Bible Of Liquid Funds - An Ideal Guide To Investments By Preetam Paritosh Choudhary

Liquid Funds, as the name implies, are investments that can be easily converted to cash. It also denotes benefit that is as good as hard money. This is primarily important for those who want to earn profits by quick selling their assets or want to switch investments at short notices. These Funds are quite similar to debt funds or mutual funds which can be redeemed in very short period of time, as less as a day. Liquid funds allow options for purchasing all investments that can be easily liquidated in the existing market. These funds are employed only in safe, short-term debts making your hard-earned money invulnerable to elevated risks.

Mutual Funds are short-term investments that mature within a year. The period of maturity ranges from a quarter (3 months) to a year offering investors a golden opportunity to reap benefits without having to invest their assets over an elongated time span. Also, in case of requirement, the investors can access their funds, with the company charging no penalty fee.

Liquid funds are normally used as substitute to short-term fixed deposits. The minimum amount that can be invested in liquid funds is as small as 1000/- and require a redemption time of barely 24 hours. As Funds have short maturity periods, they usually invest in money market instruments, treasuries and short-term corporate deposits. A Mutual fund guarantees better Funds and low-interest rate risk because they have the restrictions of possessing shares at maximum 10% of the current market value. Some of the prominent features of these funds are:-

• No entry and exit load
• Very low annual fee
• Variable investment amount depending upon the scheme
• Grand tax benefits
• Easy liquidation which rightfully glorifies the name
• An average return of 8 percent per annul over investments
• Less susceptible to market risk owing to maximum 10% investment shares

Further, if the investor gains his money prior to the lock-in time (minimum time frame within which an investor cannot redeem his assets), the liquid fund charges an exit load. Exit load is the cost payable to the company when an investor withdraws his money. But normally, the lock-in period is considerably small, less than 10 days, making liquid funds a superior investment option.

Liquid funds have a right hand over Short-term deposits. This is because the returns from short-term investments are taxable while those from Liquid funds are non-taxable, rendering funds more eye-catching than short-term investments.

Top 10 Factors Affecting Mutual Fund Companies Rankings By Curtis L Horn

1. Fund Performance - The performance of mutual fund companies will play a big role in the rankings of these companies. Investors and the companies which determine the rankings evaluate the long-term performance of the fund to determine whether the it is a quality choice or a mistake for most investors.

2. Cost of The Fund - The total cost of a fund will also help determine the ranking that the fund company receives. Some companies charge more fees and higher expenses, so they are not as good of an investment as those with lower fees and fewer expenses when the performance of each fund is the same.

3. Types of Funds Offered - The fund type is another factor considered when companies are ranked for investors. The fund type designation determines which funds are grouped together. Energy, real estate, health, financial and other types of funds are normally ranked against each other according to the sector the mutual fund is in. Some companies only offer a few types while others have a wide range of options.

4. Return On Investment (ROI) - Mutual fund companies are ranked using the company's return on investment as one of the determining factors. The better the ROI is for a mutual fund the higher the ranking of the company will be. All of the funds for the company are averaged for this factor.

5. Load Fee Designation - One of the ranking factors for mutual funds and the companies that offer them is whether there is a load or no load designation. No load funds usually have a lower cost but do not offer any investment advice in exchange.

6. Number of Funds Offered - Some companies are larger than others, and may offer more choices and variety for the funds available through the specific company. A large selection of choices will usually cause a company to rank higher.

7. Company Reputation and History - One of the most crucial mutual fund companies ranking factors is the history and reputation of the company offering the funds. Some of these companies have been around for decades, and have built up a reputation for great products and reasonable fees. Others are relative newcomers without an extensive history, and these will usually rank lower because of this.

8. Fund Management - The management of a company will play a part in the ranking the company and related assets receive. If there is new management then the ranking will usually drop some initially, and funds which have management that has been in place for many years will usually rank higher.

9. Level of Risk Involved - The risk that a fund company poses will play a role in the ranking that the company is given. If a company is considered a bigger risk then the funds offered will be ranked lower by most rating companies.

10. Average Fund Turnover - Another factor used to rank mutual fund companies is the average turnover of the funds that the company offers. Funds with a high turnover are usually more expensive, so most investors look for companies that offer choices which have little turnover in the fund.

A Few Basics About Mutual Funds By Muhammad Sannan

Mutual Funds are just a collection of stocks and bonds, and instead of each investor owning bonds or stocks of a particular company, they own a portion of a whole portfolio derived from all sorts of financial firms. Basically, you own multiple financial instruments from multiple firms in a mutual-funds investment. The advantage to this is that it spreads your overall risk to several investments, instead of on a single one in more conventional methods. Also, it is more liquid compared to handling individual bonds and stocks, meaning that you have the option of converting your investments into cash at any time you want.

Now, let's delve into the finer aspects of mutual funds. First, we should know about the various types available to us: 

• One type of a fund is the closed-end fund. In this, the firm offering closed-end funds issues a set number of shares to the public but only once, which is the initial public offering. Also, the shares can't be liquidated on demand, reducing the investor behavior solely to trading. This adds a demand and supply dimension to the fund shares market.
• Another type of a fund is the Open-End fund. In this, the firm does not offer a set number of shares, rather new shares can be issued as the company feels fit. So, it allows the investor to get the shares directly from the fund provider, rather than just trading it and getting it through another investor; which acts as an advantage, as the price of issuing new shares reflects the performance of the fund. So, the investor can look at the prices of new stocks and better decide upon the investment, which he cannot do if he is investing in a closed-end fund.
• We can further divide Open-End funds into Load, and No Load. A load is another word for sales commission. So basically, this means that if an investor owns an Open-End fund with load, he will have to pay a commission on the shares owned by him to the firm. No-Load mutual funds have no such expense associated with them, which is why they are preferred by investors as they have a relatively low cost of ownership.

So, now we know the basic types of a mutual-fund investment, and have some basic information about how they work. But the question now arises, why should you choose mutual funds offered by a firm instead of managing investments yourselves? Well, the answer to that is, as mentioned before, your risk is lower in this type of investment than in other options. Also, the firms offering these are dedicated to the job, and have all the time in the world to manage your portfolio; which you cannot do just by yourself. So, it is better to invest through mutual funds than through regular financial options. For inexperienced investors, this is especially true as the low risk of loss associated with it gives a solid platform for the investor to start off in the business world.

What Are Equity Diversified Mutual Funds? By Curtis L Horn

What are equity diversified mutual funds and who chooses these types of funds? An equity fund is a mutual fund that mainly invests in equities, and while these funds generally hold mostly equities in the portfolio there will be a small percentage of the portfolio in cash or money market investments for liquidity purposes. The goal of equity funds for investors who choose this option is the capital appreciation offered. Equity funds are considered the higher risk, because the funds invest in individual businesses and companies through stock. The company shares are typically bought on the secondary market but can also be acquired by the fund through IPOs as well. There are many factors that can have an impact on the equity market, and this is one of the reasons why an equity fund is considered a risky investment most of the time.

Equity diversified mutual funds do not invest in only a small range of companies, instead the shares purchased cover most of the market offerings. These mutual funds will invest in small, medium, and large cap companies, as well as choosing companies from a range of sectors and industries. This diversification does help lower the risk involved a little, but even with it these funds are usually chosen by higher risk investors in the hopes of a higher return as well. An equity fund usually has the goal of moderate to long-term capital appreciation instead of short-term gains. In some cases these funds will offer a significantly higher risk, but in some cases investors will lose some or all of the capital used for the investment.

The NAV of equity diversified mutual funds will be sensitive to any changes in the equity market, and to any price changes in the shares the fund holds. This type of mutual fund includes two distinct and different types of risk for an investor, and these are the systemic risks and non-systemic risks. Systemic risks are those risks associated with the equities market, and these risks cannot be completely prevented or eliminated. Non-systemic risks are those risks that are associated with a specific company or stock. This type of risk can be eliminated in many cases by careful research and evaluation of the stocks that the fund invests in, as well as portfolio diversification so that there is a range of share types and sectors in the fund portfolio.

Equity diversified mutual funds are not ideal for most investors, because these funds are considered very risky and often result in investment losses. For investors willing to take higher risks in exchange for the chance of a better return, then this type of mutual fund may be the right choice. Every investor has a risk level set that should not be exceeded, and for some investors the risks associated with this type of fund is too high. Before deciding if this fund type is a good choice for your capital you need to examine your acceptable risk and determine if a specific equity fund fits in this range.