NEW FUND OFFER FROM BIRLA SUNLIFE - SPECIAL SITUATION FUND

Birla Sun Life Special Situation Fund is the latest offering which will follow an investment strategy that would take advantage of Special Situations and Contrarian investment style. The fund has defined Special Situations as potential gains from merger, acquisition, demerger, restructuring, divesting, buy backs, new funding etc. The fund may also invest in companies that are currently out of favor, overlooked or ignored for poor results, product failures, factor affecting the industry, political interventions, etc. The fund plans to invest 80 percent of the proceeds in equity and the remaining 20 percent in fixed income securities.

Scheme Details
Issue Opens: December 17, 2007
Issue Closes: January 15, 2008
Fund Category: Open-End, Equity Scheme
Benchmark Index: BSE 200
Minimum Investment: Rs. 5000
Entry Load: 2.25 per cent for investment of less than Rs 5 crores
Exit Load: For investment of Rs. 5 crores, an exit load of 0.50 per cent will be charged if the units are redeemed out within six months from the date of allotment.

About the Fund Manager
A. Balasubramaniam is the designated fund manager for the scheme who has a total experience of 15 years in the financial industry and is working with Birla Sun Life AMC for the last 10 years. Prior to joining Birla Sun Life AMC, he was working with GIC Mutual Fund Currently, he is managing Birla Advantage Fund, Birla MNC, Birla Mid Cap, Birla India GenNext, Birla MIP, Birla MIP II Savings 5, Birla MIP II Wealth 25, Birla Sun Life MIP, Birla Balance and Birla Sun Life'95.
Birla Sun Life AMC Birla Sun Life AMC started its operation in the year 1994. Currently they are managing assets worth Rs 31,370 crore. The fund house's 21 equity fund offerings contribute over 26 per cent to its total asset under management. Out of its thirteen rated equity funds, two are rated 1-star, three are rated 2-star, two are rated 3-star, five are rated 4- star while Birla Sun Life Frontline Equity enjoys a 5-star rating.
Performance of Similar FundsCurrently, there is only one fund with similar investment style - Fidelity India Special Situations Fund. This is a Rs 2,234 crore diversified equity fund which has delivered a return of 48.15 per cent (as on December 26, 2007) since its launch in April 2006.

In recent years Birla Sun Life equity funds have been impressive. The fund holds great promise if the fund manager is able to derive the best from its broad team of managers and analysts managing a wide array of equity funds. These fund portfolios often show interesting special situation stocks ideas. This fund could be a worthy consideration for NFO fans, seeking an opportunistic bet from a proven fund family

SEBI's NEW YEAR GIFT TO INVESTORS - Waives Mutual Fund Entry loads from 04th January 2008

Securities and Exchange Board of India (Sebi) today barred mutual fund houses from charging entry load from investors who buy the schemes directly from the funds, and not through a distributor, agent or a broker.

The new rule is effective January 4, according to a Sebi circular issued today.

At present, the industry average for entry load is 2.25% of the initial investment. Asset Management Companies (AMCs) selling schemes either through the Internet, mutual fund offices or their collection centres can benefit from the new rules.

"Keeping in mind the interests of investors and to facilitate the growth of the mutual fund industry, with effect from January 4, 2008, investors making applications for investments in mutual fund schemes directly without routing through any distributor/agent/broker i.e. through Internet, submitted to AMC or collection centre/investor service centre would not be subject to entry load," said the circular.

The regulator said the waiver will also apply to additional purchases done directly by the investor under the same folio and switch-in to a scheme from other schemes if such a transaction is done directly by the investor.

A CEO of a mutual fund house said this will make life difficult for fund houses most of whom are dependent on distributors to sell their schemes. Though no figures are available, industry officials reckon only 1-2% of their business come through direct sales. This may be 2-3% for HDFC Mutual Fund and others, which have more branch network.

Sebi said the growth of the mutual fund industry in the past years and the technology available for investments has enabled investors to take informed decisions and to invest in mutual funds through Internet and other modes without availing of services of distributors/ agents/ brokers.

"There was an overwhelming response in favour of the proposal by Sebi on waiver of entry load for investors who do not route their mutual fund applications through a broker/ distributor," the regulator said explaining its decision.

The maximum entry load a fund house can charge is 6% while the maximum exit load is 4%. but AMCs cannot charge over 7% from investors when entry and exit loads are totalled.

Mutual Funds as long-term investment

Mutual Fund is a collection of money from many individual and corporate investors. This pool of money is managed by professional money managers for investment in market instruments. People who pool money to buy shares of a mutual fund are its owners or shareholders (unit holders). Fund managers invest this money to buy securities such as stocks and bonds. A mutual fund can make money from its securities in two ways: a security can pay dividends or interest to the fund or a security can rise in value. Advantages of investing in mutual funds include professional management of funds, securities research, investment diversification, variety, liquidity, affordability, convenience, government regulation etc. On the other hand, disadvantages of investing in mutual funds include payment of charges regardless of fund's performance, lack of control on investments made by fund managers etc.

Making investment decisions

It is very important to identify the financial needs and goals before making investment decisions. Financial needs/goals could be short/medium term goals like planning for a vacation, creating an emergency fund etc and long term goals like child's education, retirement planning etc. Identifying your financial needs and goals helps in selecting the investment instruments and quantum of investment. These are some general points that investors could keep in their mind while planning for investment portfolio. Don't put all the eggs in one basket. Look for diversification of your investment instruments Since the markets are volatile in short term, it is not possible to time the market (entry at lowest point and exit at highest point). Always have realistic expectations about investment performance. Try to understand why a fund has capability to outperform. The reasons could be due to sector of investments, or experienced fund managers. Remember that the past performances of the instrument may not be repeated. Consider the fees/loads and taxes applicable on the investment. It's not always advisable to invest in a new mutual fund as they have no or limited track record. Beware of a salesperson who tells you to invest in Mutual Fund IPO and that it is at par (zero premiums).

Investment Review

Although the investment in Mutual Fund is termed as Passive investment yet the investors are required to review their performances on regular basis (at least once in three month). These are the things that investors should keep in mind while reviewing the performance of a mutual fund and making exit decisions Always check the fund's total return. This is easily available in the Mutual Fund's periodic reports, websites and in various business magazines/newspaper Investors can also compare the Mutual Fund return with some benchmark index, but while comparing mutual fund performance with that of an index (Large cap Mutual funds vs Nifty or BSE Sensex, mid cap Mutual fund vs BSE 200 or BSE 500), remember that your fund's performance is calculated after fees and expenses have been deducted; the performance of the index does not reflect the costs associated with constructing and maintaining an identical portfolio. It is not advisable to compare one mutual fund directly with another. Every Mutual Fund invests based on certain focus e.g. Blue Chip funds invest only in big companies which has established track record. Mid cap mutual funds invests in mid cap (medium to small) companies and hence they are on the upper end of Risk-Reward matrix. Similarly there can be funds which are sector based e.g. Information Technology funds, Infrastructure funds etc. Usually in short term market rallies, some sectors do well and others do not and therefore investors should not switch out of their Mutual Funds investment based on short term performances of mutual funds. Avoid frequent switching from one fund to another. Switching from one fund to another involves transaction cost and that will reduce your profits. However, if a fund is consistently underperforming then it is advisable to switch your funds to other instruments.

Best Mutual Funds in India

TATA Mutual Fund has declared a dividend of 30% (Rs 3 on the face value of Rs 10 per unit) in its open-ended equity scheme - Tata Growth Fund. The investment objective is to provide income distribution and /or medium to long term capital gains while at all times emphasizing the importance of capital appreciation.
All unit holders registered under the dividend option of TATA Growth Fund as on December 21, 2007 will be eligible for this dividend. Pursuant to payment of dividend, the NAV of the Scheme would fall to the extent of payout and statutory levy (if applicable). The NAV as on December 17, 2007 under the dividend option of TATA Growth Fund was Rs 23.47.
The last dividend declared by the scheme was of 20% in November 2007. Over the last one year TATA Growth Fund has yielded 55% as against 40.28% given by its benchmark BSE Sensex, as on December 17, 2007.

Basics of Mutual Funds

Mutual Funds

A mutual fund is a type of investment vehicle where investors pool their money in order to allow each investor participate in a portfolio of securities. The individual investor doesn't actually own each security but instead, he owns shares of the mutual fund. The main benefit of a mutual fund is that it provides a way for the investor to achieve diversification in his investments without having to invest a a lot of money.The first mutual fund was the Massachusetts Investors Trust introduced in 1924. At the end of it's first year, the fund had 200 investors with $63,600 in assets. At the end of 1995, the fund grew to 73,500 investors with assets totalling $1.8 billion! Now there are over 7000 different mutual funds available for you to choose from. You may be wondering why you should choose a mutual fund. Simple - a mutual fund offers 2 large benefits over owning the stocks individually. Those benefits are diversification with professional management without having to invest a lot of money.Diversification is important because it helps to reduce the risk. By owning shares of multiple companies, the fund's share value is not devastated if an individual company has a poor performance.Selecting which securities to buy, the allocation of cash and securities, and when to purchase is all done by the fund manager or the management team. The fund manager has the training, time and the resources to make the best informed investment decisions.Also, he fund may be part of a family of funds where the investor can switch between funds at no additional cost, including switching in and out of a money market funds. Most mutual funds include some degree of check writing privileges and may offer automatic transfer of funds on a periodic basis like monthly for those who want to regularly invest a set dollar amount. This type of investment is called dollar cost averaging.

Types of Mutual Funds Available:

Domestic Equity Funds - These mutual funds mainly focus on stocks offered by different U.S. companies. With this type of fund there is a wide range of offerings that takes into consideration the size of the company, the stability of the company, growth and the potential valueof the company.
Global/International Funds - Global or International mutual funds mainly allow the investor to include foreign equities into their investments. Although deemed slightly riskier their values do tend to go up when domestic equities drop, offering a balance to the investors portfolio.
Sector Funds - sector funds give the investor a way to focus on specific parts of the business world. For example, niches like real estate, precious metals or financials. If an investor is able to tolerate an amount of risk, they may end up benefiting from investing in this way. Particularly if the investor knows something about that market segment.
Fixed Income Funds - fixed income mutual funds tend to be less volatile. This is the right fund for an investor who is looking for income. Fixed mutual funds for the most part are made up of bonds, CD's and money market funds. Yes, they do fluctuate with interest rates, still are a sound investment for someone looking for an income generating portforlio.
Hybrid Funds - Hybrid mutual funds are generally made up of different investment sectors in one mutual fund. For example, a usual mix may be the pairing of equities with bonds or blue chip stocks with riskier ones.
Index Funds - Index mutual funds imitate the selections and amounts of specified market indexes like the S&P 500. They are generally unmanaged keeping costs down.
Enhanced Index Funds - Enhanced index funds are actively managed funds applying a portion of their resources to outperform their benchmark indces.
Asset Allocation Funds - Asset allocation funds target investors who want a single product solution. They are designed to invest across the primary asset classes including equities, fixed income securities and money market. Each fund is allocated among different asset classes according to their risk tolerances.
Conservative Allocation Funds - Conservative allocation mutual funds are usually for investors with a minimum five-year investment timeframe.How to Select a Mutual FundUnfortunately, there's no one size fits all strategy when it comes to any type of investing. You need to take into consideration what your needs are and what your future financial goals are. Everyone's situation is unique. We encourage you to talk with your financial advisor to find out which mutual funds would best complement your portfolio. When choosing a mutual fund you should first get a prospectus then, call the fund company. In many cases, the prospectus is available right on the company's website. Also, Morningstar rates mutual funds. Each year end, many financial publications list the year's best performing mutual funds. Naturally, very eager investors will rush out to purchase shares of last year's top performers. That's a big mistake. Remember, changing market conditions make it rare that last year's top performer repeats that ranking for the current year. Mutual fund investors would be well advised to consider the fund prospectus, the fund manager, and the current market conditions. Never rely on last year's top performers.The ProspectusA prospectus for a mutual fund is a publication that has all the information that is required by the Securities Exchange Commission (SEC). The funds propectus includes objectives and policies, roles, services, fees, and major features of the fund.The prospectus also defines the boundaries within which the fund manager can operate. Using a hypothetical example, we will assume that the prospectus of the Chicken Farms Mutual Fund says "the fund will only invest in chicken farms in the USA that have shown a profit for at least the last two years." The fund manager would have the freedom to buy stock in any chicken farm meeting that criteria. However, the fund could not buy any chicken farm shares anywhere else other than the U.S. The prospectus also tells you the costs of the fund.Costs of Mutual FundsUsually, mutual funds are offered with several classes of shares, or they are no-load funds. Mutual fund companies exist to make money. That money can come from many different sources:
A sales charge: incurred upon purchase of shares
A deferred sales charge: incurred upon the sale of shares
Management fees: an on going operating cost
Distribution fees: on-going costs usually associated with advertising
Trading costs: costs charged by the broker for executing trades within the fund. These can be high in funds that have high turnover rates.
Other expenses: another category for on going expenses
No load funds will typically have no sales charge and no deferred sales charge, but will have the other fees listed.Load funds will offer different classes of shares such as A, B, or C shares. These will be defined by varied cost structures. An example of the impact of an investment which is held for different time periods will also be included in the prospectus. The best deal for you primarily depends on how long you hold the shares. No-load funds that are held for many years can be more expensive than load funds.In conclusion, mutual funds are a way for investors to diversify their risk and still benefit from professional money management. The prospectus identifies key information about the mutual fund including its operating boundaries and its costs. The fund manager operates within those boundaries and is important in order to achieve good results within those boundaries. Do your research, then talk to a professional investment advisor about mutual fund investing.