Looking to buy a Mutual Fund ? Most investors into Mutual Funds buy on the basis of recommendations from friends, from the broker / agent, or from some research. But if you want to buy a Mutual Fund, there are a lot of variables such as
- the industry into which the fund is investing,
- the aggressive / cautious nature of the Fund,
- the past history of the Fund Manager,
- the level of customer service orientation of the fund house
In a lot of cases, people overlook such information and then later are not happy with the performance of the Mutual Fund (for example, they bought an aggressive Fund that is more risky, and were shocked when it fell more than a cautious fund at the time of a crash).
There is a link on Economic Times that seeks to explain some of these concepts:

It is important to be well informed before you invest in a mutual fund on the premise that the fund will deliver. And when it comes to a fund in which you have already invested, it is even more crucial to be well up on numbers and facts. Sectoral allocation is also important. Excessive exposure to one sector can mar the returns if the sector underperforms. It is also important to compare the stock exposure norms and sectoral allocation over a sustained period of time. This gives you an idea as to how the funds have been deployed and the risk associated with such portfolio diversification.
Two key ratios you must keep in mind are portfolio-turnover ratio and expense ratio.
Portfolio-turnover ratio is a measure of churning the fund has undergone while the expense ratio tells us about the cost of managing the funds.
Higher portfolio turnover is seen in opportunities fund and in more actively-managed fund. Value funds are expected to show a low-portfolio turnover.

Read the whole article, and search for more information regarding such investments. Even though learning about Mutual Funds and their details could take some more time, it is worthwhile since you should make your investment when you are an informed investor. This will also help you to make decisions about investment or withdrawal in a better manner, and make you more money overall.

http://economictimes.indiatimes.com/quickiearticleshow/3279973.cms

Another useful email that I got was related to investing in the Indian stock market, especially after the crash and the learnings from that. Topic of the email: How to invest in stock markets?

1. Select businesses with good growth opportunities. Read business magazines that offer research on good businesses and read those articles thoroughly.
2. Select 1-2 good companies in those businesses.
3. Never enter into any stock at unreasonable valuations. Just because a company is good is no reason to buy the stock if it has already run up.
4. Penny stocks are manipulated by big brokers. Never look at them in your life. Take an oath.
5. Good stocks quickly regain their value.
6. Never be sentimental with any stock. A stock is not related to you, and there is no such thing as loyalty in the market.
7. Best stock ideas arise in day to day life like investing in ICICIC Bank stock in 2002 after experiencing their wonderful service when you fed up with Public sector banks. Always look for opportunities.
8. Invest in future sectors. How many of us invested in Infosys in 1997 and Bharti Airtel in 2002? But be careful and selective and do research.
9. Buy and forget will work only to some extent. Indian markets become high volatile zones. There is no reason in keeping your money after RPL reached 300 and RNRL reached 250.
10. If you can’t follow all these things, just put your money in good mutual funds.

I came across this post in an email about a sort of checklist about whether to invest in an IPO and thought that this was worth sharing; even if this helps a few people, it will be worth posting.

How to decide whether to invest in a particular IPO?
• First and foremost, find out the listed peers in the secondary markets and if IPO is at a higher valuation then there is no justification for investing.
• Check the results and growth rate in term of sales ,profit growth ,operating margins growth for the last 3-5 years and not only for 1 year as there are chances of financial engineering (manipulation) of balance sheets just before the launch of the IPO.
• Check the background of the promoters and if there are any serious criminal/income tax evasion cases against then avoid the IPO; typically crooked people are easily able to cook the books when trying to do an IPO
• Find out the purposes of raising the money. Some justified reasons are expansion of capacity, new projects, while if the sole purpose is meeting the working capital needs or repaying the debts then it does not inspire enough confidence to invest in that IPO.
• If the IPO is for a new project then we should check the turnaround /breakeven time. One example is Reliance power IPO where this time was huge and hence took a beating (projected capacity of Reliance power in next 3-4 years was less then current capacity of NTPC).
• Study the risk factors in the draft prospectus and see if they are of real concern or acceptable risks in the normal course of business.
• Check the subscription figures in QIB category as they are considered to be smart /intelligent and have access to lot of company information that retail investors do not have. Of course, this is not always true, but this is still a good indicator.
• Check the future growth prospects of the company and if the future expected growth is huge or they are operating in a niche segment or in a high growth sector for which no listed companies exists in secondary markets, then higher valuations may be justified.
• Never go by the grey market premium(GMP) of a particular IPO to make your investment decisions as they can vary daily and are mostly speculative in nature. (E.g. Reliance Power IPO having a GMP of 450 listed at a premium of Rs 10-15 only while TItagarh IPO having a GMP of Rs. 10-15 listed at a premium of Rs 150).
• Subscription figures in Employee quota can tell you whether the employees themselves are confident of the future prospects of the company.
• Some other indicators of the quality of an IPO can be the rating given by the agencies like ICRA, CRISIL or the reputation of the Book running lead managers(Example is Enam financials which manages only quality IPO’s)
• Keep in mind allotment chances as well besides the quality of the IPO. A medium quality IPO with good subscription chances can give you better returns then a very good IPO with very less subscription chances.
• Do not consider any of the above factors in isolation but look at them together to arrive at any conclusion.

And of course, if there are additional factors that you use to evaluate IPO’s, please mention them in a comment.

The next time a stock broker defaults, you can make the stock exchange he operates in, pay. That is the summary of a landmark ruling of the National Consumer Disputes Redressal Commission. Investors can get up to a lakh of rupees from the stock exchange to which the defaulting broker is attached.
The ruling will provide additional security to investors over and above what is already offered by stock exchanges. It will also make stock exchanges more vigilant in examining broker records.
Since stock brokers charge a brokerage for services rendered by them, they are immediately liable to their customers (investors). However, it was not clear whether the stock exchange was also liable for the conduct of the brokers. The judgment delivered by Justice M B Shah on behalf of a bench comprising himself, Rajyalakshmi Rao and Anupam Dasgupta conclusively settled the issue on December 20, 2007.
Several consumers had filed complaints before the Delhi consumer forum against a broker as well as the Delhi Stock Exchange (DSE), for default with respect to the sale and purchase of shares. In all these matters, DSE tried to defend itself by claiming that it was merely a non-profit making organisation which regulated the business of sale and purchase of shares and debentures and that it was governed by the guidelines issued by SEBI. It also claimed that none of the complainants had hired the services of the stock exchange, as the investor merely pays a consideration in the form of brokerage to the broker and not to the DSE. So it was not rendering any service to investors and a claim against DSE would not be maintainable.
But could the stock exchange be held jointly responsible along with the broker? The district forum held that, indeed, the DSE was jointly liable, and so did the state commission in appeal. The matter then went in revision before the national commission, which was of the same opinion.

When you are investing your hard earned money into the Indian market directly through the secondary market, or through Mutual Funds, it is essential that the people taking your money act professionally and displaying the best of ethics; they need to be honest. But there will be cases when people don’t behave that way; companies may setup buy or sell deals that benefit the promoters but not the common stock holders, or mutual funds may not be honoring redemption of dividend needs. Now you need to complain to some authority, since the company or broker or mutual fund is not responding. So here are some resources that you can use:

1. SEBI or external
agency
Investors can get in touch with the contact person named in the offer document, trustees and directors of the AMC with their grievances. Mutual funds are regulated by Sebi. The investor has the recourse to approach Sebi for any grievances towards a mutual fund in connection with non-receipt of dividends, redemption, account statement, etc. Various investor forums also take up the case of individual investors.

2. Investor Grievances & Arbitration
The Exchanges forward the complaints to the respective companies and directs them to resove the grievances of the Investors’ within 15 days. In spite of the above efforts, if the company fails to resolve the Investors’ Complaints and the total number of pending complaints against the company exceed 25 and if these complaints are pending for more than 45 days, then steps are initiated to suspend the trading in the securities of the company till grievances of the investors are resolved after issue of show cause notice.

3. About Kirit Somaiya

4. Complaint form for Mutual Funds
Summary of grievances

5. BSE Investor Desk and Investor Service Center Address

If are reading this have more resources that can help the normal investor, please leave a comment with details and I will add them