Choose the right fund to park your short term surplus

Treading on the same path, the SEBI is now planning to further tighten the noose by imposing mark-to-market (MTM) requirements for instruments with a residual maturity period of 60 days and more. Eventually the idea behind such changes is to get all the instruments irrespective of their tenure and type to be quoted on market rates and the net asset value (NAV) calculated accordingly. Moreover, the RBI and SEBI have repeatedly expressed concerns about banks and corporates round-tripping investments (continuous and frequent purchase and sale of securities) using liquid funds. Fund houses have lost significant money in liquid funds since RBI capped banks� investments in liquid funds at 10% of their net worth in May 2011.

 

 

 

 

 

 

 

 

 

The reason for such policy initiative

The MTM valuation of securities irrespective of their nature will help prevent systemic risk for mutual funds in case of heavy redemptions by institutional investors leading to winding up of their business (example cited above). Also, this move if implemented will make the mutual funds industry less dependent on institutional money but on the flipside, liquid funds and more so liquid plus schemes may lose appeal among the high-value investors as there will more volatility due to the price movements in short term papers.

Our view:

We believe that this proposal if implemented by the SEBI will have impact on mainly the liquid plus schemes holding papers of more than 60 days of maturity. Generally liquid funds may not face volatility unless the average maturity turns out to be greater than 60 days. However, if SEBI introduces a complete overhaul in the valuation of securities making them mark-to-market irrespective of their tenure may make liquid and liquid plus schemes unattractive to investors.

Hence, investors now should be careful while selecting the right debt mutual funds suiting their needs and investment time horizon. If all the securities irrespective of their tenure are made mark-to-market then the investors would be better off parking their short term surplus under savings bank account due to deregulation of savings bank account interest rates.

- Personalfn.com

(PersonalFN is a Mumbai-based personal finance website)

Yahoo! Still Needs To Generate Better Intrinsic Value

A year into her tenure as Yahoo!'s (Nasdaq:YHOO) CEO, Marissa Mayer may have ruffled a few feathers, but Yahoo!'s feathers were badly in need of ruffling as it was well on the AOL (NYSE:AOL)/MySpace path to irrelevance and doom. While there's still quite a lot of work to be done in turning the business around, the better-than-70% rise in the shares over the past year has to be encouraging to shareholders. The biggest question now is whether or not Yahoo! can take the cash coming from the Alibaba IPO and reinvest it into sustainable cash-generating growth opportunities.

Second Quarter Results Disappoint
Yahoo!'s second quarter results are a good reminder that while the tone around the stock may have changed, the business is still struggling. It is still profitable and free cash flow positive, though, which ought to buy more time for Mayer's strategies to bear fruit.

Revenue (ex-TAC) declined 1% this quarter. Search came in more or less as expected (with revenue up 5%) on a 21% improved in paid clicks, but Display disappointed. Display revenue declined 11% as overall display ads declined 2% and a shift away from premium ads send pricing down about 12%. The company's relatively large "Other" category saw revenue rise 10%.

Although revenue was disappointing, profits weren't so bad. Gross margin more or less held steady, while operating income more than doubled from the year-ago period (while declining 25% on a sequential basis). All told, Yahoo!'s EBITDA came in about 4% to 5% better than many analysts expected.

All Eyes On Asia
There is no real sign that Yahoo! is making major progress in gaining ground on Google (Nasdaq: GOOG) or Facebook (Nasdaq:FB) in ads, and while an extension of the minimum payments agreement with Microsoft (Nasdaq: MSFT) in search is a plus, it doesn't change that Yahoo!'s core operations are still in need of serious improvement.

With that, a lot of the attention around Yahoo! focuses on the company's investments in Alibaba and Yahoo! Japan. Even with the weakness in China, Alibaba's results have been quite strong recently and speculation is running that Alibaba's post-IPO valuation will run in the $90 billion to $100 billion range. As a reminder, Yahoo!'s agreement with Alibaba requires it to sell half of its stake (roughly 12%) through the IPO, while the other half can be sold at management's discretion.

There's not much that Yahoo! can do to improve the value of this stake at this point, other than to explore various tax-efficient methods of selling that second half of the stake after the IPO. Speaking of which, the timing of an Alibaba IPO is still a big unknown, as the weakness in China has many analysts speculating that the deal will be delayed into 2014 pending better market conditions.

SEE: Strategies For Quarterly Earnings Season

It Will Take Time For Seeds To Sprout
Outside of the large and much-discussed Tumblr acquisition, Yahoo! has been busy on the M&A front, with well over a dozen deals in the past few quarters. Many of these deals look like "hire by acquisition" situations, though, and it could take time for their impact to show in Yahoo!'s traffic, revenue, and profits.

Even so, I think Mayer has a cogent plan for getting this business turned around. Refocusing around mobile makes sense (and many of the deals have been targeted at mobile apps) and there are signs that traffic is on the way back. Even so, the trick will be to keep those visitors coming back and encouraging others to join them.

The Bottom Line
It's interesting to compare Yahoo! and Facebook side-to-side, and notice the relative lack of overlap. I'm not saying or suggesting that Facebook will or should buy Yahoo!, but it's nevertheless interesting to note how their strengths and weaknesses complement each other.

As is, I think Yahoo! is pretty close to fair value today. I value the Alibaba and Yahoo! Japan stakes at around $15.50 per share combined, with almost another $4.50 from cash on the balance sheet. I see the core Yahoo! business as being worth about $10 today, but that is on the basis of extremely low assumptions for future revenue and cash flow growth. Should Mayer's traffic- and value-generation strategies pay off, there could certainly be meaningful upside to the core value of Yahoo!.

Past efforts have gotten you this far, keep going

Good afternoon, Gladys, Sometimes I catch myself feeling that life has cheated me out of a good life. I am almost 55 years old and I spent my life working at low paying jobs in order to feed and care for my children. I would love to be in my own business. But, I have reached a point in my life where I feel like it's too late for me to start something new. Am I off base to think that it's possible to start anything new at this stage in life? -- A.B.

I sometimes tell people that I can imagine how Moses must have felt when he got the divine notification that he would not be retiring anytime soon. For 40 years, Moses was a shepherd and I doubt if he had any vision of leading anything but his passive sheep.

Just when he thought he had done his thing and that life was moving toward an end, God called and told him that the 40 years he had spent with sheep was just a beginning. Now it was time for the real work to begin and his real job was to lead the Israelites to the Promised Land.

I sometimes feel that way about my own life.

I spent years operating my travel company and just when I thought that successfully owning the company for many years was as good as it would get, other opportunities showed up. Today I'm writing both fiction and non-fiction, I own a successful business development company, and I do lectures and seminars around the country.

Those years that I spent in the travel industry helped prepare me for this time in my life. And yet I somehow feel that as life moves on, more opportunities with show up.

I once met a woman who in her mid 50s returned to school and after many long and hard hours finally got her degree in fine arts and has moved to Hollywood in search of both a screenwriting and acting career.

I remember being very impressed with this woman's goals and dreams. I see a lot of movies, and most of the older actresses have been acting since their youth. I asked her if she felt intimidated by getting such a late start. She responded by saying ! that she had done a great job in raising her children and making certain that they all had gotten a good education and now it was her turn and that she believed all her goals would happen.

Not once did she hint at being too old or display feelings of having been cheated by life.

We each have our own ideas of success. If you managed to find work that paid well enough for you to take care of your children I would consider that successful. So what you are in search of now is to extend that success. Only this time, it will be more for you.

Life does not cheat us nearly as badly as we can cheat ourselves. Count your blessings that you had what it took to meet the challenges in your early life. Think of the life you have lived so far as a prelude to help you with this part of your current life.

Get a new attitude! And realize that you are moving into a new phase of life that can be quite rewarding. And make a point to dream big and hold great visions and do something each day, no matter how small, that will move you toward those dreams.

Who knows? You just might be an emerging shepherd.

Gladys Edmunds, founder of Edmunds Travel Consultants in Pittsburgh, is an author and coach/consultant in business development. E-mail her at gladys@gladysedmunds.com

1 More Reason Apple Stock Is a Great Buy Today

The global smartphone industry has absolutely exploded into one of the most important segments in all of consumer tech today. And, although the competition in this space has never been fiercer, as names like Nokia and Blackberry attempt to regain their long-lost footholds, it's becoming increasingly apparent that the handset space truly belongs to Apple  (NASDAQ: AAPL  ) and Samsung. Although the first half of 2013 has seen many new and competitive offerings come to market, it's clear that the Apple/Samsung duopoly is as robust as ever. Taking a look at the smartphone industry from the lens of what matters most, profits paint quite the picture. 

It's exactly those profits that have driven such impressive gains for longtime Apple shareholders, who have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Why AcelRx Pharmaceuticals Shares Spiked Temporarily

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AcelRx Pharmaceuticals (NASDAQ: ACRX  ) , a clinical-stage biopharmaceutical company focused on the treatment of acute pain, soared as much as 32% after the company reported positive top-line data from a late-stage trial. Shares have since given back nearly all of their gains, however, and are up only around 4% as of this writing.

So what: AcelRx announced before the opening bell that its pain management system, Sufentanil NanoTab PCA System, met its primary endpoint in a late-stage study of providing a greater reduction in post-operative pain as compared to the placebo. This study reconfirmed all of AcelRx's previously announced late-stage studies on its pain management system, and the company is on pace to file a new drug application by the third-quarter.

Now what: It's certainly a positive day for AcelRx shareholders, but I'm not nearly as excited about today's data. I'm not disputing that AcelRx's drug delivery system met its primary endpoint. Instead, I'm concerned about another opioid substance going before the Food and Drug Administration. Opioid substances don't have a particularly good track record of approval with the FDA, and AcelRx has already had a huge run higher in anticipation of today's data release. There's only so much blood you can squeeze out of a turnip, and I foresee considerably more chance of downside than upside at current levels.

Craving more input? Start by adding AcelRx Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotechs like AcelRx, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Solid economic news puts tapering back on the agenda

Friday's surprisingly robust jobs report has triggered fresh debate about dialing back the Federal Reserve's $85 billion-per-month quantitative easing program.

The report showed that the U.S. economy added 204,000 jobs in October, 70% above the consensus estimates of 120,000 new jobs. It also included upward revisions for the jobs reports from both August and September.

The positive data followed a Thursday report showing that the economy was growing at 2.8% clip, or about 40% above what analysts were forecasting.

Meanwhile, the unemployment rate on Friday was adjusted slightly higher to 7.3% from 7.2%, an increase that market analysts see as an anomaly related to the recent government shutdown.

“I think the Fed can take some confidence from these reports and really put tapering back on the table,” said Dan Heckman, fixed-income strategist at U.S. Bank Wealth Management.

“I wouldn't be surprised to see a taper announcement from the Fed this year and with tapering starting in January,” he added. “There are good reasons to go ahead with tapering now, and it is certainly going to be a topic that gets moved to the front burner and will be more on the minds of investors.”

(But Fed’s Lockhart says Fed can’t rule out QE tapering next month.)

As if on cue, the bond market took the jobs data and treated it as tapering announcement, driving the yield on both the 10-year and 30-year Treasury bonds up about 14 basis points in early trading. Meanwhile, stocks rallied, with the Dow Jones Industrial Average climbing 95 points, or about 0.6%, to 15,688.56 by afternoon. The S&P 500 index added nearly 1%.

“The market is saying we probably should have tapered in September, and that's why we're getting the sell-off in Treasuries now,” said Dan Toboja, vice president of fixed income at Ziegler Capital. “I think this latest data definitely puts tapering back on the table. Right now, the market is telling you it's ready for tapering and it's giving you an excuse to do it now.”

One of the major wrinkles with regard to tapering is the impact of the head fake that Fed Chairman Ben S. Bernanke threw the financial markets in September by not beginning to taper after implying in May that such a move would be imminent.

“This time around, I'm not sure you'll see the same kind of buildup you saw in September when the markets thought there would be some tapering,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Ad! visors.

Mr. Albright, who believe there now is a 50% chance of a tapering announcement this year, said any Fed action will still be heavily data-dependent and will be driven especially by the next jobs report, which comes about 10 days before the December Fed meeting.

The other major wrinkle that could be stalling tapering activity is the fact that Mr. Bernanke is expected to pass the Fed chairmanship to Janet Yellen on Feb. 1.

That reality has sparked a new level of handicapping around the unprecedented five-year quantitative easing program, which has already swelled the Fed's balance sheet to beyond $3 trillion.

“If Bernanke were going to remain, tapering would certainly be back on the table now, but it all has to do with the transition of power at the Fed, and that's one of the reasons they didn't taper in September,” said Sean Clark, chief investment officer at Clark Capital Management Group.

“Janet Yellen's stamp will be to begin tapering at her will,” he added. “And there's a potential for her to make Bernanke look hawkish by comparison.”

And then there are those like Dan Veru, chief investment officer of Palisade Capital Management, who believes the Fed's motivation for tapering has gone well beyond the stated dual mandate of managing inflation and employment.

“I don't want to make too much out of two discreet pieces of specific data, but 200,000 is not enough to force the Fed to start tapering,” he said, referring to the number of jobs added in October. “I think it's wrong to assume that the liquidity is going away, because this decision to taper is also subject to political winds and there's another big budget debate coming in January.”

With tapering essentially off the table, Mr. Veru thinks the stock market can gain add another 3% to 5% between now and the end of the year.

The backburner theory is also supported by Paul Schatz, president of Heritage Capital LLC.

“Before the jobs report we were hearing consen! sus estim! ates that tapering would possibly start in March, but it could be as far away as June, but now suddenly people are saying tapering is back on the table,” he said. “I just don't believe one jobs report changes the Fed's plan.”

Mr. Schatz, who sees the stock market gaining at least another 2.5% by January, doesn't believe the economy is even strong enough to absorb any reduction on the quantitative easing program.

“I don't believe the market or the economy can stand on its own two feet year, so as long as there's no inflation I think they should increase quantitative easing,” he said. “In our economy right now, banks, housing, and everything is predicated on historically low rates, and if rates begin to spike imagine what that does. The fed cannot afford that ah-ha moment.”

Google vs. Facebook: How Both Can Win

At Tier 1 Investments, I seek out and invest in elite businesses. These include companies with the most valuable brands, best management, superior products and services, and strongest competitive advantages.

Google (NASDAQ: GOOG  ) has been a stalwart at Tier 1, but Facebook (NASDAQ: FB  ) does pose a threat. Enough to knock it off its perch? Doubtful. But perhaps enough to bring Facebook up to Tier 1 status if it can reach a few more milestones.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Another Day, Another All-Time Closing High for the DJIA and S&P 500

NEW YORK (TheStreet) -- The DJIA and the S&P 500 both closed trading on Wednesday at new all-time highs once again. This really is becoming quite boring.

The DJIA was up 20.17 points at 16976.24 and the S&P 500 was higher by 1.30 to close at 1974.62. The Nasdaq was fractionally lower at 4457.73 while the Russell 2000 was down 6.45 points at 1199.50.

Whatever or whoever is causing this stock market to soar into the stratosphere is now irrelevant. The numbers are what they are. This does not mean that as a trader you should just throw in the towel and start buying at these all-time highs.

>>Who Could Take the Reins From Jamie Dimon?

There continues to be an underlying fundamental problem with this market. And that problem is lack of volume or liquidity. You have read enough of my articles to know that the lack of trading volume is a big issue with me. To put that in perspective, the S&P 500 Trust Series ETF (SPY) volume set a new yearly low in 2014 on Wednesday coming in at just over 52 million shares traded. And if you compare the SPY trading volume on July 2, 2014, to July 2, 2013, you will see that the trading volume was three times higher last year, coming in at 154.8 million shares. The argument from old Wall Street pundits will be that it is different this time. It is not different this time. There is a serious lack of the small retail trader and investor in this market. The entire volume is now controlled by the hedge fund community. Those hedge funds act in unison. That is why we are not seeing a selloff taking place. When the machines decide to sell it will be fast and furious. I expect trading on Thursday will be the slowest in memory as the stock market has an early close at 1:00 p.m. EDT. It is now more important than ever to have a risk management trading process in place to navigate around in this market. The Nasdaq index is well into overbought territory. This is being fueled by the tech-heavy stocks. At the same time, the DJIA and S&P 500 are not close to being overbought. The Russell 2000 internal algorithm numbers are heading down. So we have a market that is out of sync. The fact that all indexes have a negative divergence with price creates a risk that most traders and investors do not understand.  That trading process is critical. You need signals that tell a trader when stocks are overbought and oversold. On Wednesday, I covered my Splunk (SPLK) short position from Tuesday with a terrific gain. I also covered most of my Twitter (TWTR) short for a nice gain. This cannot be done without having an internal algorithm signal. The 94% success rate at www.strategicstocktrade.com is all time stamped and cannot be disputed. At the time of publication the author was short TWTR. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.