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  • Top #5 best books for Stock Market

    Top #5 best books for Stock Market

    Importance of Reading Best Books on Stock Market:

    Do you have interest in stock market? Are you the one who is always ken to know the market movements? If yes, we have got the list of best stock market books for you. These books will help you enhance your wisdom on investments and savings. It will also enhance your knowledge on investing in the stock market. According to a survey you will be surprised to know that there are more than 85,000 books on stock market.  We have tried our best to find out the better one for you among all.  It is said that one should start investing early, but while it is important to invest early, it is also important to invest wisely. It is really very important to understand the basics of stock market before investing in it otherwise it can take you to big loss. This book will give you good investing skills and can save you to face big loss.

    1. The Intelligent Investor by Benjamin Graham

    Amazon Buy Link: https://amzn.to/2mW3RQI

    The Intelligent Investor is based on value investing, an investment approach Graham began teaching at Columbia Business School in 1928.The Intelligent Investor also marks a significant deviation to stock selection from Graham’s earlier works, such as Security Analysis.

    Since this book was published in 1949 Graham revised it several times, most recently in 1971–72. This was published in 1973 as the “Fourth Revised Edition”, and it included a preface and appendices by Warren Buffett.

    Graham died in 1976. Commentaries and new footnotes were added to the fourth edition by Jason Zweig, and this new revision was published in 2003.

    * The Intelligent Investor (Re-issue of the 1949 edition) by Benjamin Graham. Collins, 2005, 269 pages.

    * The Intelligent Investor (Revised 1973 edition) by Benjamin Graham and Jason Zweig. Harper Business Essentials, 2003, 640 pages.

    It is a widely acclaimed book by Benjamin Graham on value investing. The basic aims of this book is to prevent potential investors from substantial errors and also teaches them strategies to achieve long-term investment goals. In the book, Graham has explained various principles and strategies for investing safely and successfully without taking bigger risks. Modern-day investors still continue to use his proven and well-executed techniques for value investment. The current edition highlights some of the important concepts that are useful for latest financial orders and plans. Keeping Graham’s unique text in original form, the book focuses on major principles that can be applied in day-to-day life. All the concepts and principles are explained with the help of examples for better clarity and understanding of the financial world.

    Over the years, market developments have proven the wisdom of Graham’s strategies. While preserving the integrity of Graham’s original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today’s market, draws parallels between Graham’s examples and today’s financial headlines, and gives readers a more thorough understanding of how to apply Graham’s principles.

    The Intelligent Investor is the most important book you will ever read on how to reach your financial goals.

    https://www.youtube.com/watch?v=jL9BA38Wr78

    2. The Dhandho Investor by  Mohnish Pabrai

    Amazon Buy Link: https://amzn.to/2OuWImW

    In a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Written with the intelligent individual investor in mind, this comprehensive guide distills the Dhandho capital allocation framework of the business savvy Patels from India and presents how they can be applied successfully to the stock market. The Dhandho method expands on the groundbreaking principles of value investing expounded by Benjamin Graham, Warren Buffett, and Charlie Munger. Readers will be introduced to important value investing concepts such as “Heads, I win! Tails, I don’t lose that much! ” “Few Bets, Big Bets, Infrequent Bets,” Abhimanyu’s dilemma, and a detailed treatise on using the Kelly Formula to invest in undervalued stocks. Using a light, entertaining style, Pabrai lays out the Dhandho framework in an easy-to-use format. Any investor who adopts the framework is bound to improve on results and soundly beat the markets and most professionals.

    3. The Essays of Warren Buffett by Lawrence A. Cunningham & Warren E. Buffett

    Amazon Buy Link: https://amzn.to/2mUPzzA

    Buffett’s essays include discussions on corporate governance, finance, investing, alternatives to common stock, mergers and acquisitions, accounting and valuation, accounting policy, and tax matters. Buffett outlines his basic business principles, and as the steward of Berkshire Hathaway Inc., informs the shareholders of the company that their mutual interests are aligned. He has a philosophy of bringing in talented managers at portfolio companies and leaving them alone. He advocates purchasing shares of businesses at times when these stocks are trading at a discount from their inherent value, but he opposes following investing trends.

    This is one of the most popular books on Warren Buffett classic investing strategy. The book explains his way of investing, his strategies, etc. Moreover, the book is written is simple and easy to understand language. If you want to be successful like Buffett, you must read this book and try follow the same. It will give you all the necessary aspects to achieve similar success. So start apply the Buffett principles to your portfolio.

    With the classic Warren Buffett investment strategies, the book found its way in the list of the 5 must read books for the stock market investors.

    4. One Up On The Wall Street by Peter Lynch

    Amazon Buy Link: https://amzn.to/2Kau1bv

    More than one million copies have been sold of this seminal book on investing in which legendary mutual-fund manager Peter Lynch explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success.

    Peter Lynch is one of the most successful fund managers with an average annual return of 30% on his portfolio for a period of 13 years. (A great record for a mutual fund manager).

    This wonderful book explains all the important basics that a beginner should know before investing. From preparing to invest, how, when, whys to the long-term investment approach, everything is covered in this book.

    This book has a description of the 6 different types of stocks in the market and how to approach them.

    5. Thinking, Fast and Slow by Daniel Kahneman

    Amazon Buy Link: https://amzn.to/2mTsf5t

    According to Daniel Two systems drive the way we think and make choices, System One is fast, intuitive, and emotional; System Two is slower, more deliberative, and more logical. Examining how both systems function within the mind, Kahneman exposes the extraordinary capabilities as well as the biases of fast thinking and the pervasive influence of intuitive impressions on our thoughts and our choices. Engaging the reader in a lively conversation about how we think, he shows where we can trust our intuitions and how we can tap into the benefits of slow thinking, contrasting the two-system view of the mind with the standard model of the rational economic agent.

  • FUTURE MARKET

    FUTURE MARKET

    DEFINITION:-

    “ Market in which participants can buy & sell commodities & their future delivery contracts. A future market provides a medium for the complementary activities of hedging & speculation, necessary for damping wild fluctuations in the prices caused by gluts & shortages.”

    Future markets are places (exchange) to buy & sell futures contract. There are several futures exchanges. Common ones include The New York Mercantile Exchange, The Chicago board of trade, The Chicago Mercantile Exchange, The Chicago Board of Options Exchange, The Chicago climate Future Exchange, The Kansas city Board of trade & The Minneapolis Grain Exchange.

    A future contract is a financial contract giving the buyer an obligation to purchase an asset (and the seller an obligation to sell an asset) at a set price at a future point in time. The assets often underlying futures include commodities, stocks & bonds. Grain, precious metals, electricity, oil, orange juice & natural gas are traditional examples of commodities, but foreign currencies, emissions credits, bondwidth & certain financial instruments are also part of to day’s commodity markets.

    Futures exchanges do not set the prices of futures contracts or their underlying traded commodities. Rather, supply & demand determines the prices. But two things in particular ensure the stability & efficiency of futures markets: Standardized contract & the presence of clearing members.

    Standardized contracts mean that every futures contract specifies the underlying commodity quality, quantity & delivery so that the prices mean the same thing to everyone in the market.

    Clearing members manage the payments between buyers & seller. They are usually large banks & financial services companies. Clearing member guarantee each trade & thus require traders to make good- faith deposits (called margins) in order to ensure that the trader has sufficient funds to handle potential losses & will not default on the trade. The risk borne by clearing members lends further support to the stability of further markets.

    ADVANTAGES:-

    1. The commission charges for future trading are relatively small as compared to other type of investment.
    2. Futures contracts are highly leveraged financial instruments which permit achieving greater gains using a limited amount of invested funds.
    3. It is possible to open short as well as long positions. Position can be reversed easily.
    4. Lead to high liquidity.

    DISADVANTAGES:-

    1. Leverage can make trading in futures contracts highly risky for a particular strategy.
    2. Futures contract is standardized product & written for fixed amounts & terms.
    3. Lower commission costs can encourage to trader to take additional trades & lead to over trading.
    4. It offers only a partial hedge.
    5. It is subject to basis risk which is associated with imperfect hedging using future.

    THERE ARE TWO KINDS OF PARTICIPANTS IN FUTURE MARKETS:

    1. HEDGERS
    2. SPECULATORS

    1.HEDGERS

    Farmers, manufactures, importers & exporters can all be hedgers. Hedging is done to manage price risk. Hedgers wish to protect themselves from unfavorable price movement by for going a profit if the prices moves in their favor. There are different reasons why hedging might be undertaken. A wheat farmer can hedge against a possible price decline in the future & on the other hand cookie maker can hedge against an increase in the price of wheat in the future. A lender can hedge against a possible decline in the interest rate, whereas a borrower can hedge against a possible increase in the interest rate. To hedge, you either have the underlying commodity or you require the underlying commodity at some point in the future.

    Eg.

     

    2) SPECULATORS

    The other part of futures market is made of speculators. They provide liquidity to the market. If a farmer wants to short sell a contract for 5,000 bushels of wheat expiring in 3 months it is highly unlikely that he will immediately find another consumer who wants to long buy a similar amount of wheat at the same time. The speculators, although they do not have any interest in the underlying asset or commodity, still buy the contract looking to profit through ideal market timings. This helps the entire system by bringing in much needed liquidity.

    Future markets are standardized contracts between buyer & sellers. In this all terms & conditions are same for a buyer & seller. In this contract, margin & lot size have been already decided. We only have to decide how much lot (quantity) & at what rate (price) we have to buy. In this there are 3 contracts available to trade. Last Thursday of the month is the expiry of that month of contract.

     

                 Contract               Expiry
    Near month contract Last Thursday ex.24Nov.2016
    Middle month contract Last Thursday ex.29Nov.2016
    Far month contract Last Thursday ex.25Nov.2017

     

    Eg:

    To trade in future market you need 10 to 20% margin of the contract value.

    Contract value = CMP * Lot Size

    SBIN CMP = 250

    Lot size = 3000

    Contract value = 250*3000

    10% margin      = 75000/-

    If we buy SBIN @250

    Sell SBIN @255

    Profit per share = 5Rs.

    Lot size            = 3000

    Total profit     = 15000/-

    Means we pay a margin of 75000 & do a turnover of 75000 & we get benefited of Rs.15000/-. We earned 20% profit on the margin used.

     

  • TYPES OF EQUITY MARKET

    TYPES OF EQUITY MARKET

     

    TYPES OF EQUITY MARKET:

    types-of-equity-market

     

    A.          PRIMARY MAKET:

     

    Primary-market

                                              The primary market is also known as new issues market. Here, the transaction is conducted between the issuer & buyer. The primary market is the part of the capital market that deals with issuing of new securities. Primary market creat long term instruments through which corporate entities raise funds from the capital market. In short, the primary market creates new securities & offers them to the public. It is a public issue, if anybody & everybody can subscribe, for it. If the issue is made to select group of people then it is termed as private placement.

    Capital & Equity can be raised in the primary market by any of the following four ways:

    1. Public Issue

    As the name suggests, public issue means selling securities to the public at large, such as IPO. It is the most vital method to sell financial securities.

    2. Rights Issue

    Whenever a company needs to raise supplementary equity capital, the shares have to be offered to present shareholders on a pro-rata basis, which is known as the Rights Issue.

    3. Private Placement

    This is about selling securities to a restricted number of classy investors like frequent investors, venture capital funds, mutual funds, and banks comes under Private Placement.

    4. Preferential Allotment

    When a listed company issues equity shares to a selected number of investors at a price that may or may not be pertaining to the market price is known as Preferential Allotment.

     

    B.           SECONDARY MARKET:

     

    secondary-market

    The secondary market also called the after market & follow on public offering is the financial market in which previously issued financial instruments such as bonds, stock options, & futures are bought & sold.

     

    THE SECONDARY MARKET IS FURTHER DIVIDED INTO 2 KINDS OF MARKET:

    1.  AUCTION MARKET

    An auction market is a place where buyers & sellers convene at a place & announce the rate at which they are willing to sell or buy securities. They offer either the ‘BID’ or ‘ ASK’ prices, publicly. Everything is announced publicly & interested investors can make their choice easily. Where trading & settlement is done through the stock exchange & the buyers & sellers don’t know each other.

    2.  OTC

    OVER THE COUNTER/ OFF EXCHANGE TRADING is done directly between two parties, without the supervision of on exchange. Is based in Mumbai, Maharashtra.It does not take place, however, on the stock exchanges.OTC MARKETS are the informal types of market where trades are negotiated.

    DIFFERENCE BETWEEN PRIMARY MARKET & SECONDARY MARKET

    Difference-between-Primary-market-&-Secondary-market

     

    Also Read | Option Market

     

  • TYPES OF MUTUAL FUND

    TYPES OF MUTUAL FUND

    TYPES OF MUTUAL FUND:

    Types of Mutual Fund

     

    A.          BY CONSTITUTION

     

    1.OPEN ENDED FUNDS

    DEFINITION: “These funds buy & sell units on a continuous basis &, here, allow investors to enter & exit as per their convenience. The units can be purchased & sold even after the initial offering (IFO) period (in case of new fund). The units are bought & sold at the net asset value (NAV) decleared by the fund.”

    The number of outstanding units goes up or down every time fund house sells or repurchases the existing units. This is the reason that the unit capital of an open ended mutual fund keeps varying. The fund expanse in size when the fund house sells more units than it repurchases as more money is flowing in.

    An open ended fund provides investors an easy, low cost way to pool their money & purchase a diversified portfolio reflecting a specific investment objectives, such as growth & income. Investors do not need a lot of money to gain entry into an open ended fund, making the fund easily accessible for investment.

    Open ended funds are available in most developed countries, but T terminology & operating rules vary. US mutual funds, UK units trusts & OEICs, European SICAVs, & hedge funds are all examples of open ended funds.

    On the other hand, the funds size reduces when the fund house repurchases more units than it sells. An open ended fund is not obliged to keep selling new units all the time. For instanace, if the management thinks that it cannot manage a large sized fund optimally, it can stop accepting new subscription requests from investors. However it has to repurchase the units at all times.

     

    2.CLOSE ENDED FUND:

    A close ended fund is also known as closed end investment or closed end mutual fund. A closed ended fund is organized as publicly traded investment company by the securities & exchange commission (SEC). Like a mutual fund a closed end fund is a pooled investment fund with a manager overseeing the portfolio, it raises a fixed amount of capital through.

    New shares in a closed end funds are not created by managers to meet demand from investors, the shares can be purchased & sold only in the markets, which as the original design of the mutual fund, which predctes open end mutual funds but offers the same actively-managed pooled investment.

    Usually a characteristic of closed end schemes is that they are generally traded at a discount to NAV, but clear to maturity, the discount narrows.

     

    ·    DIFFERENCE BETWEEN OPEN ENDED & CLOSE ENDED MUTUAL FUND:

    Both open end & closed end funds have been around for many decades. Close end funds are the oldest among these introduced in the late 19th century. Exchange traded funds or ETFs are a relatively recent innovation in the fund business & were launched about 20years ago. Currently, there are 7,407 open ended funds with total net assets of $12.1 trillion. But close end fund by far have the smallest market share, with 568 funds worth about $252.6 billion. This doesn’t mean that open ended funds are always the best option & their funds types should be ignored.

     

    BASIS FOR COMPARISON OPEN-ENDED FUNDS CLOSED-ENDED FUNDS
    Meaning Open-ended funds can be understood as the schemes that offer new units to the investors on a continuous basis. Closed-ended funds are the mutual funds, which offer new units to investors for a limited period only.
    Subscription These funds are available throughout the year for subscription. These funds are available only during specified days for subscription.
    Maturity There is no fixed maturity. Fixed maturity period, i.e. 3 to 5 years.
    Liquidity provider Funds itself Stock market
    Corpus Variable Fixed
    Listing No listing on stock exchange, transactions are performed directly through fund. Listed on a recognized stock exchange for trading.
    Transactions Executed at the end of the day. Executed in real time.
    Determination of price Price can be determined by dividing NAV from shares outstanding. Price is determined by supply and demand.
    Selling price Net Asset Value (NAV) plus load, if any. Premium or discount to Net Asset Value (NAV).
     

     

     

    3.INTERVAL FUND

     

    DEFINITION : “A non- traditional types of closed ended mutual fund that periodically offers to buy back a percentage of outstanding shares from shareholders. Shareholders are not required to sell their shares to the fund.”

    Interval fund shares typically do not trade on the secondary market although many interval funds do offer shares for sale at current net asset value (NAV) on a continuous basis.

    Fess for interval funds tend to be higher than for other types of mutual funds as do returns. High yields are the main reason investors are attracted to interval funds. Here is a closer look at these investments. Minimum investment are often between $10,000 & 25,000 & have expense ratio as high as 3%.

     

    B.           BY INVESTMENT OBJECTIVE

     

    1.GROWTH FUND & EQUITY FUND:

     

    These fund invest in stocks. Wealth creation & capital appreciation is the primary objective of equity fund. They have the potential to generate higher return & are best for long term investment. These funds goal is to grow faster than money market or fixed income funds with higher risk comes higher reward. There are many different types of equity funds because there are many different types of equities.

     

                I.            DIVERSIFIED FUND

    DIVERSIFIED FUND

    A diversified fund is a fund that is broadly diversified across multiple market sectors or geographic regions. It holds multiple securities, often in multiple asset classes. Its broad market diversification helps to prevent idiosyncratic event in one area from affecting on entire portfolio.

     

    a.  SMALL CAP

     Small cap funds invest primarily in stock in companies with sizes between &300million & $2billion. Small cap fund that invest in small sized companies. Mutual funds have restrictions that limit them from buying large portions of any one issuers outstanding shares, which limit the risk while giving an investors exposure to this segment of the market.

    b. MID CAP

                    A mid cap fund invest in companies between $2billion to $10billion in the market cap. These are established business that are still considered developing & thus have a higher growth rate than large cap fund. Mid cap which invest in mid sized business.

    c.  LARGE CAP FUNDS

    Large cap funds invest in stocks in the largest companies in the world, with market caps in excess of $10billion. These can include apple,exxon,&google.

     

            II.            INDEX FUND

                          These funds aim to track the performance of a specific index such as the S&P/TSX COMPOSITE INDEX. The value of the mutual fund will go up or down as the index goes up or down. Index funds typically have lower costs than actively managed mutual funds because the portfolio manager doesn’t have to do as much research or make as many investment decisions.

     

        III.            SECTORAL FUNDS

     

     SECTORAL FUNDS

    Sectoral fund invest mostly in a particular sector or along the lines of a defined theme. Since the investment are concentrated on a single sectors or theme, sector funds are considered extremely risky. It is very important to time the entry into & exit from them as the fortunes of sectors changing in different cycles in the economy. They are meant for investor should take only a small exposure in them.

    Sectoral funds have performed have done well over the period of 10 years & better than other equity funds, but there is risk associated with it & you need to stay invested in the fund for longer period for a economy & sectors like IT. So if you are convinced that these sectors will move forward in the long run, then you can invest with long term return in your view.

     

    • FOREIGN EQUITY FUNDS

    Foreign equity funds or global/ International funds, invest in a specific region outside of an investors home country. These funds sometimes have very high returns, but it is hard to classify them as either riskier or safe than domestic investment.

     

    2.DEBT/INCOME/BOND/FIXED INCOME FUNDS

    These invest in fixed income securities, like government securities or bonds, commercial papers & debentures, bank certifications of deposits & money market instruments like treasury bills, commercial paper etc. These  are relatively sufer investments & are suitable for income generation.

     

    3.HYBRID FUND

    HYBRID FUND

    These invest in both equities & fixed income, thus offering the best of both, growth potential as well as income generation. They try to balance the aim of achieving higher returns against the risk of losing money. Most of these funds follow a formula to split money among the different types of investments.

     

     

    4.MONEY MARKET FUND

     

    MONEY MARKET FUND

    The money market fund (also called a money market mutual fund) is an open ended fund that invest in short term debt securities such as U.S. treasury bills & commercial paper. Money market funds are widely (though not necessarily accurately) regarded as being as safe as bank yet providing a higher yield. Regulated in the UNITED STATES under the investment company Act of 1940. Money market funds are important providers of liquidity to financial intermediaries.

    A money market fund is an investment whose objective is to earn interest for shareholders while maintaining a Net Asset Value (NAV) of $1 per share. Money market funds portfolio is comprised of short term, or less than one year, securities representing high quality, liquid debt & monetary instruments. Investors can purchase shares of money market funds through mutual funds, brokerage firms & banks.

    A money market funds purpose is to provide investors with safe place to meet easily accessible.

    It is types of mutual fund characterized as a low risk, low return investment. They have no loads, which are fees mutual funds may charge for entering or exiting the funds.

    A money market funds might also hold short term U.S. treasury securities, such as T-Bills, certificates of deposit (COD); & corporate commercial buyer & other instruments specified by RBI. These funds have a minimum lock in period of 15 days. Till recently, the RBI regulated money market funds but they now come under SEBI.

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  • Know about Mutual Fund

    Know about Mutual Fund

    DEFINITION:

    “A mutual fund is a professionally managed investment scheme, usually run by an asset management company that brings together a group of people & invests their money in stocks, bonds & other securities.”

     

    INTRODUCTION:

    Mutual funds are the most popular investment types for the everyday investor. Because they are easy to use in many in many ways, investing for dummies. A mutual fund is a kind of investment that uses money from many investors to invest in stocks, bonds & other types of investment. A fund manager decides how to invest the money & for this he is paid a fee, which comes from the money in the fund. All the MUTUAL FUNDS are registered with SEBI.

    In simpler terms, mutual funds are like baskets. Each basket holds certain types of stocks, bonds or a bland of stocks & bonds to combine for one mutual fund portfolio.

    Eg:   An investor who buys a fund called XYZ international stock is buying one investment security, the basket that holds dozens or hundreds of stocks from all around the globe, hence the “International” monike.

    Mutual fund

    TIP’S FOR BEGINNERS INVESTING IN MUTUAL FUNDS

    • Start saving & investing early in life.
    • Try to understand the fund in which you are investing.
    • Check the past performance of your mutual fund.
    • Don’t avoid Index fund.
    • Experience of fund managing team
    • Do not commit common mistakes
    • Understanding the risk involved
    • Keep your investment objective clear.
    • The NAV does not matter.
    • Diversify your investment over time.
    • Have an investment discipline.
    • Invest in stocks if you are prepared to take risks.
    • Never forgot your mutual fund investment.
    • Stay invested for a longer period of time.

     

    NAV ( NET ASSET VALUE )

    NET ASSET VALUE is the total asset value (net of expenses) per unit of the fund & is calculated by AMC (asset management company) at the end of every business day. In order to calculated the NAV of a mutual fund, you need to take current market value of the funds assets minus the liabilities, if any & divide it by the number of share outstanding. NAV is calculated as follows.

    NAV Rs. = MARKET/FAIR VALUE OF SECURITIES + ACCRUED          INCOME + RECEIVABLE + OTHER ASSETS + ACCRUED   EXPENSES – PAYABLES – OTHER LIABILITIES

    / NO.OF UNITS OUTSTANDING OF THE SCHEME/OPTION

    Eg. If the market value of securities of mutual fund scheme is Rs. 500 lakh & the mutual fund has issued 10lakh units of Rs. 10lakh each to investors, then the NAV unit of the fund is Rs.50.

     

    ADVANTAGES OF MUTUAL FUND

    DIVERSIFICATION

    Mutual funds provide the benefits of diversification across different sectors & companies. A single mutual fund can hold securities from hundreds or even thousands of issuers. This by investing in a mutual fund, you can gain from the benefits of diversification & asset allocation, without investing a large amount of money that would required to build an individuals portfolio. The diversification considerably reduces the risk of serious monetary loss due to problems in a particular company or industry.

    AFFORDABILITY

    You can begin buying units or shares with a relatively small amount of money.

    Eg. Rs. 500 for the initial purchase.

    Some mutual funds also permits you to buy more units on a regular basis with even smaller installments.

    Eg. Rs.50 per month.

     

    LOW TRANSACTION COST

    Due to economics of scale, mutual funds pay lower transaction costs. The benefits are passed on to mutual fund investors which may not be enjoyed by an individual who enters the market directly.

    TRANSPARENCY

    Funds provide investors with updated information pertaining to the markets & schemes through fact sheets, offer documents, annual report etc.

     

     

    DISADVANTAGES OF MUTUAL FUNDS

    ·      High Expense Ratios and Sales Charges

    If you’re not paying attention to mutual fund expense ratios and sales charges, they can get out of hand. Be very cautious when investing in funds with expense ratios higher than 1.20%, as they will be considered on the higher cost end. Be weary of 12b-1 advertising fees and sales charges in general. There are several good fund companies out there that have no sales charges. Fees reduce overall investment returns.

    ·      Management Abuses

    Churning, turnover and window dressing may happen if your manager is abusing his or her authority. This includes unnecessary trading, excessive replacement and selling the losers prior to quarter-end to fix the books.

    ·      Tax Inefficiency

    Like it or not, investors do not have a choice when it comes to capital gain payouts in mutual funds. Due to the turnover, redemptions, gains and losses in security holdings throughout the year, investors typically receive distributions from the fund that are an uncontrollable tax event.

    ·      Poor Trade Execution

    If you place your mutual fund trade any time before the cut-off time for same-day NAV, you’ll receive the same closing price NAV for your buy or sell on the mutual fund. For investors looking for faster execution times, maybe because of short investment horizons, day trading, or timing the market, mutual funds provide a weak execution strategy.

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