Earnings per Share: A corporation’s accounting earnings divided by the number of its common shares outstanding.

148. Earnings-Price Ratio: The reciprocal of the price-earnings ratio.

149. Econometric Model: A statistical model designed to explain and forecast certain economic phenomena.

150. Economic Earnings: The change in the economic value of the firm plus dividends paid to shareholders.

151. Economic Value of the Firm: The aggregate market value of all securities issued by the firm.

152. Effective Duration: A measure of a bond’s duration that accounts for the ability of either the bond’s issuer or the bondholders to cause the actual stream of cash payments to differ from that which would be received if the bond were paid off as promised over its entire life.

153. Efficient Diversification: The process of creating diversification in a portfolio by selecting securities in a manner that explicitly considers the standard deviation and correlation of the securities.

154. Efficient Market: A market for securities in which every security’s price equals its investment value at all times, implying that a specified set of information if fully and immediately reflected in market prices.

155. Efficient Portfolio: A portfolio within the feasible set that offers investors both maximum expected return for varying levels of risk and minimum risk for varying levels of expected return.

156. Efficient Set (Frontier): The set of efficient portfolios.

157. Efficient Set Theorem: The proposition that investors will choose their portfolios only from the set of efficient portfolios.

158. Emerging Markets: Financial markets in countries that have a relatively low level of per capita gross domestic product, improving political and economic stability, a currency that is convertible into Western countries’ currencies and securities available for investment by foreigners.

159. Empirical Regularities: Differences in return on securities that occur with regularity from period to period.

160. Endogenous Variable: In the context of an econometric model, an economic variable that represents the economic phenomena explained by the model.

161. Equal-Weighted Market Index: A market index in which all the component securities contribute equally to the value of the index, regardless of the various attributes of those securities.

162. Equilibrium Expected Return: The expected return on a security assuming that the security is correctly priced by the market. This “fair” return is determined by an appropriate asset pricing model.

163. Equipment Obligation (alternatively, Equipment Trust Certificate): A bond that is backed by specific pieces of equipment that, if necessary, can be readily sold and delivered to a new owner.

164. Equity Premium: The difference between the expected rate of return on common stock and the risk free return.

165. Equity Swap: A contract between two counter parties wherein one pays the other a fixed stream of cash flows and in return receives a varying stream whose cash flows are regularly reset on the basis of the performance of a given stock or a given stock market index.

166. Equivalent Yield: The annualized yield-to-maturity on a fixed-income security sold on a discount basis.

167. Eurobond: A bond that is offered outside of the country of the borrower and usually outside of the country in whose currency the security is denominated.

168. Eurodollar Certificate of Deposit: A certificate of deposit denominated by U.S. dollars and issued by banks domiciled outside of the United States.

169. European Option: An option that can be exercised only on its expiration date.

170. Excess Return: The difference between the return on a security and the return on the risk-free asset.

171. Exchange Distribution or Acquisition: A trade involving a large block of stock on an unorganized security exchange whereby a brokerage firms attempts to execute the order by finding enough offsetting orders from its customers.

172. Exchange Risk (alternatively, Currency Risk): The uncertainty in the return on a foreign financial asset owing to unpredictability regarding the rate at which the foreign currency can be exchanged into the investor’s own currency.

173. Ex-distribution Date: The date on which ownership of stock is determined for purposes of paying stock dividends or issuing shares due to stock splits. Owners purchasing shares before the ex-distribution date receive the new shares in question. Owners purchasing shares on or after the ex-distribution date are not entitled to the new shares.

174. Ex-Dividend Date: The date on which ownership of stock is determined for purposes of paying cash dividends. Owners purchasing shares before the ex-distribution date receive the new shares in question. Owners purchasing shares on or after the ex-dividend date are not entitled to the dividend.

175. Exercise Price (alternatively, Striking Price): In the case of a call option, the price at which an option buyer may purchase the underlying asset from the option writer. In the case of a put option, the price at which an option buyer may sell the underlying asset to the option writer.

176. Exogenous Variable: In the context of an econometric model, an economic variable taken as given and used in the model to explain the model’s endogenous variable.

177. Expectations Hypothesis: A hypothesis that the current futures price of an asset equal the expected spot price of the asset on the delivery date of the futures contracts.

178. Expected Rate of Inflation: That portion of inflation experienced over a given period of time that was anticipated by investors.

179. Expected Return: The return on a security (or portfolio) that an investor anticipates receiving over a holding period.

180. Expected Return Vector: A column of numbers that correspond to the expected returns for a set of securities.

181. Expected Yield-to-Maturity: The yield-to-maturity on a bond calculated as a weighted average of all possible yields that the bond might produce under different scenarios of default or late payments, where the weights are the probabilities of each scenario occurring.

182. Expiration Date: The date on which the right to buy or sell a security under an option contract ceases.

183. Ex Post: After the fact; historical.

184. Ex Post Alpha: A portfolio’s alpha calculated on an ex post basis. Mathematically, over an evaluation interval, it is the difference between the average return on the portfolio and the average return on a benchmark portfolio.

185. Ex Post Selection Bias: In the context of constructing a security valuation model, the use of securities that have performed well and the avoidance of securities that have performed poorly, thus making the model appear more effective than it truly is.

186. Ex Rights Date: The date on which ownership of stock is determined for purposes of granting rights to purchase new stock in the right offering. Owners purchasing shares before the ex-rights date receive the rights in question. Owners purchasing shares on or after the ex-rights date are not entitled to the rights.

187. Externally Efficient Market: A market for securities in which information is quickly and widely disseminated, thereby allowing each security’s price to adjust rapidly in an unbiased manner to new information so that the price reflects investment value.

F

188. Factor (alternatively, Index): An aspect of the investment environment that influences the returns of financial assets. To the extent that a factor influences a significant number of financial assets , it is termed common or pervasive.

189. Factor Beta: A relative measure of the mutual variation of a particular common factor with the return on the market portfolio. Mathematically, a factor beta is the covariance of the factor with the market portfolio, divided by the variance of the market portfolio.

190. Factor Loading (alternatively, Attribute or Sensitivity): A measure of the responsiveness of a security’s returns to a particular common factor.

ELSS PERFORMANCE REPORT NOV 2007

Below is the link to the ELSS Performance Report Ending Nov 30, detailing various perspectives for comparing equity linked savings schemes.

SNAPSHOT VIEW :

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PERFORMANCE VIEW :

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NAV DETAILS :

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INVESTMENT DETAILS VIEW :

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RISK VIEW :

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Blog Action Day…Mutual Fund way..

It been a while since i have done something worthwhile. So now blog is now part of global movement for saving environment called ‘Blog Action Day”. The concept is fast picking pace, however the issues addressed by it is of more importance.

Bloggers Unite - Blog Action Day

So how can Mutual Funds have a connection to saving the world. Well, to begin with, mutual funds are based on concept of pooling of resourses. So we can have Thematic Mutual Funds which invest in companies having high regards for CSR and Environment Protection in its product development policies and has a corporate philosophy for saving nature’s resoruces.

Such Mutual Funds can also invest in companies who are into the business of alternative fuels and alternative sources of energy. Suzlon(Get Quote), REpower, Areva.

MF ADDRESSES

A list of Mutual Fund address are provided for investors reference.

Click on below mentioned link for MF ADDRESSES.

Related Posts Only (manually created not automatically generated)

No Load Funds (In real sense)

SEBI has proposed to do away with the “entry load” fee that investors are charged if they buy mutual fund schemes directly from fund houses.

A Sebi concept paper that was put out today for feedback from the public said investors buying mutual fund products need not pay entry load for applications filed online or through collection centres of asset management companies (AMCs).

Mutual fund houses generally charge a fee from investors as an “entry load” to pay distributors’ commission. If implemented, this proposal would be a severe blow to the distribution business, since it would encourage investors to buy directly from AMCs. Distribution channels play a major role in popularising fund schemes and making them accessible for investors.

Some experts feel the entire discussion is flawed in concept. The load charges in India at about 2.25% are the lowest compared with any part of the world. In overseas markets, it is 6-7%.

Others, however, say the move might be designed to promote online transactions.

Many also feel that there is a need for distribution channels and online platforms to co-exist. As Indian Mutual Fund Industry moves towards an environment of paperless transactions, this is a much-needed step.

It is good for those who can take decisions themselves and do not need a financial advisor.

Five pointers to Mutual Fund performance

Five pointers to Mutual Fund performance

More often than not meritocracy of investments is often decided by the returns. Quite simply then a fund generating more returns than the other is considered better than the other.

But this is just half the story.

What most of us would appreciate is the level of risk that a fund has taken to generate this return? So what is really relevant is not just performance or returns. What matters therefore are Risk Adjusted Returns.

The only caveat whilst using any risk-adjusted performance is the fact that their clairvoyance is decided by the past. Each of these measures uses past performance data and to that extent are not accurate indicators of the future.

As an investor you just have to hope that the fund continues to be managed by the same set of principles in the future too.

Standard Deviation

The most basic of all measures- Standard Deviation allows you to evaluate the volatility of the fund. Put differently it allows you to measure the consistency of the returns.
Volatility is often a direct indicator of the risks taken by the fund. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return, the average return of a fund over a period of time.
A security that is volatile is also considered higher risk because its performance may change quickly in either direction at any moment.
A fund that has a consistent four-year return of 3%, for example, would have a mean, or average, of 3%. The standard deviation for this fund would then be zero because the fund’s return in any given year does not differ from its four-year mean of 3%. On the other hand, a fund that in each of the last four years returned -5%, 17%, 2% and 30% will have a mean return of 11%. The fund will also exhibit a high standard deviation because each year the return of the fund differs from the mean return. This fund is therefore more risky because it fluctuates widely between negative and positive returns within a short period.

Beta

Beta is a fairly commonly used measure of risk. It basically indicates the level of volatility associated with the fund as compared to the benchmark.
So quite naturally the success of Beta is heavily dependent on the correlation between a fund and its benchmark. Thus if the fund’s portfolio doesn’t have a relevant benchmark index then a beta would be grossly inadequate.

A beta that is greater than one means that the fund is more volatile than the benchmark, while a beta of less than one means that the fund is less volatile than the index. A fund with a beta very close to 1 means the fund’s performance closely matches the index or benchmark.
If, for example, a fund has a beta of 1.03 in relation to the BSE Sensex, the fund has been moving 3% more than the index. Therefore, if the BSE Sensex increased 10%, the fund would be expected to increase 10.30%.Investors expecting the market to be bullish may choose funds exhibiting high betas, which increase investors’ chances of beating the market. If an investor expects the market to be bearish in the near future, the funds that have betas less than 1 are a good choice because they would be expected to decline less in value than the index.

R-Squared

The success of Beta is dependent on the correlation of a fund to its benchmark or its index. Thus whilst considering the beta of any security, you should also consider another statistic- R squared that measures the Correlation.

The R-squared of a fund advises investors if the beta of a mutual fund is measured against an appropriate benchmark. Measuring the correlation of a fund’s movements to that of an index, R-squared describes the level of association between the fund’s volatility and market risk, or more specifically, the degree to which a fund’s volatility is a result of the day-to-day fluctuations experienced by the overall market.

R-squared values range between 0 and 1, where 0 represents no correlation and 1 represents full correlation. If a fund’s beta has an R-squared value that is close to 1, the beta of the fund should be trusted. On the other hand, an R-squared value that is less than 0.5 indicates that the beta is not particularly useful because the fund is being compared against an inappropriate benchmark.

Alpha

Alpha = (Fund return-Risk free return) – Funds beta *(Benchmark return- risk free return).

Alpha is the difference between the returns one would expect from a fund, given its beta, and the return it actually produces. An alpha of -1.0 means the fund produced a return 1% higher than its beta would predict. An alpha of 1.0 means the fund produced a return 1% lower. If a fund returns more than its beta then it has a positive alpha and if it returns less then it has a negative alpha.
Once the beta of a fund is known, alpha compares the fund’s performance to that of the benchmark’s risk-adjusted returns. It allows you to ascertain if the fund’s returns outperformed the market’s, given the same amount of risk.
The higher a funds risk level, the greater the returns it must generate in order to produce a high alpha.

Normally one would like to see a positive alpha for all of the funds you own. But a high alpha does not mean a fund is doing a bad job nor is the vice versa true. Because alpha measures the out performance relative to beta. So the limitations that apply to beta would also apply to alpha.
Alpha can be used to directly measure the value added or subtracted by a fund’s manager.
The accuracy of an alpha rating depends on two factors: 1) the assumption that market risk, as measured by beta, is the only risk measure necessary; 2) the strength of fund’s correlation to a chosen benchmark such as the BSE Sensex or the NIFTY.

Sharpe Ratio

Sharpe Ratio= Fund return in excess of risk free return/ Standard deviation of Fund

So what does one do for funds that have low correlation with indices or benchmarks? Use the Sharpe ratio. Since it uses only the Standard Deviation, which measures the volatility of the returns there is no problem of benchmark correlation.
The higher the Sharpe ratio, the better a funds returns relative to the amount of risk taken.
Sharpe ratios are ideal for comparing funds that have a mixed asset classes. That is balanced funds that have a component of fixed income offerings.

Five easy steps to investing in Mutual Funds

Five easy steps to investing in Mutual Funds:

Search:
Where to look for if you want to begin saving in mutual funds

Mutual funds are much like any other product, in that there are manufacturers who provide the product and there are dealers who sell them.
Large banks to organized brokerage houses to Individual Financial agents get empanelled with Mutual Funds to provide advise and assistance to customers who want to buy units. Mutual funds units can now also be bought over the Internet
Contacting an Investment advisor in a bank or a brokerage house or an Independent Financial Advisor is the first step to gathering information.
Evaluation:
choosing the right mutual fund for you

Each Mutual fund offers a variety of schemes to suit differing needs of investors. The Bank/ Brokerage house/ Individual Financial Advisor helps you make the choice based on your needs.
As an investor one may
a) for the short term or long term want to invest
b) want regular income or growth
c) want to target lower risk or higher returns
d) be convinced of a particular sector and want to invest in it
Remember, just like a salesman in a gift shop, your investment advisor can help you the most if he knows what you are looking for.

Purchase

After you have decided to save, you may have to decide among the various investment and withdrawal options that any fund offers to its investors.
Most of these schemes also offer various options to customize your operation of the fund to your needs:

Systematic Investment Plan (SIP):
Allows you to save a part of your income regularly. Also used to reduce risk when investing in schemes targeting aggressive growth.
Systematic Withdrawal Plan (SWP):
Allows you to withdraw a part of your investment regularly. Used when you want to withdraw your investment for a specific regular payment, like insurance premium payments of monthly/quarterly frequency.
Automatic debit:
Saves the hassle of writing a cheque when making an investment. Your account is debited automatically for the amount invested.
Automatic credit:
The reverse of Automatic Debit. Saves the hassle of enchasing a cheque when withdrawing an investment. Your account is credited automatically with the amount withdrawn.
Dividend plan:
Allows you to get Tax-free dividends from your investment. (As per current Tax laws).
Growth plan:
Allows the income generated from investment to be ploughed back into the scheme. Used by investor targeting growth in their investment.
Some funds carry an entry load, which is a percentage fee deducted from the amount invested before investment. Thus a 2.5% entry load will mean that if you invest Rs 1 lakh in a Rs. 10 per unit IPO, instead of getting 10,000 units, you will be allotted 9,750 units. Check for presence of such loads and other conditions before investing.
After deciding the choice of mutual fund, investment and withdrawal, you are ready to begin your savings. You need to now fill up an application form and attach a cheque of the value of your investment or mention your account number to have it automatically debited from your account.

Post Purchase Monitoring

Once you have invested in an ongoing fund, expect a period of two to three days before you receive an account statement on the address mentioned by you in your application form.

The Account Statement

Your account statement indicates your current holding in the scheme that you have invested. Please ensure that all your details have been correctly captured in account statement. Please point out any discrepancies to your nearest CAMS investor Service Centre or the Mutual Fund office. You can request an account statement any time by calling up your nearest CAMS/ Mutual fund offices usually mentioned on the back of the account statement.
The transaction slip at the end of the account statement can be used for additional purchases, redemptions or to intimate the mutual fund on any change in bank mandates/address.
The NAVs of all the open-ended schemes are published at the fund’s website, financial newspapers and AMFI (Association of Mutual Funds) web-site http://www.amfiindia.com/.

Exit

While you should periodically monitor the performance of your investments, we recommend you do not get swayed by short term considerations in deciding your exit. If you have invested in a long term fund, you can spare yourself undue worries by not monitoring the NAV every day or week. Checking the performance once in a while along with your advisor should be fine.
Most mutual funds will provide you with a toll free number that works from 9 am to 5 am and a website. For specific assistance you can also use your financial advisors help.

Redemption/ Withdrawal

Just submit your completed transaction within the transacted time for the scheme that you are invested in and deposit the same at the nearest CAMS Investor Service Centre or the office of the fund. You can either get a direct credit to your bank account or you can generally collect the cheque at the CAMS Investor Service Centre/ AMC offices. If you fail to do so then the cheque is couriered to the address mentioned in your account statement. Most funds take 1-3 days to credit your account with your redemption proceeds.

In case an exit load is applicable to your withdrawal and you have redeemed a fixed amount, an additional number of units equivalent to the exit load amount will be liquidated from your investment. You can check this amount with the mentioned exit load when you get the account statement using a simple calculator.

NEW FUND OFFER EXPENSES CALCULATOR

Click on the below mentioned link to open spreadsheet to calculate how much an investor ends up paying the AMC as NFO expenses. These amount can assume huge proportions depending upon the size of the NFO.
Any suggestion to this format are welcome.

Islamic Mutual Funds.

Get to know some interesting aspects of Islamic  guidelines. I am not a  subject matter expert, however as  part of continuous education for self, clients, other beneficiaries i shall try and explore the world of this novel way of managing money.

Under the Islamic law a person (Following principles of Islam religion) is basically not allowed to charge interest for the money he lends. The money  which is  given to someone should be for a noble cause. It should comprise of not being used for purposes which are restricted under its laws. Accordingly it should not be invested in business which are in feilds of liquor, gambling and pornography.

Basically many religions across the world prohibit such business and investments in them. In fact many religions in India such as Jainism also prohibit such investments. However what differs is the degree of adherence to such guidelines. Many Jains are involved in the Equity and Bond markets.

More details to follow.Check this place for more on this topic.

Are Equity funds suitable for Elder People?

SHOULD YOUR GRANDFATHER INVEST IN EQUITY SCHEMES. THE ANSWER SHOULD BE A BIG NO.ELDERLY PEOPLE SHOULD TYPICALLY STAY AWAY FROM EQUITY SCHEMES SINCE THEIR RISK PROFILE SHOULD SPECIFICALLY EXCLUDE SUCH SCHEMES.