INVESTMENT DUNIYA

GOODBYE TO EVERYONE

2010-03-21T04:07:00.000-07:00

THIS IS THE LAST POST OF MINE. THERE WILL BE NO FUTURE POSTS ON THIS BLOG.
ENJOYED FINDING ARTICLES AND NEWS ITEMS RELATED TO INDIAN FINANCE AND INVESTMENTS.
WOULD HAVE LOVED TO CONTINUE WRITING BUT FOR THE TIME RESTRAINTS AND WORK PRESSURE.
BYE EVERYONE .
GOD BLESS AND LOVE TO EVERYONE WHO VISITS THIS BLOG

ULIPS : RAISING THE BAR

2010-03-20T20:34:00.000-07:00

In a short time-span, ULIPs (market-linked plans from insurance companies with a risk cover) have managed to draw retail investors in droves and emerge as a larger force than mutual funds in managing long-term money.

In the best interests of investors, it is now imperative to raise the bar on the disclosure and marketing practices for ULIPs, which appear to be leagues behind those for mutual funds in some respects. There appears to be no harm in IRDA taking a few leaves out of SEBI's book. Thanks to an evolutionary process spanning two decades, SEBI's mutual fund regulations today present a fairly watertight framework for market-linked products.

Assured returns, again?

Consider the recent string of ULIPs that ‘guarantee' payment of the fund's highest NAV for the first 7 or 8 years, at maturity. Scanning their product literature gets you plenty of information on the insurance part — the premium payment options, risk cover, death benefit and the host of charges attached to the plan. But look for details on how exactly they will manage to “guarantee” the highest NAV — in short, the investment strategy — and these are quite sketchy!

Many plans stop with the sweeping statement that they may invest 0-100 per cent in debt/gilt instruments, 0-100 per cent in short term debt instruments and 0-100 per cent in equity shares.

What investors need to infer from this is that they shouldn't expect equity-related returns from these ULIPs, as they may juggle debt and equity to ensure that the NAV doesn't suffer very sharp blips. (Message: Don't mistake highest NAV for highest returns!)

Nor is there complete disclosure on how the insurer will meet any shortfall between promise and performance, if there is any, at the scheme's maturity. Shouldn't these facts be stated more directly?

Transparency please

Most ULIP products in fact seem to operate on the premise that investors should place faith in the insurer for the long term and not worry too much about how the returns are being managed. That is certainly healthy from a broader market perspective. However, not when investors are unclear about what they are buying or where the returns are coming from.

History has showed that keeping investors completely in the dark about the actual risk profile of an investment can sometimes backfire in a spectacular fashion. Multitudes of investors in the infamous Unit Scheme-64 lost their savings simply because they mistook a balanced fund (with an equity component) for a regular income fund, just because it paid yearly dividends like clockwork. Seasoned investors will also recall the popular ‘assured return' mutual funds of the late 1990s that couldn't quite manage annual payouts because debt market conditions changed dramatically.

These episodes prompted SEBI to crack down sharply on mutual funds using the words “guarantee” or “assured return” in their marketing efforts several years ago. It has taken a long time for retail investors in mutual funds to accept the fact that returns always carry a trade-off with risk. Is it really necessary to go down that road all over again with ULIPs?

Complexity

Then, there is also the needless complexity that accompanies the structure and marketing of ULIPs. Even a seasoned investor may be flummoxed by the sheer number of technical terms that are thrown into a ULIP brochure. Understanding the return profile of a product means getting to the bottom of terms such as ‘sum assured, fund value and surrender value'.

The costs you incur are stashed under multiple heads — premium allocation charges, mortality charges, policy administration charges and fund management charges. Helpfully, some of these charges are expressed in percentage terms while others are presented in terms of Rs/1,000 or Rs/month. The ‘benefit illustration' that IRDA has mandated thankfully helps to simplify these costs; but it still leaves investors no wiser about a product's return potential.

All ULIP illustrations are based on the product's NAV edging up by an orderly 6 or 10 per cent each year; but how realistic is this assumption for equity products? And does the insurer's track record support this assumption?

Avoidable confusion

The multiple points of difference in the way ULIPs and mutual funds define their NAV, charge expenses and operate also creates avoidable confusion for investors. Investors in a mutual fund can gauge how the fund performed by tracking its NAV appreciation.

Whereas, using the NAV alone can be misleading for ULIPs, as some of the expenses are adjusted in the balance of units you hold.

Or take the cost aspect — SEBI specifies that a mutual fund may charge no more than 2.5 per cent of its assets towards expenses each year. IRDA, however, defines the ULIP charges on the basis of the difference between gross and net yields over the policy term (capped at 300 basis points for sub-10 year plans). Mutual funds are not allowed to reward their agents out of the money collected from investors after SEBI recently cracked down on this practise; but ULIPs still pay commissions out of the premium collected.

As the IRDA and SEBI sit together to hammer out their differences over the next few weeks, it would help if they could commence a dialogue on some of these issues.

A common set of ground rules that govern all market-related products, irrespective of who markets them, would not just simplify the chore for both the regulators.

It would also leave investors a whole lot better equipped to make wiser choices and assert their rights, whether they are inclined to buy ULIPs or mutual funds.

WHY TO AVOID SECTORAL MUTUAL FUNDS

2010-03-19T09:23:00.000-07:00

The idea behind investing in a mutual fund is to outsource the fund management activity to a professional fund manager.
By investing in a sectoral fund you are limiting the fund manager to invest in a particular sector. Even if the fund manager knows that the particular sector will not do well in the near future, he is forced to invest in that sector only. Also you take responsibility to shift your investments from a non performing sector fund to a performing sector.

Whereas in a diversified fund the fund manager gives higher allocation to the sector which he feels will do better in the near future and he reduces the exposure in the sector which he feel will not perform in the near future.
So it is better to outsource all these decision making to the fund manager. Why should you take decision and pay management fees to the fund house.
So focus on the diversified funds.

MUTUAL FUND INVESTING ADVICE

2010-03-19T09:21:00.000-07:00

Prateek Desai from Gujarat has a piece of advice to readers of this blog :

I would like to suggest an alternative to passive mutual fund investing:-
(A) Avoid SIP of fixed date. Keep aside a small sum every month to invest in diversified or ELSS funds.Invest by net transfer when markets around lower band.
(B) Wait for about 15-20% appreciation. Take out the profit and shift profit to MIP Plans(I prefer HDFC and Reliance MIP)
(c) Do this regularly and see that you will achieve very high returns. Maintain this strategy to create your retirement corpus rather than pension plans of ULIPS. I have done this for last five years and obtained over 40 % compounded yearly. Lastly, Have patience. You will be rewarded. Regards

ETF VS MUTUAL FUNDS

2010-03-13T23:21:00.001-08:00

ETF is for exposure in indexes, gold and other commodities and for short duration they are better.
Mutual fund on the other hand deals with stocks and to get the returns from mutual fund one needs to be invested for longer period of time.

So you have to make the decision to either go for ETF/Mutual Fund.

Stock markets are zero sum game!by Rajendra Gupta

2010-03-13T18:59:00.000-08:00

Stock markets are zero sum game!by Rajendra Gupta

One looses then other gains.All ppl gain only thorough genuine profits earned by companies by their hard work and expected growth in profit raises the speculative component of price.It is all money chasing wealth.If there is more money chasing shares(limited quantity only) like FIIs coming, the scrips go up.Same way they may go down.The only assurance one has it that if you buy top companies having long term record of performance,updating their business model and have strong brand names, well they may earn at least 15% ROI and that reflects in rise in share prices slowly as money value also goes down by inflation.There are peaks and valleys around profit trend line where ppl loose money and make money.It is all probability.You may earn for months and then suddenly loose and reverse may happen with some one else.It is zero sum game.Probability wont work for you always in favor.Just have a reasonable part of your investments in stock markets or else you may get ruined in scandals and crashes.Just invest in good companies like A group which are there because they are good and consistent performers in environment.What is point of experimenting?Churning of shares makes money for experts and broker firms not for you.Greed has to be controlled and natural course of profits that companies earn should be long term objective.That also is better than FDs. At least for 5-7 years period.For day traders, yes, volatility is only was to earn or loose,whatever way you look at.

Prof RKGupta

SUDEEP MUKHERJEE OF TRILOK INVESTMENTS KOLKOTTA REPLIES TO QUERIES ON INVESTMENTS

2010-03-11T04:06:00.000-08:00

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Prasad Rao asked, Which is the best insurance policy for children
Sudeep Mukherjee,I don’t recommend any insurance policy for children. Rather invest in equity funds and build the education and marriage fund.
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Venkat.Kumar asked, I have taken a home loan of 18 lacs and my ROI is 10.00 %. My current outstanding is 16 lacs and balance term projected is 115. 1) Is it good to preclose the loan? 2) Is it good to convert the loan to current interest rate (8.75 %)?
Sudeep Mukherjee, Foreclose the loan. Saving on EMI should be channelised in to investment in equity funds by way of SIP to build your corpus for retirement or another objective you may have set for yourself.
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Shekhar Bellare asked, Sir i am investing money in birla sunlife equity fund growth on a sip base i just wanna ask can i use same folio number to buy and sell any other company mutual fund or i can buy and sell same company mutual fund
Sudeep Mukherjee, The folio no can be common to that fund house only which generated that folio. One folio no cannot be applicably to all fund houses. So, Birla folio no can be used for any Birla Fund but not for any other fund house.
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Raghu Ram asked, sir, i am making sip investment in hdfc top200,hdfc equity,rel power sector& growth fund,sundaram select midcap ,templton prima plus,sbi tax gain in each 1000Rs(among templton prima fund prima plus & blue chip which is good to invest)can u suggest any further & for children which plan is suitable
Sudeep Mukherjee,except for Reliance Diversified Power Sector Fund, all funds are good. Both Franklin India Bluechip and Prima Plus are good funds. You can consider both the funds in your portfolio.
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Pal Anand asked, I have invested 2 lakh rupees in ELSS funds and 3 year lock-in period is completed, is it better to continue with them or re-invest in good funds like the ones you have suggested(HDFC Top200 etc)
Sudeep Mukherjee,continue with the investment if the funds are doing well. If the ELSS fund is under-performing non-ELSS equity funds, then it is a good idea to redeem ELSS and invest in fund like HDFC Top 200 fund.
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Karan K asked, Please recommend funds to invest Rs 60,000 for a 3 year period.
Sudeep Mukherjee,Balanced Funds are ideal for you - HDFC Prudence Fund and DSP BlackRock Balanced Fund.
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Sourav asked, HI. WHAT IS THE BEST OPTION IN INVESTMENT IN GOLD BETWEEN THE TWO. 1) GOLD ETF 2) SIP THROUGH MUTUAL FUND IN DSPBR WORLD GOLD OR AID WORLD GOLD. WHICH ONE WILL YIELD BEST RETURN AFTER 10 YEARS.`
Sudeep Mukherjee,if you are willing to invest in gold then Gold ETF is the answer. DSP World Gold Fund and AIG World Gold Fund invest in stocks of gold mining companies and not directly into gold. If you are looking at higher returns then DSP World Gold and AIF World Gold Fund are likely to deliver higher returns compared to Gold ETF.
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Vithal Kamath asked, Please advice financial planning for my father. He is retired last year. He has a corpus of 50 Lacs.
Sudeep Mukherjee,you should definitely get retirement planning done for your father. The most important aspect is the post-retirement cash flows and management of corpus of Rs 50 lakhs to ensure that it remains intact and continues to grow while at the same time generating regular income to meet the day to day expenses.
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Meher Randhawa asked, Why do you advise Gold ETFs against physical Gold? I'd like to know the disadv for physical gold apart from safely holding on to it and its quality
Sudeep Mukherjee,According to me investment in gold should be through Gold Exchange Traded Fund (ETF). Every unit of Gold ETF is backed by half or one gram of physical gold. The unit of gold ETF are held in demat form. Hence, there is no botheration about safekeeping of gold that is associated with physical form. Also, the gold held by Gold EFTs are backed by physical gold of 0.995 fineness which is secured and insured. Gold ETF score on the wealth tax front too. Gold ETF are not considered as wealth for Wealth Tax purpose. Physical gold is considered as for wealth tax purpose. Also, gold ETF are treated as long term capital assets if held for more than 12 months from the date of purchase. One can avail of the indexation benefits claim concession from long term capital gains tax, if any.
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Shweta Palak asked, Please tell me some good tax savings mutual funds which gives good dividends also
Sudeep Mukherjee,in the ELSS category, you can consider funds like HDFC Tax Saver, Franklin India Taxshield and Fidelity Tax Advantage Fund. All these funds have a good dividend track record . Opt for dividend payout
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Jasmine Tordie asked, Hi I want to invest 50000 per year which is best option for me? i am 25 year old my View is entirely Longterm
Sudeep Mukherjee,assuming you are willing to take risk, given your time horizon, you should be investing in equity funds. I am sure if you continue with the practice of investing Rs 50k p.a. and hopefully increase the amount as you progress in life, you will make wealth for yourself. Avoid greed and fear. Develop Patience and Discipline to be a successful investor.
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Shreyas asked, hi,i have rs 15 lacs which i need to invest for a span of one month only, as there after i need the money to buy a land. where can in invest for one month to have some gains
Sudeep Mukherjee,in your case safety of capital is of paramount importance than the gains. Simply because equity markets are doing well doesn’t mean that you will make gains. Stay away from equity markets. Invest in liquid funds instead and be happy with 4%-5% returns p.a.
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Rajiv Betalwas asked, How is Gold as an investment now, and how should that be invested ?
Sudeep Mukherjee,invest in gold over next 6-12 months. opt for Gold Exchange Traded Funds (ETFs). Its easy to buy and sell Gold ETF. You have to have a demat account and share trading account with any stock broker. Avoid buying physical gold for 2 main reasons - its too much of botheration to as far as storage is concerned and it is definitely sold by banks/jewelers at 4-5% premium to market price.
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V R Jani asked, Debt options (PPF, LIC) etc give only a maximum of 8%. However, SIPs (in good times only) have given more. Are SIPs advisable for long term. Also what is the right time to redeem units from an SIP. Are LIC's pensions plans any good (They grow at 6% pa)
Sudeep Mukherjee,You are mixing equity and debt over here. both equity and debt are must in your portfolio. While equity have the potential to deliver higher returns with higher risk, debt provides safety and stability to your portfolio. SIPs are no substitute for FDs/PPF. Yes, SIPs are the best way to invest in equity fund but that does not necessarily mean that you will make money in equity funds. your selection of fund has to be right and need to monitor the portfolio regularly. Insurance plans are not ideal investment products. Term plans is the best type of insurance.
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Avinash Godbole asked, i have invested 5000 in reliance natural resource fund is mutual fund before 2 yr ,but it is in not a good position.
Sudeep Mukherjee,exit this fund and invest in diversified equity fund like HDFC Equity Fund.
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Sneha Sonpar asked, i want to invest 30000 for 5 year , which fund is best Birla Top 100, DSP BLACCK top 100, HDFC top 200
Sudeep Mukherjee,all the 3 funds are good. Go ahead and invest.
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Sarsubra asked, I want to generate a regular fixed income of Rs.30,000 per month. How much money/capital I need to make this ? Also I want the returns should be very conservative & do not make any risk. May be a small risk is OK.
Sudeep Mukherjee,Assuming your post tax return is 5%p.a., you need to have a corpus of Rs 72 lakhs. Also, here I have not assumed inflation which will definitely erode your capital over long period of time. If you have the requisite capital invest in a bank FD and try and get atleast 5% post tax. Any amount over and above should be invested in equity funds to ensure that your overall capital grows and you are able to beat inflation.
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Dheeraj Kumar Brhamabatt asked, I have invested 52,000 rupees for my son who is 7 months old now in LIC - Marriage and education plan. It is a 18 year term. Is it a good plan for Child's education?
Sudeep Mukherjee,I would recommend that you take on a slightly higher risk as far as your son's portfolio is concerned. This is mainly because you have time on your side. 18 years is a long enough period to get good returns from investment in equity funds. Insurance policies are not the right approach. Get the education and marriage plan made for your son with the help of a professional financial planner.
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Bhavik Shah asked, Hi..i have a home loan of 38lacs..recently i sold a plot for 32 lacs..how should i use the money? i need to buy a car costing 9 lacs..should i prepay my loan or should i invest in another property/equity with the cash?
Sudeep Mukherjee,I personally fee that one's personal balance sheet should be debt free. From that perspective, I would recommend that you repay your loan. I am not sure about keeping aside the money for car. That is your personal decision. Try and repay the loan first, the balance can be used to buy the car even if it means reducing the budget.
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Aninda asked, which is the best mutual fund to invest as SIP in this present market scenario
Sudeep Mukherjee,among the funds I like, Franklin India Bluechip fund, HDFc Top 200, sundaram Select Midcap and DSP BlackRock Equity Fund.
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Karthik Iyer asked, I'm buying a home and the EMI is 27,000 for 20 years. My intention is to pre-pay this loan as soon as possible to save interest. I will need lump sum amounts for this in coming years. What type of investment do you suggest for this?
Sudeep Mukherjee,since you want to repay the money, I would advise you to invest in a bank FD or liquid funds. I would not recommend an equity fund for the purpose as it is high on risk and requires you to be invested for over 3 years atleast.
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Lenin Karuappanan asked, Hello Sir, Gold is doing low now in shares. Do you see any chances that the prices will go up?
Sudeep Mukherjee,Gold is a must in every portfolio as a hedge against inflation and as an insurance in times of financial crises. Allocate 10% of your portfolio to gold. The problems in the financial markets are far from over especially in the US and Europe. I would advise that you invest a small sum in gold every month. But cap your exposure to 10%
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RN RAO asked, SIR, I HVE INVESTED IN EQUITIES IN 2007 DEC@ 21000 SENSEX ABOUT 7.0LAC AT VARIOUS SCRIPTS 15~20 . AFTER SLASHING THE MARKET I HAD AVERAGE AND NOW 1.O LACS IN LOSS WHAT SHOULD I DO OR I SHOULD INVEST IN MUTUAL FUNDS
Sudeep Mukherjee,assuming that you are invested in companies whose prospects look promising, you should remain invested. I would advise you to invest in a equity fund if you are not able to manage the stock portfolio on your own.
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Durgaprasad Shukhtankhar asked, is this the right time to enter the stock market? Can u suggest any stocks?
Sudeep Mukherjee,India looks a very promising destination for investment from long term perspective. If you are willing to invest for 3 years and above and believe in the India story, then time is ripe of investment in equities. Don’t times the markets. Invest in a diversified equity funds. Leave the job of identifying the right stock and timing the market to professional fund managers
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Dollara Sutari asked, What is your view on Debt Funds ...do you see Short Term Debt as a good option in the current scenario and if so why ..thanks
Sudeep Mukherjee,Short Term debt funds are ideal for investment horizon of less than a year. These funds lag in performance when the interest rates are likely to move up. given the fact the RBI is most likely to increase the rates when it reviews the monetary policy next month, I would like to avoid these fund until further clarity on the interest rates. I would recommend a liquid plus fund instead.
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Laxmi Shukla asked, which is the right investment for 3 years for 1Lakh?
Sudeep Mukherjee,for 3 years you can consider balanced funds that invest 65% of their corpus in equity and balance in debt. You can consider funds like HDFC Prudence and DSP BlackRock Balanced Fund among others.
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Kunte Santosh asked, i want to know about PPF a/cs
Sudeep Mukherjee,PPF is a Public Provident fund A/c. You can invest up to Rs 70,000 in a year. The rate of interest currently is 8% p.a. and the interest is tax-free. the tenure of this fund is 15 years and you can renew if for 5 years after maturity. The investments in PPF qualify for deduction under section 80C of the income tax act
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Bhanu Singh asked, Hi what is best short term investment plans you can recommend if you want to invest around 10-15 lacks Thanks
Sudeep Mukherjee,if your investment horizon is less than a year, then liquid plus funds are the best. these score high on safety and liquidity. If your investment horizon is between 1-2 years then bank FDs are the best. If your investment horizon is 18-24 months then Monthly Income Plans are the best
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Amreetesh asked, i have invested 30000 in icici infra mutual fund before 2 yr ,but it is in not a good position.
Sudeep Mukherjee,infrastructure funds are thematic funds. They do well when the sectors that constitute the infrastructure theme do well. Also, stocks in the infrastructure sector are highly volatile. I would recommend that you redeem this fund and invest in a well managed diversified equity fund.
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Bannerjee asked, Would you recommend retired people to invest in MIP Mutual funds. How do they differ from other mutual funds. Any recommended ones
Sudeep Mukherjee,Monthly Income Plans (MIPs) are offered by most mutual funds in the country. MIPs are hybrid funds with 10%-30% exposure to equities and balance to debt. While the debt portfolio is designed to generate regular income and add stability, the equity portfolio aims for increasing the overall returns. Since there is an equity component, the investor should be willing to take some degree of risk. Also, the returns are not guaranteed or assured unlike a bank fixed deposit. Although the name Monthly Income Plan, monthly income by way of dividend is not assured. Dividends are paid subject to profits made by the fund. If you are opting for dividend option, then quarterly dividends are ideal. If you are not aiming at generating regular income, then growth option is the best. These funds are treated as long term capital assets if held for more than one year from the date of investment. You can avail of indexation benefit to reduce your long term capital gains tax on the appreciation, if any. The ideal investment horizon to reap the benefit of investing in an MIP is 18-24 months. Expected returns should be in the range of 8%-10% p.a.
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Madhavan asked, for one time investment as on date of 500000 whether equity/mutual fund OR GOLD etf is better?
Sudeep Mukherjee,in my view you should divide the amount between equity, debt and gold. Allocate 10% to gold. If you are willing to take high risk and remain invested for 5 years and more then allocate a higher amount towards equity and balance in debt. If your investment horizon is less than 3 years then allocated more towards debt. As far as equities are concerned, equity funds are the best option. For debt bank FD is ideal. For gold, avoid buying physical gold. Invest in Gold ETFs
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BUY GOLD AND ADD GLITTER TO YOUR PORTFOLIO

2010-03-10T02:40:00.000-08:00

You can do it in 3 ways

1. Buy solid gold and keep it safe. Typically buy it from a trusted jeweler.

2. Buy the Gold Funds. You can invest in gold and its valuation but need to stock it by yourself. Being Indian, its easy to sell funds than selling gold. Get in touch with your funds manager.

3. Invest in gold schemes. Its typically available with jewelers. Its a bit risky but its worth a try.

Comparing to gold , Bank/ Postal deposit is more benefited. Normally gold and silver prices will hike once in 10 years. It will take another 10 years to get another boom. Any how a minimum quantity of Gold is required for marriages. If it is shortly required we can purchase Gold. Otherwise Cash deposits is much benefited.
If not able to take right decision we can invest in both as 1: 2 basis i.e. 1part Gold : 2 parts deposits. Don't invest in any schemes/gold mutual buy only 99.99 or 99.95% gold from the banks / reputed jewelers and kept in safe.

Investment Advice by Jeevan Kiran , Grace Investments, Chennai

2010-03-08T04:49:00.000-08:00

Seshan asked, Which one is better...1) 5000 per month as SIP in one pure equity fund...2) 1000 per month as SIP in 5 pure equity funds....both with long term (15-20 years) in mind
Jeevan answers, hi, it is always better to have a equity fund portfolio of 4-5 funds. It helps you diversify the risk. Your portfolio does not depend on one/two scheme to perform. Hence, divide the amount between 4- funds.
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Garg asked, My PPF account matures on 1st April 2010. Keeping in mind the new DTC with EET coming, should I close my PPF account without 5 years extension?
Jeevan answers, hi, the provisions of DTC will be applicable only to deposits made on or after 1st April 2011. You can go ahead and renew your PPF account for another 5 years.
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Veena Sridhar asked, How should a 25 yr old plan/invest in mutual fund to gain maximum wealth. Investment capacity is 9k/mth for 2 years. Thanks
Jeevan answers, hi, your age is appropriate for investing in equity funds which has the potential to build wealth over the long term. But your investment horizon is too less. You should invest in equity funds with time horizon of atleast 5 years. Then only you can capitalize on the wealth creation potential of equities
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Vignesh asked, Hi... I am residing in a rented house in Bangalore & I am planning to take Home Loan to build a house in my native. Would I be able to get tax benefit on the prepayment of Home Loan as well as enjoy tax deduction through HRA?
Jeevan answers, hi, yes you can claim the home loan benefits under the income tax act for the house you are building in your native. You can also claim the benefit of HRA for the rent paid by you for the house in Bangalore.
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Chaturvedi asked, WHY SHOULD ONE GO FOR ETF INSTEAD OF BUYING PHYSICAL GOLD. PLEASE EXPLAIN
Jeevan answers, hi, physical gold is better than ETF because it is easier to buy and sell an ETF compared to physical gold. You need to call your stock broker to buy and sell the ETF. Secondly, the units of ETF are held in demat form. So there is no worry of taking care like physical gold. also, the gold which the funds is the purest form of gold.
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Raman Kochhar asked, I am 28 years ,working in automobile company and completed 3 years in job. Till date i have taken lic policy of 5 lakhs for 15 years and given two premium of 35000 for last 2 years. I have invested 20000 in lic ulip,35000 in sbi mutual fund. Is my strategy policy will work good in future and also suggest me for future planning for getting good corpus. My monthly take home salary is 37000
Jeevan answers, hi, you seem to investment savvy but you need to plan your investment before buying any ULIP or mutual fund. If you are investing to build your retirement corpus then I would recommend that you get a retirement plan made for yourself. Once the plan is ready and you know how much you need to invest and in which asset class (equity, debt, gold),then go ahead and buy the insurance plans and mutual fund schemes.
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Meghraj asked, Hi Jeevan, in the view of the tax benefits on the housing loans likely to be withdrawn next year, will it be worthwhile availing a new housing loan at this juncture ?
Jeevan answers, hi, if buying a house is a need then i don’t see any reason why you should postponed the decision by one year. There may be an increase in the property price in the next one year. So go ahead and take the loan. I am not sure what will kind of similar benefits will be made available under the Direct Tax Code. Waiting for more clarifications and then taking action may not be a good idea.
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Bharath Reddy asked, Sir, I want to invest 25lakh in share market how many years I have to wait to avoid any capital gains tax..
Jeevan answers, hi, as per the prevailing tax laws, if you want to claim exemption from long term capital gains on equity shares and equity funds, then your holding period should be atleast 365 days from the date of investment.
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Bharat Sharma asked, Hi Jeevan, I want to know more about the capital gain tax and is it possible to avoid it by paying for loans
Jeevan answers, hi, you cannot avoid paying capital gains tax by repaying your loans. To save capital gains tax, you need to invest in capital gains tax saving bonds offered by REC and National Highway Authority of India (NHAI)
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Pratik Jain asked, i want to invest gold...which is good for me..?
Jeevan answers, hi, if you are looking at investing in gold, then consider Gold Exchange Traded Fund (ETF). These are the best form of investing in gold. Its easy to buy and sell gold ETF. You need to have a demat account and a share trading account with any stock broker. Also, do not allocated more than 10% of your overall portfolio to gold. Invest in gold as an insurance and a hedge against inflation.
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Walter asked, Sir, I intend to invest in ELSS - HDFC tax saver and ICICI tax saver, kindly suggest. Time horizon for the investment is 5 + years
Jeevan answers, hi, both the funds are good for 5 years time horizon.
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Ajay Sinha asked, Hi Jeevan, correction is possible in share market in coming months in 2010, Is it right time to invest in market ?
Jeevan answers, hi, corrections keep happening in the stock markets at regular intervals. The long term outlook looks good for the India as a country and I would definitely recommend that you invest in equity markets. Please invest for the long term - 5 years and above. Ensure that you invest in diversified equity funds. Avoid Sector or Thematic funds. Every fall in the market should be considered as an opportunity to invest in equity markets.
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Lalit Kankate asked, Hi i am planning to invest 60K p.A in met gold plus for 3 years with insurance cover for 10 years pl. suggest. i am 26 earning 25k p.m.
Jeevan answers, hi, i m not sure of the details of this policy. If its an ULIP, please stay away from it. Go for term plan. For investments, you should invest in mutual funds. ULIPs are very high on the cost side in the initial years and hence not advisable.
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UjagirRai asked, hi sir i am planning to invest in Lic of india
Jeevan answers, hi, if you are taking a life insurance policy then go only for Pure Term Plan. This is the best type of insurance for any individual of any age. It offers you higher sum assured at relatively lower premiums. Please stay away from ULIPs. Ask your insurance advisor if the policy is a ULIP. IF yes, do not go for it.
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Manikanthan Iyer asked, I am going to sell my house and buy an another asset. The Money which i am going to get from my old house can I keep for 6 months and invest or I need to invest. Is this is taxable ?
Jeevan answers, hi, you will have to deposit this money into a separate bank account call the Capital Gains Deposit Account. This money can then be utilized to buy another house property within 2 years from the date of sale of an existing house property.
________________________________________

Dhannu asked, Which are the Infrastructure Bond which are best to invest in to save tax under 20000/-category?
Jeevan answers, hi, the details of these bonds are not out as yet.
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Sibu George asked, I wanted to invested 5000 via SIP , pl tell me which fund would be the best for SIP
Jeevan answers, hi, in the equity fund category, you can invest in funds like HDFC Equity, Franklin Indi Bluechip, DSP BlackRock Equity and Sundaram BNP Paribas Select Midcap. In the balance fund category you can consider funds like HDFC Prudence and DSP BlackRock Balanced Fund.
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Deb asked, I want to invest in ELSS. I have savings of around 1 Lakh. Please advise what % of my savings should I put in ELSS scheme? Is there any other better options where I can invest?
Jeevan answers, hi, you can follow the thumb rule. 100 minus your age can be invested in ELSS. This means if you are 30 years in age, then Rs 70000 can be invested in ELSS and so on.
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Santhosh Mhatre asked, Hi i am santhosh here and i am 39 years old, How can i plan for retirement now so that i can get monthly income after i reach 55.
Jeevan answers, hi, you need to build a corpus of investments to take care of your day-to-day and lifestyle expenses post retirement. You will have to sit with an investment planner and get the retirement plan made for yourself. The plan will lay down the roadmap as to how much money you need to save on a monthly basis and invest the same into asset classes that in line with your risk appetite and investment horizon.
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Gagan Chawla asked, if someone has monthly surplus amount, then one should repay the housing loan or to have SIP in MF
Jeevan answers, hi, in my view you should repay your home loan instead of investing it in equity funds through SIP. Rather, the amount which you save on EMI should be channelized into equity funds through SIPs.
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Yogeshbhai Shah asked, How good is LIC Wealth plus when compared to all the guaranteed NAV Plans. Do u think its wise to invest in this plan than in KVP and NSC's . Thanks for your help!!!
Jeevan answers, hi, I am not sure the way these NAV guaranteed schemes work. Personally I have not been able to understand the mathematics behind these schemes. I would prefer a term plan when it comes to insurance. For regular income and safety, I would prefer NSC over LIC Wealth Plus.
________________________________________
Sabyachee Mukherjeea asked, Hi Jeevan. I had bought NSC worth 10,000 in 2004 and they matured now. Do I have to include this amount in my income this year? I got 16000 on maturity. Secondly earlier dividends of MFs were taxfree. What’s the status now and for 2011-12?
Jeevan answers, hi, yes you will have to include the total interest earned on the NSC in your total income for the year in which your NSC matured. There is no change in the taxability of dividends in the budget. They remain tax-free for both equity and debt fund investors.
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Vivek Jain asked, i have a joint home loan, me and my wife working, the tax we can save is 1lakh each as principal and 1.5 each as interest right or it will be divided since joint home loan
Jeevan answers, You have taken a joint loan for the property. That by itself does not make you and your wife eligible to tax benefits under section 24 & 80C. To claim the tax benefits by each one of you, the property should be co-owned by you and your wife. The loan should be taken by the person in whose name the property is purchased to avail of the tax benefits.
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Khatri Haresh asked, Are there new tax saving investment opportunities created in this budget
Jeevan answers, hi, yes besides the deduction of Rs 1 lakhs available under section 80C, there will be additional deduction of Rs 20k for investing in specified infrastructure bonds. The details of these bonds will be notified shortly.
________________________________________
Magan Singh asked, WHAT WILL THE NEW INREREST RATE FOR PPF AND MIS.
Jeevan answers, hi, there has been no change in the rate of interest for PPF and POMIS. It remains the same at 8% p.a.
________________________________________
Varun Singla asked, I have 5 lacs of cash. Where can i invest other than FDs for good returns ?
Jeevan answers, Hi, if you are looking at higher returns than FDs, then you can consider Monthly Income Plans (MIPs) offered by most of the mutual funds. MIPS invest 10%-25% of their corpus in equities and rest in safer fixed income generating securities. MIPs are structured to give you the benefit of debt and equity market. Since, the investment is done in equity markets, you will have to take some risk. MIPs are not risk free like FD. Also, the income in the form of dividend is not assured. Your investment horizon should be atleast 24 months to benefit from investing in MIPs
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Farhan Syed asked, what are the new TAX slabs?
Jeevan answers, The new tax rates are: NIL for income upto Rs 160000 (Rs. 190000 for woman assessee), from Rs 160001 to Rs 500000 -10%, from Rs 500001 to Rs 800000 – 20%, Rs 800001 and above 30%.
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How to make a ‘good investment'

2010-03-07T04:35:00.002-08:00

How to make a ‘good investment'

What is a good investment? We can spend hours defining that but to me, a good investment protects the value of the investor's principal. But, then, if you just tuck money away in a mattress, the principal is protected. Is that a ‘good investment'? Not really. A good investment must also ensure that inflation does not make inroads into your portfolio. The threat of inflation, especially consumer inflation, is looming large across the globe. Food prices, in particular, have been rising from April 2009 and India is no exception. In this context, inflation is not about ‘price rise' but about a ‘state of rising prices'.

Arresting inflation

Expectations of such a state of rising prices emerging in the near future is getting stronger. In the Indian context, food price inflation (currently around 20 per cent ) is a matter of grave concern as food constitutes almost 45 per cent of the spending pattern of the common man. Oil, metals and other asset classes are firming up rapidly which will have a cascading effect on inflation in the days to come.

Therefore, with one-tenth of the country's GDP in fiscal deficit and the government in no hurry to roll back the fiscal stimulus, the RBI is left with few choices other than to signal a tighter monetary policy. If they don't do it now, they would need even harsher measures to arrest the inflation threat. The bond market has begun discounting the raising of rates by the RBI, and, irrespective of the degree of hawkish tone in the ensuing credit policy, yields will continue their upward journey. The roll-back of stimulus, (implying less government borrowings) if it happens, will be positive for the bond market from the demand-supply (of government securities) perspective.

Earnings growth

On the equity front, market undertones are expected to remain positive as long as foreign institutional investors flows continue. Beyond the results-season market volatility, a bigger concern is the foundation of expectations of earnings growth of the Nifty fifty stocks in FY-11 over FY-10. A 20 per cent earnings growth consensus of the Nifty fifty stocks in FY11, on the back of Reliance Industries and Tata Steel alone contributing to 40 per cent of such growth, appears to be quite vulnerable. The profitability of both stocks is sensitive to global factors and not exclusively dependent on domestic growth story. Almost 60 per cent of the earnings growth in FY11 of the Nifty stocks is expected to come from high global swings related to the metals and energy sector.

Indian markets will thus remain quite sensitive to global macro cues; let us not rely too much on exclusive domestic economic growth-driven Nifty movements in FY-11. However, the time is once again ripe for bottoms-up approach in selecting stocks.

Debt funds: Not always risk-free

2010-03-07T04:35:00.001-08:00

Debt funds invest in instruments that carry a fixed rate of interest or are guaranteed, in many cases, by the issuer. As a result, debt funds are often perceived by the investor as being completely risk-free. However, the reality is different. Debt funds may be less risky than equity funds, but they certainly aren't risk-free. Debt fund NAVs can change with interest rates, changes in the portfolio's ratings or tenure.

There are two types of gains — one is the interest that a debt security accrues or earns which is also called the coupon; and the other is the capital appreciation which it earns due to a change in market interest rates. The following risks are associated with Debt Funds.

Interest rate risk: The price of the bond is not only based on the current interest rates but also the expected future interest rate. The NAV of a debt fund is calculated based on the price of the underlying bond/securities. If market interest rates fall, the price of the bond rises, thereby increasing the NAV and vice versa.

The extent of the fall or rise will also depend on the tenure of the bond the fund is holding. The longer the tenure, the more sensitive it is to change in interest rates. Assume a debt fund has invested in a certificate of deposit, which carries an interest rate of eight per cent and will mature in five years.

After a month, the central bank announces a cut in interest rates and as a result the same deposit is now available at say 7.5 per cent. What it means is that all fresh investments will earn 0.5 per cent lower. As the earlier deposit is earning 0.5 per cent more than the current rates the markets will pay more for the same resulting in an increase in valuation of the deposit, and thereby, increasing the NAV.

When the fund manager is expecting the rates to come down, he increases the tenure of the bonds that he is holding to increase capital appreciation and reduces the tenure, if he is expecting the rates to go up. That is why bond funds give higher returns when interest rates are expected to go down and lower returns when it is expected to go up.

If interest rate risk is one type of risk, bond funds also carry credit risk.

Credit quality: Most securities held by debt funds have a credit rating assigned by rating agencies, suggesting the ability of the security to meet its payment obligations. The higher the credit rating (P+ or AAA or A1+), the lower is the perceived risk of default, and hence, lower is the rate that one earns, and vice-versa.

Funds also take exposure in securities with lower ratings either to get higher interest rates or with the hope that the rating will be upgraded in near future. In case the rating of a bond goes up from say AA to AAA, there will be some capital appreciation resulting in increase in NAV. In case of a default, the NAV will come down as the money invested in the bond cannot be recovered from the company the fund has invested in. Therefore, it is important for an investor to not only look at the returns generated by the fund but also the credit quality of the portfolio.

Liquidity: It is important that the bonds invested in by the fund are liquid enough to be sold when the money is required. In case bonds are not liquid, they have to be sold at a discount, resulting in a lower NAV.

All the above risks are manageable and can be reduced if the investor is prudent in choosing his bond funds. If the surpluses that you have are for less than three months, you should be investing in liquid funds that have shorter portfolio tenure.

If you have the money for more than a year, you should be investing in funds with longer portfolio tenure or maturity like income funds. By doing this, you are aligning your investment objective with the fund's objective, and thereby, neutralising the volatility that the fund may go through due to any of the risks mentioned above.

ARE ULIPS BEATING THE MARKETS ?? READ ON

2010-03-07T04:34:00.001-08:00

Unit-linked insurance plans (ULIPs) investing 80-100 per cent of their assets in equity have found it an uphill task to beat the Sensex in the last one year. A compilation of 62 such schemes shows that only 20 schemes managed to outpace the narrow benchmark, the BSE Sensex, with a return of 83 per cent. The return averaged 83.5 per cent for the entire category. A majority of them have not fully participated in the stock market rally. One reason that can be attributed to this is that insurance companies receive renewal premia at different points in time and may have only deployed their assets in a staggered manner. Their absolute return divergence was also very wide. The top performer – Birla Sun Life Individual Life Maximiser – clocked returns as high 150 per cent, while Star Union Pension Equity Fund was at the bottom of the table with a decline of 5 per cent. Mid-cap stocks that were quoting at a big discount to their large-cap peers same time last year were the top performers, and the funds that invested in this segment managed to top the returns chart.

Though falling short on one-year returns, the performance of ULIPs has improved substantially over the past six months. Majority of them has outpaced BSE Sensex and S&P CNX Nifty and both these indices clocked an absolute return in the range of 3-4 per cent in the year to February. For the same period the CNX Midcap index posted a return of 17.5 per cent and quite few mid-cap funds managed even to beat the CNX Midcap by a few percentage points.

Thirty-four of the 62 schemes studied here have a two-year track record and half of the schemes posted negative returns over a two-year period. The underperformance over a two-year period could be due to fact that markets peaked out two years ago. Insurance companies by and large prefer to stay invested rather than moving into cash during market corrections.

For this analysis we have restricted ourselves to plans that have mandate to invest a maximum of 80-100 per cent in equity investments (the premium are invested in equity, after deducting premium allocation, policy administration and mortality charges).

In ULIPs, appreciation of NAV may not be the actual return to the investor as a host of charges are deducted from NAV-based returns.

Hang Seng BeES — Chance to buy into China

2010-02-26T20:25:00.000-08:00

Credited with being the first foreign ETF in the country, Hang Seng BeES is the latest offering from Benchmark Asset Management Company. An open-ended index scheme, the Hang Seng BeES aims to provide its investors with returns (before expenses) that closely correspond to the total returns of securities as represented by the Hang Seng Index.

The fund will track the index on a real-time basis and will be passively managed. That is, the AMC will not try to ‘beat' the market or seek temporary defensive positions when the market declines or appears over-valued.

Hang Seng exposure

The ETF will enable Indian investors to buy into China, the world's largest manufacturing economy. It will invest at least 90 per cent of its total assets in the stocks of its underlying index, in the same proportion as that in the index. The Hang Seng Index comprises 42 stocks, representing about 60 per cent of the total market capitalisation of the Hong Kong stock market.

The index has a 37 per cent representation from of H-Share companies (those incorporated in mainland China and listed in Hong Kong) and little under 17 per cent from the Red Chips companies (incorporated outside mainland China but controlled by mainland entities and with at least 50 per cent share of sales revenue or profits or assets from mainland China); while the remaining are HK Ordinary shares.

Among the well-known index constituents are companies such as HSBC Holdings, China Mobile, Bank of China, Petro China and Tencent Holdings.

Comment

While reams have been written about the investment attractiveness of Chinese equities, Hang Seng BeES may not fit the investment needs of all categories of investors. It may be best suited to such investors who fully understand, and have the time and resources to track, the fundamentals of the Chinese market and economy.

Unlike the actively managed domestic fund offerings that provide exposure to Chinese equities, the ETF will passively mimic the Hang Seng Index in returns. Besides, its equity exposure will be limited to the Hang Seng Index, unlike the existing fund offerings that can invest outside of the index as well as in Greater China shares.

For instance, while Fortis China-India Fund, the only fund in the pack with at least a year's existence, invests directly in Chinese equities (overall exposure limited to 35 per cent), others such as JP Morgan JF Greater China Equity Offshore Fund and Mirae Asset China Advantage Fund offer China exposure through the feeder funds route. The ETF may, therefore, offer a good fit only for investors looking specifically for Hang Seng Index exposure.

However, to its advantage, exposure to the Hang Seng Index would offer a better proposition to dividend-seeking investors. The index enjoys a higher dividend yield (about 3.25 per cent, as on January 29, 2010), compared to the little over one per cent yield of the domestic bellwether index.

Investors may also have little to worry about the scope of ‘tracking error' as the fund house has an impressive score on that front; at least as far as its existing fund offerings are concerned. Nonetheless, investors may have to build currency risk into their returns expectation.

As for those simply looking to enhance returns, Hang Seng BeES may have little to offer, though it boasts of an exposure to the world's fastest growing economy. Domestic equities offer a better bet in comparison. For instance, the CNX Nifty outperformed the Hang Seng Index each year in the last five years, save for the 2008 correction when it lagged by a couple of percentage points. Last year too, the Hang Seng Index advanced only 52 per cent, as against Nifty's 76 per cent.

WHATS BAD ABOUT THE BUDGET 2010

2010-02-26T09:08:00.000-08:00

BUDGET 2010 by VS Subramaniam

THE SENIOR CITIZENS ABOVE 65 YEARS ARE COMPLETELY NEGLECTED. WHEN THE TAX LIMIT WAS INCREASED TO 160000/- , FOR SENIOR CITIZENS
ABOVE 65, THEIR TAX LIMIT SHOULD ALSO BE INCREASED FROM 2,25000/- TO 250000- AT LEAST
IT IS A GREAT INJUSTICE SHOWN TO THEM

Not addressing national issues by Dipak Srivastava

The FM has ignored the 3 most emergencies overshadowing the country:
1. Under development of tribal/ backward areas that have become a hotbed for Maoists.
three National Issues. Even though our Railway min did give token recognition, our FM has blissfully ignored the problem.
2. National defence : anybody's guess as to when war with China and Pakistan may flare up. We shall be caught highly unprepared discussing growth rates and Sensex, while the vital statistics go for a toss. FM has not spared a thought for National Security.
3. Inflation: Any body's guess when India can go the Mexico/ Malaysia way as far as sky rocketing inflation is going. It is virtually accepted by every other minister that it cannot be controlled in the short term. What are we waiting for? for inflation to touch 60% before we start acting. All eyes are on whether stimulus will go or not, any guess as to the extent of counterfeit currency notes in circulation. Rs. 1,14,000 crores last estimate by RBI. Any surprise why inflation is going up without control?

Aristocratic Budget by VIJAYAKUMAR

It seems traditional Old man (Pranab) has faith in creamy layers only those will give support to India both financially and morally. Others have only to vote but not to taste the cake (benefits) from the Govt.

What about educated youth employment ?
What about Landless laborers ?
What about Infrastructure development ?
What about Urbanologist ?

Still 70% of Rural People seeking employment in nearby Urban areas by which transportation is wasted (using different mode of travels like bus/car/two wheelers etc. by which petrol/diesel & man hour&man powers are wasted). More over pollution increases alarmingly. If Govt plan to start suitable industry in the nativity of rural / urban areas then there will be sufficient saving of health & wealth of these people.

Again Govt is paving path to way warding youth.

God only has to save our youth/nation.

Budget 2010-11 by Rajagopalan Krishnan

The budget as usual has the intricate deception. On one hand Mukherjee is giving Income-tax benefits to the salaried class, on the other he has increased the price of gold, automobiles, diesel,petrol, MAT etc. which will definitely have a cascading effect on the common man. When I say common man I am talking about the poor people and people whose income is lower than 1.6 lacs. Government babus are comparatively richer and the unscrupulous staff in excise and income tax department will definitely make a hay while the sun shines! There is no drastic measure on the teeming population nor there are any measures to tackle the skyrocketing food prices. This budget again favours the builders and not the home seekers as the racket involved in the housing and black money churned out in the deal is still untackled. It is common knowledge in each deal minimum 10 to 50 lacs are made in black by the builders and the buyers have no hesitation in shelling out the money in black. It is very difficult to either eradicate poverty or corruption in India with the present government machinery. I am sorry the budget is totally a far-fetched and impracticable one which superficially looks good at a glance. If India has to catch up with the west they have to arrest the teeming population and give enough space for people to breath fresh air as the cities are becoming concrete jungles. In fact the houses are not bought by the needy but people who want to double their income in short span of time.

Not for common Man by chanchal chakrabarti

This budget will please all those, who are paying taxes and in organized sector. what about those who do not fall in any tax bracket. Increase in diesel and petro products will have cascading effect on prices of all commodities. It is the common man who has to bear the burnt for that. common is already reeling under 17% inflation in food and vegetables and I feel it will now go up to 20%. That is the Common Man's budget, my foot.

Given one hand snatched with other hand pankaj ruparel

Given a little tax concession it will only benefit who's income is more than 3Lakhs. Other hand increase the rate of Petro and Diesel and Coal. Within the month the electricity, transportation will increase. Automatic cost increase rate increase. Service tax introduce in Health related service from Hospital. No. tax will be paid by insurance co. If they pay they certainly increase the premium.

Not a Cheering Budget. by Rahul Singh

Pranab babu has once again proved that today's budget goes all out to support the rich investors and the relatively comfortable economic strata of the country. In any case the rich or the higher middle class is hardly bothered by hike in Petroleum products and the inflation, but the middle class and AAM AADMI is certainly hit by the hike in Diesel and Petrol prices as this will have cascading effect on the inflation of all most all the commodities. As such the common man is hard pressed with the high inflation of food items. This will only add fuel to the fire and make the middle class life miserable. The opposition walkout from the Parliament is justified and the government needs to push back the inflation as an immediate priority lest the have nots start looting the haves leading to lawlessness all over.

BUDGET2010 HIGHLIGHTS

2010-02-26T08:29:00.000-08:00

Minimum Alternate Tax up from 15% to 18% on book profits
-Fiscal deficit pegged at 5.5% of GDP
- I-T dept to notify simple two-page Saral 2 form for individuals for current year
-Personal income tax: Nil for income up to Rs 1.6 lakh, 10% for income bet Rs 1.6 -5 lakh
- Personal income tax: Income between 5-8 lakh: Tax at 20%
- Personal income tax: Above Rs 8 lakh, tax at 30%
- Professionals with Rs 15 lakh income need account audit
- Partial rollback of excise duty relief on large cars
- To provide subsidy in cash instead of bonds for fertiliser, oil
- Customs duty on gold, platinum imports raised to Rs 300 from Rs 200
- Service tax to GDP ratio is 1%
- Net revenue gain of Rs 43,500 cr from customs, excise proposal
- Direct tax proposals result in Rs 26,000 cr loss; indirect tax yield Rs 45,000
cr gain
- News agencies exempt from service tax
- Some services hitherto not taxed would be brought under the purview of new Service Tax
- Service Tax rates unchanged at 10%
- No import duty on some equipment in road projects
- Cut in duty for photovoltaic units
- External commercial borrowing will be available for food storage industries
- Clean energy cess on domestic, imported coal
- Peak customs duty remains unchanged at 10%
- Central excise on LED lights halved to 4%
- Agricultural seeds exempt from service tax
- Full excise cut on electric cars
- For solar mission, solar power generating units rates are to be reduced by 5%
- Cut on personal tax rates means saving of Rs 50,000 for income up to Rs 8 lakh
- Partial rollback of excise duty relief on large cars
- Peak excise duty hiked from 8% to 10%
- Market borrowing were up to 3,45,000 cr. Enough to meet credit need of private sector
- Duties on smoking and non-smoking tobacco products up
- Excise duty on large cars, SUVs, multi utility vehicles hiked
- Petroleum products: basic excise duty of 5% crude, 7.5% on diesel & petrol; 10% on other products
- Structural changes in excise duties of tobacco, propose to extend excise duty
- Revenue loss of Rs 26,000 cr on a/c of direct tax proposals
- Surcharge for companies reduced to 7.5%
- Due to direct taxes, result in a revenue loss of Rs 26,000 cr
- Threshold limit for TDS applicability to be rationalised
- Extended scope of presumptive taxes up to Rs 40 lac
- Real estate sector now gets 5 years for completion instead of 4 years before
- To boost tourism investment, offers investment linked tax deductions
- Addl Rs20,000 deduction available for investment in infra bonds
- Reduces current surcharge of 10% on domestic comp to 7.5%
- Automation of excise, service tax already rolled out
- FY11 market borrowing pegged at Rs 3.45 lakh cr
- Govt to set up apex level Financial Stability and Development Council
- FY13 fiscal deficit seen at 4.1%
- Fiscal deficit seen at 4.8% in FY12
- Allocates Rs 1,900 cr for UID project
- Planned expenditure up 15% over 2009-10
- Increase in non-planned exp up only 6%
- Total exp proposed up 8.7% over 2009-10, to Rs 11 lakh cr
- Taskforce to counter problems in Maoist affected areas. Adequate funds will be allocated
- Allocation to Defence over Rs 147,000 crore
- Technology advisory group to be set up under Nandan Nilekani
- Smart card extended to NREGA
- RBI to dole out more banking licences: Pranab
- Sign language training centre for hearing impaired
- Rs 4,500 cr for program of social justice, sr citizens, backward classes, handicapped
- Rs 100 cr allocated for women farmers
- Exclusive skill dev prog in textile and garment sector
- Rs 48,000 cr for Bharat Nirman plan
- Asks state govt to contribute for social security to workers in unorganised sector
- Infra stocks spurt on higher allocation
- To allocate Rs 22,300 cr to Health Ministry
- Allocates Rs 100 cr for new pension scheme, to benefit 100,000 low income citizens
- Khadi institutes get Rs 400 cr
- GOI sign $150 mn deal with ADB for implementing Khadi programme
- Rajiv Awas Yojana now ready' gets Rs 1,270 cr for FY11
- Rs 7300cr in 2011 for backward sections
- GST, Direct Taxes Code from April 2011
- Housing loan: 1% interest subvention scheme extended, allocation Rs 700 cr
- Urban dev allocation up more than 75% to Rs 5400 cr
- Allocates Rs 1,200 cr for drought mitigation
- Indira Awas Yojana: allocation up by Rs 10,000 cr
- NMDC, SVJN stake sale to fetch Rs 25,000 cr in FY10
- NREGS gets Rs 40,100 cr in FY11
- Rs66,1000 cr allocateds for rural development in FY11
- IIFCL disbursements at Rs 9000 cr by March 2010
- School education outlay for FY11 at Rs 31,000 cr
- States to get Rs 3,675 cr for primary education at rural level
- To set up coal regulatory authority
- Spending on social sector at Rs 137,000 cr
- Rs 25,000 cr allocated to develop rural infrastructure
- Growth to exceed 7.2% in this fiscal
- Final FY10 GDP figure maybe higher than estimate of 7.2%
- To set up National clean energy fund
- Plan outlay for Renewable energy ministry up 61%
- Power allocation doubles to Rs 5,100 cr
- To set up 5 more mega food park projects
- Allocation for road tansport Rs 19,894 cr
- Farm loan repayment extended by 6 months
- ECB to be available for cold storage
- To provide Rs 400 cr to boost farm output in eastern India
- Timely repayment of crop loans: subvention raised from 1% to 2%
- Govt is committed to growth of SEZ to promote exports
- Proposes allocation of Rs 200 cr for climate-resilient agricultural program
- Extend 2% interest subvention for exports for another year
- FY11 capital for PSU banks at Rs 16,500 cr
- Extends interest subvention of 2% for handloom, handicrafts for 1 more yr
- Propose new bill to address problems in corpoate sectors
- Will augment assistance to RRBs to strengthen rural sector
- RBI may give license to some more private sector players and NBFCs
- Rs 1,900 cr addl capital in four PSU banks
- Ownership and control clearly defined in FDI policy
- To discuss Kirit Parikh report in due course
- Subsidy for fertiliser sector to increase farm productivity
- Govt to raise Rs 25,000 cr this year to meet cap expenditure requirements
- GST and DTC can be introduced in April 2011
- Steps to reduce public debt, paper to be presented in 6 months
- Signs of food inflation going to non-food items
- Need to review stimulus, move to fiscal consolidation
- Double digit food inflation in 2009
- Export figures encouraging; pvt investments can be expected
- Concerned over emergence of double digit food inflation
- 18.9% growth rate in manufacturing sector in 2009
- Final figure may be higher if earnings in last quarters are strong
- Need to make recovery
- Growth slows down to 6% in Q3 vs 7.9% in Q2 this fiscal
- Focus shifts to non-governmental actors
- 3rd challenge: relates to problems in government system
- 2nd challnge: harden economic growth to make dev more inclusive
- 1st challenge: quickly revert to higher GDP growth path of 9%, cross double digit growth
- Economy is in a better position than a year ago, however, challenges remain
- Uncertainity was there on account of delay in monsoon, concerns about production and food prices
- Pranab Mukherjee starts announcing Union Budget
- Bond yields steady ahead of Budget

INCOME TAX SLABS FOR INDIVIDUAL PAYERS

2010-02-26T01:51:00.000-08:00

The finance minister proposed the following slabs for individual tax payers:

There will be no tax for income upto Rs 1.6 lakh. This was the same earlier.

For income between 1.6 lakh - 5 lakh, the tax liability will be 10%. The older slab was 1.6 - 3 lakh.

For income between 5 lakh - 8 lakh, the tax liability will be 20%. Earlier 20% tax was deducted on Rs 3-5 lakh income.

Individuals with income of above Rs 8 lakh will have tax liability of 30%. Earlier 30% was deducted on income of Rs 5 lakh and above.

The government would allow a deduction of up to Rs 20,000 for investments in long-term infrastructure bonds. The deduction would be in addition to Rs 100,000 allowed under Section 80C of India's Income Tax Act.

EDUCATION IS COSTLY AND BIG AMOUNTS

2010-02-21T09:20:00.001-08:00

Education is costly and big amounts of money are required often. start planning from your child's birth.

In this era of rapid change, the education of children has become a major component of financial planning. For instance, in 2009, all the Indian Institutes of Management hiked their annual fees by Rs 75,000-4 lakh. In percentage terms, they were quite hefty hikes. Both IIM Calcutta and IIM Lucknow hiked their fees from Rs 5 to Rs 9 lakh in a single year -- a 80 per cent hike. Others like, IIM Ahmedabad increased their fees from Rs 11.5 lakh to 12.5 lakh. No wonder, parents, whose children are aspiring to be management graduates, can suddenly fund their numbers going completely berserk. In such circumstances, it is important that parents start early to ensure that there are no hiccups at the final stages. And that implies planning well in advance. Some points that will help in this planning :

EARLY START
Most people associate financial planning in education only with college and postgraduate expenses. But this is not so. Pre-school attendance in the form of playgroups are now common. There are significant costs from this stage itself, which can easily go up to Rs 25,000 to 50000. In a city like Mumbai, the Poddar Group of schools is charging Rs 90000 per term. The option is safe and secure debt instruments, that have the feature of accessibility when required.

PLANNING FOR EXPENSES
The expenses intensify as the child enters school and this part has to be properly provided for. Apart from admission and tuition fees, there are a lot of additional heads -- uniform, school bus, stationary and so on. These could be in the range of Rs 50,000 to Rs 500,000 a year during the school years. On an average ICSE & CBSE schools are charging in the range of 36000 to 100000 lakh fees a year as tuition fees excluding school bus costs.

With the advent of international education, costs will rise further. IB schools are charging fees ranging from 1 Lakh onwards . Some school insist the parent pay at one go which is difficult for parents having more than one child and taking into consideration the runaway inflation I the last 1 year . One way is through a pay-as-you-go effort, whereby the expense is met from regular income. But this policy is fraught with risks. It is better if a regular amount is set aside each year that becomes available over a period of time. Since the payment requirement for such portfolio will stretch over 10 years, a variety of options like bonds, mutual funds and stocks can be deployed.

AIMING FOR THE SKY
An increasing number are sending their children abroad right from this stage, to get a good education. This stage requires adequate use of equity in the portfolio to deliver growth over the years, as there is a long time frame till this stage comes into play.

The period of college education would mean four-five years, depending on the country where the child is studying. The expense will also vary significantly, but for good universities abroad, it can go up to $50,000 a year, which means Rs 22-24 lakh. The best way to provide for this is by ensuring a lumpsum comes in each year during the period when the child is of this age. An important point is also that parents will need to plan for various stages simultaneously and they do not have the luxury of saying, first we will plan for school and then move ahead.

THE BACKUP
This is the traditional area where educational planning took place, but is now just a part of the overall process. Even in India, these expenses are rising and except for a few courses like chartered accountancy, most of the other areas require spending in lakhs of rupees. For example, a two-year stint at an MBA institute, including IIMs, will mean an expense in the range of Rs 6-12 lakh, depending upon the institute chosen.

There can be a variety of areas used for planning these expenses and there is also a lot of time for the efforts to be put into effect, which can be anything from 15-20 years, depending on when the process is started. A mixture of long-term debt and equity would be essential for this purpose, using a wide array of instruments. The better the planning here, the lower will be the reliance on loans for education. Another point is that at all stages of the planning process, there has to be a safety element built in through the use of insurance on the life of the parent. This is important, as there has to be a situation where there is no disruption of the education

NEW DEPOSIT RATES EFFECTIVE FEB 2010

2010-02-21T09:05:00.000-08:00

Banks have started to revise an upward trend in interest rates which are lagging with the current inflation rates after the RBI increased the CRR for banks . Here are the banks which have revised their interest rates on FDS and others are soon to follow .

ICICI BANK

IBDI BANK

J & K BANK

UNION BANK OF INDIA

Strategy to review your MF portfolio

2010-02-21T05:15:00.000-08:00

I have some questions regarding portfolio management and review of mutual funds:

— How frequently should I review my portfolio?

— What are the criteria to decide whether a fund is performing or not?

— If it is underperforming should I wait for some more time period or immediately sell it?

I am 30 years old and can invest Rs 5000 per month in mutual funds. What is the allocation to be made across different classes of funds (large-cap, diversified, mid-cap and small-cap)?

Amol Kulkarni

Mumbai

We appreciate your intention to come up with a systematic strategy to review your portfolio. These tricky questions pose a challenge to many investors. We will attempt to answer them by giving you some broad guidelines. As a general rule, you can review the performance of your portfolio at least once a quarter, subject to the following exceptions:

A huge rally in stocks in a short span of time warrants a cautious approach for two reasons: one, it could be a sign of a bubble in which case you would be better off encashing those paper profits; or two, your asset allocation – between debt and equity or amongst large-mid- and small-cap funds - would have gone out of kilter. You may have to review and rebalance the portfolio in such a case. In addition to this, any change in your strategy or risk profile too would warrant a review.

Is a fund performing?

When you review your portfolio, assess the performance of the individual funds and their overall contribution to the portfolio returns. Compare the funds returns with that of its benchmark and with funds belonging to the same category. For instance, mid-cap funds may be compared with their respective benchmarks and schemes with a similar strategy of investing in mid-cap stocks.

For this purpose do not take short periods of say one month. Unless it has been an eventful quarter, even a three-month period does not provide much insight. Look at the performance over 6-month, 1 year and two-year time frame. In markets such as the present one, a one and two-year period would reveal a lot on how the fund has tackled the different market phases. If you have held the fund for a long period of five years or more, then see if the three-year return has seen any significant change since the last time you reviewed it.

What is the extent of underperformance that can be tolerated would be the next logical question. Should you sell a fund because it returned 2-3 percentage points lower than its peer? Perhaps not. You will then have to look at the risk-adjusted return (as represented by Sharpe ratio). The fund which appears to have marginally underperformed may actually be doing so because of its lower risk profile. That means, its risk-adjusted return could very well be superior to some of its peers.

Note that, even between the same categories of funds — say within large-cap funds or mid-cap funds — the risk profile tends to vary. Most funds provide this data in their fact sheet. However, a variance of over 10 percentage points in performance should be a cause for concern.

Once you notice that a fund's performance is dipping, look out for the reasons as well. Has the fund' sector calls not worked well? Is the fund holding too much cash? If the fund is able to beat its benchmark but struggles to keep pace with peers, it could be because of the fund's conservative mandate or the high-risk mandate of its peers. Look for these variances before deciding on the next course of action. However, if the fund continues to be a laggard even after 3-4 quarters, it perhaps may be a time to take a call.

An active equity fund seldom holds over 5-8 per cent in cash and equivalents. It also strives to remain invested in equities at all times. Funds from the HDFC basket are an example of such a strategy. Remember that while wrong sector calls occasionally can be tolerated, underperformance due to prolonged periods of poor participation in equity or high cash holdings isn't a good strategy. It defeats the very purpose of your investing in equity funds.

Sell immediately?

Was your fund in the top-10 list or top quartile of the equity fund list and has now slipped slightly lower in the last three or six month period? First thing: Do not panic and sell right away. You do not have to chase returns at all times. Only prolonged periods of underperformance, as mentioned earlier, should prompt you to sell a fund.

In your entire portfolio, there will always be a few funds that aren't great contributors to the overall returns score. Such funds, unless they are a drag the returns of your funds portfolio, need not be sold. A value-fund or a dividend yield fund for instance, may not be the best performer during bull phases, as was seen in the previous market rallies. However, such funds warrant a definite hold if they outperform their category peers. Besides, their value-investing approach may come in handy during periods of market correction. Gold funds or international funds too qualify as primarily diversifiers. So, do not expect these funds to keep pace with domestic diversified funds.

As for intention to hold across market-cap segments, much would depend on your risk appetite. Given your age, we think it would be safe to assume that you can stomach some risks. You can in such a case go for 10-15 per cent of pure large-cap funds, 40 per cent in mid-cap and thematic funds and the rest in diversified funds with a long-term track record.

Interest rate hikes are not necessarily bad for the equity market

2010-02-21T05:13:00.000-08:00

Interest rate hikes are not necessarily bad for the equity market if past experience is anything to go by, feels Mr Nandkumar Surti, Chief Investment Officer, J.P. Morgan Asset Management India. In an interview with Business Line Mr Surti gives his opinion on the short-term concerns in the equity and debt markets and the opportunities the latter offers currently.

Excerpts from the interview:

Have the inflationary/interest hike concerns and credit crisis in certain European economies affected fund flows into emerging markets?

In the short term, the developments in Europe will affect the fund flows to the emerging markets. By and large, Asia will adopt the interest rate normalisation process in the course of CY2010. This is likely to be non-disruptive for most of the markets. What one has to realise is that we are seeing a much better growth in the Asia region as compared to the rest of the world. We believe that once the current crisis is resolved, one should see money chasing growth economies and India along with China is obviously the fastest growing economies.

Even as earnings hobble to normalcy, higher raw material costs and interest rate hikes could be threats once again to corporates. Do you believe the turnaround could be short-lived?

Rising input costs as growth finds a stronghold is obviously something which corporate India will have to contend with. In general, we have seen raw material costs rise and margins compress. But this is likely to be compensated by a gradual rebound in volumes.

Also, as mentioned earlier, we see the interest rate reversal more as a rate rationalisation process rather than a tightening. We see liquidity conditions to be, by and large, comfortable. Even though the RBI will start raising the repo/ reverse repo, we see lending rates, by and large, stable as spreads continue to be very attractive.

There could be some short-term pressures in the first half of the next fiscal on account of the borrowing programme. But that presents more of an investment opportunity on the bond side.

Do you believe that the market has fully factored in inflationary concerns, monetary tightening and the impending rollback of stimuli?

The worst expectations on the street are a close to lower double digit on inflation. The bond markets are more concerned about the imminent government bond supply rather then the rate increase. We expect the government borrowing programme as well as rate hike to be front-loaded in FY2011. Liquidity mismatches amidst higher supply could put some pressures on rates.

However, we see the bond markets at the short end of the curve aggressively pricing in rate hikes of close to 150 bps in the next year. We see this as an investment opportunity. We have seen in the past that interest rate hikes are not necessarily bad for the equity market.

An ascending interest rate scenario can spell trouble for long term debt funds?

We see interest rates more a function of high government bond supply rather then the fear of RBI rate hikes. 10-year government bonds could trade in the range of 8-8.25 per cent in the first quarter of FY-11 on the back of the large supply.

However, we see lot of value in corporate bonds in up to three-year segment where we see bonds trading at a much higher spread compared to our assessment of RBI rate hike.

With improved performance by corporates has the risk perception of corporate bonds come down?

In the worst of 2008, we have seen only a few corporates being affected by the liquidity/ credit crisis. This is largely on account of the derivative/ forex exposure of these corporates. With improved fundamentals, good local and internationally liquidity, we see the worst for the corporate bonds to be over.

With narrowing credit spreads, does corporate bond market offer good investment avenues for debt funds? What is JP Morgan's strategy with its debt fund?

AAA Corporate bond spreads have narrowed in the bench mark 5 and 10 years. In the segments up to 3 years, we see bonds trading at much higher yields on account of temporary factors like CRR hike and impending traditional March tightness. We see value in these segments.

What should a debt fund investor's strategy be at this point in time?

We are advising our clients to increase asset allocation to short-term bond funds. A short-term bond with high current cash exposure stands a very good chance to build portfolio for next 3-6 months by taking advantage of the current high short-term rates. We believe that investors should avoid long bonds for the next three months and wait for more clarity on the borrowing calendar and the RBI's April Monetary Policy Review.

Q What is your reading of the Q3 earnings in India? Have valuations run ahead of earnings growth?

The aggregate financial performance of corporate India for the quarter ending December 2009 was in line to a little better than expected. Excluding oil PSUs (where quarterly data can be misleading due to subsidy etc.), operating profit of Sensex companies rose about 22 per cent YOY, about 1 percentage point higher than estimates. Net profit for Sensex companies rose about 17 per cent YOY, 2 percentage points higher than estimates. A broader universe of corporates delivered faster growth with aggregate operating profit rising 34 per cent YOY (higher by about 3 percentage points) and net profit by about 26 per cent YOY (in line).

With the correction in the equity market from the middle of January we believe that valuations are actually starting to look reasonable. With more evidence of accelerating growth emerging we would expect market to get valuation support in case it continues to correct owing to external or macro factors.

Q. Can India Inc's revenue growth be said to be back on track? Is the growth indicating volume as well as pricing power traction?

GDP for current fiscal is expected to grow at 7.50 per cent and for FY2011 at 8-8.50 per cent and inflation at an average 6 per cent. Given this, a 13-14 per cent nominal growth of the economy is expected. Within that one can expect better managed companies to post a 20-25 per cent earnings growth. Some of the growth we have seen in the last 6-8 months has obviously been aided by the fiscal and monetary policies in India. We have seen latest IIP number at 16.8 per cent, with a sharp upward movement in the index itself. This is a very positive sign. We see fiscal and monetary environment to be reasonably conducive to growth. While we see volumes coming back, we think that corporate India would allow volumes to pick rather then look for aggressive price increases.

REAL ESTATE TAMILNADU AND KERALA

2010-02-21T05:09:00.001-08:00

True Value Homes (TVH), a leading engineering, construction and project management firm, plans to launch affordable housing projects in Kochi, Coimbatore, Tiruchi, Tirupati, Madurai and in multiple locations in Chennai in the next three months.

According to a press release from the company, the demand for affordable housing in India is still far outstripping the supply. The shortage in the low-income housing segment is estimated to be around 2.1 crore households. This presents a Rs13-lakh crore opportunity for developers. The affordability of a house for an average middle-class household has been defined to be in the Rs 3-10 lakh range. At this price, there could be a potential of 21 million buyers.

Mr N. Ravichandran, Chairman, True Value Homes India Pvt Ltd, said in the press release, “Addressing the growing demand of the affordable homes segment, TVH Svaya is poised to provide world class housing, which is now within the reach of the middle class.”

In Chennai the company has launched TVH Svaya, a $60-million residential project spread over 13 acres with 840 apartments of 555-1,085 sq.ft and priced between Rs14 lakh and Rs 23 lakh. TVH Svaya is situated in Sriperumbudur, a suburb to the west of Chennai on Kundrathur High Road. It targets the middle class family earning a cumulative income of Rs 5 lakh per annum. The apartments would be ready for occupation within six months of booking. TVH is a professionally managed company based in Chennai which has completed more than 4 million sq.ft of built-up space, with about 6 million sq.ft under construction and 28 million sq.ft in the pipeline covering residential and commercial property across Tamil Nadu.

‘Infrastructure thrust vital'

India's economic growth has to be supported by adequate and sustainable infrastructure development, according to a report “Infrastructure Development in India: An Assessment of Status and Strategies” by NCAER. The report provides a review of the progress of infrastructure development for seven sectors.

As the economy has accelerated growth, the utilisation rates of infrastructure have gone up whereas infrastructure building is itself lagging. There is a need to improve implementation performance. The report suggests full exploitation of the current potential of the infrastructure sectors; slack capacity in one sector also implies less than full utilisation of capacity elsewhere.

The report covers seven sub-sectors of infrastructure — power, telecommunication, roads, railways, airports, ports and irrigation.

The release, quoting Mr Suman Bery, Director General, NCAER, said “The Eleventh Five year plan (2007 to 2011) projected investments in infrastructure development to the tune of $500 billion. The current economic slowdown has cast some doubts on the scale of investments that may be possible in a short period of time, but there is a wide recognition that infrastructure development would be essential for sustaining high rate of economic growth over a longer term which in turn is necessary to achieve developmental goals.

“This study points to areas which require attention to improve performance in infrastructure development. It is hoped that this report will act as a useful source of reference to policy makers, academics, corporate sector and the public-at large on Infrastructure development in India.”

Long-term investing is about objectives not risk

2010-02-21T05:08:00.001-08:00

Investors typically believe that stocks are less risky in the long run.

Some lean on this belief to extend their time horizon when faced with unrealised losses.

As one investor argued, stocks mean-revert and, hence, carry lower risk over the long term. Does mean reversion justify long-term holding of stocks?

This article discusses mean reversion and explains why it is counter-intuitive to hold mean-reverting assets for the long term.

It then argues that investors hold assets for the long-term because they are intuitively aware of asymmetric returns-compounding effect.

It also shows how the core-satellite framework helps in moderating these factors, encouraging holding stocks for the longer term.

Mean reversion

The argument that stocks are less risky in the long run is puzzling. For, if stocks are risky in the short run, where does the risk disappear in the long run? One argument could be that investors are able to predict variation in stock price over the longer horizon. This type of variation that reduces long-horizon risk is called mean reversion.

This means that a short-term downtrend in asset prices will be likely followed by an uptrend, as prices correct to their long-run average. Likewise, a short-term uptrend in prices will lead to lower returns expectations, causing price correction in the future. All of this means that price risk reduces over the longer horizon.

Now, the basic principle of financial market is the risk-return trade-off.

This means that the investors can only expect returns that are commensurate with the associated risks.

If mean reversion were indeed true, the long-run price risk for stocks will be low. And that would translate into lower long-run returns.

So, why then do investors extend their time horizon? The answer, perhaps, rests in the fact that investors are intuitively aware of asymmetric returns-compounding effect.

Asymmetric compounding

Suppose an investor buys a stock for Rs 10,000. Assume that the stock can only take two states — it can either rise 50 per cent or decline 50 per cent. If the stock declines in the first year by 50 per cent to Rs 5,000, it has to move up 100 per cent in the next year to recover the initial capital. Can it?

Even if the stock were currently way below its long-run average, it may take a long while for it to claw back the initial loss. Suppose instead the stock had risen 50 per cent in the first year to Rs 15,000.

It has to lose only 33 per cent to fall back to its initial investment.

The above example demonstrates a fact about returns-compounding — it takes a lot of effort to recover capital than it is to lose it!

Returns-compounding can, hence, have a devastating effect on the portfolio.

Investors intuitively understand this effect.

That is why they conveniently convert their short-term holdings into long-term investments when there is a large loss in the portfolio.

The problem, however, is that mean-reversion questions long-horizon investment while asymmetric compounding encourages such investments. What then should investors do?

Conclusion

Investments should be driven by liability structures such as buying a house or protecting pre-retirement lifestyle, post-retirement.

Mean reversion and asymmetric returns-compounding would then be drivers for the strategic asset allocation decision during the portfolio construction phase and later, for portfolio rebalancing.

The debate on whether stocks are less risky in the long run arises from the need to shift assets from short to long horizon.

The core-satellite portfolio overcomes this need for horizon-shifting by separating short and long-horizon exposures.

The core retirement portfolio, for instance, is passively-constructed with a horizon to match the retirement date while the satellite is structured to provide excess returns through continual rebalancing.

Such structures do not settle the debate on whether stocks are less risky in the long run; they help investors' side-step the issue and construct meaningful portfolios.

Plan and track to grow your money

2010-02-21T05:07:00.000-08:00

The world is changing, and so is world of money. Finance and personal finance rank first and third, respectively, in the most searched keywords by Indian netizens.

Statistics show that most people could manage very well on the income they have if they are able to keep their bills and expenses within the income. Sadly, too many people do not understand how to do this.

Simply having a budget in place or keeping up with your checking account isn't enough anymore. Our research shows that a person earning Rs 1 lakh per month has 50–100 financial transactions across all instruments each month. It's difficult to track these spends and get a clear picture of where your money is going.

Goal-setting

How many times have you made a New Year's resolution to stay within your financial budget? Started out with gusto on January 1 and lost steam by January 31?

An important aspect of financial planning is setting limits or thresholds for your spends at the beginning of the month and tracking it against your actual expenses.

Goal setting is a great planning tool that brings in discipline and rigour to your financial management. Try classifying goals as either wants or needs.

Go a step further and add long-term or short-term to the description. For instance, say you want to buy a new car soon. Gathering the money for a down payment without borrowing or dipping into savings would be a short-term need; call it priority number one. Longer-term needs, such as contributions to a retirement fund, can get priority two.

Choose goals you can get excited about. Do you need to save for your dream car or that house you've been wanting for years? To motivate yourself to spend less, always visualise your future with your dreams coming true.

It is important you know where your money's going so you know where you can save. Make a budget that will meet your financial duties. If you have to cut down on certain expenses to live within your budget, then do so. Spend money that has been set aside for a particular expense only for that purpose.

We all know what it is like to have our money dribbling away one coin or one note at a time. It can be very helpful to record all expenditure for a set period of time.Once you know where your money is going, you can curtail unnecessary expenses.

While the easiest way to manage money is to put a piece of paper in your wallet or check book and check what happens with every rupee you spend. But practically does this really work? And, what if you have accounts across multiple banks? How do you remember your transactions ?

In such a situation, the best tool one can the one that organizes your financial information by bringing your accounts together in one place – including banking, credit card, loan and investing accounts. And lets you check in anytime to see exactly where your personal finances are for the week, month or year.

Mobile phones are almost life savers today. Try and setup bill reminders to not miss payment dates and input expenses on your phone's calendar. So when you sit down during the weekend with your accounts, you know exactly where you spent during your last outing.

If you break down your personal finances, they are less overwhelming. And you have learnt that you can keep them organised if you take a few minutes each day. A predictable financial future will leave you with more money in your pockets.

STOPPING YOUR SIP IN THIS VOLATILE MARKET - IS IT WISE VIEWS FROM READERS

2010-02-21T00:21:00.000-08:00

Sanjay Gupta says
You give your hard earned money to a mutual fund, SIP etc for higher returns. The Fund or the Company which has taken your company has people with high pay checks, advertisement etc.

Will it be in a position to give you the returns as promised, I doubt. Better to invest in A group shares and forget or invest in FDR,PPF, NSC You investments would be safe and sure.

If you speak to people you would find 90% of people have lost their money taking interest into account. Why let others to train and earn at your expense.Why not do it on your own.

Every Investment in Equity is Risky by Jagan P James says

Even SIP is as risky as any other investment, only console is you don't feel the pinch of it till you go for closing it. No matter, which equity based investment you enter, you make money only when the market is in an up-move.

Say you invest 10000 on a NAV of 100, when you want to en cash if the NAV is less than 100, no matter how much ever NAV has increased in the mean period, ultimately you wont even get your principle.

Even if 10000 was invested as sip over a period as 1000 each , still if you en-cash when the market is in a down-slide, there is an equal chance of getting lesser than the principal.

HEMAL PAREKH OF ARIHANT INVESTMENTS MUMBAI REPLIES TO QUERIES

2010-02-18T03:08:00.001-08:00

Pavan Pal Singh asked, I have investing more amount than required in ELSS MF's , can I redeem my excess units if I don't claim any Tax saving on them
Hemal answers, hi, all the units are locked in for 3 years. You can redeem the excess units only after completing the mandatory lock in of 3 years.

Shripad Bhatt asked, Please suggest which 2-3 of the following funds are best to start SIP for 2000 each. 1. Sundaram SMILE 2. SBI contra 3. ICICI discovery 4. Birla Frontline 5. Franklin bluechip 6. IDFC premier equity. I already have SIP with HDFC top-200, DSPBR top-100 and Sundaram Midcap. Please comment. Thanks in advance.
Hemal answers, hi, all are good. Pick any three you wish to.

Sudesh Ghosh asked, Sir can i invest in mutual funds in the name of My Wife & Daughter Kindly advice
Hemal answers, hi, yes you can invest in mutual fund in the name of your wife and daughter. If daughter is minor, then you or your wife can be the guardian.

Mod N K asked, I have invested in SBI Infrastructure fund, HDFC Mid cap Opp. fund and Morgan Stanley A.C.E Fund. The former twos are performing not up to my expectation. Should I continue or exit after lock in period
Hemal answers, hi, redeem all the 3 funds. Invest in diversified equity funds -

J Rao asked, Good afternoon. My son is 10 months old and we have put 1.1 lakh Rs. in his kid's account which he got as cash gifts from our friends and relatives. I want to invest this money with an investment horizon of 15 years for his higher education. Please suggest a plan.
Hemal answers, hi, I am sure you are already on your way to build a large corpus to take care of your son's higher education and marriage. Since time is on your side, I would advise you build a portfolio consisting of equity funds. You can invest up to 75%-80% in equity. The rest can be invested in safer instruments like FDs

Raj K asked, Dear Mr Hemal, I pay House Loan Rs 8500 per month and i can save only 10000 total in a month, please advise if i can invest remaining Rs 1500 in ELSS or SIP Mutual fund and which are good one.
Hemal answers, hi, consider ELSS fund only if you want to save tax. Otherwise invest in non-ELSS funds.

Balkrishna Anpat asked, is icici pru tax fund is good
Hemal answers, hi, the track record is nothing to write home about. The fund's performance has not been consistent. I would rather consider funds like Franklin India Taxshield or Fidelity Tax Advantage Fund.

BHUSHAN asked, HemaljiI, PLEASE ADVISE SAFE INVESTMENT OPTIONS FOR LUM SUM AMOUNT FOR TIME HORIZEN TWO TO THEE YEARS. HOW SAFE IS INVESTMENT IN MIP HDFC LONG TERM OR ANY OTHER GOOD MIP.
Hemal answers, hi, HDFC MIP - Long Term is a good investment idea for investment horizon for 2-3 years

Viji Pitambar asked, hello sir.. I'm looking to invest in any fund mainly which gives tax benefits and also good returns for short term. can u please suggest me a good option for the same
Hemal answers, hi, unfortunately all tax saving investment encourage you or I should say force you to invest fo the long term. Hence, all tax saving instruments have a lock in of atleast 3 years

Sheetal Kaikaini asked, what is your view on the markets. how do you look at them in this calendar year
Hemal answers, hi, my view on the market is positive. the markets are awaiting the budget to be presented this month. Also, there are concerns on financial condition of Greece which has turned the sentiments negative. India as a country is doing well. If you are a long term investor with a time horizon of atleast 5 years then you should consider investing in Indian equity market

Badshah Sheikh asked, sir 25 year from now i am 36 yrs old, i want my wealth Rs.1 crore that time how much i invest per month through sip. and suggest few company's have already sip in hdfc top 200.idfc premier equity, sundaram select focus.
Hemal answers, hi, assuming your investment fetch you compounded annual return of 12 over the next 25 years, you will have to invest Rs 5,300 every month to reach the target of Rs 1 crore.

BHUSHAN Parmar asked, PLEASE ADVISE WHETHER MIP IS GOOD OPTION OR DEBT FUND FOR SECURE INVESTMENT WITH LITTLE LOWER RISK.
Hemal answers, hi, MIPs are debt funds with 15-30% exposure to equities. This makes them candidates for risk. The risk however is low. The returns are not assured.

Umesh More asked, sir, i need help in planning my investments for retirement age--i am 40 yrs old--how can you help me
Hemal answers, hi, the best approach would be to get the retirement plan made for yourself. The plan will guide you regarding the amount you will need when you retire, the amount of investment you need to do every month to build the retirement corpus. Take help of a an honest and competent investment planner.

Deepak Despande asked, Hello sir. Please clarify. I have a investment of rupees two lacks in 5 funds equally. now my return is around 21% and i want to book it. What is the procedure to only take my profit out but not the investment. Is it possible?
Hemal answers, hi, redeem units equivalent to the profit in each fund.

Haris G asked, I have invested 1.5Lac in post office MIS in Jan this year and planning another 1.5Lac in march do you think it's wise to invest in PO Mis or is there any other alternative
Hemal answers, hi, I do think that it is a good investment in today's times given the fact that the rate of interest are low for most fixed income securities.

Riddhima Sharma asked, i am 38yrs. Annual earnings 7lac. what will be the best term insurance policy for me
Hemal answers, hi, the thumb rule for arriving at a figure of adequate insurance cover is 20 times your annual income. In your case it will be around Rs 1.40 crores.

HARIIYER asked, I am investing Rs.2000/- PM thro SIP in each of HDFC Growth, HDFC prudence & IDFC Premier equity plan A. Pl advise shall i stay with this funds.
Hemal answers, hi, your funds are good but you are too heavily exposed to HDFC. I would choose Franklin India Bluechip Fund over HDFC Growth Fund

Cajetan Serpao asked, Can you please let me know is it worth to have Birla Sun life insurance dream plan which is a term plan compared to other term plan, since this provides a guaranteed maturity benefit. Thanks in advance.
Hemal answers, hi, I would advise you to opt for a simple term plan. Any frill attached to a term plan makes it unattractive from cost perspective

Maneka Rang asked, Why don't you suggest index funds any reasons for specific aversion to INDEX funds ?
Hemal answers, hi, index funds are good investment avenues. Research shows that in India it is easy to outperform index like Sensex and NIFTY. Hence, my preference for non-index based diversified equity funds

Nageswar Uppludu asked, R/Sir, Suggest one best Pension fund.
Hemal answers, hi, if you are planning to take a pension plan to take care of your retirement, then Pension plan is certainly not the ideal investment. I would rather build a retirement corpus that can generate regular income for me post retirement. I would encourage you to take help of an investment planner to help you with the corpus you should build by the time you retire.

Trikkanad Dilip asked, Hi Sir, I am investing in SIP and i plan to take out money after 10 years (my goal). Some analysts say that if you don't take out money in proper time, SIP is not useful. Should i keep withdrawing in between or let corpus build? Your comments please.
Hemal answers, hi, Its a good practice to book profits occasionally. If the returns on your funds are more than the target return, then booking profit to take out the excess return makes sense. Say for e.g. if your target return is 15% and you made 25%, then book profits in a way to take out the excess 10%

MAYANK asked, Hello sir I have 2Lacs rupees of disposable Income.. I want to Invest it for 2-3 Months Time horizon.. I want to invest it in safe hands.. Want to gain maximum by Investing in less risky assets. Pls let me know the various alternatives where i can look upon? Thanks
Hemal answers, hi, the best investment for 2-3 months with negligible risk would be liquid plus funds. You can consider HDFC Cash Management Fund - Treasury Advantage plan among others.

N Venkat asked, i have been investing last 2 years in DSP BR Equity Fund and Reliance regular saving equity fund? is good to invest in these two using SIP mode?
Hemal answers, hi, you can continue investing in these funds via the SIP route. Over the period ensure that you hav a balanced portfolio. In other words, invest in 4-5 well managed funds to diversify the risk.

Lalit Shah asked, is it beneficial to redeem tax saving MF after three year
Hemal answers, hi, I would suggest redemption only if the fund's performance is not up to the mark or as per the expectations. If the fund is doing well then it is a better idea to hold on.

MANISH BANSAL asked, what is effect of price rise on share market
Hemal answers, hi, inflation leads to increase in interest rate thereby pushing up the cost of capital. The borrowing cost of companies go up thus reducing their earning/net profit. In a nutshell, inflation doesn't augur well for stock markets.

Kore Ashish asked, Sir, please tell me the future prospects of Sundaram Thematic fund & Tata-indo global infrastructure fund which i presently own.
Hemal answers, hi, these are thematic funds, their performance is directly linked to the performance of the stocks that form the underlying theme. These funds don't show consistent performance. They move in cycle. At times their performance is above average and at times below average. I would not recommend these funds to any investors. You should redeem and invest in well managed diversified equity funds.

Ramesh Kavaskar asked, hdfc prudence and hdfc balance what is the difference and which is better why
Hemal answers, hi, HDFC Prudence was acquired from Zurich Mutual Fund which was merged with HDFC MF. HDFC Balance fund is the one launched by HDFC MF. I would recommend HDFc Prudence over HDFC Balanced on account of consistent performance and a longer track record.

Rama Magazine asked, what r the smart tips considering the forthcoming budget & the introduction of direct tax code.
Hemal answers, hi, very difficult comment on the same. All that is being said is sheer guesswork. I would recommend that you wait for the budget

Sakshi k Jain asked, I have almost 10 lacs in hand. I already have fds worth 15 lacs, PPF quota is full for the year, what are the good options to invest where I can get 10-12% return without much risk
Hemal answers, hi, you can look at balanced funds - these funds invest 65% of the corpus in equity and the rest is invested in debt securities. Your investment horizon should be atleast 3 years. As far as risk is concerned - I would classify it as moderately risky

Avinash K asked, Kindly suggest some of the good mutual funds for SIP for long term holdings (10 t0 12 years).
Hemal answers, hi, among the well managed diversified equity funds that I like and personally invest in - HDFC Equity Fund, Franklin India Bluechip Fund, Sundaram Select Midcap and DSP BR Equity Fund.

Hanuman Singh asked, How is HDFC standard life policy? Can we go for it?
Hemal answers, hi, you have not mentioned the policy name/type. Hence difficult to comment. As far as insurance is concerned, I prefer only term plans. These serve the real purpose of insurance i.e. risk cover against untimely death. I would not prefer any investment linked policy like endowment. ULIPs is strict no no.

ELSS DECODED

2010-02-17T09:25:00.001-08:00

ELSS Decoded

With the current fiscal year coming to an end, fund houses are back to marketing equity-linked tax saving schemes (ELSS) aggressively. Traditionally, it is during February and March that many investors buy into these schemes to avail of the tax breaks these schemes offer.

Going by the historic data, close to 50% of the annual net inflows into ELSS are recorded during the past two months of the fiscal year (April to March).

Fund houses try to lure investors to put money in such schemes with tag lines such as, "Yeh tax bachaye, investment ka fayda bhi laye" or "Get triple tax benefits and doosra income advantage". If you too are tempted to invest in one of these equity mutual funds (MFs), which offer tax advantages. ETIG offers you a few tips to make the best out of your hard-earned money.

ELSS OR (NON TAX-SAVING ) DIVERSIFIED EQUITY?

What differentiates the two is the tax deduction of up to Rs 1 lakh under Section 80C of the Income-Tax Act available to ELSS. This tax benefit is not available for investors who put money in other diversified equity schemes. However, as far as the investment objective is concerned, there is no fundamental difference between these two categories.

Having said that, it is important to note that historically, the average returns in the category of diversified equity schemes have always been relatively better than those of ELSS. (See Table). The Table is only indicative of the average category performances. The performance of the tax saving scheme may be relatively better than their diversified equity peers on an individual fund house level.

ELSS OR (NON TAX-SAVING ) DIVERSIFIED EQUITY?

Given the mandatory three-year lock-in period in the case of ELSS, many people assume that in the absence of any immediate redemption pressure, fund managers lack the kind of enthusiasm to manage an ELSS which they otherwise do while managing other (non tax saving ) diversified equity schemes. This presumption is however subjective for each fund house and every fund manager.

But having said that, one can not also deny the fact that the mandatory three-year lock-in period helps promote the habit of long-term saving among investors. For instance, this mandatory lock-in period may have turned boon in disguise for many investors when the markets passed through a transitory phase in 2008. Those who continued to remain invested (mandatory or otherwise) in their equity schemes would have recouped most of their losses in 2009.

DIVIDEND OR GROWTH?

If the thought of locking in investments for three years puts you off, investors can opt for dividend rather than the growth option for their ELSS investments. This will ensure that any appreciation in capital is returned back to the investor periodically ensuring that capital is intact and locked in for three years.

For instance, Rs 10,000 invested in an ELSS appreciates by about 20% in a year and if the fund declares a dividend of, say 10%, an investor would get back Rs 1,000 while the balance Rs 11,000 continues to remain invested next year. Periodic dividends received annually can then be re-invested by the investor in any other financial instrument or product.

IMPLICATIONS OF RE-INVESTING DIVIDEND?

Dividend re-investing is an option where instead of paying back the dividend declared to the investor, the fund house uses the money to buy additional units of the scheme for the investor. The option is thus pretty similar to the growth option where the money grows within the scheme itself.

There is, however, a flip side to this option, especially as far as ELSS is concerned. Each time the fund declares a dividend and purchases additional units of the scheme, the same will be considered as a fresh investment for the purpose of tax deduction under Section 80C of the I-T Act, which provides for tax deductions on specified investments.

Investors can thus claim a deduction to the extent of new units purchased, up to a maximum limit of Rs 1 lakh. Each such purchase of fresh units will be treated as a new investment and thus locked-in for three years starting from the date of their purchase or date of dividend reinvestment. Thus, if the dividend is re-invested in, say the third year of investment, the money will be locked in for a further three years.

SIP OR LUMP-SUM INVESTMENT?

A systematic investment plan (SIP) is ideally the best route to make periodic investments in equity schemes. Working on the principle of a recurring deposit scheme of any bank, a SIP ensures that a small number of units of an MF are purchased each month, irrespective of market volatility. Investors can thus get a larger number of units with the same monthly investment when the markets slide and a lower number when the markets are rallying.

In the case of an ELSS, however, each SIP is a new investment that means a lock-in period of three years. A lump-sum amount of say Rs 1,00,000 invested in an ELSS in March 2007 can be redeemed by the investor by the end of March 2010.

However, if the same amount is invested through a monthly SIP of Rs 1,000 each, only the first SIP will be redeemable in March 2010. Thus the SIP that got invested in September 2008 will be available for redemption only by the end of September 2011.

Diversify and evaluate costs for better returns

2010-02-17T09:24:00.001-08:00

Diversify and evaluate costs for better returns

Basically, a mutual fund is a collection of money (funds) from many investors. This pool of money is managed by professional money managers, for investments in market instruments. Investors who pool money by buying mutual fund units are its shareholders (unit holders).

Fund managers invest this money and 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 it can rise in value.

Advantages of investing in mutual funds include professional management of funds, research of securities, 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 and lack of control on investments made by fund managers.

Diversify and evaluate costs for better returns

First of all it is important to ascertain and identify your financial needs and goals before taking investment decisions.

Financial needs/goals could be short or medium-term goals like planning for a vacation, creating an emergency fund etc, and long-term goals like a child's education, retirement planning etc.

Identifying your financial needs and goals helps in selecting the investment instruments and quantum of investments.

There are many flavours in mutual funds available in the market and their offerings vary from low risk and low return to high risk and high return funds.

Liquid mutual funds

Liquid mutual funds invest in safe instruments like government securities. This a good option for investors looking at parking their money for a short term.

Investments in liquid funds are fairly liquid. An investor can enter or exit from the fund at any point in time. Thus, if short-term liquidity is your highest priority you can look at investing in liquid mutual funds.

Debt funds:

Debt funds and balanced mutual funds are safer investment instruments. Balanced funds invest a certain portion of their corpus in blue-chip stocks and hence they provide better returns. Investors with a low risk profile should invest in balanced mutual funds.

Equity funds

There are various schemes and investment instruments available in the market in this category. Investors should be careful while investing in equity mutual funds.

Usually, the high beta funds perform very well in good market conditions but on the flip side, they under-perform the market in adverse conditions. Investors should go in for a basket of equity funds with different themes in order to diversify their risk in the market.

Tax-saving mutual funds:

These are also known as equity-linked savings schemes (ELSS). Investments in a tax-saving fund provide rebate under Section 80C of the Income Tax Act.

These funds come with a lock-in period of three years and invest a major portion of their funds in equity and equity-based instruments. Investors should select a scheme carefully after studying the fund performance, expenditures likely to be incurred, and method of investments.

Unit-linked insurance plans (ULIP)

Investments in these funds come bundled with insurance. These funds invest the money in equity or related instruments and deduct a portion of the investors' funds to provide them insurance cover. Investors have the option to select a debt fund or equity fund for their investment.

Investors should select the scheme carefully after studying the fund performance, management fees and chances offered to switch between funds, based on market conditions.

Gold funds:

Investments in commodities, especially gold, have picked up in recent times. The gold-based investments add another dimension to a portfolio. It acts as a debt instrument and usually provides good returns during uncertain economic conditions. Investments in gold based funds (exchange-traded funds) are a good way to take positions in gold rather than physically holding it. It is much safer to hold than the metal and is easy to liquidate in the market.

Points to keep in mind

Here are some points investors should keep in mind while planning a mutual funds portfolio:

Diversify: Don't put all the eggs in one basket. Look for diversification of your investment instruments.

Targets: Always have realistic expectations of the investment's performance. Try to understand why a fund has the capability to out-perform (could be due to the sector or experienced fund manager). Remember, the past performances of the instrument may not be repeatable.

Charges: Consider the fees, loads and taxes applicable on the investment

IDEA CELLULAR WILL HIT 77 NEXT WEEK

2010-02-17T08:39:00.000-08:00

Idea Cellular will go up to Rs. 77 within next week before budget by Mittal kawita

Motilal Oswal has maintained buy rating on Idea Cellular with a price target of Rs 77 in its Feb 25, 2010 research report.

Idea Cellular's 3QFY10 PAT of Rs 1.7b (down ~23% YoY and QoQ) was significantly above estimates. Consolidated revenue grew 15.3% YoY and 5.9% QoQ to Rs 31.5b led by robust traffic growth of 14.9% QoQ (vs 3.3% QoQ growth in 2QFY10). RPM decline of 7.8% QoQ also surprised positively (our est of 10% QoQ decline). Consolidated EBITDA grew 16.7% YoY and remained flat QoQ despite higher new circle losses and ESOP provision. While competitive intensity remains high, we are positively surprised by the robust volume pick-up and sustained EBITDA margin in established circles.

Solid operating metrics: Idea (ex-Spice) reported 3QFY10 ARPU of Rs 200 (vs est Rs 192), down 24.8% YoY an 4.3% QoQ. RPM declined 19.6% YoY and 7.8% QoQ to Rs 0.51. Total volumes carried on the network increased 43.7% YoY and 14.9% QoQ to 57.8b minutes. This is the highest traffic growth reported by Idea in the past six quarteRs . Minutes of use per subscriber increased 3.7% QoQ to 389 minutes, likely on seasonal strength, MOU elasticity and regain of volume market share post tariffs cuts. This is the fiRs t instance of MOU growth for Idea in the past six quarteRs . Churn rate increased to 9.1% per month, reflecting significant volatility in the pre-paid market.

VISHAL MENGANANI OF TRIDENT FINANCE REPLIES TO QUERIES

2010-02-17T02:22:00.001-08:00

Dutta asked, is there any limit of tax benefit on pension plan, i want to invest 1 lakh every year what is my tax benefit
Vishal MengananI answers, ideally don’t go for off the shelf products as your needs are unique to you, go for a customized retirement plan with a financial planner. ________________________________________
Pasad D K asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers, Network 18 FD
________________________________________
Abhishek asked, Hello Sir, I have now joined as Management trainee in a finance Co. I just want to know which scheme will be more beneficial for me for investment monthly. I am now drawing salary 15k per month. Apart from SIP is there anything beneficial? If it is SIP then should I go for SBI or any other organizations?
Vishal Menganani answers, look for the track record of the scheme apart from the fund house. you can go for franklin bluechip, HDFC top 200 and DSP BR 100
________________________________________
Pravakar asked, Hello Sir, good afternoon. i am in confusion i.e. shall i go for Recurring Deposit for 5 year with an amt of 1000 or invent 15000/yr in HDFC for 5 yrs.
Vishal Menganani answers go for HDFC Ltd announced a Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Reddy asked, Hello Sir, I have started investing SIP in HDFC TOP 200 (Rs. 1000), DSPBR TOP 100 (rs. 1000),HDFC Prudence Fund(Rs. 1000), DSP BR Balanced Fund (Rs. 1000), IDFC Premier Equity FUND (Rs. 2000).Kindly tell me about my portfolio.
Vishal Menganani answers stay invested
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TIWARI asked, HELLO SIR, KINDLY ADVISE WHETHER LUMP SUM AMOUNT IS GOOD OR SIP'S ARE GOOD FOR INVESTMENT IN MUTUAL FUNDS.PLEASE ADVISE TWO BEST INCOME FUND & TWO BALANCE FUND / EQUITY FUNDS
Vishal Menganani answers it is always advisable to go via SIP as the load on your pocket is less, you manage volatility better and you could stay invested for longer terms. I would advise you to stay away from income funds for the year. HDFC Prudence/DSP Balanced are my picks.
________________________________________
ND Roy asked, Pl suggest a life insurance policy
Vishal Menganani answers go for term plans
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Deep Dutt asked, II understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore the option for "reduced paid up" with your insurer and invest in a term plan and mutual fund
________________________________________
Mansha K asked, I understand that its mandatory to invest in ULIP's for 3 years, is it advisable to take the money out after 3 years? or should i continue with the investment?
Vishal Menganani answers explore options of "reduced paid up" policy with your insurer and invest the amount in a combination of term plan and mutual funds
________________________________________
Amit Karp asked, Where should I invest Rs 1 Lac for 10 years for my child's education ?
Vishal Menganani answers you could start with an equity heavy portfolio and annually reduce your exposure to equity by say 10% per annum.
________________________________________
Vikas asked, Sir, I have 3 lakhs rs at my disposal which i want to invest. I need them may in next 1-2 years for my MBA fees. As i cant go for long term bets kindly suggest some scheme, MFs etc. As markets are too volatile these days i don’t want to go into schemes fully exposed to equities.
Vishal Menganani answers go for bank FD as you need to preserve your capital.
________________________________________
Siddhu asked, According to you is it wise to invest in single premium insurance policies say for example LIC's Bima Bachat? For a working professional who already have enough insurance say approx. 65 lacs of sum assured.
Vishal Menganani answers the minimum cover should be 15 times your take home, if you are exceeding it then don’t invest any further in insurance.
________________________________________
Thatgartha asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
________________________________________
Misal Pavan asked, Sir your suggestion on Birla SL BLUCHIP (G), DSP TOP 100 (G), HDFC Growth Fund, DSP BR Tiger(G), Rel Div power sector Fund (G), DSP BR Equity (G)
Vishal Menganani answers stay invested
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Praveen Sankhe asked, Hi Sir, I am investing in HDFC ULIP and HDFC Equity Fund. Please suggest me some other funds (1 diversified, 1 balanced and 1 MIP) to make my portfolio complete.
Vishal Menganani answers exit ULIP and invest in HDFC top 200 (Diversified) HDFC Prudence Balanced) Principal MIP Plus (MIP)
________________________________________
Deepak Singh asked, Sir I have around 10 MFs with investment around 7 lakhs. Some of them are giving very good return but on average my returns is 15 % in two years. Please suggest
Vishal Menganani answers compared to the markets you seem to have fared well. when we advise our clients we assume equity to give you 12-15% approx. so stay invested
________________________________________
Rambabu asked, Hello Sir, I am interested to invest in SIP with an amount of Rs 1500/- per month. Can you suggest 4 to 5 mutual funds?
Vishal Menganani answers HDFC top 200 and DSP top 100
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Sourav asked, Hello Sir, I am 37 years old and started investing SIP in equity diversified mutual fund of Rs.12500/ per month from December 2009. I am looking forward to invest for 23 years in mutual fund. My quarry is after how many years will I start to transfer from equity to debt fund and how much will I expect to get after 23 years of SIP investment.
Vishal Menganani answers as a general rule your age number should be the minimum exposure to debt i.e if you reach age 40 then atleast 40% should be invested in debt instruments, however as you near your goals then you can reduce your equity exposure to under 10%.
________________________________________
Argi K asked, Dear Visal I m a NRI guy. Want to invest some 8 lakh rupees in India for next 4-5 years. Kindly suggest some good options except property. Thanks
Vishal Menganani answers invest in Equity MFs with a large cap bias.
________________________________________
Satish Shetty asked, Hi Vishal, I am new to investments and illiterate on the subject. My monthly salary is Rs. 20000/- after expenses i can save 10000 a month. Where can i save and how can i benefit from this.
Vishal Menganani answers align your savings and investments to your goals and proceed accordingly.
________________________________________
JC Gupta asked, WHY EXPERTS ADVISE TO KEEP OUT OF ULIPS? I HAVE ABOUT 1.50 LCS PER ANNUM TO INVEST PLEASE SUGGEST SOME GOOD MUTUAL FUNDS.. IS RELIANCE REGULAR SAVINGS EQITY GROWTH A GOOD OPTION? ADVISE
Vishal Menganani answers ULIPS are sold as combination of insurance and investments. The insurance cover is maximum 5 times if it has to enjoy 80C benefit. Also ULIPS take away a lot of ur investments under mortality charges, fund management charges and commissions to agents. Thus out of 100 rupees you pay in the first year only 75 rupees on an average gets invested. In MFs on the other hand it is close to 99 rupees. As of reliance regular savings its a good funds and you should stay invested.
________________________________________
Sundara Iyer asked, Most of the ELSS are losing it's charm; is there any investment(Tax benefit) can replace ELSS in the near term for 3 years?
Vishal Menganani answers For all its flaws ELSS has one of the lowest lock ins. Bank FD has 5 years, NSC has 6, PPF 15 years (partial withdrawal at 5). Thus even if you have chosen a wrong scheme you could exit the earliest from an ELSS
________________________________________
Raj asked, I want to know about ELSS, for how many years we can invest here and which ELSS is best now a days, Is it a best option to invest here. Please advise.
Vishal Menganani answers ELSS is an equity linked instrument which provides tax benefits under section 80C. They have a lock in of 3 years.It is a good option factoring in the power of equity and tax benefits. Some good schemes are HDFC Tax Saver and Franklin Tax Shield
________________________________________
Ashfaq Khan asked, Sir, I want to save Rs.10,000 per month, which is the best investment option for me
Vishal Menganani answers you could invest in a mix of debt instruments like debt funds, bank FDs etc and equity MFs via the SIP route.
________________________________________
Sunder Bhamgara asked, currently i am doing SIP in Kotak opportunities 1000, DSP TIGER - 1000, Principal Emerging BlueChip - 1000, ICICI Discovery phase - 1000; are these funds are o.k.? shall i make change in my portfolio? If yes, please suggest good funds; Thanks
Vishal Menganani answers exit principal and ICICI fund and invest in HDFC top 200 and DSP top 100 as that would reduce the risk of variation in returns.
________________________________________
Ravi Kiran asked, Hello sir, please tell me investment apart from shares &insurance investment rs one lakh. short-term period.
Vishal Menganani answers investment horizon less than 6 months should go for liquid plus funds, for a longer tenure upto 1 year you can go for floating rate fund
________________________________________
Modink asked, I have recently invested Rs15000/- in Tata Equity PE fund Trigger 10%,Rs15000/-in Fidelity India Value fund and Rs.30000/-in Sundaram BNP Paribas PSU OPP. Fund. My time horizon shall be 5 years. Whether Investment is right or should I Exit?
Vishal Menganani answers Although we are averse to thematic funds, but your time horizon allows you to stay invested with an otherwise good choice of funds.
________________________________________
Santhosh asked, I have few units of reliance pharma mutual fund exactly invested 1 year before and now it shows nearly 50% profit. Is it right time to sell or hold it for some more time.
Vishal Menganani answers you can book profit but do not exit.
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Srinath Kasargod asked, hello sir, I'm planning to invest 1Lakh. Can you please suggest me which FD is best? (time frame 3-4yrs)
Vishal Menganani answers there is a possibility of the deposit rates being hiked and hence my advise would be to park your money ion savings bank account with sweep in facility and invest in FDs post the rate hike. In corporate FDs we advise for HDFC Ltd Systematic Saving Plan (SSP), which will pay variable interest rates on recurring deposits to investors.
________________________________________
Archana asked, Hi Vishal .....Please tell me with a small amount like 1 lakh rupees where I can invest...except insurance policies & mutual funds
Vishal Menganani answers you could invest in bank FDs, post office MIS, Tax Free Bonds etc. However do note that if for low risk investments the returns would be commensurately lower too.
________________________________________

Buy Transport Corporation of India

2010-02-14T07:44:00.000-08:00

Buy Transport Corporation of India, tgt Rs 145 by Ganesh

Gaining strength in the express cargo services.
TCI operates in express distribution through its brand XPS, which is the fastest growing brand in that business. Brand XPS boasts of excellent quality service and integrated solutions to provide efficient key customer management. The company has created super hubs in the north and is in the process of establishing them in the south. TCI focuses on high value-added and high yield air and express services. Going forward we expect the revenues of the XPS segment to grow at CAGR of 27.5% over FY07 - FY09E.
Supply Chain solutions to be major growth driver.
TCI provides the entire gamut of supply chain solutions like distribution, clearing and forwarding, warehousing, cold chain logistics and other value-added services consultancy. Strong growth is expected from this segment due to larger volumes from existing clients. New clients are being added in a variety of verticals that include retail and cold chain solutions. Going forward we expect the revenues of the supply chain solutions segment to grow at CAGR of 44.9% over FY07 - FY09E.
Expanding operations in coastal shipping.
Currently, TCI has a fleet size of five vessels with a total capacity of 16444 DWT. The company also has plans to buy one ship every year for the next three years. All of them would be second-hand ships. This is expected to lead to strong growth in terms of revenues form the coastal shipping business.

STOCK MARKET FORECAST FOR MONDAY 15-02-2010

2010-02-14T07:40:00.000-08:00

FRIEND DON'T INVEST NOW , IT IS NOT THE GOOD TIME TO INVEST WAIT FOR CORRECTION
by shivA

Market will open big gap down on Monday
If Europe market open green means people are less loss,but there is an large chance of opening in red only , so one week is volatile for Asian & Indian market so square off all position with little loss
I am repeating from the last week now who are taking my words with little loss so beware friends
I am not telling always negative words this is the time to giving negative message
so beware

RNRNL MATHS

2010-02-14T07:39:00.000-08:00

MATHS PROVES RNRL UPTO 100 !!! Dr abdul hameed

The total number of shares in RNRL is 163 crores.But the floating number of shares (shares held by the public) is just 48.8 crore shares.
RNRL has been trading in a range of 62-75 rupees,that is just a maximum of 13 points up or down for the past 3.5 months(from 28th OCT 2009 to 11th FEB 2010). But RNRL traded as one of the most active counters during the period.Hence we can conclude that this was accumulation that was going on in the 3.5 months period.
The total number of shares traded during the above 3.5 month period is 74 crore shares.
Now let us go back to the floating number of shares.The total traded shares(74 crores) is more than1.5 times the floating number of shares(48.8 crores).Hence what does this finding of ours indicate? RNRL which is Rs 65 now can increase upto a minimum of 65*1.5=97.5
Now have not i proved that RNRL can at least reach upto Rs 100. What it requires is only an initial spark!!!!!

L&T Finance NCD — Ideal for those looking to diversify debt

2010-02-14T07:37:00.001-08:00

L&T Finance's secured non-cumulative debenture (NCD) can be considered only by investors who are looking to diversify their debt portfolio.

The rates offered by L&T Finance are 8.4 per cent and 8.5 per cent for semi-annual payout and annual payout respectively. However, better options with a superior credit profile may become available given the rising interest rate expectations. The rates are higher compared to the (much safer) bank deposits (7.75 per cent is the highest offered by bank deposits for a 3 year tenure).

However, asset financing companies such as Mahindra & Mahindra Financial Services, Shriram Transport Finance and Dewan Housing Finance offer better rates while enjoying similar credit rating as that of L&T Finance.

Other deposits also offer higher rate of interest to senior citizens which is not the case with the current non-cumulative debenture issue.

Having said this, the advantage of the non-cumulative debenture option over deposits is its superior liquidity; it can be traded in the market and is secured and enjoys priority over public deposits.

The company

L&T Finance is an asset financing non-banking financial company (NBFC) that provides equipment financing, tractor and commercial-vehicle financing, micro-financing and lending against shares.

The company entered mutual fund business by acquiring DBS Cholamandalam AMC recently. The company has 432 branches and points of presence. L&T Finance has a loan book size of Rs 6,016 crore with 87 per cent of the book secured.

Investment grade credit rating (ICRA LAA+), capital adequacy ratio of 15.6 per cent and a strong parent who is ready to pump in capital from time to time lend confidence to the issue.

L&T Finance's loan book comes to the extent of 38 per cent from corporate financing, with the balance from retail loans.

Asset quality has witnessed some slippages but is till in manageable with NPA ratio at 2.7 per cent.

The company's net interest income and net profits for the first half of 2009-10 stood at Rs 212 crore and Rs 57 crore respectively.

Earnings seem to be improving after witnessing a fall for the year ended March 31, 2009.

Options

Investors can choose between the three-year semi-annual and annual payouts with pre-tax coupon rates of 8.4 per cent and 8.5 per cent respectively.

While post-tax returns will be lower, lack of a cumulative option exposes these instruments to reinvestment risk (the risk that you have to invest the interest receipts at a lower rate). The payout options are also not monthly which doesn't provide regular income required.

The previous tranche of L&T Finance NCD (five year) currently trades at a yield-to-maturity (assuming reinvestment) of 7.7 per cent, which is indicative of slight premium on listing for this instrument.

However, capital gains on this instrument appear less likely as rising interest rates and widening corporate spreads may impact bond prices.

Issue Details

The non-cumulative debenture offer plans to raise Rs 500 crore (including the green shoe option of Rs 250 crore) with 30 per cent or Rs 150 crore reserved for retail investors.

The offer opened on February 9, 2010, and closes of February 22, 2010. But the allotment to investors is on a first-come-first-serve basis.

Reassess the risks in your portfolio

2010-02-14T07:35:00.000-08:00

I have been holding few mutual funds for a long period. Please advise whether I should continue with them or to switch to better funds. I am 68 years old and retired but willing to take moderate risks over 1-2 years. I expect good dividends and do not wish to trade. All my funds are under the dividend payout option. The funds are: Birla Sun Life Equity, DSPBR Equity, DSPBR Opportunities, DWS Alpha Equity, HSBC Equity, ICICI Pru Infrastructure, Reliance Infrastructure, UTI Infrastructure, UTI Leadership Equity, UTI Energy, Sundaram BNP Paribas Select Small Cap and Sundaram BNP Paribas Select Focus.

S.Y. Kekre

The overall risk profile of your portfolio can be termed above-average. While you have said that you can stomach some risks, your time-frame for the same appears too short. If you were confronted with a correction like the one in 2008, then your returns of up to even three years can be completely eroded. Unless you have sufficient other income/wealth streams, it may not be very prudent to take much risk given your age and your retired status.

The dividend track record of domestic equity funds so far suggests that some of the top funds with above-average risk are not often regular dividend payout candidates. Besides, you may be aware that mutual funds are under no obligation to pay regular fixed sums as dividends even if you choose the payout option.

Do not therefore depend on mutual fund dividends for regular source of income. They can at best be a supplement. But we will try and re-jig portfolio so that you hold funds with relatively less risk, good performance track record and those with a regular dividend payout history.

Continue to hold Birla Sun Life Equity and DSPBR Equity. These funds have been fairly regular in their dividend payments. Add Templeton India Growth and HDFC Equity. They have been consistent in their performance and would suit your moderate risk appetite. They have also been active in paying out dividends when the markets have rallied too fast or when the fund house feels that markets are over-heated and run ahead of fundamentals.

Add debt funds

Hold on to HSBC Equity and review performance a year later. Marked under performance of this fund over peers need not be tolerated. The three infrastructure funds that you hold can only increase your portfolio risk, besides duplicating stocks. If you must hold, continue with ICICI Pru infrastructure but ensure that it accounts for only 5-10 per cent of your total fund holdings. Exit from the other two infrastructure funds.

If you are sitting on some profits, considering selling the other funds that we have not mentioned above, reason being that they may either not fit your risk profile or have been under performers. Sundaram Select Small Cap is a close-end fund. It has performed well; you can consider holding it and take a call once it becomes open-ended. Consider adding a few monthly income plans and debt funds to your portfolio. These, apart from providing some hedge for your equity fund, would also pay relatively regular dividend. Monthly income plans also take an average 15 per cent exposure to equities to prop returns.

HDFC MIP Long Term, Canara Robeco Income and Fortis Flexi Debt would be funds that are likely to provide some regular dividend for you. Opt for the monthly or quarterly payout schemes.

2010-02-11T07:54:00.000-08:00

I need your advise on TDS from FD Interest received by Ramakrishnan S

I had few FD with a bank wherein interest is credited on quarterly rests to my SB account. This bank calculated interest accrued as well as interest actually paid during the financial year and deducted TDS. Is this right? If not, What is the recourse that I have against the bank.

Answer :

You can ask the bank to not deduct TDS if the following are satisfied:
1. Your other income is not chargeable to tax.
2. You give them Form 15H or Form 15G at the start of the financial year.

BUDGET 2010 WISH LIST PART 3

2010-02-11T07:49:00.000-08:00

Age of Sr Citizen by suresh khanna
Sir,
Age of Sr Citizen = 60 Yrs {Railways}
Age of Sr Citizen = 65 Yrs { I.T.Dept.}
Please standardize the age of Sr Citizen as 60 Yrs both for Railways and I.T.Dept.
Thanks and Regards,
[S.Khanna]

Plz increase tax by yadwinder singh thnda

Dear Sir,
I am a common middle class Indian, I run from paying tax and will give you 100 excuses to reduce tax but somewhere in my heart i know i am not honest. Like we need money to run our home in same way you need money to run country. So please increase taxes so that this country can be run in a better way.
But would request you to take some measures like
1) stop quota system give facility to poor not
to the person who have quota certificate and not willing to pay.
2) Make the officials more accountable and responsible
3) Give the IAS lobby only that much work which they can do, personal feeling is that they are overburdened and have many responsibilities so they end up doing nothing
and hence are accountable.
4) Increase salaries of govt employees, much enough that they don't have to ask for bribe and then put strict punishment on bribing like issues (like corporate do)
5)Make the people feel the worth of taxes they pay.
6) Stress on building quality education system then quantity education system (i.e happening in our country)
7) don't handover Govt departments to corporate because govt is unable to handle rather improve the management structure.
8) Earlier you made India free economy so that investors should come to India now it is the time to increase taxes from outside investment so that we can earn from them.

Income Tax_TDS Rules by RAVINDRANATHA MANJA

By making PAN compulsory for interest income above 10,000 Govt. is just harassing the common man and the senior citizens. When the basic exemption limit itself is 150,000 there is no logic for this rule. First catch hold of big amount of black money involved in real estate, share market and some huge deposits kept in Bank SB/Current/term deposits (say above 25 lakhs above). I hope finance minister will rectify the mistakes and uses his thinking power to unearth the black money.

BUDGET 2010 WISHLIST PART 2

2010-02-10T21:50:00.000-08:00

Income Tax slab be revised jitendra garg

The following are the message towards Income Tax for individuals:
1. Rate of Income Tax is to be considered.
For income upto 2,50,000.00 No TAX
2,50,000.00 to 7,50,000.00 10%
7,50,001.00 to 15,00,000.00 20%
15,00,001.00 and above 30%
2. Limit ot be enhanced from 1,60,000.00 to 2,50,000.00.
3. 80C deduction to be enhanced from 1,00,000.00 to 2,00,000.00.
4. Home loan interest to be raised from 1,50,000.00 to 2,00,000.00.

Tax 2010 by abboral boral

1. Extend micro finance to rural India with PPP model 3% interest --min loan 2000 max 10000 with 2 years term
2. Introduce GST with 12% indirect tax for all commodities -remove cst,local tax , octroi, state level entertainment tax
3. 60% collection to stay in state and 40% for central-a software will automatically shift fund of 40% to central --all banks should introduce such system
4. No tax upto 5 laks earning and beyond 5 a simple 15% tax with tax releif for 2 lakh on deposited to PF,Pension fund,Insurance only
5.Housing loan upto 30lakhs --15% tax releif
6.Agriculture --upto 10 acre land earning --no tax and beyond 5%

Income tax - Individual by krishnan srinivasarao

The following are the message towards Income Tax for individuals:
1. Rate of Income Tax is to be considered.
For income upto 2,50,000.00 No TAX
2,50,000.00 to 5,00,000.00 10%
5,00,001.00 to 7,50,000.00 20%
7,50,001.00 and above 30%
2. Limit ot be enhanced from 1,60,000.00 to 2,50,000.00.
3. 80C deduction to be enhanced from 1,00,000.00 to 2,00,000.00.
4. Home loan interest to be raised from 1,50,000.00 to 2,00,000.00.

Income Tax. Slabs Debabrata Chakrabarti

The following are the message towards Income Tax for individuals:
1. Rate of Income Tax is to be considered.
For income upto 2,50,000.00 No TAX
2,50,000.00 to 7,50,000.00 10%
7,50,001.00 to 15,00,000.00 20%
15,00,001.00 and above 30%
2. Limit ot be enhanced from 1,60,000.00 to 2,50,000.00.
3. 80C deduction to be enhanced from 1,00,000.00 to 2,00,000.00.
4. Home loan interest to be raised from 1,50,000.00 to 2,00,000.00.

Tax deducted at source by nalam kumar

We belong to family of insurance agents,mutual funds agents,deposit mobilisation for banks, company, nbfc etc.
My commission income is Rs 120000/- not liable to tax but tds deduction @ 10% is made on income because of section 194J .MY hard earned money is deducted and paid to me after almost 2 years. with 6% interest whereas I pay 10.75 % interest on my home loan. WHY TDS is deducted on my income even if I am not liable to pay tax. I have to pay professional fees to consultants to get my money.
Please protect this family of more than 25 lakhs agents from this problem

Income Tax on Fixed deposit by Jitender Kumar Chaudhary

There should not be any Tax on Fixed Deposits in the Banks .Money is losing its value each year as inflation is a realty.Rs. 100 now would become worth Rs. 90 year next year and so on and in coming 4 to 5 years , it may become equal to Rs. 50.
People keep their money in Fixed deposits with a hope that the value of the money would be maintained by earning some interest.
So, why tax the interest which would help in maintaining the value of the money. In reality, there is no earnings

Income tax for senior citizens by gundu rao

No tax up to 5 lakhs
Sec 80C to be raised to 3 lakhs
10% TAX UP TO 15 LAKHS
15LAKHS TO 20 LAKHS 15%
20 LAKHS AND ABOVE 25%
Capital gains tax to be 15% irrespective of short term or long term.
Investment in sec 54 EC to be 3 crores and not 50 lakhs as Chidambram did.
thanks
ck gundu rao

Personal Income Tax by Subir Chatterjee

1-Direct Tax Code:Maturity proceeds for PPF and LIC not to be taxed as proposed.As India is not having any social security system in place and hence the common man\'s entire savings are mostly in these two instruments so by taxing these two will not be in the interest of common middle class men.

2-No tax till Rs 300000/-.Tax for Rs 300000 t0 Rs 1500000/ to be made 10%.Tax for earnings above Rs 1500000/- to be made 15 %.

3-Strict compliance can bring in more revenue for Government.

4-80C to be raised to Rs 300000/-

Income Tax Slab & 80C by vipul udeshi

1) No tax for income upto 350000
2) 10% tax for income of more than 350001 to 500000
3) 20% for income 500001 to 900000
4) 25% for income 900001 and above
5) 80C limit to be raised to 145000
6) PPF limit should be made to 100000 from that of 70000

Income tax change:Slabs and Tax rates by sathyam guda

The best is abolition of Income tax. Next best is abolition of income tax for individuals. Next best is having a 5% uniform tax for Rs.10 Lakhs per annum and above. The Limit of Rs.10 lakh per annum shall be subject for upward movement based on review every two years. If these IT changes are not possible, it would be good if slabs are changed to 3 to 5/ 5 to 10 / 10 to 15/ and >25 lakhs with tax liability of 2%/ 5%/8%/12% and 15%. This would result in best tax compliance and more disposable incomes both for 5/15/25 lakh earners and all business/industry and service establishments and corporate. This if not immediately, in about 3 to 5 years time will boom the welfare of the country that is very high growth of economy (9% ), great surge of consumer lead growth across all sectors, low interest rates regime, virtually increase in all kinds of indirect taxes (individual related to business transactions relate such as excise etc) and thus employment and livelihoods to all. As of today total tax payers in India are about 3.40 million approximately. A rough estimate suggests that the changes in IT slabs and rates as stated above would lead to a tax collection of about Rs.1000000 (One million crore) as against present (3 4 = Rs.8 lakhs crore = Individual Corporates etc).

TDS on interest by raju singh

At present tds on interest income is 10% if it crosses limit of rs 10000/- per annum. To me a sum of rs 10000/- earned annually is just a nominal amount to be taxed.In simple words income is less then rs 1000/- a month It is just making a mockery of common laymen particularly poor people who are wholly dependent on fixed monthly income. I request to increase this limit to at least Rs 50000/- though practicably it should be rs 100000/- annually

Tax exemption on Mediclaim / Medical insurance by deepak barman

The present limit is Rs. 15000 although actual expense is much higher especially in case of combined family's health insurance. This type of insurance is taken by those who have no reimbursement facility for medical treatment from their employers. Hence the amount of premium on medical insurance is dependent on one's need to protect family's medical necessities and no luxury at all. In fact, I, being a retired, spend around Rs. 20000 per year for Mediclaim worth Rs. 3 lac's each for myself and my wife. Therefore, the actual spending ( instead of limitation )on this score may please be exempted under Section 80D

Finance for country by Pankaj S

1) while levying tax it should be kept in mind what's the per capita income of country, current per capita income of India is Rs 38,084 (Per capita income is usually reported in units of currency per year).

2) People who are in favour of tax exemption should keep in mind that if they are earning more, that doesn't mean they shouldn't be taxed as its same thing as accumulating essential commodities of country, the point should be to divert the tax money in the right direction. Govt. should see that money should be spread equally in the country. If they are taking tax on income it should be diverted in the right direction.

3) Today every second person is having more than 1 house and more than 1 car. People who own excessive properties and cars should be levied more tax and tax money should be diverted towards providing the same to people who don't have that.

4) Finance should be diverted towards equally providing basic necessities and requirements of citizens of India and it should be made sure to provided to each citizen of country.

5) More tax should be levied to people who have more than 1 children.

6) Govt. should encourage private sector to setup industries in the areas like Bihar, UP, Orissa and adjoining areas of metro cities etc. If more education opportunities, more employment opportunities and more business is in other areas than metro cities then 50% of problems of countries can be solved.

7) Govt. should be careful for Old people who don't have shelter and inc

Tax Deductions For Education by Sachin Salgarkar

The cost of education has been rising steadily. The annual tuition fees for Primary and Secondary is almost Rs. 25K these days ( non aided schools). There should be some deductions allowed for these expenses. Also should consider something similar to the 529 Plans in the US.

some important points for development by sobana sridharan

1. Home loan interest should be reduced to 6% instead of 8% or more charged by banks which will definitely improve house building activities throughout India and thereby more employment will be created and so purchasing capacity of the people.Also land ceiling act should be introduced to curb acculation of land and house.
2.Allotment of funds should be more for agriculture sothat foods production will be increased and thereby price of commodity will be controlled.
3. Government will take the responsibility of constructing house building for cheap rates for poor people and should deduct money from the salary with min interest
4. Govt should implement small family norms throughoput India by giving incentives by way of free education

INVESTING IN MUTUAL FUNDS ADVICE

2010-02-08T09:38:00.001-08:00

Diversify your portfolio and be patient with investments

I invested in HDFC Core and Satellite Fund (Growth). This was via SIPs from May 2007 to May 2008. I discontinued because I felt the fund was not doing well. Should I sell my investment or let it stay? Should I switch to some other HDFC fund? I already hold HDFC Equity and HDFC Top 200.

-Ajay Kumar

HDFC Core and Satellite invests heavily in mid-cap stocks. The fund did not do too well in 2007 but faced the downturn of 2008 well. Overall, it has been an average performer.

Do not jump in and out of schemes based purely on short-time performance. Stay invested in this fund and keep tracking its performance. If you are still disappointed, then sell your units but do not pick up another fund from HDFC. Diversify your holdings. Go for a mid-cap fund from another house.

How good or bad is Reliance Diversified Power Sector Fund vis-à-vis Reliance Regular Savings Equity Fund? My investment horizon is three years.

-Udit Pant

The two funds are not comparable, as they differ in their investment mandates. Reliance Regular Savings Equity is a diversified equity fund. Reliance Diversified Power Sector is a thematic fund: it invests in stocks companies associated with power sector. Ideally, you should avoid theme-based funds. They will perform depending on how the market is responding to that particular theme. On a standalone basis, Reliance Regular Savings Equity has shown the potential to perform during both good and bad times.

I am about to invest in mutual funds. Could you make fund suggestions? These are my requirements:
1) ELSS - Monthly SIP of Rs 2,000
2) Non-ELSS - Monthly SIP of Rs 1,000

-Mathusoothanan S

For ELSS investments, choose Sundaram BNP Paribas Taxsaver or Franklin India Taxshield. These funds allow investors a tax deduction on investments up to Rs 1 lakh under Section 80C of the Income Tax Act. But, do remember these funds have a three-year lock-in.

For investments other than ELSS, you may choose a balanced fund such as DSPBR Balanced or HDFC Prudence.

I invested Rs 35,000 in the NFO of ICICI Prudential Indo Asia Equity Fund in September 2007. Two years ago, I invested in Magnum Global. Should I hold or exit?

-Zain Uddin Ahmed

Ideally, you should avoid investing in NFOs. Select funds which have a good performance history. ICICI Prudential Indo Asia Equity Retail invests 65 per cent of its assets in Indian stocks, with the rest in Asian stocks. What is crucial is your reason for investing in this fund. Did you want a global exposure to your portfolio? In that case, you could give it some more time. It's a decision only you can take.

Magnum Global's objective is to invest in companies where part of their earnings comes from foreign currency. Of late, the fund's performance has deteriorated. Watch it for a while before you exit.

Please note that investing in equity requires patience. You must not get disheartened over short periods of time. But, keep tracking performance closely to decide whether or not it is worth moving out of

BUDGET 2010 WISHLIST

2010-02-08T08:58:00.000-08:00

REVISE THE RENTAL CEILING FOR TDS by BRAJESH KUMAR

AT PRESENT THE ANNUAL RENTAL INCOME OF ABOVE RS.1.20 LACS IS SUBJECTED TO TDS ON 10%. I REQUEST YOU TO INCREASE THE CEILING TO RS.2.40 LACS PER ANNUM

Income Tax Slab by setu jagannath

Please increase the income tax exemption limit(i.e Tax free income) from Rs 1,60,000 to at least Rs 3,00,000. Common man is already affected with price rise, inflation and rise in price of essential commodities. At least this step can reduce the tax burden to some extent. To be precise a person with an annual income of 3 lakhs can be defined as a poor person at least in today's economic scenario with all the price rise of essential commodities and there is no point in pressurizing him further.

Income Tax -30% by ritesh soni

It is quite sad that all the hard earned money is taxed by the government with the assurance that we will get better infrastructure and roads. In Mumbai, roads are a big mess and people are delayed from work because o f traffic Jams caused by potholed road.

Government should spend money in providing better Roads to every city where there are lot of industries . At least Indian metros should be focused upon ,.

Income Tax by Sundaram K

We are the salaries clause are most affected by IT.

We have been taxed at source directly with as high as 30%, were as the big sharks are get away with different names like "Farmers" etc.

Why don't the govt catch those kind of people and tax them 30% directly with absolutely no exemptions allowed and tax the poor working people to pay 10% stright without any exemptions. This way we can have more money collected rather than people find ways to escape.

Expecting in budget by Nitin Mathure

Keep Fuel prices stable for whole of the year & control all the commodities prices where, till date, only Congress Govt.is always seen short.

Common Man Budget by Kumar Iyer

1) Increase standard Deductions
For Salaried men - 2 Lakhs
For Salaried women - 2.25 Lakhs
For Senior citizens - 2.6 Lakhs
2) Increase Section 80 C Deductions to 1.5 Lakh

Budget for Common by Krishna

None of the products such as luxury, cigarette, alcohol is being talked about here! but of the basic living things

1) Budget shouldn't always necessarily mean increase in taxes, thereby affecting the lives of common hood. Unfortunately, it is
2) Budget should be 'Reforming' (for overall development of nation & its citizens) not but 'taxing'. It's not a voice for reform, but a voice of despair.
3) Duel tax such as Direct Income Tax (TDS) VAT is much affecting. Overall tax structure is very high
4) Fuel prices are generally raised before the budget (and also intermittently) After increasing the prices, mercy is shown by reducing a very small percent of decrease
5) When fuel is raised, cost of all other produce goes up automatically. Again, "Budget" seems to be an inappropriate action.
6) Appears no relation between the ' Yearly Budget' and the 'Daily Price Rise'. Income of middle lower class people marginally raise once in a Year, but 'Daily' price raise' can't be handled with this income.
7) Offering Good education to children is becoming a matter of pride (like owning a luxury SUV), but it's not being seen as a national development programs! (It's an another subject that most of the educated adults remain unemployed poorly employed after completing 20 years of education and after spending few lakhs of money & valuable time & energy )
8) Direct producers and end-buyers are at a loss, most of the times.

MONTHLY INCOME PLANS ARE BACK IN FLAVOUR

2010-02-08T05:30:00.000-08:00

Monthly income plans (MIP) of mutual funds seem to have captured the fancy of ‘riskaverse' investors. Faced with the prospects of shrinking returns from debt schemes, many investors are turning to their financial advisors for help and the advice they mostly get is the same: ‘‘ Invest in MIPs, which have a small exposure (mostly 15-25 %) to equity. The equity component will act as a ‘kicker' and give you extra returns.However, as critics point out, what most advisors don't tell investors is that they would be cut short once bears tighten their grip over the stock market.

‘‘ Many experts recommend MIPs because these are the right product at this juncture. Fixed income products are anyway not delivering great returns and they are expected to fall further,'' says Hiren Dhakan, associate fund manager, Bonanza Portfolio . ‘‘ MIPs will be useful because of their portfolio mix of equity and debt. If you can earn extra returns from equity, it would offset low returns from debt,'' he adds.

And financial experts have good reason to believe that debt returns may fall further. The likely large government borrowing in the next financial year may drive yields up, pushing down debt returns . Many investors are already rethinking their debt investment as these schemes give only 5.0-5 .5% return, say investment advisors.

However, critics point out that the whole premise on which the MIPs are sold could prove wrong. ‘‘ The products are sold on the assumption that equity would give extra returns, but that need not be the case always,'' says an investment consultant, who doesn't want to be named. ‘‘ Safety, higher returns , tax-efficiency , active management of debt equity allocation and liquidity of investment, liquidity ... MIPs are supposed to be the one solution to all these needs. Clearly, there is some mis-selling going on,'' he adds.

Dhakan says the MIP recommendation is based on two reasons :
one, there is a consensus that the prospects of debt investment remains rather bleak for the time being.
Two, there are no negative factors as far as equity investment is concerned.

Company deposit plans take shine off bank FDs

2010-02-07T09:26:00.001-08:00

If you are looking to invest in a fixed-income instrument, there are more products other than bank fixed deposits that are attractive.

A growing number of private companies are coming up with fixed deposits schemes that promise a return as high as even 13 per cent, which is double the present bank deposit rate.

However, advisers say that investors need to be very cautious because high returns may come with higher risks, as compared with placing money in bank term deposits.

Some of the well-known companies that are at present offering fixed deposits with returns in excess of 10 per cent with different time horizons include JP Associates, Shriram Pistons, J P Associates, Unitech and Ansal Housing.

The largest public sector bank, State Bank of India (SBI) is offering a 6 per cent rate of interest for a one-year deposit. Other private banks such as ICICI Bank and HDFC Bank are offering an interest rate of 6.5 per cent. For a three-year deposit, SBI pays 6.5 per cent, while both ICICI Bank and HDFC Bank offer 7 per cent over that period.

“I think investors can look forward to cash in on these instruments if they get proper service from these companies. It is a perpetual instrument, therefore, if an organisation can service their clients well, renewals can also possible, and for the company it is one of the cheaper sources for raising funds,” said DR Dogra, chief executive officer and managing director, CARE, a credit rating agency.

Investment advisers, however, say that recommending corporate fixed deposits may give higher returns than a bank fixed deposit but these investments can be slightly risky. Bank deposits, in comparison are zero-risk in nature.

Jagannadham Thunuguntla, equity head, SMC Capitals, said, “These (company fixed deposits) are unsecured instruments, which mean if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option. Those who want to take advantage of the returns should understand the risk associated with it.”

Himanshu Kohli, chief executive officer, Client Associates Private Wealth Management firm, agreed with Thunuguntla. “Although some companies are offering reasonably good returns, the risk involved is higher than bank deposits. For companies, raising funds through debt becomes a cheaper source of building capital. The credit rating and the profile of these companies should be reviewed before one puts his money into these schemes.”

Pick your online broker wisely for smooth trade

2010-02-07T03:05:00.001-08:00

Pick your online broker wisely for smooth trade

. This is how you choose an online broker.

YOUR NEEDS MATTER

If you are a first timer, please ensure that you opt for a broking arrangement with no commitment to trade.

Opt for the pay per trade offer, in which you pay a percentage of brokerage for every trade that you do. If you do not trade, you do not pay anything at all.

If the broker insists on a 'pre-paid' offer , opt for the lowest possible commitment. Typically pre-paid offers begin with Rs 1,000 upwards.

STUDY THE PLAN WELL

It makes sense to compare apples with apples. Generally, broking houses mention the brokerage rates to attract investors and traders.

However, when you trade, your transaction costs include brokerage, securities transaction tax (STT) and turnover charges amongst other statutory charges.

Statutory charges remain the same, irrespective of the broker you choose.

But you should also take into account the costs you incur on depository account every time you transact.

Some brokers quote you a transaction rate assuming that the depository account will remain with them. If you intend to keep the depository with any other entity other than your broker, then you may have to shell out higher brokerage charges. This plays a key role if your transaction size is small.

FUND TRANSFERS

Fund transfer is a tedious thing for many investors.

Many brokers offer online transfer of funds and have got tie-ups in place with most banks.

But do check twice if the fund transfer is allowed both ways — from bank account to broking account and from broking account to bank account — to ensure ease of transaction.

MULTIPLE CONTACT POINTS HELP

Your broker should ideally allow you to access the account the way you choose — telephone, online or through a relationship manager in a branch.

Telephone access is handy when you are travelling or do not have access to the internet.

There are some brokers who charge less for online trades and a premium if you choose to trade through call centre or relationship manager.

Hence, it is essential to check the pricing for each mode of trading.

TECHNOLOGY - BE CAREFUL

When you see the 'demo' before signing with a broker, the trading tool works absolutely fine.

But there are issues such as slow internet that may adversely impact your real life experience.

Also, some trading terminals work only when you have a broadband internet connection.

It is advisable to have both the broadband friendly fully-loaded version of the trading screen and the 'lite' version that works on the slow internet connections.

SECURITY ISSUES

Brokers' trading terminals should have good online security measures.

"Investors should not share their user IDs and passwords with anyone and avoid using cybercafes ," says Vinay Agrawal, executive director of Angel Broking.

Reputed brokerage houses do keep upgrading their firewalls and security systems at regular intervals. It is advisable not to access your trading account from the cybercafe or publicly-used computers.

CONSTRUCTING A DIVERISIFIED PORTFOLIO

2010-02-07T02:40:00.000-08:00

Investors typically (over) diversify across assets to reduce the downside risk in the stock market. Those who take the mutual fund route simply buy diversified funds. Others who construct self-directed portfolios, however, face a problem; for creating a diversified portfolio is not easy. How should investors create such a portfolio?

This article discusses the difficulty in constructing self-directed diversified portfolios. It then suggests a practical approach to creating such a portfolio within the core-satellite framework.

Correlation effect

Diversification as a concept was developed when Harry Markowitz argued in a seminal paper as to why it pays to invest in a basket of assets.

The diversification process is easy if the portfolio were to contain just two stocks.

Then, the investor has to simply ensure that the relationship (captured by correlation) between the two stocks is minimal (less than one).

The problem, however, comes when the portfolio has several stocks.

Computing the correlation that each stock has with every other stock in the portfolio becomes cumbersome.

Professional money managers use sophisticated optimisation models such as generalised mean-variance analysis.

Such programs and models make the process difficult for individual investors.

Besides, a self-directed diversified portfolio requires large initial capital. The reason is that the correlation among stocks has increased sharply in recent years due to globalisation. This means that a portfolio now has to carry more than the traditional 20 stocks to achieve diversification; a study in the US pegs the number at 200!

Moreover, every time a new stock is added to the portfolio, the investor has to keep in mind how the stock reacts with other assets in the portfolio.

All these issues make it practically difficult for an individual investor to construct a self-directed diversified portfolio.

Core-satellite effect

An easier approach would be to construct a portfolio within a core-satellite framework. This framework helps an investor take a diversified exposure with minimal effort.

The equity core would constitute of a low-cost index fund, preferably one on a broad benchmark index such as the S&P CNX 500.

The objective is to enable the investor take low-cost diversified exposure to equity as an asset class.

Given the limited choice of such funds in the country, investors can also consider index funds benchmarked to the Nifty or the Sensex.

The equity satellite can be either a self-directed portfolio or a portfolio of mutual funds. The objective of this portfolio is to generate excess returns over the benchmark index.

The point is that an investor need not be concerned with correlations and diversification for a self-directed equity satellite.

For one, such a portfolio is concentrated, as it strives to generate excess returns over a relatively shorter investment horizon compared with the equity core. For another, correlation structures are anyway not meaningful over the short term.

The case is somewhat different for an equity satellite consisting of a portfolio of mutual funds. In such cases, the objective would be to buy funds in diverse sectors and styles.

An investor can, for instance, construct a portfolio of mid-cap fund, emerging-market fund and bank ETF without being overly concerned about computing the correlation structures among these assets.

The equity satellite can also have a combination of sector funds and direct exposure to stocks.

That is, an investor can construct a portfolio of sector funds, emerging market fund and mid-cap stocks for style diversification.

This article does not delve into the merits of diversification as a risk-minimizing process. It simply offers a practical approach to constructing an equity portfolio within the core-satellite framework. The construction process for equity core is the same for mass affluent investors and HNWIs. The equity satellite portfolio for HNWIs is somewhat different in that it can also carry exotic exposure such as private equity and commodity futures. Investors should suitably combine bonds with equity to achieve diversification across asset classes.

INVESTMENT IN MUTUAL FUNDS

2010-02-07T02:39:00.001-08:00

I am a teacher by profession and newly married. My husband is an engineer. Please take a look at our existing portfolio and suggest improvements. We don't see any reason to withdraw money from mutual funds in the near future. About 45 per cent of my portfolio is in mutual funds, about 38 per cent in direct equities and 17 per cent in fixed deposits. This was invested before marriage. We are currently running SIPs of Rs 1000 each in the following funds: Birla Sunlife Frontline Equity, Birla Sunlife Tax Relief '96, HDFC Prudence, DSP BR Equity and UTI Dividend Yield. Besides, we are planning to start a new SIP of Rs 2000 per month in Reliance Regular Savings fund.

If dividend reinvestment and growth are two ways of getting similar returns then why are they available as two options? Are the units allotted as dividend in an ELSS fund also subject to a lock-in of 3 years?

Pooja Pratihasta

We appreciate your early initiative to save and build wealth. You hold a good portfolio of funds. However, with a double income and perhaps higher savings now, you should be able to take on a little more risk in your fund portfolio to prop up returns. Clearly, the fact that you have direct exposure to equities suggests that you are not a conservative investor. The funds you hold currently, though they have a good track record, could be termed the core of your portfolio. We would like you to build a satellite of few other funds that can provide a kicker in terms of returns.

Hence, we suggest some re-jig/additions to your portfolio. Assuming that both of you would invest, you can consider holding five funds each, to begin with. Between you and your spouse, one of you can continue SIPs in Birla Sunlife Frontline Equity while the other can invest in DSPBR Equity.

Hold on to Birla Sunlife Tax Relief 96 until the lock-in and exit if you have made annual returns of over 10 per cent. While this fund sports a healthy 20 per cent annualised five-year return, its three-year record is a measly 6.6 per cent (most funds have seen a setback in their three year record as a result of the 2008 correction). If you are an active observer of the stock markets, continue your direct investing approach.

Satellite

If you are hard-pressed for time – stock markets are increasingly going to require more work to spot trends/picks – consider shifting some portion of your direct equity investments into mutual funds.

For this purpose, you can assume similar risks by adding a dash of mid-cap funds such as IDFC Premier Equity and Sundaram BNP Paribas Select Midcap. Even if you keep an SIP running on mid-cap funds, it pays to buy these schemes on declines linked to markets. For instance, every 5-10 per cent decline in the broad market index can be used to accumulate more units of mid-cap funds. Review the funds every year, before renewing SIPs.

ETFs

Besides these, one of you can consider holding gold ETFs; again buy them on declines. A value-averaging strategy on the S&P CNX 500 index fund (offered by Benchmark Mutual) would help you hold a wide basket of stocks that represent a good part of the listed universe. This index has traditionally been a tough benchmark for mutual funds to outperform. Add UTI Mahila Unit Scheme. This fund boasts an excellent track record and would provide some debt exposure to the portfolio, without being too conservative in its choice. While UTI Dividend Yield, has an above-average track record, Templeton India Growth may be a superior option for any fresh investments, if you are looking at a value-oriented approach.

Reliance Regular Savings Equity is a very volatile fund, though it outperforms most peers by a huge margin during rallies. It would be a fund to invest during steep market corrections if you actively track markets. But do set target returns to book profits. We would not suggest an SIP strategy on the fund.

Hold at least 20-25 per cent of your portfolio in debt options. Consider booking profits on your mutual funds, as and when the equity:debt ratio undergoes a change of over 10 per cent. You can even park such profits booked in debt funds such as UTI Mahila or HDFC MIP Long Term and use them to invest during steep equity corrections.

Dividend reinvestment

True, there is no difference in returns between dividend reinvestment and growth options at present. The former just allows you to hold more units over a period, instead of allowing the profit to accumulate in the NAV. However, if all capital gains (whether short or long term) are taxed as proposed by the new tax code, dividend reinvestment would be a superior option from a taxation perspective as the reinvested units would go to increase the cost of your funds and would to that extent, reduce the value of gain for tax purposes. Yes, units allotted under dividend reinvestment option of ELSS would be subject to fresh lock-in of three years.

Equity Funds — Ones that missed the bus

2010-02-07T02:36:00.000-08:00

A large number of equity funds have failed to match the market indices in the stock market rally of the past year. A compilation of returns shows that 119 of the 256 open-end equity funds in operation (including theme funds) missed the bus in delivering full participation to their investors. These funds recorded a return lower than the 77 per cent generated by the Sensex. So should investors in all these funds head for the exit door? Not necessarily. We put the one-year underperformers through additional filters to decide on the ones in which investors can prune exposure:

Of the 119 funds which failed to deliver the market's 77 per cent gain, 46 were sizeable underperformers, trailing the index by 10 percentage points or more. This shorter list features quite a mix of funds — ones with defensive themes, such as FMCG or consumer stocks; those playing on underperforming sectors, such as telecom or media; one Quant fund and a few tax saving funds.

Of these, investors can hold on to FMCG, Lifestyle, healthcare, media or telecom funds, as their underperformance is simply a function of the underlying sector turning in a sedate returns due to its defensive orientation.

Excluding these theme funds gives us a shortlist of 37 laggards. Of these, however, a few funds deserve consideration for their consistently defensive orientation. After all, funds which trailed the indices this year but contained losses better than the market in 2008, may not be bad bets for conservative investors. Funds such as HSBC Dynamic, Reliance Equity, HSBC Equity, DWS Alpha Equity, Religare Growth and Kotak 30 each of which registered a much lower fall than peers in 2008, may be retained for this reason.

This exercise leaves us with a shortlist of 12 equity funds (See Table). Not only have these funds lagged the market as well as the category average over the past year, they were also less than effective in containing losses to the NAV in 2008. Not all of these funds have been in existence for three years.

Funds that have a three-year record and yet have fared poorly on the above counts may be “sell” candidates at this juncture. JM Hifi, JM Small and Midcap, Fortis Opportunities are funds in this list. Investors in these funds should actively consider exiting them and replacing them with funds with a better recent record.

A few funds with a less than three-year record also feature in this shortlist. Investors in these funds should reduce holdings if they form a large portion of the portfolio. Marginal exposures can be retained with a wait-and-watch approach.

RETIREMENT ADVICE IN FORTIES

2010-02-07T02:34:00.000-08:00

I am Gulshan, aged 42. My wife, aged 39, is a home-maker. We have two children, aged 12 and seven. I worked abroad for some years and am now settled in India. I decided not to take up employment but lead a retired life with my savings.

I have a corpus of Rs 1.1 crore, which I have invested in equity, mutual funds, fixed deposits and in savings account.

I stay in my own house, which is worth Rs 40 lakh. My monthly expenses work out to Rs 35,000, including the fuel cost for my car. I am investing in systematic investment plans in four schemes the total outgo is Rs 25,000.

My concerns are:

The cost of higher education for my daughter and son may cost Rs 5 lakh each (present value). I may require a similar amount for their marriages. How much do I need to save monthly to reach the target taking inflation into account?

I hold a life insurance traditional endowment policy with a sum insured of Rs 5 lakh that is likely to mature in the next couple of years. Do I need any other insurance?

For health benefits, I have taken a mediclaim policy with sum insured Rs 2.5 lakh to cover all my family members.

After the children's education and weddings, I wish to have pension until I am 75-80.

What will be the pension we – my wife and I – require if our requirement is 50 per cent of the current expenses? How much do I need to save for the purpose?

I bought land few years ago and that is currently worth of Rs 20 lakh.

I have decided not to take up employment even if we find it difficult to meet our needs. Please take note of this and suggest a plan.

Current assets are as follows: I have invested in several mutual fund schemes with mixture of large and flexi cap funds to the tune of Rs 75 lakh. (see chart)

We have direct exposure in equity market to the tune of Rs 8 lakh. I with my own research I intend to make Rs 1-2 lakh per annum from the equity market. You can accommodate Rs 1 lakh as income while calculating the requirement.

I have deposited Rs 25 lakh in one of the nationalised bank. This deposit is likely to mature at the end of this year. Where should I deploy the amount upon maturity?

Current savings account balance is Rs 2 lakh, which is likely to meet our expenses for the next couple of months.

Solution

Asset allocation is paramount, especially for someone planning retirement in early forties.

As your non-earning years are several, you need to deploy the funds conservatively. Failing to do so may leave you with lesser money at a later date.

Going by your current standard of living, there is ample scope for expenses to increase as your children grow up.

As you have already made up your mind not to work anymore, you should try to balance your life by cutting unwarranted expenditure.

Asset allocation

Your investment is tilted towards equity. This may not be in the best interest of a person looking at a fixed monthly income. At the current juncture what is required is higher exposure to debt and the exposure should it be as high as 70 per cent of the corpus.

For instance, out of your Rs 1.1 crore, you need to invest at least Rs 75 lakh in fixed instruments to earn an interest of Rs 5.8 lakh.

With interest in most banks at 7 per cent, you ought to park Rs 55 lakh between deposits and post office monthly income scheme (maximum permitted is Rs 6 lakh) and the rest in fixed deposits in companies with at least AA investment rating.

As there is a possibility of interest rates increasing in a year's time, park your deposits for tenure of not more than two years at present.

A point worth noting is that bank fixed deposits of up to Rs 1 lakh is covered by insurance. Hence deploy your deposit in different banks.

Taking into account the Rs 1 lakh profit from equity shares, the total income after tax will be Rs 5.8 lakh.

So you need to structure your goals and start saving accordingly.

Goals

Education: For your daughter's education the present value of Rs 5 lakh inflated at 6 per cent (the same will be used for all calculations) will be Rs 6.3 lakh. To accumulate this amount you need to save Rs 10,330 a month for the next 48 months and should earn an interest of 12 per cent compounded annually (for all future calculations the same interest is considered).

For your son's education, in another eight years the present value of Rs 5 lakh will be Rs 8 lakh if inflated at the same rate.

To reach the target you need to save Rs 5,100 for next 96 months.

Marriage: As your expenses may exceed your income, you can postpone the accumulation for this goal by four years. Once your daughter's higher education target is met you can start saving for marriage.

Assuming you plan for her marriage in 10 years – when she reaches 22, the present value of Rs 5 lakh will be Rs 9 lakh. You need to save Rs 8,700 for 72 months to reach the target.

If your son is getting married at 26, your requirement at that point of time will be Rs 14.3 lakh. You can start saving Rs 3,460 from 2014 for 168 months to reach the target.

Pension: You have stated you will require 50 per cent of the current monthly expenses as pension. This amount, currently Rs 17,500 a month, will be Rs 50,000 if inflated for next 18 years.

To have this sum as pension for the next 20 years from the age of 60, you ought to have a saving of Rs 1.2 crore and it should earn an interest of 2 per cent over and above the inflation.

If you earn less than this, your corpus will get exhausted early.

If so, you can at that point consider selling the plot or alternatively resort to reverse mortgage of your house for the rest of your life and leave the other assets as estate to your legal heirs.

To transfer the assets to your legal heirs it may be advisable to write a will clearly indicating all details.

Conclusion

The systematic investment plan adopted by you has to be stopped immediately if you wish to execute the plan mentioned above, which is aimed at cutting cost. To meet the shortfall in your monthly income, consider fixing regular targets and booking profits on your mutual fund investments, after exhausting the balance in your savings account.

To protect your corpus you need to take medical insurance for at least Rs 10 lakh. The current medical insurance of Rs 2.5 lakh is too low.

The maturity proceeds of your life insurance policy can be earmarked for any shortfall in corpus for education or marriage of your daughter.

JAI PRAKASH ASSOCIATES - GOOD GOING

2010-02-07T02:31:00.000-08:00

Cement maker Jaiprakash Associates today reported a 60 per cent increase in sales in January this year at 11.65 lakh tonnes.

The company had sold 7.27 lakh tonnes in the same month last year, Jaiprakash Associates said in a statement.

During the April-January period, the company sold 86.17 lakh tonnes of cement, up by 40 per cent over the same period last fiscal.

Jaiprakash Associates' cement sales also rose by 60 per cent in December 2009 at 10.59 lakh tonnes over the same month last year.

The installed production capacity of the company stands at 17.1 million tonnes per annum. It is aiming to enhance it to 22.8 million tonnes by the end of the current fiscal.

STOCK MAKET LOSS ADVICE BY GANESH K

2010-02-07T02:28:00.000-08:00

Can any One Advise me what to do as am holding plenty of shares which are in heavy loss and am frustrated

HDIL 500 Shares @ 375
L&T 30 Shares @ 1558
Timex 500 Shares @ 29
Suven Life Science 500 Shares @ 29
Ispat Industries 1000 Shares @ 20.20
JP Associates 300 Shares @ 155
Bharti Airtel 130 Shares @ 340
Educomp 100 Shares @ 710
Jindal Stl & Power 100 Shares @ 700
Unitech 500 Shares @ 88
Suzlon 500 Shares @ 96
Melissa

Advice is as follows by Ganesh K

Please do not get frustrated. Actually all those who participated in the market in the month of January and beginning of February have lost a lot of money. Even I have lost around 1 lakh in the last 20 days. Your selection of stocks are really admirable ones. Not even a single choice of yours is scrap. All are fundamentally strong and will come back to the same position or even shoot up high. Yes, the market is in down trend for the time being and I think budget will set the motion up. Looking at your portfolio, I guess you are a long-term kind of an investor. So what is the problem? For short-term trading look for stocks around Rs. 50 to 100 which have only around 1 to 2 crores of equity base with high promoter holding for immediate gains. All the best. Some of my choices in this category are : Alokind, HBL Power, Himalaya International, Tulsyan NEC,Rajesh Exports, Tourism Finance, Transport Corporation of India, Raj Packaging, FCSSOFT, Himachalfut (for trading), Marksans, KFA, Uttamglava, Gujnre, Ashapura, GTL Infra, Orient Ceramics, Subex & in the banking sector you can choose Canara Bank for immediate growth.

Regards,
Ganesh K

Dividend, re-investment or growth?

2010-02-06T18:19:00.001-08:00

Mutual fund houses often use dividends as a means to attract inflows to equity linked saving schemes (ELSS) in the first quarter of the calendar year. That leads investors to seek help in identifying which option is superior when investing in equity funds: Dividend, dividend-reinvestment or growth?

Dividend for companies is routinely paid out of the profit, but in a mutual fund, if the fund house thinks the market is overheated or finds it difficult to deploy funds, it may sell a part of the portfolio and pay back the capital appreciation as dividends to the investors.

Dividend and growth are the two common options provided by mutual funds to the investors. Under the dividend option again, investors are allowed to choose between payout and re-investment. Here is a look at how investors should decide between options, generally, and with specific reference to ELSS:

Dividend option: Under the dividend option a certain percentage of the capital appreciation is paid back to the investors in the form of dividends. A point worth noting here is that the amount distributed to the investors comes out of the fund's NAV. If the NAV of a scheme is Rs 30 per unit and if the fund declares a Rs 5 per unit dividend, the ex-dividend NAV of the scheme will settle at Rs 25. So, dividend is just one way of taking out your profits from the investment.

If you are a long-term investor, remember that dividend payouts actually bring down your portfolio value. Having said this, the major advantage of the dividend option is that if the market undergoes a steep correction, such as the one witnessed in 2008, the sums already taken out by you through dividends will be protected.

But if you are looking to build a portfolio for the long term, it may be better to fix a return target and use the dividend transfer plan to invest dividends in debt funds or monthly income plans to protect your profits. If your key reason for investing in a fund, like an ELSS is tax savings, then the dividend option is better for you.

Dividend re-investment: Returns under growth and re-investment options are almost the same. Under dividend re-investment option, once the dividend is declared, the fund house buys additional units of the scheme on the ex-dividend date at the prevailing NAV and adds it to your investment. The number of units held in the scheme will increase.

Under the growth option, based on the appreciation in the stocks held in the portfolio, the NAV itself will increase.

At the time of redemption, the value of your portfolio will be almost the same, whether you opted for re-investment or growth. The reinvestment option value would be slightly higher because of the tax benefit on dividends received.

Re-investment vs growth: The advantage of the re-investment is that re-invested dividends are eligible to be treated as fresh investments under Section 80C of the Income Tax Act under an ELSS scheme. For example, if you invested Rs 50,000 in a scheme in November 2007 just before its dividend declaration when its NAV was Rs 46.89, the current value of investment works out to Rs 50,125 under the dividend re-investment option.

Had you preferred the growth option your investment value would be Rs 49,575. The reason for this difference is that in the last two years the fund has declared three dividends that amounted to Rs 16,897 in total. If you were in the 30 per cent tax bracket you could have enjoyed tax benefit of Rs 5,070 on those dividends and that is the gain over and above the Growth option.

The only flip side of dividend reinvestment in an ELSS is that dividends reinvested too will carry a three year lock in period and that may prevent you from cashing out fully when your original investment completes three years.

Investors who opted for the dividend re-investment option can stay invested under this option as long as they have room for the same under section 80C.

Alternatively, if you have exhausted the Rs 1 lakh threshold for investing under Section 80C, the dividend transfer plan would be a better bet.

If an investor chooses the growth option at the time of investment in an ELSS, he is not allowed to switch to other options before the completion of the three-year lock-in period. So, before writing out your cheque for an ELSS, select your option based on your requirements.

Flexible approach to debt funds

2010-02-06T18:17:00.000-08:00

After retirement from service, I have received a lump sum from my employer. I have already invested 60 per cent of those funds in 9 per cent Senior Citizen's Scheme. I want to invest the balance amount in avenues where the rate of interest is 10 per cent or more. What are the options? As an ex-employee of bank as well as senior citizen I obtain interest at 9 per cent from my bank. Would it be worthwhile to invest in debt funds?

Asok Biswas

You have done well to invest a good portion of your retirement funds in Senior Citizen's scheme. While the scheme cannot boast of superior returns, it is among the safest and steadier return options available at present. Investment made in the scheme is also available for tax deduction under Section 80C of the Income Tax Act for the present.

The interest rate offered by your bank also appears attractive. You can consider a 1-2 year deposit in it. As for the rest of your funds, do not lock in to long-term bank deposits at the moment. Interest rates are expected to gradually ascend by the end of this year. Keep a look out for 2-3 year bank deposit rates of over 9 per cent. This may not happen in the next few months though.

That leaves you with the option of corporate fixed deposits and debt funds. If you are familiar with investing in corporate deposits, look for those with high credit rating and offering returns of at least 9 per cent.

The limitation in most of these fixed income options is that there would be no guarantee as to whether they would provide you inflation-beating returns. In other words, a faster rate of inflation could mean that the post tax income (interest income is taxable) from these options do not meet your cost of living.

Debt fund investing

Unless you have other sources of income from property and so on, you may have to take some exposure to debt funds that provide you superior returns.

The key advantage here is that debt funds are open-ended — which means that you can withdraw the money when ever you wish to. Redemption proceeds are typically received within three working days. This key benefit of liquidity is not available in your other deposit schemes. Besides, the dividend income is not taxed. However, there would be capital gains on sale of debt funds.

Some of the top debt funds have generated three-year returns of 11-12 per cent and even higher returns over a five-year period. The average, though, is as low as 7 per cent, effectively suggesting that there can be a wide variance in the performance of these funds, which are subject to interest rate risk and credit risk of the underlying security they invest in.

Unlike your fixed deposits, debt mutual funds are more actively managed and churned; reason why they are able to generate superior returns for slightly higher risk undertaken. But remember, the NAV of debt funds, too, can fall sharply.

We, therefore, suggest some debt funds, with a flexi-approach and some monthly income funds which would do the task of managing the interest rate cycle and credit risk for you.

Consider investing about 15-20 per cent of your retirement funds in HDFC MIP Long term, UTI Mahila Unit Scheme (through your spouse or daughter), Canara Robeco Income, Reliance MIP and Fortis Flexi Debt.

These are a combination of monthly income plans and income funds. Opt for the dividend payout scheme if you are risk averse and need some inflows.

Note that mutual funds do not guarantee regular dividends. Even as MIP options strive to give you regular dividends, they are not under any obligation to do so. Hence, do not look at debt funds as a monthly source of income.

They are best viewed as a supplement, with returns perhaps superior to deposits. If the funds you hold do not declare dividend regularly, consider selling some units once or twice a year, to cash out the profits.

Gold is a risk-stabiliser, not returns-enhancer

2010-02-06T18:16:00.000-08:00

Recently, a certain industry association had a discussion on asset allocation and the debate turned towards gold. One question deliberated was: Is gold a good investment within a portfolio framework? The question assumes relevance because of the insatiable demand for the yellow metal in the country.

This article discusses gold investment as part of the asset allocation process. It first explains why gold is rationally sub-optimal investment. It then provides reasons to show why gold is a strategic investment for liability-driven portfolios despite the associated risk.

Rationally sub-optimal

For the purpose of this article, gold investments refer to investment in the physical asset, gold ETF and gold futures. It does not include gold jewellery and stocks of gold-mining companies.

Now, total returns from any investment can be decomposed into two sources- periodic cash flows such as dividend and interest income, and capital appreciation. An investment that provides returns from both sources moderates the asset price risk.

Take a high dividend-yield stock. Large periodic dividends cushion the decline in the stock price compared with a growth stock that pays no dividend.

Viewed in this light, gold should carry a high downside risk because the total returns come only from capital appreciation.

One factor that could moderate this downside risk is the demand-supply dynamics. World demand for gold for jewellery and other industrial use in 2008 was more than the supply from mining production.

The difference was bridged by recycling existing gold. If the world industrial production increases, demand for gold could go up, which could moderate the downside risk.

Of course, this argument does not take into account two primary price drivers in the market-central banks and traders. A decision by the central banks to offload gold could cause the yellow metal to fall sharply. Likewise, a large build-up and unwinding of trader positions could cause the metal to swing wildly, causing high price volatility. Despite these factors, investing in gold may be optimal.

Risk stabiliser

Gold acts as a safe-haven or “flight to quality” investment during geopolitical conflicts and financial crisis. The sharp increase in gold prices during the sub-prime crisis is a testimony to this fact. This safe-haven factor makes gold a desirable component of a retirement portfolio. Why?

Suppose a retirement portfolio suffers sharp decline in value due to global crisis at or near the investment horizon. The portfolio will then fall short of the desired value at the horizon.

An exposure to gold can moderate the shortfall risk in such circumstances.

Then, there is the insatiable demand for gold in the country. This can be attributed to what behavioural psychologists call as affect. In this context, affect refers to the good feeling that a person gets from buying gold. This feeling, in turn, leads to a lower risk perception and a higher benefit perception, even when it is not warranted.

Affect can be attributed to the obligation to gift gold jewellery during marriage and to other social and cultural reasons well entrenched in the Indian society.

Given this requirement for gold, exposure to gold ETFs would be optimal in a custom-tailored marriage investment portfolio. This is a portfolio that an investor creates to meet marriage costs. Gold ETFs would help in meeting the liability- buying jewellery at the higher spot price.

Gold ETF exposure should be preferably taken through a systematic investment policy- buying on one or more pre-determined days every month. This takes away the need to time the investment.

Conclusion

Empirical evidence suggests that allocating 3-5 per cent in gold would improve the risk-adjusted returns of a portfolio.

The actual asset allocation process would depend on the risk appetite as well as on the current wealth structure of the individual.

Mass affluent investors should a higher allocation than the HNWIs. The reason is that gold is more a risk-stabilizer than a returns-enhancer.

INVESTMENT OPTIONS FOR RETIRED PERSONS

2010-02-05T08:48:00.000-08:00

Fixed deposit

They have been the most popular product for many for decades. They are simple and easy to understand. The drawback has been the tax on interest which reduces the effective yield from the product. You can work around the tax angle by investing in your spouse's name if your spouse is not earning. This will ensure higher tax-free income.

The rates have already fallen by 1.5-2 percentage points and more cut is likely in the coming quarters. One has to be aggressive with his choice of company or bank as there is a considerable difference in the borrowing rates.

Monthly income plan

This product is offered by different categories of institutions ranging from post offices to banks. In the case of post offices, there is a cap on the amount invested at Rs 4.5 lakhs per person. A couple can park as much as Rs 9 lakhs between them for an assured return of eight percent. Though there is no tax deducted at source from this product, the interest nevertheless is taxed depending on the income slab.

Besides post offices, mutual funds too offer these plans but the returns are not guaranteed . In the case of this product, mutual funds allocate a portion of the corpus in equity which means it has an element of risk. In a rising market, these can be considered by senior citizens after taking into account the monthly needs.

The advantage with a mutual fund plan is that it offers the potential of capital appreciation over a period of time. Also, since mutual funds distribute their profits in the form of dividends, they are tax-free in the hands of investors. However, such dividends are distributed after taking into account dividend distribution tax.

Balanced fund

At an early stage of retirement , most retirees will be in a fairly comfortable position with their money. Such investors can consider balanced funds as one of the products for their corpus. The advantage with a balanced fund is that during an equity downtrend, it acts as an excellent cushion as debt tends to be a performer during such a scenario. During an equity uptrend, they benefit from the rally in the stock prices.

That is also one of the reasons why balanced funds have managed to post a good show in the last 12 months when compared with largecap focused funds.

A combination of all products can ensure higher returns though the ratio of the mix depends on the risk-taking ability and liquidity comfort of the investor. Both attain significance for all class of investors particularly for senior citizens.

INVESTED IN PROPERTY THEN READ THIS

2010-02-05T08:28:00.000-08:00

Property prices are going for a tailspin

Be warned there will be an avalanche in the property price and prices will soon crumble by
more than 50% to 60%, as Europe and America faces another bout of recession, pls do not book your apartments now, you will regret later. The Indian property bubble will definitely burst this years second half and it will take another 5/6 years to reach this level.
The safest way to heaven(investment) is gold. Pls note gold production will come down drasticallyin next 5 years(civil war in Ghana and unrest in Namibia) and so far the world has produced just enough gold to fillup two olympic size swimming pool(yes peanuts), so invest in Gold. China willsoon surpass India in gold intake.

HOW TO AVOID LOSSES IN THIS UNCERTAIN & RISKY MARKET

2010-02-04T18:23:00.001-08:00

HOW TO AVOID LOSSES IN THIS UNCERTAIN & RISKY MARKET

1) Somehow our market has become very dependable on other markets in spite of the fact that our economy has strong fundamentals, great PSU and private banks, many of our companies have posted good quarterly results, government has given good industrial projections and yet we always look for clues from other markets, like a dancer who is not sure and watching other dancers' stepping, to perform for himself.

2) Luckily our market has the geographical advantage, that is
(i) Our market opens after American market closes
(ii) Our market opens only after other major Asian markets opens
(iii) European market opens couple of hours before our market closes, so we do get a direction from European markets that how our market will perform in the crucial closing hours. Therefore, we do get an idea of shape of things to happen in our market.

3) No body can teach you stock-marketing. One has to learn it himself from his experiences in the market.

4) Never think the other person is more intelligent than you to give you tips and kind enough to make you rich.

5) Don't participate in the market every day. Beginners should participate in trading only on clear days, that is,on full GREEN days, especially the US and other major Asian markets.

6) These days there are no investors, there are only traders so market is also behaving exactly in the same way, so,never take any kind of trend for granted to last long, you never know what the next day has in store for you.

7) Never hope. Be practical. Buy when everybody is selling and sell when everybody is buying.

8) There are some stocks like Kwality Dairy, which perform well when market is down. Do invest in such stocks which have proven record of performing in volatile and negative market situations.

RAMESH RAGHAVENDRA OF NEWAGE INVESTMENTS MYSORE REPLIES TO QUERIES ON HOME LOANS AND CRR HIKE

2010-02-04T07:40:00.001-08:00

Arun Mishra asked, if i have two home loans, can i show income from home = 0 for both the homes? i have not rented any of the home. if not how much income i need to show?
Ramesh Raghavendra answers, On one of the homes as per your choice you will have to take the notional rental value as your income (even though it may have been lying vacant).

Selvaraj T asked, Will I be able to transfer home loan within State bank groups? I have loan with SBH and I would like to transfer it to SBI.
Ramesh Raghavendra answers, Why not. they are different legal entities.

Arup Bannerjee asked, Why banks are biased towards existing customers? When there is increase in PLR [due to CRR or any other reason] it is passed to every customer but when there is reduction is CRR, bank normally lends to new customer with less rates but existing loyal customers are kept away from reduction?
Ramesh Raghavendra answers, I agree that banks are less than fair with their existing customers. Though existing RBI regulations cover this point not a single bank is following them. the affected consumer should complain to the banking ombudsman about the non following of such regulation.

Paloma Mehta asked, Hi Ramesh, what are the tax liability when we make a prepayment for the housing loan, and waht are the advantages.
Ramesh Raghavendra answers, There is no question of a tax liability when you prepay a home loan. In fact it is treated as principal payment and will be eligible for deduction under section 80C upto an overall limit of Rs. 1 lac. Off course if you are selling the flat itself within 5 years of acquiring it there will be a requirement to refund any tax benefit that you might have claimed in earlier years

Babubhai N I asked, Rameshji will you answer my query i am currently 45 yrs and my net income is 45000 will i get a home loan of 15 lacs and what will be interest rate and tenure and what will be approx emi
Ramesh Raghavendra answers, If you have no other loan you should not have a problem in getting a loan of Rs. 15 lacs (off course the house cost should not be less than Rs. 19 lacs).

Thiruraj N asked, hi, 4 of us wants to buy a 1ground land and construct 4 flats (2+2) in that. All of us wants to take home loan for both the land and construction. Pls guide us how to proceed and which banks are providing loan for this arrangement?
Ramesh Raghavendra answers, You have not stated what the arrangement will be for owning the land and flats. will you form a cooperative housing society or a condominium. This kind of loan is difficult to get as it is pretty unusual. You should perhaps try HDFC limited who might have some experience in this.

Bardaoi Singhta asked, Ramesh Raghavendra- thanks for the answer sir. What if I remove the wheels - does it qualify as in immovable asset and hence for home loan ? I appreciate your efforts to guide me sir.
Ramesh Raghavendraanswers, No it does not. A "house property" needs to be a building or land apeertunant thereto. A car body (with or without wheels) cannot qualify as a building

John Ibumapalam asked, Hi Harsh, I have recently bought second new home and my emi has started. Can I get tax benefit on second home ( I will not claim any tax benefit on first home)?
Ramesh Raghavendra answers, You can get tax benefits on loan repayment on both homes. It is a misconception that you can get benefits only in respect of one house property.

Sandeep Ved asked, What can u speculate about the home loan rates after three years from now? and what will be the tax benefits then?
Ramesh Raghavendra answers, I think anybody who can answer that question right would make millions on the bond market .

Dipen Lakotia asked, hello. is the bank under an obligation to provide copies of all documents executed by the borrower in respect of the home loan.
Ramesh Raghavendra answers, Absolutely. They are supposed to do this even without a written request by the borrower. But if you have not got it send a written request and if it is still not given please file an official complaint with the banking ombudsman.

Sachin Darekar asked, Hi Ramesh i am opting for a loan of 13 lakhs from HDFC should i opt for 20 years repayment or 15 years repayment...I can afford 15 also
Ramesh Raghavendra answers, It depends on your monthly budget and the provision it has for emergencies. If your monthly budget can afford the higher EMIs on a 15 year loan (as compared to a 20 year loan) the b y all means you should only take a 15 year loan.

Pina Shah asked, is car loan and home loan same thing ? if i take car loan and live in car..will i get home loan rate since the car becomes my home ? Sir pls clarify.
Ramesh Raghavendra answers, Extremely innovative question. This had me scarring to the law books. Unfortunately for tax purposes it recognizes only as buildings or land appurtenant thereto as "property". So if you live in a caravan you will not be eligible for any tax benefits on loan taken to acquire this Van. Also as far as banks are concerned the rates will be that applicable to a car loan as the depreciation of the asset values and its movable nature will determine the interest rate on loans.

Manoj Gaitonde asked, I am having a housing loan for the house I have purchased few years back. I have got spare money right now. What shall i do- Purchase any property for appreciation in future or repay my housing loan? for your information I have got stable income for paying future EMIs.
Ramesh Raghavendra answers, I think you should take professional advise in this matter from a financial planner. The answer would depend on your tax situation, asset financial goals, current asset allocation, risk taking abilities, etc. Without the benefit of personalized advise you are likely to take a wrong decision. Personally if your risk taking ability is moderate to high and you have good insurance cover for the risks that you are exposed to, the option to invest in residential property for renting it out and gaining capital appreciation can be pretty attractive. But as i said - this is a big ticket purchase and you should seek individual professional advise on this matter.

Jitu Thadani asked, Hi Harsh, I have a home loan of 24 Lacs from HDFC with 10.25% interest. Now I have an option to low down the interest rate to 8.75% by paying processing fee of 1.5%. So it is advisable to keep the loan in HDFC or to transfer it to SBI??
Ramesh Raghavendra answers, Very clearly it will be advisable to shift to the new scheme. However you might be even more better off asking then to shift you to their new teaser rate scheme. If they refuse you should look at other banks in the market who offer such teaser rates.

Manoj Daundkar asked, How is CRR directly impacting Home loans?
Ramesh Raghavendra answers, There is no direct connection between CRR and home loan rates (or any interest rates for that matter). As you are probably aware CRR is the percentage of the deposits that a bank is required to compulsorily keep with RBI. When this percentage is increased the amount of money available with the bank to lend decreases. Also the CRR deposit kept with RBI carries no interest so the bank has to earn more from its balance deposits to compensate. In both cases this exerts pressure on the banks to increase rates on loans. But this is only one factor (though an important factor) that affects interest rates. General liquidity conditions, availability of deposits in the markets, fiscal policy, etc have their own influence on interest rates. Hence we may not see banks increasing interest rates even after the recent CRR hikes are actually carried out during February 2010.

Michelle Pereira asked, Hi Harsh, I have opted for a new flat, which is under construction, for 37 lacs at Chennai. Planning to take a loan for 20 lacs (My monthly gross is 55k). Suggest which bank to go for and whether to opt for Fixed or Floating rate if the loan tenure can be 15 or 20 yrs. Will the interest rate go high in the coming years? I have shortlisted HDFC or LIC Housing. Any other suggestions from your end?
Ramesh Raghavendra answers : , Congratulations on your decision to buy your own flat. If your age is less than 40 years you should easily be able to get a loan of Rs. 20 lacs from any bank based on a net income of around Rs. 45k per month (assuming you have no other loan outstanding). As far as type of interest rate is concerned (fixed or floating) this is never a one time decision and you need to keep reviewing your decision at least once every 6 months. As far as today's conditions are concerned a pure fixed arte loan that remains fixed for the entire duration of the loan will be prohibitively expensive at around 13.50% or so. In the current times the best bet is the teaser rates offered by various banks where the rates remain fixed for the first 2-3-5 years and is then floating thereafter is a good bet considering that rates are expected to go up in the near future.

PRASANNA PANDIT OF AKSHAY INVESTMENTS

2010-02-03T02:05:00.000-08:00

Nikhil Batra asked, Mr Prasanna. I am 32 yrs old. I have various policies LIC and ULIP and the total sum assured is 12 lakhs. Is it sufficient. What else can be done.
Prasanna Pandit answers, Adequacy of sum assured should be validated keeping your personal worth in picture. Your family may need certain amount on regular basis in case of your absence. Hence you could possibly work out the corpus amount taking a risk free rate of return say Post office FD that may yield 8%. Hence suppose your family needs Rs. 8 Lakhs per annum for their regular expense then you would need a corpus of Rs. 1 Crore. Please work out your requirement accordingly to define the correct estimate of your insurance requirements.

Arjun N asked, Hi, my employer quoted wrong PAN in his records and is given Form 16 last year with wrong PAN number. What should I do? Will the income tax dept take action against me?
Prasanna Pandit answers, Please write a letter to the ward officer relevant to your jurisdiction stating the mistake. Attach a copy of the PAN card with the letter and get an acknowledgment of this submission on your copy. This should take care of this mistake

Manikutti asked, Can i continue to stay in the rented house and claim the HRA while owning a house and availing the IT benefit on home loan by showing a modest rental income?
Prasanna Pandit answers,Yes you can but this modest rental income has to compare with the reasonable letting value in your area of residence

Mridul Roy asked, Sir,I am paying mediclaim Health insurance premium for my parent .Will i get tax benefit?
Prasanna Pandit answers, Yes you can get a deduction for this

Mangesh Mhatreasked, Sir,I am paying mediclaim Health insurance premium for my parent .Will i get tax benefit?
Prasanna Pandit answers, Yes you can get a deduction for this

Kalidas Mathur asked, How can we track how much money is credited into my PF account. Is there any web site where we can get this info.
Prasanna Pandit answers,You would get annual PF slips from the PF department through your employer. The PF department is in the process of putting up this feature wherein you can check the balance status online.

Nikhil Chainani asked, Hi, For tax investment what is better between ULIP & Tax saving ELSS.
Prasanna Pandit answers,I would go for ELSS MFs

Reema Chopra asked, i am staying in my own home and i had availed housing loan can i get HRA exemption from income
Prasanna Pandit answers, No you cannot avail the HRA deduction in this case

Annadurai Mughulam asked, Hi Sir, I stay in Chennai, my parents stay in Kolkata, every year i am sending 1.5laks to my parents for their living. Pls advise me is there any way by which i can claim some tax exemption on this amount?
Prasanna Pandit answers, No deduction for such expense can be claimed as these are personal expenses

Mriuntajay Shankar asked, Sir, Is PAN card migration essential? As i got shifted to different state and no where i file my income tax return?
Prasanna Pandit answers, Yes it is pertinent to change your PAN data with the tax authorities. An example as to how it may impact you is in case you have a refund, then your current ward officer may refuse to release the refund stating that there is no clarity on who has jurisdiction over your case

Manish Panda asked, What is a Diversified Equity Mutual fund? Why is it recommended for better returns? How is it different from other category of Mutual Funds?
Prasanna Pandit answers, Diversified Equity MF are such funds that have exposure to varied industries that may help in avoiding a steep fall in case any particular sector falls. This is unlike sector funds that has exposure to limited sectors such as say banking sector or power sector

MVerma asked, hi i'm planning to buy 2BHK. But current market price is too high so i planned to buy 1BHK and give it on rent and i will take 2BHK for me on rent. Doing this can i claim home loan and house rent. Please advice.
Prasanna Pandit answers, Yes you can claim both the home loan deduction & HRA deduction. The rent received should be reduced by the interest amount and 30% standard deduction to arrive at the net taxable income.

Kalyan Maditlu asked, Hi Sir, For financial year 2007-08 i declared my TAX returns and i should get nearly Rs:16K from the I.T dept but till date i didn't received even a single paisa and the bad news is that i lost the I.T return paper. So my question is when i will receive this money else to whom i need to contact on this issue?
Prasanna Pandit answers, You can check the status of your refund on www.tin-nsdl.com Approach your ward officer to enquire the status of the refund and if required issue an indemnity bond to the officer to get your refund. in case you have efiled your return then you can get a copy of the returned filed on the tax website

Hariprasad M asked, I have invested 1.5Lac in post office MIS in Jan this year and planning another 1.5Lac in march do you think it's wise to invest in PO Mis or is there any other alternative, my age is 32 and I can put this money for 5-6 Yrs.
Prasanna Pandit answers, I would advise equity investments such as MFs or direct equity. But these investments should be done in a disciplined manner and regularly. Such investments would work wonders in the long run compared to Post office investments

Shefali Sarma asked, Dear Mr. Prasanna! I have two home loans. One house is at my home town, that is very far from my work. another one is near to my work, which is under construction. Can I avail tax exemption on loan repayment on both? can i avail HRA ?
Prasanna Pandit answers, As the second home is under construction, you cannot claim any home loan deduction. You can however, claim the HRA deduction for your stay near your work. Also, once the second home is complete then you cannot claim HRA unless that house is let out. If not then one of your house would need to be deemed to be let out

Nikhil Rao asked, I have a LIC endowment policy for 2,50,000 sum assured. Yearly premium is about 12,000. I have been paying premium for last 6 years but I feel, I should discontinue... What do you suggest
Prasanna Pandit answers, In case you can wait for the premium paid to be returned on maturity then it may be advisable to stop the plan and go in immediately for a higher term cover. You can then invest the difference in equity related investments.

Usha T asked, Sir, my EPF+LIC is >1Lakh, There is no scope for tax savings. I do not own a house. Pl. tell me what else I can do to save tax? Pl. answer.
Prasanna Pandit answers, You can go in for medical insurance that could fetch you additional tax deduction

Azam Mohammed asked, HI PRASANNA, I'm having a ulip 0f 30000 each year and paid since 3 yrs but there is no return and it's in minus flow. Can i switch from growth to equity or shall I stay on or exit? Pls suggest.
Prasanna Pandit answers, You can exit the plan & go for separate equity investments

Neeta Garg asked, If I put2 lakhs in PPF/ELSS, I get Tax exemption for 1 Lakh and Whether the 8% interest will be taxed (for the Balance 1 lakh)at the time of withdrawal (or) that will be taxed (for the 1 lakh) when it is matured. Thanks in advance for your reply. Vijay.
Prasanna Pandit answers, PPF interest is tax free currently and hence the withdrawal of the same is not taxable

Rai Akshay asked, Hi, How to save tax on Child Education Fees? What is the difference between Child Edu. Allowance paid by Company and Child Education under 80C? Thank you.
Prasanna Pandit answers, Education allowance is an exempted income and it does not require proof of educational expense to be provided. on the other hand school tuition fees paid for your child's education is a deduction from your income and you need to provide the fee receipt to your employer to claim this deduction

Manohar Kadam asked, Hi If any one has new IT rules for the financial year 2010-11 and about the tax exemption on home loan please let me know
Prasanna Pandit answers, The tax break for home loan remains the same as in the earlier year. Up to Rs. 1.5 lakhs of deduction for self occupied residential property loan and Rs. 1 Lakh principal repayment

Dhruv Jhawar asked, Hi sir, i am planning to go for a Home loan please advice me whether to go for a home loan for saving tax is a better option or shall i opt for other alternatives to save tax
Prasanna Pandit answers, In case you are investing in a home from the perspective of getting a home then tax break is incidental. However, if getting tax break is the sole objective then you might have better liquid options than an illiquid residential property

A K Singh asked, what is elss?
Prasanna Pandit answers, ELSS is Equity Linked Savings Scheme that has exposure to the equity market. Investments in such Mutual Funds (MF) gets you tax deduction but has a lock in period of 3 years

Ashok Kandhari asked, Should i consider VPF for tax savings and retirement? My PPF and EPF contribution meets the quota of 1Lacs... i am in dilemma with VPF..whether to save a little there or not. My age is 26yrs and my EPF contribution is 3k per month. PPF 70k
Prasanna Pandit answers,In case you have met your section 80C investment limit then instead of focusing on similar investment better focus on equities / equity oriented mutual funds. Considering your age it would make lot of sense to go for equity investments

Siddarth Shah asked, When direct tax code does come into existence will tax saving have any meaning left ? If so please elaborate with some good illustrations. Thanks in advance
Prasanna Pandit answers, Yes tax savings will still have meaning as the current limit of Rs. 1 Lakh is proposed to be increased to Rs. 3 lakhs. The problem is that home loan deduction of Rs. 1.5 lakhs for interest is proposed to be withdrawn

Vedpathak Anuj Kumar asked, HDFC TAX SAVER OR ICICI TAX PLAN. WHICH IS THE BEST ELSS?
Prasanna Pandit answers, Of the two, i would go for HDFC Tax saver

Vidya Balsubramanium asked, Sir, i can save 2/4 thousand/pm. where should i go?
Prasanna Pandit answers, In case you are risk averse then go in for PPF investment that would give you risk free & tax free interest income. In case you can handle risk then go in for good ELSS MFs that would give you good returns in the long run

Madhuri Jadhav asked, I HAVE 20 LAKHS CASH WITH ME. WHICH THE BEST WAY TO INVEST WITH HIGH RETURNS
Prasanna Pandit answers, You can invest in liquid funds with a option of systematic transfer plan (STP) wherein every month a defined amount would be pushed to equity exposure MF. Else you can immediately go in for equities / equity MFs

Manoj Patel asked, If given option what to choose between salary and consultation fee for the CTC of Rs 70000?
Prasanna Pandit answers, For a CTC of Rs. 70000 per month probably fee model might be better as you can claim expense deductions related to rendering this service viz., conveyance, petrol, telephone, attire, books & periodicals etc. In case the gross fee goes beyond Rs. 10 Lakhs then Service Tax may be applicable and thereafter it might be better to be in Salary mode if you do not get separate ST reimbursement

Lalit Kanakate asked, Sir, Which type of mutual fund good for Long term Good Return?
Prasanna Pandit answers, Diversified Equity Mutual fund should be looked at in terms of long term horizon

Shikha Magadh asked, Hi Prasanna, Please suggest 3 best tax saving MF for a horizon of 3 yrs. Return must be decent.
Prasanna Pandit answers, Please note the answer to a similar query asked earlier

S K Sharma asked, Can you suggest me some tax saving schemes apart from ELSS, NSC, PPF, Tax Saving FDs, LIC?
Prasanna Pandit answers, Medical / health insurance, Principal repay of home loan, School tuition fees for your children, donations to specified institutions etc are other deduction components

Anubhav Jain asked, I have to invest 50,000 Rs lump sum for this particular year. Kindly tell me tax saving schemes which have 100% exposure to equities. I would like to diversify this amount into 3 mutual funds.
Prasanna Pandit answers, HDFC Tax Saver, SBI Magnum Tax Gain & Birla Sun life Tax relief are good funds

Chaturvedi Abhisekh asked, I have to invest 50,000 Rs lump sum for this particular year. Kindly tell me tax saving schemes which have 100% exposure to equities. I would like to diversify this amount into 3 mutual funds.
Prasanna Pandit answers, You can go in for ELSS MFs for equity exposure and tax deductions

Ulips will Bloom . Give it time

2010-01-30T19:16:00.001-08:00

I f you are in your late 30s, have a wonderful family and a plum job, you have made it in life. So, why think about life insurance?

Especially when there are all negative reports about unit-linked insurance plans (Ulips). The problem is that not many have complete knowledge about the product. Not many buy it on their own and not many opt for it for the right reasons.

So whoever buys it, may feel he or she is forced into a bad deal. Often such schemes are sold as cheaper or almost free products. That there are no free lunches in the financial world and whenever you try eating one, you end up paying more one way or other is often forgotten.

Coming to the frightening prospect of defending Ulips against deafening criticism — let me say that it is the best thing that has happened to financial planning. They are long-term products and if you keep them for over 10 years, they are as fairly priced as MFs. They are transparent and flexible and give inexpensive asset allocation through lateral shift options. But all this works if only you know what to buy and how to buy.

The catch is that not many (financial wizards included) could ever decode whether the small print is good or bad for them. If the print is small, by design it is bad? Save regularly, start early, think long term and protect your capital — are the four mantras chanted by every financial planner who knows how to find a sure way to wealth. These four principles are embedded in Ulip life insurance plans more firmly than in any other financial product, mutual funds included.

Then why run away from the life insurance salesperson? Because he knocks off 20% or 30% or 40% of your savings just in the form of commission and ties you down to unwarranted long-term commitments? Agreed, there are some life insurance plans that are atrociously priced and aggressively sold, but there are also many fair priced and genuine life insurance products.

For best returns, remember:

- Don't just buy into the argument that a term+mutual fund is a better package than Ulips. There are definite advantages of combining them into a single plan, especially after the expenses cap on Ulips
- Many Ulips now are as fairly priced as MFs if you invest for over years
- Because of improving longevity and the increasing risk of living too long, invest in locked in assets (Ulips+PF) that make you mandatorily save for long term
- Avoid all withdrawal and flexible premium options, except in cases of serious cash flow constraints
- Investing in Ulips is a bad idea if your time horizon is less than 10 years
- Buy only those Ulips which are simple to understand and have no "small print"
- Seek advice directly from insurers if you have doubts about hidden costs

In nutshell, if you are careful enough to choose the right product at the right price, Ulips offer a better deal in terms of asset diversification and give you a fair risk adjusted returns. The so called 'high costs' of Ulips disappear if you think long term and that exactly is the purpose of financial planning.

Have you claimed your tax benefits

2010-01-30T19:13:00.001-08:00

As the financial year comes to an end, it is time for the salaried section to put in place the tax-saving investments.

While the remaining two months can be used for making the investments, it gets a lot easier if the employer is provided with all details as it will do away with the task of waiting for refunds.

Since most employers expect employees to provide proof of tax saving by the end of January or February, check out if you have completed the tasks.

Rent receipt details

The house rent allowance can turn taxing if employees don't provide details of their rental expenditure.

Hence, provide details of rent paid for the past months so that HRA does not become a taxable income.

Details of all tax saving investments

Signing up for long-term tax-saving instruments like insurance or pension plans is meaningless if the details are not provided for tax relief.

While the task of providing details becomes easy when you opt for salary deduction, the trouble comes when you make these investments on an annual or half yearly basis.

When insurance payments are made through ECS, it is still mandatory to provide the receipt or statement to the employer to get the tax relief.

Keep track of changing guidelines

Income tax regulations, as you are aware, are subject to change. Hence, you need to assess the past investments at regular intervals.

A classic example is investments in pension plans which were earlier covered under Section 88CCC.

Now they have been brought under Section 80C and the upper limit too has been raised to Rs 1 lakh from Rs 10,000.

Similarly, there have been changes on the health insurance front too with additional relief being provided for premium paid on behalf of senior citizen parents.

Reducing burden from LTA

Leave travel allowance is always a tricky component for young professionals. Since the allowance needs to be claimed (some companies do provide without request), it can skip the attention of many professionals.

There are a couple of factors associated with LTA. As the name indicates, the allowance is provided to enable the professional to travel on leave once a year to his native place.

Hence, the individual is required to provide details of the travel to claim it. The other part of the allowance is with respect to income tax. The allowance, as per the IT Act, is tax-free once in two years or twice in a block of four years.

So, it is important for the salaried segment to keep track of the year while claiming the tax benefit as it need not be taxed alternate years or twice in a block of four years. During the remaining two years, the allowance is taxable.

Medical reimbursement

Another expenditure which is not taxed from the point of employee is medical expenditure, up to a limit of Rs 15,000 per annum. Some employers do provide the money if not claimed but then it will become an allowance and hence taxable.

Instead, employees can reduce the tax burden by claiming the allowance with the help of medical bills on a monthly or annual basis.

WILL THE NEW TAX CODE KILL ALL TAX BENEFITS A DISCUSSION

2010-01-30T08:07:00.000-08:00

Rajesh Kumar Thand says

The new tax code is good on some aspects like widening of tax slabs and also reduction of
tax rates, but overall it will not benefit the salaried class because of the simple reason that
they cannot claim tax rebates on home loan interest paid, medical expenses and LTA. Who will now buy a home if there is no tax rebate. The good thing may be, it will lower the demand for home loans and so there would be a severe drop in the realty prices. We can get homes in cheaper prices. I sincerely doubt, this will be implemented since the realty lobby and banks will push for the existing home loan interest rebate for tax to stay, otherwise they are going to incur heavy losses. Imagine if there are no home loan borrowers what will happen to the future of banks and realty companies. Travel companies and airlines will be hit badly because no one can claim LTA. All premature insurance, PF withdrawals will be taxed. Moreover no tax benefit on investments in mutual funds is going to hit lot of financial firms. Government is not doing any favour to the middle class since the benefits incurred earlier on home loan interest, HRA & mutual funds are going to nullify the new benefits to be given to tax payers because of widening of tax slabs and lowering of tax rates. Every year the IT department actually beats the target they fix for direct tax or indirect tax collection, but still our government is hell bent on devising new strategies to tax people rather than providing relief to the tax payers.

Neeraj Kumar says

The Draft Direct Tax Code has done away with all exemptions and has made a very good attempt to uncomplicate the tax-planning. Filing of return would be much more simpler.

If you are a middle class person then kindly analyze your tax burden after removing all exemptions under the new tax slab. You will hardly find any difference. In fact, majority of us would be benefited.

By making the Income Tax Act uncomplicated and simpler it would also reduce corruption. Isn't it? So first think before criticizing this bold attempt by the Ministry of Finance.

Ahbhay Gangurde says

1. Net taxes reduced on salaried.
2. Tax benefits on primary housing reduced. This will lead to reduced interest in buying big homes & big loans just to save taxes. Only people who want to buy a home will buy. People buying a second home will get tax benefit on loan but at the same time will have to add the rent to total annual income and pay taxes on it.
3. You now have complete freedom in planning your finances. Earlier it was a "Tax Saving Planning"

Why is it that when investors realize returns on a mutual fund, its price tends to fall?

2010-01-29T08:24:00.000-08:00

Mutual funds are a well-diversified portfolio of investments that include equities, bonds and other securities. Mutual funds have become increasingly popular among investors saving for retirement because of the low risk that they carry, along with their reputation of providing consistently positive long-term returns.
Under the broad category of mutual funds there are three main types, open-end funds, closed-end funds and exchange traded funds (ETFs).
The value of a fund is quoted as the net asset value (NAV) of the fund. The NAV for a fund is calculated by taking the total assets of the fund and deducting the total liabilities of the fund. NAV is usually divided by the total shares outstanding for the fund, resulting in NAV per share. This per-share value is, in essence, the price investors must pay for the mutual fund.
In open-end funds, the NAV per share is recalculated at the close of every trading day. This is done because the value of the assets and liabilities underlying the funds are constantly changing. Closed-end funds usually trade at a premium or discount to their NAVs.
There are three reasons why this may occur:
pressure of supply and demand, fund management and expectation of asset performance.
Just like stocks, shares of ETFs are bought and sold in the secondary market every day. Subsequently, the price of an ETF will change throughout the trading day. When your mutual fund takes a profit, you are realizing capital gains on your investments. When this occurs, all of the capital gains earned on the investment are distributed among the investors in the fund. Because the fund has sold some of its underlying stock and has paid out all of the capital gains to investors, its total assets will decrease. Finally, when the assets of the fund decreases - so does the fund's NAV per share.

How is Gold BeES better than any other gold etf?

2010-01-29T08:21:00.000-08:00

Gold BeES is the first, largest and most traded Gold ETF with volumes over 4 times as compared to any other ETF, this is one of the reason why liquidity is never a issue when you want to do bulk trading, moreover its prices are very transparent and stable and the fund have low tracking error compared to other ETFs available in the market. Other Gold ETFs don’t have the volume and liquidity could be a matter of concern moreover I have generally observed that their prices are very fluctuating when compared to Gold BeES.

ETF STRATEGY IN A DOWN MARKET PART II

2010-01-29T08:18:00.000-08:00

Indexing or Exchange Traded Funds (ETFs) have gained popularity in global markets. With a large number of institutional investors in the market, it has become impossible for any active investor to consistently beat the market, hence the best way to participate in the market is through index funds. ETFs are the most efficient route to take exposure to an Index and when compared to any other open ended index funds ETFs are transparent, low cost, traded on the Exchange just like any other stock and offers solution across asset classes.
How one can you use ETFs?
• You can diversify your core equity holding with a single ETF unit
• Use it to build a long term core holding of equity by systematically investing in various index funds like Nifty ETF, Nifty Junior ETFs, Bank ETF etc
• If bullish on market, just buy a Index ETF and no need to do individual stock picking
• If you have some stock in your portfolio, just do a switch trade by selling the stocks in your portfolio and buying an Index ETF of your choice
• Taxation is like shares (long term Capital Gain is zero and Short Term is 15%)

ETF strategies for tackling a down market?

2010-01-29T08:16:00.000-08:00

Exchange Traded Funds (ETF's) are rapidly becoming a popular investment tool for many investors. As with any investment, it is important to understand the downside risks.
ETFs are traded like stocks, so they inherit many of the same risks as stocks. However, there are several strategies that ETF investors can use to protect their capital during a down market. These strategies include knowing when to sell, knowing how to allocate your assets, following the rotation of sectors and using hedging techniques.
Sell Your ETF Knowing when to sell your ETF is just as important as knowing when to buy it. Many investors do not know when to sell and they tend to hold on to their shares hoping things will improve. Unfortunately, it may be a long time before they fully recover. During a down market, there are several reasons investors should consider selling their ETFs:
Risk Tolerance: Every investor should know how much risk he or she can tolerate. If you are having trouble sleeping at night due to concerns over the market, then you have reached your limit and it is probably a good time to sell. You've already made the losses, so now it's time to save what's left. Stop Orders: Stock investors have long used stop orders to protect their portfolios. Fortunately, investors in ETFs can use the same stop techniques available for stocks, such as trailing percent stops, limit stops, volatility stops or some other variation that helps close out a position at a predetermined amount.
Ready Money: If you will need the cash for some purpose in the next couple of years, it is a good idea to reduce your risk and move your money to a low-risk investment now. Investors can move to less volatile ETFs or sell for cash to preserve gains should the market turn down.
Balancing Act: Rebalancing your portfolio is always a good idea. Should your ETF run up in value, providing a nice gain, it might overweight your portfolio toward one sector or industry. A good strategy is to sell part of the ETF to capture the profits and then diversify your reinvestments. This approach protects your profits should the market take a dive. Expectations: Investors who beat the market may find that their initial reasons for purchasing an ETF have changed. Maybe it failed to meet your expectations, or the fundamentals underlying the investment changed for the worse. When this happens, it is a good time to sell and move on to another opportunity.

What are the five easy steps to avoid financial stress?

2010-01-29T08:11:00.000-08:00

1) Try to determine how much is your exact income periodically say month quarter or yearly.Of course it is easy to determine your exact income monthly if you earn salary from employment.

2)Try to estimate your monthly (or regular interval) expenses.Then try to spend less than your income.In short budget your income - expenditure.This estimate can be arrived at after monitoring your income expenses for a period of 6 months or 1 year.

3) Try to segregate expenses in to regular expenses rent,electricity.telephone etc or one time expenses like spending for a function buying a consumer durable like Fridge / TV / Two Wheeler / car etc.

4)Out of income you are expecting to receive regularly first allocate to regular expenses & save some portion of income for future one time expenses.

5) Invest regularly in RD / FD / mutual fund etc which earns some return in form of Interest dividend etc.Fix a target period for investing & after the the investment matures you can utilize for purchasing durables like fridge / tv / car / house etc.

How can a retired person manage his income?

2010-01-29T08:06:00.000-08:00

Your income stream during your retirement years usually depends on your annual expenses, the amount you have saved and the amount of years you project you will stay in retirement. To balance your income with your expenses, consider doing the following:
Make a list of your monthly expenses, such as utilities - including electricity, telephone, gas and water - groceries, rent or property taxes and transportation. Also consider medical and leisure expenses. These amounts may change each year because of cost-of-living increases, which means that you must do an assessment at the beginning of each year. In general, inflation increases about 3% per year, but could be higher for certain expenses such as medical and health. Take stock of the amount you have saved for retirement. This includes your regular savings and your retirement account balance. Consider the amount of years you plan to stay in retirement.
For a pensioner that becomes his first part of post retirement income. Taking into account the plan, as suggested above ,he can plan additional inputs. Unfortunately a very small percentage are covered by regular pension scheme. The others should join the National Pension Scheme that is available to all citizens. Just depending on final GPF and gratuity is not practical as we do not have the discipline to invest properly when large amount comes in hand. A defined % of income while being young has to be saved as a rule. With inflation one will always have to do a catchup exercise to meet your essential needs. Health in old age is one large expenditure that must be provided for through insurance and ready cash.

BEST LIC POLICY

2010-01-29T08:02:00.000-08:00

Jeevan Anand is the best LIC policy. It is for both Endowment and Whole life policy. It is a term policy but also covers risk after the maturity of the POlicy. If we Take ur 25 and Term of Payment is 20 years, after maturity of the policy in 20 years the amount will be paid with bonus and it still covers the risk till you attain 75. The Bonus are added to your policy amount.

CRR hike and investments in Mutual Funds

2010-01-29T07:53:00.000-08:00

Investment in Debt oriented Mutual Funds

Today’s hike in CRR will not impact bond market much, so debt funds too will not be affected much. Presented below is the investment strategy an investor can follow while investing in different kinds of debt/income based funds:

Liquid Funds:An investor with less than 6 months investment horizon may look at investing in liquid funds which may generate steady returns going forward and the returns could also possibly improve.

Income and Gilt Funds: On long term funds, an investor needs to stay put for more than 1 year. Is the right time to enter in : “long term yields are more dependent on the government borrowing programme to be announced in the budget, so only post budget it will be appropriate to take a call whether to enter in or not”.

With spiraling inflation, possibilities of rate hike in next credit policy and possibilities of fiscal measures by Government and uncertainties over borrowing programme of Government for next financial year may keep the long term rates volatile in short term.

Short Term Debt Funds: On short term funds – funds that invest with an average maturity of one to two years - “in March we may see a gradual increase in short term interest rates, so better to stay away from these funds.” Any increase in interest rates causes a fall in the market prices of debt paper and consequently the NAV of a fund.

Fixed Maturity Plans: With so much uncertainty, an investor may feel safe if he invests in fixed maturity plans and holds it till maturity. FMPs may act as the best bet to tide over short term uncertainties. Typically, FMPs hold their investments till the end of the scheme tenure, thereby cutting interest rate risk in the intervening period.

TN POWER FINANCE LTD OFFERS HIGH RATE OF INTEREST

2010-01-29T06:30:00.000-08:00

PROFILE

DEPOSIT SCHEMES

TAX BENEFITS

CONTACT

Buy and Hold the following shares

2010-01-28T07:56:00.001-08:00

Buy and Hold the following shares

Suzlon
unitech
IFGL Ref
GVKPL
3i Infotech
Camlin
GMR Infra
IndiaBulls RealEstate(IBReal)
IDFC
IDBI
Nagarjuna Fertiliser
Nagarjuna Construction
Punj Llyod
RNRL
Thomas Cook
Aban Offshore

Holding of these shares will give you Good and reasonable return on both Short term and Long term basis.

Buy and Enjoy Profit

Vijay Dhamani of Tryst Financial Services of Mumbai replies to queries on investments

2010-01-28T07:38:00.001-08:00

Ramesh N asked, Currently for this FY 2009-10, I have invested Rs. 25000/- on SBI Magnum Tax gain as a tax-saving instrument. Do you think shall I go ahead with the same for the next FY? Or can you suggest me any other better tax saving mutual fund scheme?
Vijay Dhamani answers, hi, in my view you should have not more than 2 ELSS. Since you have invested in Magnum this year, you can consider Franklin India Tax shield or Fidelity Tax Advantage next year

Narayan Petkar asked, How much income-tax should we pay for the money that we make through MFs & shares?
Vijay Dhamani answers, hi, if you have invested in equity funds, then you do not have to pay any tax on long term capital gains. Long term means that you should have sold your units/shares after 12 months from the date of purchase. On the short term gains you will have to pay tax @ 15%

Ajay Tejani asked, Dear sir is it okay to Prepay home loan and close it should be continued , I have spare capacity what do you advice ?
Vijay Dhamani answers, hi, I am always advised my clients to have less debt in their balance sheet. If you are in a position to prepay your debt, by all means go ahead and do it. IT will ensure that you have more peace of mind at the end of the day. Also you will be able to finally own your house. Nothing like it, go ahead and prepay.

Manish Behl asked, Which is the best mutual fund to invest with moderate risk profile?
Vijay Dhamani answers, hi; the best type of mutual fund for investors with moderate risk appetite would be balance funds. These funds invest 65% of the corpus in equities and 35% is invested in debt. These are treated as equity funds as far as taxation goes. No tax on long term capital gains. 15% on short term capital gains

Sailaja Srinvas asked, Hi Vijay Dhamani, I am 38 years old. What is the best type of investment
Vijay Dhamani answers, There is nothing like best mutual fund or best investment. You should invest in asset classes that will help you achieve your investment objective, that are suited to your risk appetite and investment horizon. Do not invest in a mutual fund or any scheme for that matter because your friend invested or your broker suggested so. Always link your investment to your objectives, risk and investment horizon.

Venkatesh Rao asked, Hi, My son is 9 months old. Presently, we have 1 lakh in his kid's savings account which he got as gifts from our various relatives and friends. We want to invest this amount with an investment horizon of 15 years. Please advice how we can invest this 1 lakh to get maximum returns. Thank you.
Vijay Dhamani answers, hi, start building equity fund portfolio for your son. Start an SIP in 3-4 funds if possible. I am sure in next 15 years you will be able to build a large corpus to meet his expenditure higher education

Megan Dsouza asked, Which is the best tax saving scheme?
Vijay Dhamani answers, In my view you can consider funds like Franklin India Taxshield and Fidelity Tax Advantage fund for your ELSS portfolio. Franklin India Taxshield is a predominantly large cap fund with small exposure to midcap stocks. It was launched in April 2009 and has since inception delivered compounded annualised return of over 30% Fidelity Tax Advantage Fund is a relatively new fund. It was launched in January 2006. The fund has the mandate to invest in stocks across the market capitalisation. The fund is a truly diversified equity fund and comes from a fund house that is known for its research and processes. The fund's compounded annualised return since inception is around 17%.

Annie Verghese asked, hi, i want to make some investments for my son's future...what do you advise?
Vijay Dhamani answers, hi, if you are building an education corpus for your son, then it is better to have a portfolio that comprises predominantly equity funds. I am assuming here that you have atleast 8-10 years on hand. Start building a portfolio of diversified equity funds.

Ananad Mirpuri asked, How will the direct tax code affect us? Where should we invest now? Can u name us some specific schemes?
Vijay Dhamani answers, hi, I am not sure how will the new tax law be like. It's better to wait and watch. For the time being invest according to the existing rules. Once the new tax laws are in place, the decision can be taken accordingly

Chandershekhar Reddy asked, Hi, i am planning to invest in gold is it the right time to invest or shall i wait for some more time please advice
Vijay Dhamani answers, hi, Invest in gold from an insurance point of view rather than investment. Returns from gold have been slightly more than inflation and hence it is regarded as a hedge against inflation. Also, gold is the most sought after commodity when the financial markets are in crisis. In my view an allocation of 10-15% is ideal. Invest in gold via the exchange traded funds ( Gold ETFs) as it is easy to buy and sell compared to physical gold. Never buy gold from banks as the purchase price is always higher by 4%-5%. Invest every month over the next 6-12 months

Karn Sanjeev asked, Hello Sir, Name some best mutual fund for SIP in Chetan' answer
Vijay Dhamani answers, hi, you can consider funds like Franklin India Bluechip fund, HDFC Top 200 Fund, Sundaram Select Midcap and DSP Black Rock Equity Fund

Ved rahi asked, hi i m 40 yr old for tax saving at present i am investing 59k in lic term plan & 24k in reliance sip p.a.now pl.suggest for 17k investment to be made p.a.
Vijay Dhamani answers, hi, if you have a PPF account then invest the balance in PPF. If you do not have a PPF account then opt for 5 year bank FD that qualifies for deduction under section 80C

Vikas Dar asked, hi Vijay, please let us know asset allocation for young and mid aged people under various asset class.
Vijay Dhamani answers, hi, there is no formula to ascertain the asset allocation though more investment advisors follow a simple thumb rule - 100 minus your age should be allocated to debt. So if you are 25 years then 75% of your savings should be allocated to equity. The logic behind this rule is that when you are young you have higher risk taking ability as you have time on your side to recoup the losses you may incur on equity investments. As you grow old, your risk taking ability goes down and hence higher allocation to debt like FD, bonds, post office schemes etc.

Atul Sawant asked, Hi, I have invested in Tata Infrastructure, Reliance diversified power sector fund and Birla Frontline Equity fund and planning to invest in HDFC Top 200 fund and Principal Emerging Blue Chip fund. Please advice if this is the right choice.
Vijay Dhamani answers, hi, you are investing in funds which are at the moment top performing. This may not necessarily be the case always. Always invest in funds whose performance has been consistent. While Birla Frontline and HDFC Top 200 are among my picks, I would like to give Principal Bluechip and Reliance Diversified Power Sector fund a miss. I would rather go for Franklin India Bluechip Fund

Rohit Mukherjee asked, Hello Vijay Dhamani, i want to save my 50K for tax saving. Is there any other investment way apart from 80C(like mutual fund, LIC etc) and home loan interest that can help my gross salary to be reduced to some extent?
Vijay Dhamani answers, hi, you can consider taking medical insurance for yourself and your dependent parents. You will get a deduction under section 80D. The deduction for you will be Rs. 15000 and for your parents also Rs. 15000. If your parents are senior citizens then they will be eligible for deduction of Rs 20,000. You can also donate some income and claim deduction under section 80G.

Ravi Singh asked, i am watching stock markets from last 10-12 year and have just invested in penny stocks .... i m looking for next blue chip companies and intend to invest for long term ...say 10 -15 years? ur guidance please.
Vijay Dhamani answers, hi, you seem to be on the right path finally as far as investing in equity markets are concerned. First build your portfolio with Bluechip Stocks. First focus on building your core portfolio. If you really want to play the momentum then you can keep aside 5% of your savings for this purpose.

Arun Swamy asked, Hello sir, Which is the best SIP product for an investment of 4k a month invested for next 12 months period???
Vijay Dhamani answers, hi, SIP is a simple method of investing in mutual funds. This method helps to average your cost of purchase over the long run which could be anywhere between 3-5 years. It is ideal for investing in equity and balanced funds. You can invest in diversified equity funds like HDFC Top 200, DSP BR Equity Fund among others

Vinay Mokashi asked, i want to invest 50000 for a year. Where should i invest
Vijay Dhamani answers, hi, if you are willing to invest only for a year, then safety of capital comes first. I would recommend that you invest in a bank FD. you will have to settle for lower returns but like I said returns take a backseat if your investment horizon is one year

Sumit Kapoor asked, i want to save my 30000 for tax saving. Where should i invest this money?
Vijay Dhamani answers, hi, there are 3 main options that you can consider; You can invest in safe assured return product called PPF. You can consider ELSS which is a equity fund and carries higher risk. The best would be to divide the amount equally between ELSS and PPF. You can consider taking a term plan for covering the risk on your life. Life insurance premium paid qualifies for deduction under section 80C.

Chetan Kabra asked, i have 1 thousand to invest per month/...were should i invest for a healthy returns in 3 to 5 year
Vijay Dhamani answers, hi, if you are willing to take risk, then equity funds are an ideal option for you given your time horizon of 3-5 years. Invest via the SIP mode and ensure that you are disciplined and patient. Equity markets are known to be volatile and these 2 virtues are essential to be a successful equity investor

Sharman Sheikh asked, What is the difference between growth and dividend options in mutual fund? I always prefer to have the growth option, since i don't need any money now. But my friend always prefers the Dividend option. Do you think either of us is a loser here? Or both of us are benefited equally? Fyi, I don't prefer to sell any MF before an year.
Vijay Dhamani answers, hi, if you want a part of the gains to come back to you then you should opt for dividend payout option. This is more suitable for retired investors who are looking at regular cash flows. If you are young and building a long term portfolio, then growth is best for you. By taking dividend you will reduce the power of compounding

REAL ESTATE BANGALORE

2010-01-27T17:47:00.000-08:00

Flip through any newspaper that gets printed from Bangalore, and it is not uncommon to find real estate companies putting out full page advertisements of their projects.

Similarly, hoardings are back in action in the city showcasing real-estate developments, and radio ads are also being resorted to. Companies are now thinking out of the box and, in fact, 2009 witnessed a few prominent players showcase their ongoing projects in a bid to find buyers for their unsold stock.

With aggressive promotional campaigns on the one side, and favourable home loan rates and a big push from banks and the government on the other, developers were successful in stimulating buyer-interest during the second half of 2009.

Signs of good times?

Does this signal the return of good times for the Bangalore real-estate sector? Some reports do suggest that sales volumes in the residential market have gained momentum over the past few months, and transactions are said to have grown by about 40 per cent on a year-on-year basis. Companies have come out with new launches and sales continue to be better than last year signalling that the worst is, indeed, over.

According to a top official of the Bangalore-based Sobha Developers, the real-estate sector in the city is on a revival. In fact, the company was one of the first to reach out to buyers through innovative campaigns. “Since June 2009, there has been a pick up in demand. The economy is showing strong signs of growth and the interest rates for home loans have come down,” he adds.

With the economy getting over the slowdown blues, and the IT and ITeS sectors beating expectations in the past few quarters, the Bangalore market is witnessing a pent-up demand from these sectors, which augurs well for the real-estate market, said Mr Sunil Mantri, Chairman, Sunil Mantri Group.

“The IT/ITeS employees had stayed away from the market during 2008-09 due to job insecurity,” he said recently, while announcing the launch of two residential projects in the city. “But now we are targeting IT employees for these two projects, and there has been a good response. With the return of salary hikes and bonuses, IT employees' confidence has come back too,” he added.

Mr Anand Narayanan, National Director – Residential Agency, Knight Frank India, says that there is definitely an increase in buyer interest over the last six months. “The developers are also increasingly using top-of-the-line advertising and real-estate advisors to package and sell their products,” he adds.

Innovative channels

In fact, at Sobha Developers, the official says that besides advertising, the company has opened many other innovative sales channels such as an employee referral programme, lady consultants, brokers' channel, and online communications. “We have also opened new marketing offices in Dubai and Mumbai.”

These all-round efforts have resulted in a significant increase in enquiries and sales, he adds.

“Well-designed advertisements are the ones which will stand out and assist developers in generating product-level interest,” says Mr Narayanan of Knight Frank. Though developers are not willing to come out with actual ad-spends, it is believed that ad-spends in the rejuvenated market conditions could be significant. Though Sobha Developers declined to give the exact numbers, the official says that the ad-spend is “in line with the budget”.

Integrated marketing

For 2010-11, the company would focus on an integrated marketing communications approach, “to further enhance our brand equity, generate leads and sales enquiries, and reassure the consumer that we are a high-quality player with significant focus on delivery”, he adds. The planned spend for the next financial year would be based on “target sales and would be distributed appropriately across channels to optimise our cost of sale,” says the official.

If numbers are anything to go by, Provident Housing, the wholly-owned subsidiary of the Puravankara Group focusing on the affordable segment, spent about Rs 2 crore on its promotional campaigns in 2009-10 for its affordable projects in Chennai and Bangalore.

The company had print and broadcast campaigns for the Provident Wellworth project in Bangalore that had apartments in the Rs 14-19 lakh price bracket.

“Ads or no ads, the going has been excellent for us,” says Mr Jeyakar Jerome of Provident Housing. The company saw about 70 bookings a month.

REAL ESTATE MANGALORE

2010-01-27T17:42:00.001-08:00

With realty in Mangalore city witnessing rapid growth over the past few years, pressure on the roads is mounting. The city planners have now realised the need for upgrading the existing road infrastructure and establishing new ones wherever necessary.

While the Mangalore City Corporation (MCC) has been implementing road infrastructure development projects within the city limits with the Rs 100-crore grant given by the Karnataka Government, the revised Master Plan of Mangalore Urban Development Authority proposes the construction of a ring road and expanding the roads within the city.

The widening and concreting of the roads, which began in 2008, are going on in full swing in most parts of the city.

As the project focuses on road infrastructure development within the city, most properties in the residential and commercial segments will benefit from this.

RING ROAD

Highlighting the need for better roads for the growth of the city, Mr P. M. A. Razak, President of the Kanara Builders' Association, told Business Line that commercial property will witness more growth due to the widening and concreting of roads.

He said the revised Master Plan of Mangalore has marked the roads as per their hierarchy and each of them will be widened accordingly.

The Master Plan has suggested the construction of a 36-km-long ring road from Kotekar in the south of Mangalore to Surathkal in the north. According to the Master Plan, the 45-metre-wide road will pass through the villages of Deralakatte, Belma, Amblamogaru, Adyar, Neermarga, Tiruvail, Moodshedde, Padushedde, Marakada, Kenjar, Thokur, Bala and Idya.

It is to be noted that some of the major residential and commercial projects are planned in some of these villages.

Deralakatte, for instance, is emerging as the education hub with a host of professional colleges having their presence there. Also, some prominent developers of Mangalore have already started residential projects there.

A ring road would give a boost to the establishment of integrated townships in these villages. This apart, a road project — Mangala Chorniche — running parallel to the Nethravathi and Gurupur rivers has been proposed in the Master Plan.

Mr Razak said that the concept of TDR (transferable developmental rights), which has been proposed in the Master Plan, will facilitate faster road widening as it would be an incentive for the landowners to surrender the required land for road widening.

Transferable rights

However, the willingness of the landowners to part with the land will depend on the compensation in terms of adequate TDR and guarantee to repurchase the TDR by the City Corporation, he said.

The TDR allotted now is inadequate to compensate landowners for the loss of land. Currently the TDR is 1.5 times of the land surrendered for the roads. This needs to be increased to at least three times immediately, he said.

Though the revised Master Plan has several provisions for infrastructure development such as road widening, ring roads, etc., the critical factor will be availability of funds and execution of works by the local bodies.

Mr Razak said that the local authorities have to strike a balance in generation of funds from taxation revenues, development fees, and loans/ grants.

The execution of infrastructure project is the key for the success of the revised Master Plan, he added.

Market melts on global cues, monetary policy fears

2010-01-27T17:31:00.000-08:00

Uncertainty, on both global and domestic fronts, pulled the equity market down for the sixth consecutive trading day on Wednesday. The 30-stock Sensex lost 490 points, falling 2.92 per cent to close at 16,289. It has fallen by 1,423 points over the last six days. The broader Nifty fell 3.09 per cent to 4,853. The NSE notched up a record F&O turnover of Rs 1.58 lakh crore.

The problem started last week, with the US President, Mr Barack Obama, placing trading and investment curbs on US banks, said Mr Deven R. Choksey, Managing Director, KR Choksey Shares and Securities: "As a result the banks, which now have to downsize their lending portfolios, want hedge funds to return their money. Hedge funds are, in turn, unwinding in the overseas markets."

This withdrawal is reflecting in the Indian market, where FIIs have sold equities worth more than a net Rs 7,100 crore over the last six trading sessions. On Wednesday, they were net sellers for Rs 2,212 crore. Global markets were in the red too. The Dow was down on Tuesday and, on Wednesday, the Hang Seng slid 0.38 per cent, the Nikkei 0.71 per cent, and the FTSE 1.16 per cent, while the CAC fell 1.4 per cent at India closing time.

POLICY UNCERTAINTY

Mixed corporate results added to the sentiment. Another reason for the market fall could be uncertainty about the extent of (expected) reversal of the accommodative monetary policy on Friday, said Mr G. Chokkalingam, Director and Head of Equity Research at Barclays Wealth.

He added that as the market had gained 80 per cent over the last 13 months, several largecap scrips had reached their fair valuations, triggering profit- booking.

Mr Choksey said that investors must not panic because the market can bottom out anytime: "Expect insurance companies to go bargain hunting during this fall."

Retail investors are already doing the same, showing up as net buyers on the BSE the past ten days. Mr Jason D'Souza, a regular investor, said he had been buying regularly the last six days. "On Monday and Wednesday I bought Punj Lloyd, JK Tyres and a few small-cap stocks. Tomorrow, too, at opening I will be buying."

Net retail purchases on the BSE amounted to Rs 214.5 crore on Wednesday. Domestic institutions were net buyers for Rs 1,475 crore on Wednesday and for Rs. 4,743 crore over the last six days. "It should also be kept in mind that it was the domestic institutions that invested in 2008, when the FIIs were taking out the money," said Mr Chokkalingam.

On the BSE, 88 per cent (or 2,581) of all the listed scrips declined, and only 338 scrips advanced. All the sectoral indices ended the day in the red, with realty, metal and auto bearing the brunt.

MH Satyanarayana Investment adviser from Hyderabad replies to queries on investments

2010-01-27T08:38:00.001-08:00

Neil Dsouza says, I HAVE INVEST 1000/- PER MONTH WHICH SIP PLAN IS BEST FOR ME TIME HORIZON 3 YEARS

N H Satyanarayana replies : With this amount it is best to start a SIP in HDFC equity fund which has shown tremendous growth over the last 2 years . Another option would be Reliance Growth Fund which is equally good

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Keshav Mhatre says, Sir, please tell me an investment where I can invest 10K per month for three years and get handsome return.

N H Satyanarayana replies : There is no such as handsome returns . The best return in the current scenario is 8 to 10% . Spread your investment in SIP like DSPR top 100 , HDFC top 200 , IDFC premier plan A say 3000 each and 1000 in Religare contra fund . This way you will have an aggressive portfolio which will fetch you the desired returns .

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Fahim Sarguru says, I got 200,000 ,it better to start business in Gulf or put in property in India.. Please advise

N H Satyanarayana replies : As of now the Gulf Property situation is not clear . If investing then with this amount best to invest in Pune or Mysore or Gurgoan .

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Aditya Nair says, How to invest with 30000

N H Satyanarayana replies : depends on the returns and the risk you have. If you are conservative then invest in PPF or Bank FDs for short term . If you have a high risk appetite then invest In any quality equity mutual fund as mentioned in my previous answers.

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Rupam Bhattacharya says, Sir, i have 5000 rs per month for investment, which MF should i choose. my investment horizon is 10 yrs .

N H Satyanarayana replies : Start a SIP in HDFC top 200 , Reliance equality and IDFC Premier equity fund . You will good returns after 10 years.

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Ravi Shetty says, which will fund or scheme will be best for investment of lump sum for period of 10yrs.

N H Satyanarayana replies : None at present . As you can see the markets have lost close to 1100 points till Jan 27 . Predictions are there that the markets might test 12000 levels so it is not advisable to investment lump sum in any mutual fund. Try the SIP route as answered above.

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Prakash Patalvaru says, Hello sir I want to invest Rs 1 lakh and get a good return where to invest on which ? Please do suggest .

N H Satyanarayana replies :Please mention the time frame of investment . If long term then Gold is a good bet , even Silver is a good bet.

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Venus Prajapathi says, I want to invest in mutual funds with investment of 1000 per alternate day. Which one is the best bet from a long term perspective and is this the right time to enter the mF. Plz advise.

N H Satyanarayana replies : HDFC top 200 , HDFC equity fund , Reliance growth are the best bets

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Gagan Deep Singh Bhatia says, Sir, is it true that investing 25,000 today would yield 1 crore if invested in MF's by compounding interest in about 35-40 years.

N H Satyanarayana replies : If wishes were true then Satanarayana would be riding a horse. Gagan this is absolutely untrue that 25000 today will become 1 crore

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Atul Shah says, What is better an 5yr FD or PPF

N H Satyanarayana replies : PPF

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girisha says, Hi Satya, i always in struggle to get financial status right near the end of financial year. Even feel and find cash crunch. How can i plan for whole year to meet end of year demand?

N H Satyanarayana replies : Wise man says plan and spend accordingly. Live within your means and that will solve most of your financial problems

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Bhamri says, Hi , could you advice me which is a good mutual fund to deposit about Rs 100000. We are looking for a regular return

N H Satyanarayana replies : Lump sum investment at this point is not advisable. Instead SIP it and it will help. Follow the advice given above . Bye

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Yash Sanghvi says, Hello Sir, I am looking at assured 1 crore return in 5-10 years so how much investment and which funds?

N H Satyanarayana replies : Roughly 1 Lakh monthly SIP in about 10 quality MF for a period of 10 years may do the trick

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Jitendra Mehta says, Good afternoon, which is better an RD of rs.2000 per month or an SIP of rs 2000 per month?

N H Satyanarayana replies : SIP is better . Returns will be superior to fds but involves risks and patience.

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T S K Ramaiah says, Pls. suggest some diversified fund for investment

N H Satyanarayana replies : HDFC top 100 , HDFC equity , IDFC premier plan A , DSPR top 100

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Sam Kapoor says, i want to invest 2 lacs other than fds etc pls guide when and where .

N H Satyanarayana replies : Stagger investments in MF via SIP routes in quality well established MFs . Keep your goals in mind .

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Amit Chainani says, Where to invest to get maximum guaranteed funds in return other than any policies .

N H Satyanarayana replies : There is such thing as guaranteed return funds . Best is to invest in bank FDS.

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Bharat says, Hi, I am a beginner with 21k pm. I am having Aviva Lifelong ULIP of 20k pa with 7 lacs lifecover. Other than that I have no investments. I am a father of 2-year-old son and yet another one next month. Can u suggests good investment options for me?

N H Satyanarayana replies : Not clear , are you earning 21 K per month or are your saving 21 K pm please clarify. As about Aviva Life Insurance ULIPs have their shortcoming which need to be looked at

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Sairam Virani says, With investment capacity of Rs.40000 per annum, what is your best suggestion to invest. Looking in to 10 years from now.

N H Satyanarayana replies : Start a SIP for 10 years every month 1500 in a quality MF.

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Prasad says, i want to invest for my daughter education i have 4lakhs what should i do

N H Satyanarayana replies : Choose Tata Child plan and also UTI Mahila Scheme in wife's name . Start a SIP in a quality MF

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Arun says, 24 yeas old. Kindly let me know which is the good scheme to get good returns. I can invest 3k for next 24 months.

N H Satyanarayana replies : Start a SIP 1000 Rs each in HDFC top 200 , HDFC equity and UTI Master fund will do the trick.

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RAMKRISHNA BHAT OF KOCHI REPLIES TO QUERIES ON INVESTMENTS

2010-01-27T07:30:00.001-08:00

Suresh K says, i would like to take plan for my 6 months old daughter.Could u pls suggest one also it should have tax saving for me.

RAMKRISHNA BHAT REPLIES : Since the tenure of investment is going to be more than 15 years it is advisable to take a child plan from Tata MF . Opt for Tata Child plans which is expected to give a decent return

SANJAY GUPTA says, Hi , with a view point of 5 -7 years, which fund could be bought and what return we can expect.

RAMKRISHNA BHAT REPLIES : Investment in MF in lump sum at this point is not advisable. Instead opt for a SIP in an established MF like HDFC top 200 , dsp top 100 , IDFC Premier Plan A , HDFC Equity . As far as returns are concerned , SIP will cushion all ups and downs of the markets so returns will be decent .

Madhulk says, HI Ramkrishna, I have 2 lacs Rupees that I have accumulated by investing RD, I now want to invest it in some good return not much risk investment. What do u suggest, Debt Fund or Company FD's?

RAMKRISHNA BHAT REPLIES : Neither , Debt funds are not performing well in the last 6 months and Company FDs are too risky. It is advisable to put them in Bank FDs for shorter tenure of 2 years as FD rate are likely to go up in th near future.

Raghuraman says, Hello, which investment path is better path - Term life insurance + Aggressive Equity based Mutual Funds OR ULIPs?

RAMKRISHNA BHAT REPLIES : It is advisable to buy a vanilla Life Insurance Plan and invest in a well established MF .

Nikhil Iyer of Diamond Investments Chennai replies to queries on investments

2010-01-27T07:26:00.001-08:00

BHARATH asked, Sir, when I all set to do the redemption of my MF fund ,suddenly the market crashes, what to do to avoid losses. Kindly suggest a way out sir
Nikhil Iyer answers, mutual funds allow you the benefits of returns with a relatively lower level of risk. They do not eliminate the risk factor altogether. The best way to avoid such pitfalls is to stay invested for atleast 3-5 years in a fund with a long term performance record.

Prasad Murkute asked, I want to invest for my daughter education I have 4lakhs what should I do
Nikhil Iyer answers, As i don't know how far is the goal or for how long will you invest. I would advise you to go for an equity heavy portfolio which would slowly move towards a higher debt component as you near the goal.

Nagesh Tripathi asked, Sir, I want to generate cash for my retirement. pls suggest
Nikhil Iyer answers, Get yourself a customized retirement plan made by a financial planner. It should account for your estimated monthly expenditure and certain items like medical and travel expenses which could occur on an annual basis.

Sharad Kumar asked, With investment capacity of Rs.40000 per annum, what is your best suggestion to invest. Looking in to 10 years from now.
Nikhil Iyer answers, Ideally your investments should be aligned to your goals. A safe bet for such a horizon would be into diversified equity funds with large cap bias like HDFC top 200 and DSP top 100.

Shanawaz Khan asked, Hi, I am a beginner with 21k pm. I am having Aviva Lifelong ULIP of 20k pa with 7 lacs life cover. Other than that I have no investments. I am a father of 2-year-old son and yet another one next month. Can u suggests good investment options for me?
Nikhil Iyer answers, Ideally you should get a financial planner to create a customized financial plan for your family, this would allow you to go for investments which are in line with various goals. As for the ULIP I would advise you to discontinue it and go for a pure term plan like Aviva Life Shield Plus.

Amit Mishra asked, Where to invest to get maximum guaranteed funds in return other than any policies
Nikhil Iyer answers, The best guaranteed returns investment as of now is the PPF which guarantees you an 8% return without asking for the charges, which seems to be the norm with the guaranteed return ULIPS

Sameer mathani asked, I want to invest 2 lacs other than fds etc pls guide when and where
Nikhil Iyer answers, you can go for diversified mutual funds like HDFC top 200, DSP Top 100 etc.

Anand Haldipur asked, I want to invest Rs.9 Lakhs for a period of one year which I am planning to finance for my flat please, where should I invest
Nikhil Iyer answers, I would advise you to go for a 1 Year FD as capital preservation is ultimate requirement for you.

Daniel Mathai asked, what will happen to National Savings certificate which is going to expire in Financial year 2011 under new tax code
Nikhil Iyer answers, A majority of the tax saving instruments such as NSC, five-year bank deposits, equity-linked saving scheme (ELSS), ULIPs and the senior citizen's scheme are not included under section 80C investments under the Direct Tax Code. The investments that are permitted under the new Section 66 (replacing Sec 80 C) are employee's provident fund, new pension plan, super annuation and pure insurance (if the premium paid is one-twentieth of the sum insured).

POSTAL LIFE INSURANCE

2010-01-26T10:20:00.002-08:00

POSTAL SAVINGS SCHEME

2010-01-26T10:20:00.001-08:00