wsx asked, I got house in other city bought on home loan. It is locked and no one is staying there. How much home loan interest is exempt in such case? Do I need to show fair rent even if it is not rented?
Naveen Chopra answers, In case of self-occupied property, there is Rs.150000 cap on interest that can be claimed. In case if the property is not self-occupied, than whatever interest is paid by you can be claimed. Regarding fair rent, it needs to be disclosed only if the proerty is not claimed as Self-occupied. In your case, if you do not have any other property in your name, than you can claim the same as Self-Occupied.
________________________________________
awer asked, sir i have a home loan , but do not have a component on hra in my salary .can i claim a deduction under 24c for home leoan interest paid
Naveen Chopra answers, You can claim Interest paid on Home Loan irrespective of the fact whether you have HRA as component of your Salary or not. Interest is cliamed under section 24(b).
________________________________________
hllo asked, On the gift I give to my wife and the income is generated on that by investing it. What will be tax implication? Will it club to my income?
Naveen Chopra answers, The income generated will be clubbed with your income and you will be paying tax on such income.
________________________________________
souz asked, Is profit from sale of shares to be included while filing returns? What if there is also a loss from sale of shares?
Naveen Chopra answers, Profit from sale of shares can either be short term or long term. If the profit is short term it is taxable and hence the same should be included while filing returns. Same is the case with the loss, as the same would be either adjusted against current years profit or carried forward to next year. As far as Long term profit is concerned, although the same is exempt from tax, it is advisable to dicslose the same under Exempt Income category. As regards loss, if the net result after adjustment is loss, you can ignore the same as it cannot be carried forward.
________________________________________
debasish1 asked, I have constructed a house with housing loan in my workplace, my spouse is staying in other state in rented house. She is not having any income. Can I claim both houseing loan and rent while calulating tax liability?
Naveen Chopra answers, If both the house are in a separate state and it is difficult to travel to your self onwed house on a day-to-day basis, you can claim tax benefit for HRA as well as for home loan.
________________________________________
def asked, Can property tax paid for self occupied home can be shown and minus-ed against income in ITR-2.
Naveen Chopra answers, You cannot claim any such deduction.
________________________________________
vinayc asked, I just got to know that i filed my last year tax returns for the wrong assessment year. I filed them for Assessment year 2007-08 but i should have actually filed for the year for 2008-09. Please suggest what can i do now.
Naveen Chopra answers, Refile for A.Y. 2008-09 at the earliest.
________________________________________
Mandar asked, If I decide to move to a rented apartment what is the maximum House Rent that I can claim is Rs.36,000p.a only ?
Naveen Chopra answers, There is no maximum limit specified for House Rent allowance. As a gerenal rule, your HRA should be 50% of your basic salary.
________________________________________
Raman asked, I got a form16 'A' from ICICI bank for tax they deducted. Do I need to add that to my return?
Naveen Chopra answers, Yes. ICICI bank has given you a certifiacte for the amount of tax they have deducted from the income that was credited to your account. the tax has been deducted at a concessional rate of 10%. while filing income tax return, you will have to disclose the amount mentioned in the certiifcate as income and claim tax concession for tax already deducted and paid on your behalf.
________________________________________
perminder asked, Besides my regular work, I also do some freelancing. Do I have to show it as other income?
Naveen Chopra answers, Certainly, it is your income and you have to disclose all the income earned during the year, however small it may be.
________________________________________
vinoda asked, Is it mandatory to file before 31st July? Can I file after 31st July ? upto what date I can file the return?
Naveen Chopra answers, You can certainly file your return after 31st July also. However in case your tax calculation results in additional tax liability, you will have to pay penal interest @1% per month for late filing of return. Further if there is any unadjusted loss, you won't be able to carry forward such loss to subsequent years. Further if you file your return after 31st March of next year, you can even be liable to pay penalty of Rs.5,000/-.
________________________________________
Jai asked, I have a query.. i have purchased a new house. the old house would be on rent. would it be possible to show the rent on my wife name and claim deduction for the new house from my tax?
Naveen Chopra answers, Presumably the old flat is in your name. If that is the case, any income generated from such flat will be your income and this cannot be shown as rent income of your wife.
________________________________________
Suvam asked, I am paying LIC premiums for my father who is retired and dependent on me. Can I submit those receipts for my tax exemption?
Naveen Chopra answers, No, you cannot. You can claim deduction for premium paid only for self, spouse and children.
________________________________________
vinoda asked, apart from 1 Lakh, can I exemption for Mediclaim under 80c and 80d, what are limits
Naveen Chopra answers, Apart from Rs. 1 lakh deduction u/s 80C, you can additionally claim deduction for Medical insurance premium paid. The limit for claiming deduction is as under - Premium paid for self, spouse and children - Rs,15,000/- or actual premium paid, whichever is less. Premium paid for parents - Rs,15,000/- or actual premium paid, whichever is less. If parents are senior citizens, the limit of Rs. 15,000/- is extended to Rs.20,000/-
________________________________________
Meher asked, While filing returns, do we also need to show mutual fund dividends?
Naveen Chopra answers, Mutual fund dividend is exempt from tax and hence does not affect your tax calculation. However you should disclose the same in the income tax return, as a separate area is provided in the income tax return.
________________________________________
Jule asked, I live in a rented flat and get HRA. In June 2008, I booked a house (still not ready) with a home loan. Can I claim the HRA as well as benefits from the home loan?
Naveen Chopra answers, Since the house is under construction, you cannot claim home loan benefits. This can be available from the year you get then possession of the property. Till then enjoy the benefits of HRA exemption.
________________________________________
hhhh asked, hi, can i file my return now?
Naveen Chopra answers, Certainly. You can file your income tax returns till 31st July. So hurry up and file your return.
Thursday, July 30, 2009
Wednesday, July 29, 2009
INVESTING EXPERT MRINAL PARVATKAR REPLIES TO QUERIES
________________________________________
abhinavs asked, do u think for starters SIP would stand out to be amongst a few good options to invest...???
Mrinal answers, hi, yes for investors begining to invest for the first time, SIPs are the best way of investing. Build a portfolio of well managed funds with track record of atleast 3-5 years to show for
________________________________________
shk asked, hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me
Mrinal answers, hi, the answer to your question lies in making an comprehensive investment plan made for you. The investment plan will precisely tell you how much to invest for each financial goal and in which ivestment instrument
________________________________________
subrat asked, I am a salaried employee, i am planning to buy a home but only after 3 years. What kind of investments do you think will be suitable for me so that I can use the money saved for my home but at the same time not let the money lie around idle.I can save about 10 to 15 thousand per month
Mrinal answers, in my view you can consider investing in MIPs from mutual funds. HDFC MIP - Long Term is among the better performing MIPs
________________________________________
tst asked, Sir I invested in following MF through SIP. Pls suggest can continue same for long term DSP BR TIGER, HDFC growth, Sundaram Select focus, DSP ML Equity growth.
Mrinal answers, hi, you have a good portfolio of mutual fund schemes.Continue with your SIPs.
________________________________________
MyMoney asked, Please sugget some tips on how to select a Pension fund. I can invest around 35-40K per year. Is LIC worth looking at?
Mrinal answers, hi, Pension plans help you meet your post retirement needs. It is important to have a retirement plan in place before taking any pension plan. In my view, invest in a mix of equity funds and debt rather than taking a pension plan.Build a retirment corpus adequate enough to generate regular income every year post retirement
________________________________________
investor asked, I have a certain lumpsum amount for which I need capital protection. Is it a good idea to invest lumpsum in debt oriented MIP and invest the monthly income in good equity diversified funds? If not can you suggest a better alternative?
Mrinal answers, hi, sounds like a good idea. I would recommend that you opt for quarterly dividends as agianst monthly in case of MIPs
________________________________________
madanchikna asked, Hi Mrinal, I am a salaried person having monthly intake of 60k after cutting taxes . I want to buy one 2BHK of cost around 30L ,where to invest my money and how to invest? can u please guide me .. thnx in advance
Mrinal answers, hi, The selection of investment option will depend on when you need the money i.e no of years to buying your property. If your investment period is less than 3 years, fixed income instruments like FDs will be the ideal. In your case capital preservation is important compared to returns.
________________________________________
narah asked, Mrinal, Your point about ULIPs is good, in fact I also planned to invest in term plans and MFs for future. However I have already invested around 1.5 lakhs in ULIPs over the last 3 years. Should I close all those and invest in MFs and equities and take a good term plan?
Mrinal answers, hi, After your mandatory investment of 3 years, do not pay further premium. Rather invest in mutual funds.
________________________________________
abhi asked, Please rate these NFO, I want to invest either of them through SIP for 3 years 1. JPMorgan JF Greater China Equity Offshore Fund 2. DSP BlackRock World Energy Fund 3. Canara Robeco F.O.R.C.E Fund 4. Kotak Select Focus Fund Please suggest Thanks Abhishek
Mrinal answers, hi, in my view your portfolio is not very healthy. You have all the thematic funds in your portfolio. I would recommend that you redeem you entire portfolio and invest in well managed diversified equity funds with a track record of atleast 5 years.
________________________________________
GetMore asked, I m a 44 yr old, can save max 5 k per month, interested in retirement solutions, but return on pension scheme is very nominal. Planning to invest in MF for approx 14 yrs. Your Opinion required
Mrinal answers, hi, in my view pension plans are expnesive and may not be the ideal way to plan for retirement. I would suggest that you take help of a financial advisor to get a retirement plan made for you and then invest in line with your retirement plan
________________________________________
raj asked, Madam, for my 2 yr old son what do u suggest a MF with SIP or insurance as i dont want returns till 18 yrs. I already have his Max new york life insurance, savings a/c , kids a/c &FDs
Mrinal answers, hi, to plan for your child's future expenditure like higher education / marriage, get an investment plan made. The investment plan will help you decide how much money you will need after 18 years, how much should you invest every month and which products so that you have the right amount of money at the right time.
________________________________________
Mani asked, Hi, what will happen if we stay invested for long years (say 20 years , 15 years..) in a mutual fund? eg a amount of rs 10000 in a good mutual fund for that many years. Is that a good strategy.
Mrinal answers, hi, yes 15 years is a good time for investing in equities. If you invest Rs. 10,000 in equities for 15 years and if you money grows at the rate of 15% p.a. over 15 years, your investment of Rs. 10,000 will grow to Rs.80,000 (approx). Yes, its a good idea to invest in equities for 15 years but do not forget that your investment is in line with your asset allocation and risk appetite
________________________________________
Rajeev Sharma asked, Hi Mrinal, Can you throw some light on taxation related to short term and long term gains on both equity and debt funds. Also, I have about 6 months expenses as a contingency fund of about 6 lakhs - all in Bank FDs. Given the low interest which they are fetching does it make sense to move them over to debt mutual funds. Thanks for your answer.
Mrinal answers, hi, i have discussed the taxation of mutual funds earlier in this chat. Regarding moving money from FD to debt funds, you need to understand that while FDs offer fixed assured returns debt fund returns are market linked. Technically speaking debt funds can give negative returns if the interest rates in the economy move up. Given today's economic scenario and the fact that its your contingency fund, I would not advise you move out of FD
________________________________________
Pari asked, How abt investing 1 lac in short term and then keeping rotating this money in the market in stokcs?
Mrinal answers, hi, I would not recommend equity investment for investment horizon less than 3 years. While it make seem easy to make money from stock market while the going is good do not forget the fact that equities investments carry maximum risk. A stock can fall 20% in one day and if it is because the company's fundamentals are bad the loss could be permanent. Hence invest in good company shares with long term horizon of atleast 3 years
________________________________________
LAKSHMINARAYANAN asked, Which diversified fund can be invested now for monthly SIP for Rs.2000/- each for 3 MF and time horizon of 10 years
Mrinal answers, hi, you can consider investing in funds like Franklin India Bluechip, HDFC Equity and DSP BR Top 100 Equity Fund among others
________________________________________
beakrishnan asked, i am a retired personal and have something atlast to invest- FDs rates are very marginal now a days. I am not interested in investing in risky stock market - can you advise me suitably as to where can i invest this little sum of mine?
Mrinal answers, Dear Sir, it is true that interest rates are low and the options are few. You can consider investing in Senior Citizens scheme that offers 9%. The maximum investment in this scheme can be upto 15 lakhs. Bank Fds are the next option to choose from.
________________________________________
narah asked, Mrinal, Are all ULIPs bad according to you?
Mrinal answers, hi, ULIPs charge are high for the first 3 years. In a normal scenario the it take at least 10 years for the ULIPs to recover the initial costs. Consider a combination of term plan and mutual funds over the ULIPs
________________________________________
tst asked, Hi sir, what about Rel infrastructure fund and DSP ML world power fund(NFO)
Mrinal answers, hi, these are thematic funds that offer higher return for higher risk. The fund is dependent on the performance of the sectors that form the theme. The fund manager does not have the flexibility to invest in sectors that do not form a part of the theme. In a situation where the underlying sectors are not doing well the fund manager has no choicd but to stay invested in the same. Hence, investors who are sure of the future performance of the sector and who can time their entry into and exit form the sector can consider investing in these funds. It is better to look at diversified equity funds that can invest in any sector that the fund manager finds attrative from returns point of view.
________________________________________
sandeep asked, Is it good to go for term insurance for financial security? which plan is best and exact amount to go for at age of 30 with one child?
Mrinal answers, hi, as far as insurance is concerned the ideal option is term plan. Do not go for endowment, money back or ULIPs. Term plan offer only risk cover and you get the benefit of higher sum assured for lower premium. I would adivse you to calculate your human life value (HLV) and then decide the sum assured for your term plan.
________________________________________
123 asked, hi, I there any plan to invest Rs. 5000/month for 15-20 years to get better returns.
Mrinal answers, hi, for investment horizon of 15 years equities are the best investment opiton. However, you should keep in mind that stock markets are volatile and equity investments carry maximum risk. The longer you stay invested the higher the chances that you will make goo returns
________________________________________
qwerty asked, query on sips - irrespective of the fact that an sip is started earlier to august 09 , will entry load be deducted ? if so why as each sip is treated as a fresh purchase . please give ur opinion .
Mrinal answers, hi, the SEBI circular says that all equity oriented fund SIPs registered prior to 1st August 2009 will be charge entry loads till the last instalment is invested. In other words,all SIPs registered after 1st August will be not be charged any entry load
________________________________________
dfdd asked, Is there any income tax obligation for long term investments (more than 1 year) in stocks or mutual funds? What percentage of the returns would be taxed? What if I have a loss on the investments?
Mrinal answers, hi, if you are investing in equity and balanced funds then there is no long term capital gains tax if the investments are redeemed after one year. In the case of debt funds, the long term capital gains tax would apply. It will be 10% without indexation and 20% with indexation whichever is lower. If there is a long term loss on equity funds then the same cannot be adjusted against the long term capital gains. In the case of Long term capital gains from debt funds, the long term loss can be set off against long term gains
________________________________________
qwerty asked, sir i am in mid 30's and wish to invest in mutual funds . i have read about investement in index funds and etfs . what are these and how are they better than active funds. are they worth investement and what proportion of my amount should i invest . if recommended which are the ones which are recommended .
Mrinal answers, hi, index fund invest in stocks that constitute the underlying index and in the same proportion. The fund manager has no choice to invest in stock other than those that form a part of the index. Hence it is known as a passive style of management and the expenses are low compared to actively managed funds. In India, non-index based diversified equity funds have outperformed the popular index like Sensex and Nifty. Hence, if you are considering investing in index funds do not allocate more than 20% of your overall equity portfolio to these type of funds
________________________________________
qwerty asked, how is franklin felxicap ? should we exit and enter franklin bluechip
Mrinal answers, Hi, Franklin Flexicap can invest across stocks with any market cap as agains Bluechip which can invest only in large cap stocks. If you are willing to take risk of investing in large and midcap stocks then Flexicap is ideal or else switch to Bluechip Fund
________________________________________
rites asked, hi, Mrinal my salry is 9000/-pm i can save 4 to 5k p.m. which saving plan is best for me pls suggest
Mrinal answers, Hi, I would advise that you invest your monthly savings in line with your investment goals and risk appetite. For e.g your investment goal can be retirement and if retirement is 10-15 years away then majority of your savings can be invested in equities and the balance in debt
abhinavs asked, do u think for starters SIP would stand out to be amongst a few good options to invest...???
Mrinal answers, hi, yes for investors begining to invest for the first time, SIPs are the best way of investing. Build a portfolio of well managed funds with track record of atleast 3-5 years to show for
________________________________________
shk asked, hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me hi i am self employed person monthly i can save between 5000 to 10000 i have 2 kids i want to save for there future where and how should i invest plz ans me
Mrinal answers, hi, the answer to your question lies in making an comprehensive investment plan made for you. The investment plan will precisely tell you how much to invest for each financial goal and in which ivestment instrument
________________________________________
subrat asked, I am a salaried employee, i am planning to buy a home but only after 3 years. What kind of investments do you think will be suitable for me so that I can use the money saved for my home but at the same time not let the money lie around idle.I can save about 10 to 15 thousand per month
Mrinal answers, in my view you can consider investing in MIPs from mutual funds. HDFC MIP - Long Term is among the better performing MIPs
________________________________________
tst asked, Sir I invested in following MF through SIP. Pls suggest can continue same for long term DSP BR TIGER, HDFC growth, Sundaram Select focus, DSP ML Equity growth.
Mrinal answers, hi, you have a good portfolio of mutual fund schemes.Continue with your SIPs.
________________________________________
MyMoney asked, Please sugget some tips on how to select a Pension fund. I can invest around 35-40K per year. Is LIC worth looking at?
Mrinal answers, hi, Pension plans help you meet your post retirement needs. It is important to have a retirement plan in place before taking any pension plan. In my view, invest in a mix of equity funds and debt rather than taking a pension plan.Build a retirment corpus adequate enough to generate regular income every year post retirement
________________________________________
investor asked, I have a certain lumpsum amount for which I need capital protection. Is it a good idea to invest lumpsum in debt oriented MIP and invest the monthly income in good equity diversified funds? If not can you suggest a better alternative?
Mrinal answers, hi, sounds like a good idea. I would recommend that you opt for quarterly dividends as agianst monthly in case of MIPs
________________________________________
madanchikna asked, Hi Mrinal, I am a salaried person having monthly intake of 60k after cutting taxes . I want to buy one 2BHK of cost around 30L ,where to invest my money and how to invest? can u please guide me .. thnx in advance
Mrinal answers, hi, The selection of investment option will depend on when you need the money i.e no of years to buying your property. If your investment period is less than 3 years, fixed income instruments like FDs will be the ideal. In your case capital preservation is important compared to returns.
________________________________________
narah asked, Mrinal, Your point about ULIPs is good, in fact I also planned to invest in term plans and MFs for future. However I have already invested around 1.5 lakhs in ULIPs over the last 3 years. Should I close all those and invest in MFs and equities and take a good term plan?
Mrinal answers, hi, After your mandatory investment of 3 years, do not pay further premium. Rather invest in mutual funds.
________________________________________
abhi asked, Please rate these NFO, I want to invest either of them through SIP for 3 years 1. JPMorgan JF Greater China Equity Offshore Fund 2. DSP BlackRock World Energy Fund 3. Canara Robeco F.O.R.C.E Fund 4. Kotak Select Focus Fund Please suggest Thanks Abhishek
Mrinal answers, hi, in my view your portfolio is not very healthy. You have all the thematic funds in your portfolio. I would recommend that you redeem you entire portfolio and invest in well managed diversified equity funds with a track record of atleast 5 years.
________________________________________
GetMore asked, I m a 44 yr old, can save max 5 k per month, interested in retirement solutions, but return on pension scheme is very nominal. Planning to invest in MF for approx 14 yrs. Your Opinion required
Mrinal answers, hi, in my view pension plans are expnesive and may not be the ideal way to plan for retirement. I would suggest that you take help of a financial advisor to get a retirement plan made for you and then invest in line with your retirement plan
________________________________________
raj asked, Madam, for my 2 yr old son what do u suggest a MF with SIP or insurance as i dont want returns till 18 yrs. I already have his Max new york life insurance, savings a/c , kids a/c &FDs
Mrinal answers, hi, to plan for your child's future expenditure like higher education / marriage, get an investment plan made. The investment plan will help you decide how much money you will need after 18 years, how much should you invest every month and which products so that you have the right amount of money at the right time.
________________________________________
Mani asked, Hi, what will happen if we stay invested for long years (say 20 years , 15 years..) in a mutual fund? eg a amount of rs 10000 in a good mutual fund for that many years. Is that a good strategy.
Mrinal answers, hi, yes 15 years is a good time for investing in equities. If you invest Rs. 10,000 in equities for 15 years and if you money grows at the rate of 15% p.a. over 15 years, your investment of Rs. 10,000 will grow to Rs.80,000 (approx). Yes, its a good idea to invest in equities for 15 years but do not forget that your investment is in line with your asset allocation and risk appetite
________________________________________
Rajeev Sharma asked, Hi Mrinal, Can you throw some light on taxation related to short term and long term gains on both equity and debt funds. Also, I have about 6 months expenses as a contingency fund of about 6 lakhs - all in Bank FDs. Given the low interest which they are fetching does it make sense to move them over to debt mutual funds. Thanks for your answer.
Mrinal answers, hi, i have discussed the taxation of mutual funds earlier in this chat. Regarding moving money from FD to debt funds, you need to understand that while FDs offer fixed assured returns debt fund returns are market linked. Technically speaking debt funds can give negative returns if the interest rates in the economy move up. Given today's economic scenario and the fact that its your contingency fund, I would not advise you move out of FD
________________________________________
Pari asked, How abt investing 1 lac in short term and then keeping rotating this money in the market in stokcs?
Mrinal answers, hi, I would not recommend equity investment for investment horizon less than 3 years. While it make seem easy to make money from stock market while the going is good do not forget the fact that equities investments carry maximum risk. A stock can fall 20% in one day and if it is because the company's fundamentals are bad the loss could be permanent. Hence invest in good company shares with long term horizon of atleast 3 years
________________________________________
LAKSHMINARAYANAN asked, Which diversified fund can be invested now for monthly SIP for Rs.2000/- each for 3 MF and time horizon of 10 years
Mrinal answers, hi, you can consider investing in funds like Franklin India Bluechip, HDFC Equity and DSP BR Top 100 Equity Fund among others
________________________________________
beakrishnan asked, i am a retired personal and have something atlast to invest- FDs rates are very marginal now a days. I am not interested in investing in risky stock market - can you advise me suitably as to where can i invest this little sum of mine?
Mrinal answers, Dear Sir, it is true that interest rates are low and the options are few. You can consider investing in Senior Citizens scheme that offers 9%. The maximum investment in this scheme can be upto 15 lakhs. Bank Fds are the next option to choose from.
________________________________________
narah asked, Mrinal, Are all ULIPs bad according to you?
Mrinal answers, hi, ULIPs charge are high for the first 3 years. In a normal scenario the it take at least 10 years for the ULIPs to recover the initial costs. Consider a combination of term plan and mutual funds over the ULIPs
________________________________________
tst asked, Hi sir, what about Rel infrastructure fund and DSP ML world power fund(NFO)
Mrinal answers, hi, these are thematic funds that offer higher return for higher risk. The fund is dependent on the performance of the sectors that form the theme. The fund manager does not have the flexibility to invest in sectors that do not form a part of the theme. In a situation where the underlying sectors are not doing well the fund manager has no choicd but to stay invested in the same. Hence, investors who are sure of the future performance of the sector and who can time their entry into and exit form the sector can consider investing in these funds. It is better to look at diversified equity funds that can invest in any sector that the fund manager finds attrative from returns point of view.
________________________________________
sandeep asked, Is it good to go for term insurance for financial security? which plan is best and exact amount to go for at age of 30 with one child?
Mrinal answers, hi, as far as insurance is concerned the ideal option is term plan. Do not go for endowment, money back or ULIPs. Term plan offer only risk cover and you get the benefit of higher sum assured for lower premium. I would adivse you to calculate your human life value (HLV) and then decide the sum assured for your term plan.
________________________________________
123 asked, hi, I there any plan to invest Rs. 5000/month for 15-20 years to get better returns.
Mrinal answers, hi, for investment horizon of 15 years equities are the best investment opiton. However, you should keep in mind that stock markets are volatile and equity investments carry maximum risk. The longer you stay invested the higher the chances that you will make goo returns
________________________________________
qwerty asked, query on sips - irrespective of the fact that an sip is started earlier to august 09 , will entry load be deducted ? if so why as each sip is treated as a fresh purchase . please give ur opinion .
Mrinal answers, hi, the SEBI circular says that all equity oriented fund SIPs registered prior to 1st August 2009 will be charge entry loads till the last instalment is invested. In other words,all SIPs registered after 1st August will be not be charged any entry load
________________________________________
dfdd asked, Is there any income tax obligation for long term investments (more than 1 year) in stocks or mutual funds? What percentage of the returns would be taxed? What if I have a loss on the investments?
Mrinal answers, hi, if you are investing in equity and balanced funds then there is no long term capital gains tax if the investments are redeemed after one year. In the case of debt funds, the long term capital gains tax would apply. It will be 10% without indexation and 20% with indexation whichever is lower. If there is a long term loss on equity funds then the same cannot be adjusted against the long term capital gains. In the case of Long term capital gains from debt funds, the long term loss can be set off against long term gains
________________________________________
qwerty asked, sir i am in mid 30's and wish to invest in mutual funds . i have read about investement in index funds and etfs . what are these and how are they better than active funds. are they worth investement and what proportion of my amount should i invest . if recommended which are the ones which are recommended .
Mrinal answers, hi, index fund invest in stocks that constitute the underlying index and in the same proportion. The fund manager has no choice to invest in stock other than those that form a part of the index. Hence it is known as a passive style of management and the expenses are low compared to actively managed funds. In India, non-index based diversified equity funds have outperformed the popular index like Sensex and Nifty. Hence, if you are considering investing in index funds do not allocate more than 20% of your overall equity portfolio to these type of funds
________________________________________
qwerty asked, how is franklin felxicap ? should we exit and enter franklin bluechip
Mrinal answers, Hi, Franklin Flexicap can invest across stocks with any market cap as agains Bluechip which can invest only in large cap stocks. If you are willing to take risk of investing in large and midcap stocks then Flexicap is ideal or else switch to Bluechip Fund
________________________________________
rites asked, hi, Mrinal my salry is 9000/-pm i can save 4 to 5k p.m. which saving plan is best for me pls suggest
Mrinal answers, Hi, I would advise that you invest your monthly savings in line with your investment goals and risk appetite. For e.g your investment goal can be retirement and if retirement is 10-15 years away then majority of your savings can be invested in equities and the balance in debt
Tuesday, July 28, 2009
DO NOT INVEST IN BALANCED FUNDS REASON WHY
1. Do not go for the balanced funds, reason is you must invest in equity or pure related eguity instruments like index funds, by buying balanced funds with 65% and 35% ratio, you yourself do not what you are heading towards, you will be passive investor and it will not lead you higher, be aggressive and invest in direct equity in the tune of 70%, rest 30% you buy NSCs.
2,Do not invest through SIPs. Again there are enough reasons for that, one. entry load is too high, though they have abolished recently , on an average all AMCs(asset management company) charges 2.5% that is hue amount.
3. Do not diversify, human brain is capable to do certain tasks only very precisely, we are not meant for multitasking, so instead of diversifying, just concentrate either on one index fund(which itself is a diversification)or one or two large cap stocks,like ONGC,SBI .stucy their movements for two years and than you will be able to time it and make money.
4.Do not venture in to f&o, Buy one or two large quality stocks ,buy at dips and never book losses. Have a close watch on macro-economics.
Be a player in the market and you will win.
2,Do not invest through SIPs. Again there are enough reasons for that, one. entry load is too high, though they have abolished recently , on an average all AMCs(asset management company) charges 2.5% that is hue amount.
3. Do not diversify, human brain is capable to do certain tasks only very precisely, we are not meant for multitasking, so instead of diversifying, just concentrate either on one index fund(which itself is a diversification)or one or two large cap stocks,like ONGC,SBI .stucy their movements for two years and than you will be able to time it and make money.
4.Do not venture in to f&o, Buy one or two large quality stocks ,buy at dips and never book losses. Have a close watch on macro-economics.
Be a player in the market and you will win.
Sunday, July 26, 2009
SAVING TIPS
1. Never buy automobile if you got house on a central location....or transportation is not a big fuss......
2. Try to save what you can immediately after you got your salary......If you sit idle and think that you will save at the end of the year, you will find there is no money left....
3. If you can play in the stock market, its good!!! But giving money to MF not always advisable....There are N no. of MFs including ICICI prudential whose fund managers do not always guarantee return...
4. Put money in LIC Jeevan Saral....8.5% guaranteed return...make other LIC MF policies too.....
5. Give yourself a goal to put a centain amount of money in FD every year. When inflation is low, put money in long term saving, when inflation is high, put in short term saving.....
6. Use PPF as it is tax free
7. Do not go for Home loan if you already have a house in any of the Metros...These markets are highly inflated.....If possible, buy small lands here and there from people who urgently need money...These fellows tend to sell their possessions cheap....avoid big realty developers in between...
8. If possible, trade in the commodity market...This year, sugar and tea prices are going to sore....This kind of things happen every year...So speculate...you will get high return...
9. Never take car loans. car is a depreciating asset.
10. Avoid risky loans....and if you can make Rs. 4 from rs. 2, feel satisfied....
Never be too greedy....
2. Try to save what you can immediately after you got your salary......If you sit idle and think that you will save at the end of the year, you will find there is no money left....
3. If you can play in the stock market, its good!!! But giving money to MF not always advisable....There are N no. of MFs including ICICI prudential whose fund managers do not always guarantee return...
4. Put money in LIC Jeevan Saral....8.5% guaranteed return...make other LIC MF policies too.....
5. Give yourself a goal to put a centain amount of money in FD every year. When inflation is low, put money in long term saving, when inflation is high, put in short term saving.....
6. Use PPF as it is tax free
7. Do not go for Home loan if you already have a house in any of the Metros...These markets are highly inflated.....If possible, buy small lands here and there from people who urgently need money...These fellows tend to sell their possessions cheap....avoid big realty developers in between...
8. If possible, trade in the commodity market...This year, sugar and tea prices are going to sore....This kind of things happen every year...So speculate...you will get high return...
9. Never take car loans. car is a depreciating asset.
10. Avoid risky loans....and if you can make Rs. 4 from rs. 2, feel satisfied....
Never be too greedy....
Long Term Investment Strategy
Long term investments earn you profit only in Strong and Efficient Markets. Because only in Efficient Markets, the current stock price completely reflects the future estimates about the stock.
I believe, in India the markets are still not as efficient as the rest of the developed world and this poses a big risk to an individual investor to choose and invest in individual stocks.
The options available for individaul investors is to either invest in Mutual Funds or the more new products like ETF's. They provide individuals with greater diversification at one go. I personally prefer mutual funds because these people are more efficient and effective in making decisions and sentiments do not come into play. Also they have more information than a common individual.
I believe, in India the markets are still not as efficient as the rest of the developed world and this poses a big risk to an individual investor to choose and invest in individual stocks.
The options available for individaul investors is to either invest in Mutual Funds or the more new products like ETF's. They provide individuals with greater diversification at one go. I personally prefer mutual funds because these people are more efficient and effective in making decisions and sentiments do not come into play. Also they have more information than a common individual.
INVESTING FORMULA
Investments should not be centralised in a particular segment they have to be systematically diversified like if you have Rs. 100 to invest then
1. Fixed Deposits Rs. 30
2. Postal Deposits Rs. 20
3. Real Estate - Rs. 15
4. Gold - Rs. 15
5. Mutual funds and insurance - Rs. 10
6. Equities - Rs. 10
In equities also out of Rs. 10 the following strategy would give excellent returns.
1. Entry point - Wait for the opportunity and buy on 20 to 25% correction
for Rs. 2.50
2. If the Market corrects further buy for another Rs. 2.50
3. Watch for the further trends and invest rest of Rs. 5
This strategy would give excellent returns and create wealth
1. Fixed Deposits Rs. 30
2. Postal Deposits Rs. 20
3. Real Estate - Rs. 15
4. Gold - Rs. 15
5. Mutual funds and insurance - Rs. 10
6. Equities - Rs. 10
In equities also out of Rs. 10 the following strategy would give excellent returns.
1. Entry point - Wait for the opportunity and buy on 20 to 25% correction
for Rs. 2.50
2. If the Market corrects further buy for another Rs. 2.50
3. Watch for the further trends and invest rest of Rs. 5
This strategy would give excellent returns and create wealth
Saturday, July 25, 2009
Capital protection funds: What’s in it for risk-seeking investors?
Capital protection funds: What’s in it for risk-seeking investors?
Asset prices have been wobbly during the recent months. This has led many investors to consider taking exposure to products that offer downside protection. Capital protection fund is one such product available to retail investors. Are such funds optimal investments?
This article explains the structure of capital protection funds. It also discusses how such funds sit within a portfolio and shows why such exposure can be considered by even the risk-seeking investors.
The structure
Capital protection funds are structured products designed to attract risk-averse investors to the stock market. In developed countries, such funds offer capital guarantee with some upside participation.
In India, these are closed-end funds that offer capital protection, without a guarantee.
The capital protection comes from the fund’s exposure to typically zero-coupon bonds (also called as zeros). Suppose an investor buys units worth Rs 50,000. Assuming an eight per cent yield on the zeros, the fund will require Rs 39,690 to earn Rs 50,000 in three years to protect the investor’s capital. This leaves the fund Rs 10,310 now to invest in the equity market for upside participation.
The capital protection enables risk-averse investors to expose their portfolio to the equity market. Such funds, because of their exposure to zeros, can also form part of the asset allocation decision for risk-seeking investors. Here is how.
Efficient portfolio?
Suppose a risk-seeking investor decides to allocate 40 per cent to stocks, 30 per cent to bonds and 30 per cent to alternative assets. The asset allocation decision translates into 70 per cent (beta) exposure to the core portfolio and 30 per cent (alpha) exposure to the satellite portfolio.
The bond exposure inside the core runs a price risk. This is the risk that the investor has to sell her bond fund holdings at a lower price. The price risk leads to shortfall risk — the risk that the investment will fall short of the required amount at the horizon.
An optimal investment would be buying zeros that matches the liability duration. Suffice it to know here that zeros carry no reinvestment risk (giving it an edge over even fixed maturity plans) and if held till maturity, no price risk as well.
Unfortunately, investors do not have avenues to take exposure to zeros. So, investment in a capital-protected fund can be looked at as two components — exposure to zeros for horizon-matching investments and exposure to equity for upside participation.
Adding such funds to the portfolio can, hence, help risk-seeking investors reduce shortfall risk.
The caveats
Market participants argue that capital protection fund can be easily replicated by investors. An investment in a fixed-deposit or a PPF along with exposure to call options could provide similar payoffs.
Even without considering the tax efficiency and higher cash flows required for a fixed-deposit compared with zeros, the problem is that replicating payoffs requires strict risk management rules. Otherwise, consecutive losses on call options could lead to erosion of capital allocated for equity participation.
That said, capital protection fund also has its share of concerns.
First, a high fee structure acts a deterrent; the typical fee structure is 2.25 per cent of assets under management.
Second, the range of returns within peer funds makes fund selection very important. According to Valueresearchonline.com, the one-year returns on UTI Capital Protection Oriented three-year plan was 11.25 per cent, while Birla Sun Life Capital Protection Oriented three-year plan was 5.85 per cent.
Third, the problem is that such funds do not always offer call-option-like payoffs. Any direct exposure to stocks could expose the fund to downside risk- risk that it may not achieve its capital protection.
Conclusion
Capital-protection funds may be a good investment for retail investors because of its exposure to zeros.
While funds with call-option-like payoffs are optimal within a portfolio context, the high fee structure is a deterrent.
Asset prices have been wobbly during the recent months. This has led many investors to consider taking exposure to products that offer downside protection. Capital protection fund is one such product available to retail investors. Are such funds optimal investments?
This article explains the structure of capital protection funds. It also discusses how such funds sit within a portfolio and shows why such exposure can be considered by even the risk-seeking investors.
The structure
Capital protection funds are structured products designed to attract risk-averse investors to the stock market. In developed countries, such funds offer capital guarantee with some upside participation.
In India, these are closed-end funds that offer capital protection, without a guarantee.
The capital protection comes from the fund’s exposure to typically zero-coupon bonds (also called as zeros). Suppose an investor buys units worth Rs 50,000. Assuming an eight per cent yield on the zeros, the fund will require Rs 39,690 to earn Rs 50,000 in three years to protect the investor’s capital. This leaves the fund Rs 10,310 now to invest in the equity market for upside participation.
The capital protection enables risk-averse investors to expose their portfolio to the equity market. Such funds, because of their exposure to zeros, can also form part of the asset allocation decision for risk-seeking investors. Here is how.
Efficient portfolio?
Suppose a risk-seeking investor decides to allocate 40 per cent to stocks, 30 per cent to bonds and 30 per cent to alternative assets. The asset allocation decision translates into 70 per cent (beta) exposure to the core portfolio and 30 per cent (alpha) exposure to the satellite portfolio.
The bond exposure inside the core runs a price risk. This is the risk that the investor has to sell her bond fund holdings at a lower price. The price risk leads to shortfall risk — the risk that the investment will fall short of the required amount at the horizon.
An optimal investment would be buying zeros that matches the liability duration. Suffice it to know here that zeros carry no reinvestment risk (giving it an edge over even fixed maturity plans) and if held till maturity, no price risk as well.
Unfortunately, investors do not have avenues to take exposure to zeros. So, investment in a capital-protected fund can be looked at as two components — exposure to zeros for horizon-matching investments and exposure to equity for upside participation.
Adding such funds to the portfolio can, hence, help risk-seeking investors reduce shortfall risk.
The caveats
Market participants argue that capital protection fund can be easily replicated by investors. An investment in a fixed-deposit or a PPF along with exposure to call options could provide similar payoffs.
Even without considering the tax efficiency and higher cash flows required for a fixed-deposit compared with zeros, the problem is that replicating payoffs requires strict risk management rules. Otherwise, consecutive losses on call options could lead to erosion of capital allocated for equity participation.
That said, capital protection fund also has its share of concerns.
First, a high fee structure acts a deterrent; the typical fee structure is 2.25 per cent of assets under management.
Second, the range of returns within peer funds makes fund selection very important. According to Valueresearchonline.com, the one-year returns on UTI Capital Protection Oriented three-year plan was 11.25 per cent, while Birla Sun Life Capital Protection Oriented three-year plan was 5.85 per cent.
Third, the problem is that such funds do not always offer call-option-like payoffs. Any direct exposure to stocks could expose the fund to downside risk- risk that it may not achieve its capital protection.
Conclusion
Capital-protection funds may be a good investment for retail investors because of its exposure to zeros.
While funds with call-option-like payoffs are optimal within a portfolio context, the high fee structure is a deterrent.
TERM INSURANCE - DRIVE A BETTER PREMIUM BARGAIN
Did you know that the cost of buying a term insurance policy has crashed in recent times? Insurers have slashed premium rates by 30-40 per cent, passing on the benefits of reduced cost of capital for their operation to the policyholders.
The cut in rates has become possible because the solvency margin for life insurance companies that provide no-frills insurance plans and risk cover against life was reduced by two-thirds by the Insurance Regulatory and Development Authority (IRDA) last year.. This move was aimed at improving the penetration of basic insurance.
However, there are still few companies that charge premia that are not in line the current market trends.
With the IRDA planning to publish a new mortality table in the next couple of months, one can anticipate further rate cuts based on the claim ratio (claims in different age-groups). With increasing life expectancy and advancement of medical facilities and as many as 22 insurers competing for business there is ample scope for premium rates to decline at least for the middle-aged.
Under-insured
Term insurance can be taken to cover the life of self. A joint life cover can be taken with a spouse or business partners. Although term insurance is a traditional product, it is a non-participating plan — meaning that it will not carry any maturity value on expiry. That is, you cannot view this product as an investment; it only covers you for the risk of loss of life during the term of the policy. It is worthwhile to note here that some insurers are selling products which do return the premium, but this comes at a higher premium rate. The term cover required would differ between people based on the risk-taking capacity of the individual in the event of any untoward happening.
Though there is no standard rule, it is advisable to take a sum that would act as an income replacement for the family. It may be advisable to have a cover which is 10-12 times the annual income. Then, if an untoward incident happens, the claim proceeds can be deployed at an interest rate of 8 per cent to meet the monthly expenses of the nominees, without a compromise on lifestyle. An individual can also buy separate term plans to match his/her financial goals.
Due to low awareness levels, the insurance penetration level in the country is abysmally low compared with developed markets . This suggests that many individuals are either unaware of such plans or are under-insured. That term insurance sales account for less than 5 per cent of total sales for insurers tells the story. With equity markets buoyant for the past four years, distributors also prefer selling ULIPs due to attractive commission, thus neglecting the sale of pure term insurance products.
Rate card
Over the past year, premium rates for low insured amounts of, say, Rs 10 lakh, have declined by about 10 per cent. But the rates for higher-end policies has declined significantly by 30-40 per cent. HDFC Standard Life Insurance Company (HDFC-SLIC) has cut premium rates by 30-40 per cent in March for term products according to Mr Paresh Parasnis, Principal Officer and Executive Director, HDFC Standard Life. When asked to comment on the possibility of further reduction in premium once the new table of mortality is announced, he replied that the scope for this may be limited.
A general trend witnessed is that for the age group of 30, the divergence in the premium rates across insurance companies is not very high. For instance, Aviva Life Insurance and Aegon Religare offer a 25-year term policy at Rs 11,361 per annum (inclusive of service tax and education cess of 10.3 per cent) for a male of 30 years, for a sum insured of Rs 50 lakh. For the same cover, LIC charges Rs 14,600.
But the divergence is higher if the policyholder is 50 years and above. For a cover of Rs 50 lakh and a 10-year term, HDFC-SLIC charges an annual premium of Rs 34,865 inclusive of all taxes. For the same cover, Birla Sun Life charges Rs 45,499 and Max New York Life Rs 50,000.
Rider
Term policies also allow you to add other riders or benefits such as critical illness benefit, accelerated sum assured and accident death on payment of additional premium. It is important to note that the rates will get expensive as one’s age goes up.
Hence it is advisable to take cover at an early age and step it up every year at the rate of 5 per cent of the basic sum insured to protect against changes in earnings and living standards
The cut in rates has become possible because the solvency margin for life insurance companies that provide no-frills insurance plans and risk cover against life was reduced by two-thirds by the Insurance Regulatory and Development Authority (IRDA) last year.. This move was aimed at improving the penetration of basic insurance.
However, there are still few companies that charge premia that are not in line the current market trends.
With the IRDA planning to publish a new mortality table in the next couple of months, one can anticipate further rate cuts based on the claim ratio (claims in different age-groups). With increasing life expectancy and advancement of medical facilities and as many as 22 insurers competing for business there is ample scope for premium rates to decline at least for the middle-aged.
Under-insured
Term insurance can be taken to cover the life of self. A joint life cover can be taken with a spouse or business partners. Although term insurance is a traditional product, it is a non-participating plan — meaning that it will not carry any maturity value on expiry. That is, you cannot view this product as an investment; it only covers you for the risk of loss of life during the term of the policy. It is worthwhile to note here that some insurers are selling products which do return the premium, but this comes at a higher premium rate. The term cover required would differ between people based on the risk-taking capacity of the individual in the event of any untoward happening.
Though there is no standard rule, it is advisable to take a sum that would act as an income replacement for the family. It may be advisable to have a cover which is 10-12 times the annual income. Then, if an untoward incident happens, the claim proceeds can be deployed at an interest rate of 8 per cent to meet the monthly expenses of the nominees, without a compromise on lifestyle. An individual can also buy separate term plans to match his/her financial goals.
Due to low awareness levels, the insurance penetration level in the country is abysmally low compared with developed markets . This suggests that many individuals are either unaware of such plans or are under-insured. That term insurance sales account for less than 5 per cent of total sales for insurers tells the story. With equity markets buoyant for the past four years, distributors also prefer selling ULIPs due to attractive commission, thus neglecting the sale of pure term insurance products.
Rate card
Over the past year, premium rates for low insured amounts of, say, Rs 10 lakh, have declined by about 10 per cent. But the rates for higher-end policies has declined significantly by 30-40 per cent. HDFC Standard Life Insurance Company (HDFC-SLIC) has cut premium rates by 30-40 per cent in March for term products according to Mr Paresh Parasnis, Principal Officer and Executive Director, HDFC Standard Life. When asked to comment on the possibility of further reduction in premium once the new table of mortality is announced, he replied that the scope for this may be limited.
A general trend witnessed is that for the age group of 30, the divergence in the premium rates across insurance companies is not very high. For instance, Aviva Life Insurance and Aegon Religare offer a 25-year term policy at Rs 11,361 per annum (inclusive of service tax and education cess of 10.3 per cent) for a male of 30 years, for a sum insured of Rs 50 lakh. For the same cover, LIC charges Rs 14,600.
But the divergence is higher if the policyholder is 50 years and above. For a cover of Rs 50 lakh and a 10-year term, HDFC-SLIC charges an annual premium of Rs 34,865 inclusive of all taxes. For the same cover, Birla Sun Life charges Rs 45,499 and Max New York Life Rs 50,000.
Rider
Term policies also allow you to add other riders or benefits such as critical illness benefit, accelerated sum assured and accident death on payment of additional premium. It is important to note that the rates will get expensive as one’s age goes up.
Hence it is advisable to take cover at an early age and step it up every year at the rate of 5 per cent of the basic sum insured to protect against changes in earnings and living standards
REALTY MUMBAI AND SEA LINK EFFECT
It is an eight-lane bridge over the sea that has gladdened the hearts of motorists in Mumbai, especially those on the western suburbs. And, needless to say, realtors too are a happy lot as better infrastructure leads to property appreciation.
The much hyped Bandra-Worli sea-link was expected to cut travel time from the western suburb of Bandra to central Mumbai from 60-75 minutes to a mere seven minutes, sans blaring horns, frayed tempers and traffic snarls. A conservative estimate pegged vehicle operational cost savings at about Rs 100 crore annually as traffic was estimated at about 1.2 lakh passenger car units near the western end at Mahim.
However, in reality, both the ends of the bridge taper to a single file and motorists are constrained to spend over 15-20 minutes manoeuvring through choke points after traversing the bridge. Moreover, only four lanes are now operational and four more are likely to be thrown open to traffic by the year end.
Constraints apart, the 5 km Rs 1,800-crore link is an engineering marvel, which has made many a visitor stop and gape.
Bajaj Electrical Ltd, which unravelled over 100 km of cable to illuminate the bridge, has added ample gloss by its lighting systems. The lighting alone will consume 1000 KW a day as 225 glass reinforced polyester lamp poles have been installed on the bridge, besides those for the stay cables of the super structure.
DEFINITE APPRECIATION
The General Secretary of the Builders Association of India, Mr Anand J. Gupta, said the sea-link definitely enhanced property values in Bandra (both east and west) and Worli, not to speak of the locations close to the Western Expressway. Moreover, it would help some people take a buy call, who otherwise were postponing purchases.
Stating that it was a little too early to quantify the impact in terms of prices, he said it was known that the prices quoted by developers in Bandra (both east and west), where the rates hover at Rs 12,000-Rs 18,000, were higher by Rs 1,500 a sq.ft
At Worli, developers, who otherwise would settle for Rs 20,000-22,000 a sq.ft, are now asking Rs 25,000.
The impact was also visible in Andheri, especially in locations that had easy access to the highway, he said.
Mr Pawan Swamy, Managing Director-West, Jones Lang LaSalle Meghraj, said
Worli had no commercial component on the sea-face and a positive commercial trend in the rest of Worli was expected.
Bandra West too had no commercial property market of significance, with the entire focus on that front being on BKC (Bandra Kurla Complex) in the east. BKC had its own dynamics and no major change could be attributable to the sea-link as such.
In terms of residential values, Bandra (West) would improve because of enhanced connectivity to south Mumbai.
Worli would also see positive effects, despite the fact that it had very limited residential supply. Values there would rise because of improved approachability to the airport and the western suburbs.
In general, Mr Swamy said over the last 2-3 quarters, there was hardly any price appreciation anywhere in the city, and that included Bandra and Worli. Prices for certain projects might have increased in response to specific market dynamics, but locations tended to remain steady in terms of prices.
He said that the western suburb from Bandra to Andheri would see the most noticeable market improvement and the impact would taper off as one went further down.
Mr Hardeep Dayal, Managing Director, Centrum Infrastructure and Realty, said it was too early to evaluate the impact.
Motoring across the bridge was not completely smooth as bottlenecks at the Worli exit were a dampener. The full impact would be known once the impediments were cleared and all eight lanes became operational.
TOURIST HOTSPOT
The bridge appears to making a mark as a ‘must see’ tourist spot in the city. Many tour operators were upbeat of the prospects. If toll collection is of any indication in the first few weeks, the numbers were highest on Saturdays and Sundays.
The much hyped Bandra-Worli sea-link was expected to cut travel time from the western suburb of Bandra to central Mumbai from 60-75 minutes to a mere seven minutes, sans blaring horns, frayed tempers and traffic snarls. A conservative estimate pegged vehicle operational cost savings at about Rs 100 crore annually as traffic was estimated at about 1.2 lakh passenger car units near the western end at Mahim.
However, in reality, both the ends of the bridge taper to a single file and motorists are constrained to spend over 15-20 minutes manoeuvring through choke points after traversing the bridge. Moreover, only four lanes are now operational and four more are likely to be thrown open to traffic by the year end.
Constraints apart, the 5 km Rs 1,800-crore link is an engineering marvel, which has made many a visitor stop and gape.
Bajaj Electrical Ltd, which unravelled over 100 km of cable to illuminate the bridge, has added ample gloss by its lighting systems. The lighting alone will consume 1000 KW a day as 225 glass reinforced polyester lamp poles have been installed on the bridge, besides those for the stay cables of the super structure.
DEFINITE APPRECIATION
The General Secretary of the Builders Association of India, Mr Anand J. Gupta, said the sea-link definitely enhanced property values in Bandra (both east and west) and Worli, not to speak of the locations close to the Western Expressway. Moreover, it would help some people take a buy call, who otherwise were postponing purchases.
Stating that it was a little too early to quantify the impact in terms of prices, he said it was known that the prices quoted by developers in Bandra (both east and west), where the rates hover at Rs 12,000-Rs 18,000, were higher by Rs 1,500 a sq.ft
At Worli, developers, who otherwise would settle for Rs 20,000-22,000 a sq.ft, are now asking Rs 25,000.
The impact was also visible in Andheri, especially in locations that had easy access to the highway, he said.
Mr Pawan Swamy, Managing Director-West, Jones Lang LaSalle Meghraj, said
Worli had no commercial component on the sea-face and a positive commercial trend in the rest of Worli was expected.
Bandra West too had no commercial property market of significance, with the entire focus on that front being on BKC (Bandra Kurla Complex) in the east. BKC had its own dynamics and no major change could be attributable to the sea-link as such.
In terms of residential values, Bandra (West) would improve because of enhanced connectivity to south Mumbai.
Worli would also see positive effects, despite the fact that it had very limited residential supply. Values there would rise because of improved approachability to the airport and the western suburbs.
In general, Mr Swamy said over the last 2-3 quarters, there was hardly any price appreciation anywhere in the city, and that included Bandra and Worli. Prices for certain projects might have increased in response to specific market dynamics, but locations tended to remain steady in terms of prices.
He said that the western suburb from Bandra to Andheri would see the most noticeable market improvement and the impact would taper off as one went further down.
Mr Hardeep Dayal, Managing Director, Centrum Infrastructure and Realty, said it was too early to evaluate the impact.
Motoring across the bridge was not completely smooth as bottlenecks at the Worli exit were a dampener. The full impact would be known once the impediments were cleared and all eight lanes became operational.
TOURIST HOTSPOT
The bridge appears to making a mark as a ‘must see’ tourist spot in the city. Many tour operators were upbeat of the prospects. If toll collection is of any indication in the first few weeks, the numbers were highest on Saturdays and Sundays.
Debt or equity
The question as to where to invest — in debt or equity — is not about which asset class is more attractive, but about how to allocate between the two if you have a specific purpose in mind. Depending on the individual’s circumstances, resources, aspirations, investment horizon and risk tolerance, one needs to arrive at the proportion between debt and equity.
Why debt
Investors typically end up investing in debt investments to seek capital protection, have a predictable income stream and low overall portfolio fluctuation. Let’s say, you were an avid debt investor in fixed deposits of venerable banks like the State Bank of India. A decade ago, if you had lent money through a deposit to SBI for a period of ten years and renewed it at prevailing rates, a lakh of rupees earning 7.6 per cent per annum would have grown to roughly Rs 2.1 lakh today, provided you didn’t have to withdraw money or pay taxes. In case you saved the money for general purposes, the sum you saved may not buy much more than it did at that time. What went wrong? Nothing really.
While your deposit was earning interest, the value of the investment was being stolen away from you silently by the dangerous destroyer of wealth called inflation. It took away 5.1 per cent a year, netting you just about 2.5 per cent as the “real” return.
In case you saved towards building a house, after a decade, you may not even have enough money for the kitchen, leave alone a complete house! After all, property prices have risen roughly at 12-15 per cent in the last 10 years, much more than what you earned on your FD.
Let’s say instead of lending to SBI you invested in their stock, by buying their shares for Rs.1 lakh, the value of your investment would be worth Rs.8.24 lakh at current market prices. Your decision would have been severely tested many times in between. When market was fearful it may have valued the company less than its worth and in generous times, much more than the fair value. But in the long run, it would have ended up valuing your partnership closer to the fair value. This example clearly shows that the decision between debt and equity should be based on what you saved for originally and for how long can you continue to stay invested.
Which debt options
The choices within debt may change depending on the direction of interest rates. For now, the probability of the overall domestic economy picking up well is likely to cap the fall in interest rates. Interest rate-sensitive bond funds and gilt funds in such a case will struggle to deliver out performance. Retail deposit rates are continuing to fall while the rates prevalent in the larger debt market have been picking steadily since January this year. This leaves a retail debt investor in a Catch-22 situation — with neither attractive rates from a fixed deposit nor the certainty of higher returns from income funds.
If one were to lock-in the money in long-term deposits, one may regret the decision as inflation tends to rob the value of the investment. One can alternatively invest in Arbitrage Funds and Monthly Income Plans which are conservatively managed and can give a decent hedge with a small percentage of equity built in.
As to long-term surpluses that may not be required at the next four-five years, one can invest in equity comfortably. Valuations aren’t as cheap as they were about even four months back.
In a growing economy like India, which is one of the most broadbased in the world, one is better off investing in a diverse set of sectors either directly or through a mutual fund. Which sector will be more valuable in the short term in terms of appreciation of market value is a difficult guess. The world is waiting desperately for clear signs of revival and if evidence to the contrary emerges, there may be another bout of short term pain. Hence it’s better to stay diversified rather than taking sectoral bets.
Yet, in the long run, say two-three years, almost all real asset prices, equity, commodities, real estate may appreciate so much to balance the deterioration of the paper currency that buys them. The amount of stimulus and the potential circulation of money itself may guarantee that the real assets will appreciate strongly. If this unfolds, paper money and fixed income options make may look like one big mistake.
Why debt
Investors typically end up investing in debt investments to seek capital protection, have a predictable income stream and low overall portfolio fluctuation. Let’s say, you were an avid debt investor in fixed deposits of venerable banks like the State Bank of India. A decade ago, if you had lent money through a deposit to SBI for a period of ten years and renewed it at prevailing rates, a lakh of rupees earning 7.6 per cent per annum would have grown to roughly Rs 2.1 lakh today, provided you didn’t have to withdraw money or pay taxes. In case you saved the money for general purposes, the sum you saved may not buy much more than it did at that time. What went wrong? Nothing really.
While your deposit was earning interest, the value of the investment was being stolen away from you silently by the dangerous destroyer of wealth called inflation. It took away 5.1 per cent a year, netting you just about 2.5 per cent as the “real” return.
In case you saved towards building a house, after a decade, you may not even have enough money for the kitchen, leave alone a complete house! After all, property prices have risen roughly at 12-15 per cent in the last 10 years, much more than what you earned on your FD.
Let’s say instead of lending to SBI you invested in their stock, by buying their shares for Rs.1 lakh, the value of your investment would be worth Rs.8.24 lakh at current market prices. Your decision would have been severely tested many times in between. When market was fearful it may have valued the company less than its worth and in generous times, much more than the fair value. But in the long run, it would have ended up valuing your partnership closer to the fair value. This example clearly shows that the decision between debt and equity should be based on what you saved for originally and for how long can you continue to stay invested.
Which debt options
The choices within debt may change depending on the direction of interest rates. For now, the probability of the overall domestic economy picking up well is likely to cap the fall in interest rates. Interest rate-sensitive bond funds and gilt funds in such a case will struggle to deliver out performance. Retail deposit rates are continuing to fall while the rates prevalent in the larger debt market have been picking steadily since January this year. This leaves a retail debt investor in a Catch-22 situation — with neither attractive rates from a fixed deposit nor the certainty of higher returns from income funds.
If one were to lock-in the money in long-term deposits, one may regret the decision as inflation tends to rob the value of the investment. One can alternatively invest in Arbitrage Funds and Monthly Income Plans which are conservatively managed and can give a decent hedge with a small percentage of equity built in.
As to long-term surpluses that may not be required at the next four-five years, one can invest in equity comfortably. Valuations aren’t as cheap as they were about even four months back.
In a growing economy like India, which is one of the most broadbased in the world, one is better off investing in a diverse set of sectors either directly or through a mutual fund. Which sector will be more valuable in the short term in terms of appreciation of market value is a difficult guess. The world is waiting desperately for clear signs of revival and if evidence to the contrary emerges, there may be another bout of short term pain. Hence it’s better to stay diversified rather than taking sectoral bets.
Yet, in the long run, say two-three years, almost all real asset prices, equity, commodities, real estate may appreciate so much to balance the deterioration of the paper currency that buys them. The amount of stimulus and the potential circulation of money itself may guarantee that the real assets will appreciate strongly. If this unfolds, paper money and fixed income options make may look like one big mistake.
Monday, July 20, 2009
TAX SAVING INVESTMENT NITIN GOKHALE MUMBAI BASED TAX CONSULTANT REPLIES TO QUERIES
Deepali asked, hi nitin, i have a portfolio consisting of mutual funds and PPF. MF are mostly tax saving but are not performing as expected. i have HSBC Progressive themes(D), ICICI pru infra (G), Kotak tax saver(G), principal tax saver, Relaince tax saver(ELSS), SBI magnum tax gain(D), Sundram energy(G). I have a net loss of 63k till date. i have to invest rs 1 lac for this financial year. please suggest some good funds.
Nitin Gokhale answers, You can invest into SBI Magnum Tax Gain, Sundaram Tax Saver, HDFC Tax Saver.. pls note that the loss is more from market timing of the investment. You need to invest into elss funds again this year so that you can average out your cost and that will help you recover capital more quickly. Also spread the same over a few installements and if possible through a 6 months SIP. This will further help you reduce the risk of your equity investments.
sunil asked, I have booked FD in a bank in my wifes name whose income is less than 1.5 L , should I declare the interest on fd during return filling...?
Nitin Gokhale answers, If spouse has no income out of her own qualification and abilities, then it is subject to clubbing with the income of the earning spouse.
ajoy asked, Hello Nitin, I am an NRI and have term deposits of Rs 20L. The TDS deduction on the interest is around 33%, how much can get back and how?Nitin Gokhale answers, That would depend on your overall income. If you are in the highest tax bracket, then you cannot get any refund.
HS asked, Can you please suggest a good ELSS SIP apart from Fidelity Tax Advantage & SBI Magnum Tax Gain '93, in which I have already invested or should I increase the SIP amount in any of above funds. I am looking at period of 3 - 5 years. Pl suggest
Nitin Gokhale answers, Sundaram Tax Saver and HDFC Tax Saver can be considered.
miroo asked, Dear Sir. Good Afternoon to you!!! I am 28 and earning 30k per month. My employer does not provide facility of PF. My current investments are 1L in PPF, 33K in valrious MFs, 4k SIP per month in Diversified MFs, 3k per month in ULIP. Pls. guide me regarding my investment and future investment.
Nitin Gokhale answers, You are already investing in a pretty diversified set of avenues.. Keep it up. At your age, you can take a higher level of risk. However considering you are not getting PF, you should at least invest 60K into PPF. You already have a ULIP and you can continue with that. Look at your overall monthly surplus and you can invest most of that into a systematic investment plan. I would suggest about 50% of your funds can be midcap funds. Not sure how your liquidity is, but I would suggest some portion of your investments can be in liquid debt avenues like debt mutual funds or even bank fds that could be stopped in case of an emergency.
Akash asked, Hello, I have invested 20000 rs in Reliance super market return plan full equity. Jeevan surbhi 25000/- . LIC profit plus 25000/-. Is this OK or any more suggestion is there
Nitin Gokhale answers, You should diversify across avenues from predominantly insurance options currently. You can invest into equity mutual funds through a systematic investment plan. You can also invest part funds into debt options like PPF.
Barry asked, Which is the best diversified equity mf with a 5 year time frame ?
Nitin Gokhale answers, unfortunately past returns need not mean future returns.. hence you should invest into a basket of funds. HDFC Equity, Canara Robeco Equity, Franklin India Flexicap among large cap and Reliance Regular Savings Fund/Reliance Growth, SBNPP Select Midcap, Birla Sunlife Midcap under diversified midcap funds. Depending on the amount you are investing you can choose about 2-6 funds.
srikanth asked, Hi Nitiin, I had taken Housing loan from LIC they were charging Intrest 10.5% , SBI is Charging 8%, how can i ask them reduce intrest rate..??
Nitin Gokhale answers, Unfortunately organizations do not reduce the interest rate for existing customers every time they reduce it form new customers. You maybe forced to change the bank if you want to reduce the same and your bank is unwilling. Pls also keep in mind that SBI is 8% only for the first 2 years.
ravid asked, tax benfits we will get for investments to charity or trust
Nitin Gokhale answers, Under Section 80G, you can get the benefit for charity. the organization needs to be registered and will give you a receipt which will tell you whether you get a 50% or a 100% deduction from your taxable income.
sanju asked, pls suggest good investment plans for kids(1.5yrs age)Nitin Gokhale answers, Partly through traditional insurance plan. Pls choose a plan where the parent is the life assured. This gives a double benefit in case of life risk. the sum assured is paid out on life risk plus the maturity value is paid out as planned by you. In addition, you could use a sip into equity mutual funds considering that equities do well in the long term which is what you are looking for.
chid asked, Hello Nitin I have got the redemption amount of one of the tax saving bond. A 10.3% of tax has been deducted at source on the interest part of it. I have been issued form 16A. Should I show this in my Tax returns form? I fall in 30% tax bracket. Should I pay the balance tax?
Nitin Gokhale answers, Yes, you need to include it while filing your returns and you need to pay the balance tax if you are in a higher tax bracket. Pls do not miss this out since the IT dept is well automated and your IT office would have details of the other income as well.
vishal asked, Is reliance regular savings fund-growth good option at this point of time?
Nitin Gokhale answers, Midcap funds are likely to do well over a 2-3 year time horizon. However considering the market run up do phase you investments over a period.
Jagdish asked, I would like to invest Rs.20000 per year, with my 1 year old son, which plan (MF/Insurance/Equity ) suitable to me??
Nitin Gokhale answers, For needs like children's education, I would suggest you can prefer a traditional children's insurance plan. You can top that up with other market linked avenues including a monthly systematic investment plan.
GG asked, Hi I am working software field abd getting 45k permonth as you know we dont have job guaranty could u please suggest such tax savin plan which helps me in tuff situation also
Nitin Gokhale answers, I would suggest you invest part of your savings in liquid debt avenues to plan for about 6 months of expenses. Unfortunately tax savings options are not liquid and hence these may be non tax saving funds. You can also use a bank fd which you can prematurely close.. the tax benefits can be reversed but that will not be of great concern if one has lost a job. Beyond that you can invest some into market linked avenues to provide you upside and keeping in mind that you will earn a lower return on liquid debt funds. Once you reach 6 months of buffer then you can start partially investing into locked in debt options like PPF, NSC, etc that give you better returns and also have the option of increasing exposure to higher risk ELSS mutual funds.
sunil asked, where to invest with minimum risk in 2009..
Nitin Gokhale answers, Low risk could cap your returns especially in periods where markets can run up after we are out of an economic downturn. Best way is a diversified approach as suggested earlier.
mamu asked, Mr Nitin, can I invest in PPF to save tax and also expect good investments returns 15 years from now?
Nitin Gokhale answers, PPF today provides among the best post tax returns Vs other deposits. However, I would always suggest a balanced approach with a combination of avenues as each avenue has its one benefits and negatives. Eg PPF is low on liquidity in the first few years.
jiji asked, I would be selling my house and the money that the derive form the deal approx 15lakhs would like to invest where i can get gurrantted returns pls suggest something
Nitin Gokhale answers, It is a good idea to invest in a combination of avenues. Broadly, if you are looking for avenues outside real estate, you can diversify between Debt options and Equity Options. Debt options provide you safety and can be across Post office savings like NSC, PPF, Bank Fixed Deposits and Debt mutual funds. You can take risk for part of the funds where you can park money into a liquid mutual fund and do a systematic transfer into equity funds over about 6-12 months. Transfer as much into equity keeping mind your risk profile. While investing in debt options keep in mind that some avenues that give you returns through interest could be tax inefficient. Hence always look at post tax returns before investing.
mak asked, Hello Nitin I am investing in following funds through SIP.I have 10-15 year time zone in mind. Franklin India Opportunities Fund - Equity - Diversified, HSBC Tax Saver Equity Fund - Equity - ELSS, Principal Personal Tax saver - Equity - ELSS, SBI Magnum Tax Gain Scheme 93 - Equity - ELSS I am expecting 20-22 % return. Please suggest should I continue with them or should change the fund Nitin Gokhale answers, You could replace the Principal Personal Tax Saver with Sundaram BNP Paribas Tax saver. You could also change the Franklin fund to a Reliance RSF fund or Birla Midcap fund to give some midcap exposure considering the long term nature of your investment.
Karthik asked, Hi I'm willing to take risk but I want to have high returns. Suggest some tax saving investments.
Nitin Gokhale answers, The two highest level risk investments as part of tax saving investments would be the ELSS Fund which is the tax saving mutual fund. The other option to take risk would be through the Unit Linked Insurance Plan(ULIP). The ELSS fund could be used through the systematic route especially since markets have run up a bit. Or at least can be phased in over a period. Use the ULIP if you are looking for life cover as well. ULIPs have higher initial costs and hence only invest if you are looking at a horizon of over 7 years. Also do evaluate the same carefully since there is a lot of mis selling that happens on this avenue.
Nitin Gokhale answers, You can invest into SBI Magnum Tax Gain, Sundaram Tax Saver, HDFC Tax Saver.. pls note that the loss is more from market timing of the investment. You need to invest into elss funds again this year so that you can average out your cost and that will help you recover capital more quickly. Also spread the same over a few installements and if possible through a 6 months SIP. This will further help you reduce the risk of your equity investments.
sunil asked, I have booked FD in a bank in my wifes name whose income is less than 1.5 L , should I declare the interest on fd during return filling...?
Nitin Gokhale answers, If spouse has no income out of her own qualification and abilities, then it is subject to clubbing with the income of the earning spouse.
ajoy asked, Hello Nitin, I am an NRI and have term deposits of Rs 20L. The TDS deduction on the interest is around 33%, how much can get back and how?Nitin Gokhale answers, That would depend on your overall income. If you are in the highest tax bracket, then you cannot get any refund.
HS asked, Can you please suggest a good ELSS SIP apart from Fidelity Tax Advantage & SBI Magnum Tax Gain '93, in which I have already invested or should I increase the SIP amount in any of above funds. I am looking at period of 3 - 5 years. Pl suggest
Nitin Gokhale answers, Sundaram Tax Saver and HDFC Tax Saver can be considered.
miroo asked, Dear Sir. Good Afternoon to you!!! I am 28 and earning 30k per month. My employer does not provide facility of PF. My current investments are 1L in PPF, 33K in valrious MFs, 4k SIP per month in Diversified MFs, 3k per month in ULIP. Pls. guide me regarding my investment and future investment.
Nitin Gokhale answers, You are already investing in a pretty diversified set of avenues.. Keep it up. At your age, you can take a higher level of risk. However considering you are not getting PF, you should at least invest 60K into PPF. You already have a ULIP and you can continue with that. Look at your overall monthly surplus and you can invest most of that into a systematic investment plan. I would suggest about 50% of your funds can be midcap funds. Not sure how your liquidity is, but I would suggest some portion of your investments can be in liquid debt avenues like debt mutual funds or even bank fds that could be stopped in case of an emergency.
Akash asked, Hello, I have invested 20000 rs in Reliance super market return plan full equity. Jeevan surbhi 25000/- . LIC profit plus 25000/-. Is this OK or any more suggestion is there
Nitin Gokhale answers, You should diversify across avenues from predominantly insurance options currently. You can invest into equity mutual funds through a systematic investment plan. You can also invest part funds into debt options like PPF.
Barry asked, Which is the best diversified equity mf with a 5 year time frame ?
Nitin Gokhale answers, unfortunately past returns need not mean future returns.. hence you should invest into a basket of funds. HDFC Equity, Canara Robeco Equity, Franklin India Flexicap among large cap and Reliance Regular Savings Fund/Reliance Growth, SBNPP Select Midcap, Birla Sunlife Midcap under diversified midcap funds. Depending on the amount you are investing you can choose about 2-6 funds.
srikanth asked, Hi Nitiin, I had taken Housing loan from LIC they were charging Intrest 10.5% , SBI is Charging 8%, how can i ask them reduce intrest rate..??
Nitin Gokhale answers, Unfortunately organizations do not reduce the interest rate for existing customers every time they reduce it form new customers. You maybe forced to change the bank if you want to reduce the same and your bank is unwilling. Pls also keep in mind that SBI is 8% only for the first 2 years.
ravid asked, tax benfits we will get for investments to charity or trust
Nitin Gokhale answers, Under Section 80G, you can get the benefit for charity. the organization needs to be registered and will give you a receipt which will tell you whether you get a 50% or a 100% deduction from your taxable income.
sanju asked, pls suggest good investment plans for kids(1.5yrs age)Nitin Gokhale answers, Partly through traditional insurance plan. Pls choose a plan where the parent is the life assured. This gives a double benefit in case of life risk. the sum assured is paid out on life risk plus the maturity value is paid out as planned by you. In addition, you could use a sip into equity mutual funds considering that equities do well in the long term which is what you are looking for.
chid asked, Hello Nitin I have got the redemption amount of one of the tax saving bond. A 10.3% of tax has been deducted at source on the interest part of it. I have been issued form 16A. Should I show this in my Tax returns form? I fall in 30% tax bracket. Should I pay the balance tax?
Nitin Gokhale answers, Yes, you need to include it while filing your returns and you need to pay the balance tax if you are in a higher tax bracket. Pls do not miss this out since the IT dept is well automated and your IT office would have details of the other income as well.
vishal asked, Is reliance regular savings fund-growth good option at this point of time?
Nitin Gokhale answers, Midcap funds are likely to do well over a 2-3 year time horizon. However considering the market run up do phase you investments over a period.
Jagdish asked, I would like to invest Rs.20000 per year, with my 1 year old son, which plan (MF/Insurance/Equity ) suitable to me??
Nitin Gokhale answers, For needs like children's education, I would suggest you can prefer a traditional children's insurance plan. You can top that up with other market linked avenues including a monthly systematic investment plan.
GG asked, Hi I am working software field abd getting 45k permonth as you know we dont have job guaranty could u please suggest such tax savin plan which helps me in tuff situation also
Nitin Gokhale answers, I would suggest you invest part of your savings in liquid debt avenues to plan for about 6 months of expenses. Unfortunately tax savings options are not liquid and hence these may be non tax saving funds. You can also use a bank fd which you can prematurely close.. the tax benefits can be reversed but that will not be of great concern if one has lost a job. Beyond that you can invest some into market linked avenues to provide you upside and keeping in mind that you will earn a lower return on liquid debt funds. Once you reach 6 months of buffer then you can start partially investing into locked in debt options like PPF, NSC, etc that give you better returns and also have the option of increasing exposure to higher risk ELSS mutual funds.
sunil asked, where to invest with minimum risk in 2009..
Nitin Gokhale answers, Low risk could cap your returns especially in periods where markets can run up after we are out of an economic downturn. Best way is a diversified approach as suggested earlier.
mamu asked, Mr Nitin, can I invest in PPF to save tax and also expect good investments returns 15 years from now?
Nitin Gokhale answers, PPF today provides among the best post tax returns Vs other deposits. However, I would always suggest a balanced approach with a combination of avenues as each avenue has its one benefits and negatives. Eg PPF is low on liquidity in the first few years.
jiji asked, I would be selling my house and the money that the derive form the deal approx 15lakhs would like to invest where i can get gurrantted returns pls suggest something
Nitin Gokhale answers, It is a good idea to invest in a combination of avenues. Broadly, if you are looking for avenues outside real estate, you can diversify between Debt options and Equity Options. Debt options provide you safety and can be across Post office savings like NSC, PPF, Bank Fixed Deposits and Debt mutual funds. You can take risk for part of the funds where you can park money into a liquid mutual fund and do a systematic transfer into equity funds over about 6-12 months. Transfer as much into equity keeping mind your risk profile. While investing in debt options keep in mind that some avenues that give you returns through interest could be tax inefficient. Hence always look at post tax returns before investing.
mak asked, Hello Nitin I am investing in following funds through SIP.I have 10-15 year time zone in mind. Franklin India Opportunities Fund - Equity - Diversified, HSBC Tax Saver Equity Fund - Equity - ELSS, Principal Personal Tax saver - Equity - ELSS, SBI Magnum Tax Gain Scheme 93 - Equity - ELSS I am expecting 20-22 % return. Please suggest should I continue with them or should change the fund Nitin Gokhale answers, You could replace the Principal Personal Tax Saver with Sundaram BNP Paribas Tax saver. You could also change the Franklin fund to a Reliance RSF fund or Birla Midcap fund to give some midcap exposure considering the long term nature of your investment.
Karthik asked, Hi I'm willing to take risk but I want to have high returns. Suggest some tax saving investments.
Nitin Gokhale answers, The two highest level risk investments as part of tax saving investments would be the ELSS Fund which is the tax saving mutual fund. The other option to take risk would be through the Unit Linked Insurance Plan(ULIP). The ELSS fund could be used through the systematic route especially since markets have run up a bit. Or at least can be phased in over a period. Use the ULIP if you are looking for life cover as well. ULIPs have higher initial costs and hence only invest if you are looking at a horizon of over 7 years. Also do evaluate the same carefully since there is a lot of mis selling that happens on this avenue.
Wednesday, July 15, 2009
FINANCIAL INVESTMENT ADVISOR SMITA CHANDIRAMANI OF TULIP INVESTMENTS REPLIES TO QUERIES
George asked, Hello Smita , I am an NRI, and I have Rs.10 lakh as cash, ready to invest. Pls advise me on the best course of action Smita Chandiramani answers, Hi George, if u hv a clear 7-10 yrs horizon to invest this money, then I would suggest tht u can invest majority of this money into large cap diversified at current levels of the mkts. Over this tenure u can expect to make an annualised return of around 16-18%.
pramb asked, I am trying to build portfolio via SIP of 12000 in HDFC TOP 200(large Cap), DSP BR TOP 100(large Cap), Birla SL Forntline Equity(large Cap), Sundaram Select Focus(large Cap - Aggresive and risk), Reliance Growth(mid-cap) and ICICI PRu Infastructure(sector) and one GOLD ETF Fund. Please suggest whether these are right choicesSmita Chandiramani answers, The portf seems gud
BM asked, We are husn=band wife 37 years each earning 70k per month together. We have cash savings of approx 6-7 lakhs What instruments would your receommned for a approx return of 12-15% per year we have a daughter of age 4.5 yearsSmita Chandiramani answers, U will need to maintain higher allocation to equities. Assuming a return of 16% in equities over the long run and 6% tax free return in debt, u will need to maintain a 60(equity):40(debt) ratio to make a 12% return over the long run. In debt u can look at PPF and bank FDs. For equities u can look at diversified equity MFs.
sam asked, Dunno why guys make statements like 'U should immediately get urself an adequate TERM Insurance cover'... First question should have been is father retired... If so does he get a pension... If so how much... Then next set would be u r 29 years of age meaning you have worked for 7-9 years... So what are your savings... Then blah blah blah... My 2c Smita Chandiramani answers, Dear Sam, there is a reason for the word 'ADEQUATE' being mentioned in the sentence. As complete info is not provided, it is the responsibility of the individual to estimate the amt of insurance reqd. This amt can also be zero, i.e in case there are existing financial resources available with a person, then insurance cover may not be needed at all.
Sameer asked, Maam, My PPF Account is about to mature. Where can I park lumpsum money with risk free rate of interest without being taxed on returnsSmita Chandiramani answers, U can keep extending the tenure of amt lying in PPF in blocks of 5 yrs. U can keep the money there as long as u want. Returns there r not taxed.
asf asked, i would like to invest INR 5000 per month through MIP. Can afford medium - high risk. Suggest me a good mutual fund and scheme.Smita Chandiramani answers, It is SIP. U should invest into 2 funds from among options like HDFC Growth, DSPBR Equity, Reliance Vision, Sundaram Select Focus, etc.
ajay asked, We have bought a apartment. It is registered with my father's name and I am paying some percentage of money for this apartment. I am paying proper income tax to Govt of India on my earning. Is there any complication due to Income Tax point of view in this process as I am paying some money on behalf of my father ? Does he need to declare this thing somewhere or it is absolutely fine for son to pay the money on behalf of his father. Smita Chandiramani answers, Hi Ajay, there should not be any problem in ur case. The money given to him can be shown as gift. There will be no problems on the tax side.
v asked, have 5 lacs in pf and ppf/ 20 lacs in mf and 10 lacs in equity. like to retire in 10 years looking at 2 cr. kindly advise if i invest another 20 k per month for next 10 years is ok. life span is 80 yrs. family of three .Smita Chandiramani answers, Assuming u invest around 20K p.m. for the next 10 yrs over and above the existing 30L equities, u should be able to accumulate 1.8 Cr. So if u include ur debt part, u maybe able to achieve ur 2 Cr trgt.
ram asked, would you suggest investment in reliance diversified power sector? is it too risky? can we dedicated a small amount to it?Smita Chandiramani answers, Hi Ram, the core part of ur investment portf should consist of large cap diversified Funds. In case u understand a particular setor well and wish to hv higher presence in it, u can allocate a small portion (say 5% of portf) to that particular sector using a sector fund.
saurabh asked, i want to know about govt. new pension scheem. can u help? Smita Chandiramani answers, http://www.pfrda.org.in/writereaddata/linkimages/Offer%20Document957798914.pdf This link will lead u to the offer document which contains all details regarding the NPS. It provides gud clarity on the entire scheme.
ased asked, hi sridhar whats ur view on index funds .which one do you recommend .I am investing in diversified mf .should i stop and invest only in inex funds or etf ? which is better index funds or etf ? Smita Chandiramani answers, It is definitely a gud strategy to build the core part of ur portf using Index Funds. If ur horizon is long term, the both ETFs and Regular Index funds should be gud (as from Aug'09 entry loads r abolished). In case ur existing funds r large cap funds then there is no need to replace them.
venkat asked, are children's eductation plans any good or is it better to for diversified mf ? Smita Chandiramani answers, Dear Venkat, the cost structure in Children's Edu Plans r generally higher. Due to this the long term returns take a hit. It is much wiser to build funds thro diversified MFs. In case of MFs invest the money on ur name and add ur child as the second holder where ur spouse is the gaurdian.
Koti asked, I am 32 with my wife(not working) and two kids (4, 1), Investing 14000 in MF (Reliance Growth, HDFC Equity, Fidelity Equity, Franklin Templeton Bluechip, SBI Magnum Umbrella -Contra), 30000 in PPF, 66000 in LIC (Jeevan Anand). My monthly income is 60000 Rs. My monthly house hold expenses are 25000 Rs. How is my financial planning? Please give me necessary suggestions. Smita Chandiramani answers, Hi Koti, get urself adequate TERM Insurance cover immediately. Once u hv this u should relook ur LIC policy. It maybe a better idea to divert part of this money into ur PPF a/c. Ur MF portf is gud. Ur savings ratio is gud.
00 asked, Dear Maam, do we get a tax benefit if we purchase a residential plot, instead of a residential house ?Smita Chandiramani answers, No, just for a plot not tax benefits. But if u construct a house on this plot within a specified time u can then get tax benefits on the housing loan taken for the purpose.
Jyothi asked, Hi Smita, I had invested in the MF Franklin India Prima fund Rs. 1,10,000 (Monthly SIP for 3 yrs. Ended in July 2008) I want to change the allocation in FTI Prima to FTI Prima Plus, through an STP. But I’m not sure when to start because the returns from Prima is currently negative. Do I wait till I atleast break even before starting the STP? More importantly, is my decision to change the allocation to Prima Plus a valid one? Or, do I hold on to Prima for some more time? Smita Chandiramani answers, Hi Jyothi, is this the only fund in ur portf? If yes, then invest into a large cap fund thro a SIP in future. It maybe a better idea to hold onto Prima fund and switch it entirely when mkts r at relative highs. This may take a few years. In case u hv other large cap funds in ur portf u should continue with the SIP.
Abhishek asked, Pls suggest me some good short term debt funds for investing for 1 year.how much gain can I expect from them?Smita Chandiramani answers, Hi Abhishek, for a 1 yrs horizon, the best option is to invest into a bank FD. There is a chance that in future there maybe some hardening of interest due to which debt funds may not give the best returns.
terd asked, Maam , for my 2 yr old son, i have invested in max new york life insurance and also opened a kids a/c in bank. What more investements can u advice like LIC , etc??Smita Chandiramani answers, Hi, it is not the best option to invest for ur child thro Insurance based investment options. A bank a/c is a gud idea where u teach the kid the virtue of savings. To build a decent fund for their future the best option is to invest via diversified large cap equity oritented Mutual Funds.
pramb asked, how good is Reliance Growth, Sundaram Select Focus Smita Chandiramani answers, Both r well managed funds and hv done well in the past. Reliance Growth is more focused towards midcap stocks. Sundaram Select Focus is focused towards Large Cap stocks.
nicky asked, Hi VS: i am 29yr old & only earning member of my family, father retired, mother house wife & my wife is also house wife, have 1 baby of 2yrs.......i manage to save rs. 15000/- per month after all expenses ......have opened ppf account + LIC of about 50000/- per year, please suggest a good risk free investment idea's....thanks Smita Chandiramani answers, Hi, U should immediately get urself an adequate TERM Insurance cover. U can get quotes from ICICI Pru Pure Protect, Reliance TERM Plan, Kotak TERM Plan, SBI Shield, etc. U need to build a balanced asset allocation plan which would enable u to grow u money at a rate faster than inflation. This would enable u to fulfill ur future responsibilities and needs. For this u must invest some part of ur long term savings into Equities thro Mutual Fund route. Of the 15K start with a 5K mthly SIP into Equity MFs with a 10-15 yrs horizon.
vicku asked, Which bank gives the best interest rate for FD for 2 years term?Smita Chandiramani answers, The interest rate would vary based on the amt u wish to invest. The difference in rates will be marginal. PSU banks should be offering close to 8% for a 2 yrs period.
AMAR asked, Heloo Maam, pls tell me I want to invest 1Lac ruppees (either in Mutual Fund or in Share Market), pls suggest me for Max return where I have to invest. I can wait for long time also.ThanksSmita Chandiramani answers, Hi Amar,making consistent higher return should be the focus and not the best return. It is best to stick to large cap stocks or Mutual Funds which invest in them. In case u wish to invest thro MFs u can look at HDFC Grwoth, DSPBR Equity, Reliance Vision, etc...
Dinesh asked, Hi, At age of 30, i am investing 20,000/- per yr. in PPF & NSE each,43000 per yr in LIC policies(Jeevan mitra tripl.cov) , 11000 SIP in diversied MF. Is it a good portfolio. What are good MF for 15yr horizone, ThanksSmita Chandiramani answers, It is better to invest thro PPF and discontinue NSC. Create an emergency fund which also covers around 6 mths of living expenses, and keep it in a safe place like a bank FD. Getting ur self adequate TERM Insurance cover is recommended. Once this cover is in place u can review ur LIC policy. Invest money with a long term horizon (10 yrs or more) into diversified MFs like Reliance equity advantage, HDFC Top 200, DSPBR Top 100, Sundaram Select Focus, etc to build funds for ur needs like children’s future and retirement.
pramb asked, I am trying to build portfolio via SIP of 12000 in HDFC TOP 200(large Cap), DSP BR TOP 100(large Cap), Birla SL Forntline Equity(large Cap), Sundaram Select Focus(large Cap - Aggresive and risk), Reliance Growth(mid-cap) and ICICI PRu Infastructure(sector) and one GOLD ETF Fund. Please suggest whether these are right choicesSmita Chandiramani answers, The portf seems gud
BM asked, We are husn=band wife 37 years each earning 70k per month together. We have cash savings of approx 6-7 lakhs What instruments would your receommned for a approx return of 12-15% per year we have a daughter of age 4.5 yearsSmita Chandiramani answers, U will need to maintain higher allocation to equities. Assuming a return of 16% in equities over the long run and 6% tax free return in debt, u will need to maintain a 60(equity):40(debt) ratio to make a 12% return over the long run. In debt u can look at PPF and bank FDs. For equities u can look at diversified equity MFs.
sam asked, Dunno why guys make statements like 'U should immediately get urself an adequate TERM Insurance cover'... First question should have been is father retired... If so does he get a pension... If so how much... Then next set would be u r 29 years of age meaning you have worked for 7-9 years... So what are your savings... Then blah blah blah... My 2c Smita Chandiramani answers, Dear Sam, there is a reason for the word 'ADEQUATE' being mentioned in the sentence. As complete info is not provided, it is the responsibility of the individual to estimate the amt of insurance reqd. This amt can also be zero, i.e in case there are existing financial resources available with a person, then insurance cover may not be needed at all.
Sameer asked, Maam, My PPF Account is about to mature. Where can I park lumpsum money with risk free rate of interest without being taxed on returnsSmita Chandiramani answers, U can keep extending the tenure of amt lying in PPF in blocks of 5 yrs. U can keep the money there as long as u want. Returns there r not taxed.
asf asked, i would like to invest INR 5000 per month through MIP. Can afford medium - high risk. Suggest me a good mutual fund and scheme.Smita Chandiramani answers, It is SIP. U should invest into 2 funds from among options like HDFC Growth, DSPBR Equity, Reliance Vision, Sundaram Select Focus, etc.
ajay asked, We have bought a apartment. It is registered with my father's name and I am paying some percentage of money for this apartment. I am paying proper income tax to Govt of India on my earning. Is there any complication due to Income Tax point of view in this process as I am paying some money on behalf of my father ? Does he need to declare this thing somewhere or it is absolutely fine for son to pay the money on behalf of his father. Smita Chandiramani answers, Hi Ajay, there should not be any problem in ur case. The money given to him can be shown as gift. There will be no problems on the tax side.
v asked, have 5 lacs in pf and ppf/ 20 lacs in mf and 10 lacs in equity. like to retire in 10 years looking at 2 cr. kindly advise if i invest another 20 k per month for next 10 years is ok. life span is 80 yrs. family of three .Smita Chandiramani answers, Assuming u invest around 20K p.m. for the next 10 yrs over and above the existing 30L equities, u should be able to accumulate 1.8 Cr. So if u include ur debt part, u maybe able to achieve ur 2 Cr trgt.
ram asked, would you suggest investment in reliance diversified power sector? is it too risky? can we dedicated a small amount to it?Smita Chandiramani answers, Hi Ram, the core part of ur investment portf should consist of large cap diversified Funds. In case u understand a particular setor well and wish to hv higher presence in it, u can allocate a small portion (say 5% of portf) to that particular sector using a sector fund.
saurabh asked, i want to know about govt. new pension scheem. can u help? Smita Chandiramani answers, http://www.pfrda.org.in/writereaddata/linkimages/Offer%20Document957798914.pdf This link will lead u to the offer document which contains all details regarding the NPS. It provides gud clarity on the entire scheme.
ased asked, hi sridhar whats ur view on index funds .which one do you recommend .I am investing in diversified mf .should i stop and invest only in inex funds or etf ? which is better index funds or etf ? Smita Chandiramani answers, It is definitely a gud strategy to build the core part of ur portf using Index Funds. If ur horizon is long term, the both ETFs and Regular Index funds should be gud (as from Aug'09 entry loads r abolished). In case ur existing funds r large cap funds then there is no need to replace them.
venkat asked, are children's eductation plans any good or is it better to for diversified mf ? Smita Chandiramani answers, Dear Venkat, the cost structure in Children's Edu Plans r generally higher. Due to this the long term returns take a hit. It is much wiser to build funds thro diversified MFs. In case of MFs invest the money on ur name and add ur child as the second holder where ur spouse is the gaurdian.
Koti asked, I am 32 with my wife(not working) and two kids (4, 1), Investing 14000 in MF (Reliance Growth, HDFC Equity, Fidelity Equity, Franklin Templeton Bluechip, SBI Magnum Umbrella -Contra), 30000 in PPF, 66000 in LIC (Jeevan Anand). My monthly income is 60000 Rs. My monthly house hold expenses are 25000 Rs. How is my financial planning? Please give me necessary suggestions. Smita Chandiramani answers, Hi Koti, get urself adequate TERM Insurance cover immediately. Once u hv this u should relook ur LIC policy. It maybe a better idea to divert part of this money into ur PPF a/c. Ur MF portf is gud. Ur savings ratio is gud.
00 asked, Dear Maam, do we get a tax benefit if we purchase a residential plot, instead of a residential house ?Smita Chandiramani answers, No, just for a plot not tax benefits. But if u construct a house on this plot within a specified time u can then get tax benefits on the housing loan taken for the purpose.
Jyothi asked, Hi Smita, I had invested in the MF Franklin India Prima fund Rs. 1,10,000 (Monthly SIP for 3 yrs. Ended in July 2008) I want to change the allocation in FTI Prima to FTI Prima Plus, through an STP. But I’m not sure when to start because the returns from Prima is currently negative. Do I wait till I atleast break even before starting the STP? More importantly, is my decision to change the allocation to Prima Plus a valid one? Or, do I hold on to Prima for some more time? Smita Chandiramani answers, Hi Jyothi, is this the only fund in ur portf? If yes, then invest into a large cap fund thro a SIP in future. It maybe a better idea to hold onto Prima fund and switch it entirely when mkts r at relative highs. This may take a few years. In case u hv other large cap funds in ur portf u should continue with the SIP.
Abhishek asked, Pls suggest me some good short term debt funds for investing for 1 year.how much gain can I expect from them?Smita Chandiramani answers, Hi Abhishek, for a 1 yrs horizon, the best option is to invest into a bank FD. There is a chance that in future there maybe some hardening of interest due to which debt funds may not give the best returns.
terd asked, Maam , for my 2 yr old son, i have invested in max new york life insurance and also opened a kids a/c in bank. What more investements can u advice like LIC , etc??Smita Chandiramani answers, Hi, it is not the best option to invest for ur child thro Insurance based investment options. A bank a/c is a gud idea where u teach the kid the virtue of savings. To build a decent fund for their future the best option is to invest via diversified large cap equity oritented Mutual Funds.
pramb asked, how good is Reliance Growth, Sundaram Select Focus Smita Chandiramani answers, Both r well managed funds and hv done well in the past. Reliance Growth is more focused towards midcap stocks. Sundaram Select Focus is focused towards Large Cap stocks.
nicky asked, Hi VS: i am 29yr old & only earning member of my family, father retired, mother house wife & my wife is also house wife, have 1 baby of 2yrs.......i manage to save rs. 15000/- per month after all expenses ......have opened ppf account + LIC of about 50000/- per year, please suggest a good risk free investment idea's....thanks Smita Chandiramani answers, Hi, U should immediately get urself an adequate TERM Insurance cover. U can get quotes from ICICI Pru Pure Protect, Reliance TERM Plan, Kotak TERM Plan, SBI Shield, etc. U need to build a balanced asset allocation plan which would enable u to grow u money at a rate faster than inflation. This would enable u to fulfill ur future responsibilities and needs. For this u must invest some part of ur long term savings into Equities thro Mutual Fund route. Of the 15K start with a 5K mthly SIP into Equity MFs with a 10-15 yrs horizon.
vicku asked, Which bank gives the best interest rate for FD for 2 years term?Smita Chandiramani answers, The interest rate would vary based on the amt u wish to invest. The difference in rates will be marginal. PSU banks should be offering close to 8% for a 2 yrs period.
AMAR asked, Heloo Maam, pls tell me I want to invest 1Lac ruppees (either in Mutual Fund or in Share Market), pls suggest me for Max return where I have to invest. I can wait for long time also.ThanksSmita Chandiramani answers, Hi Amar,making consistent higher return should be the focus and not the best return. It is best to stick to large cap stocks or Mutual Funds which invest in them. In case u wish to invest thro MFs u can look at HDFC Grwoth, DSPBR Equity, Reliance Vision, etc...
Dinesh asked, Hi, At age of 30, i am investing 20,000/- per yr. in PPF & NSE each,43000 per yr in LIC policies(Jeevan mitra tripl.cov) , 11000 SIP in diversied MF. Is it a good portfolio. What are good MF for 15yr horizone, ThanksSmita Chandiramani answers, It is better to invest thro PPF and discontinue NSC. Create an emergency fund which also covers around 6 mths of living expenses, and keep it in a safe place like a bank FD. Getting ur self adequate TERM Insurance cover is recommended. Once this cover is in place u can review ur LIC policy. Invest money with a long term horizon (10 yrs or more) into diversified MFs like Reliance equity advantage, HDFC Top 200, DSPBR Top 100, Sundaram Select Focus, etc to build funds for ur needs like children’s future and retirement.
Tuesday, July 14, 2009
FINANCIAL ADVISER PISHUVARDHAN SHETH OF APPLEFINANCE REPLIES TO QUERIES
ria asked, which is the best saving option amont MIS and NSC so that i can get cash for my monthly expenses during my retirement.?Pishuvardhan Sheth answers, hi, for monthly income Post Office MIS is one of the option but there is a limit of Rs 9 lakhs. Besides MIS, you can consider options like FDs with monthly / quarterly income plan. For e.g. HDFC Ltd fixed deposit offers the monthly income plan
Udayan asked, Hi, I need to understand I am 27 and I have a cash balance of arnd 10 lacs and anrd 10 in equity and MFs I have Booked a under construction flat of 50 lacs where i have to arrange the money in next 3 yrs in phased manner, I am currently earning and 11 lacs per anum. Please advice selling timing for selling stocks and getting loans.Pishuvardhan Sheth answers, hi, if the money to be paid for construction of house is currently invested in equities, then you should start the exit immediately. As and when you get good opportunity, I recommend that you exit. You have 3 years to go before the money is to be paid. 3 years should be long enough to help you exit equities completely
bharatbalani asked, Sir, i want to invest 50000 rs every month. Where should i invest for long termPishuvardhan Sheth answers, hi, by long term if i assume 5 years and more then I would recommend that you consider investing major portion of your savings in equities. Equities are volatile but over the long term they can give you returns in the range of 12-15%
thirumalai asked, hi i am 33 years old i want to retire at age of 50, kindly advise which mutual funds i should invest to get retirement amount of 2 crores & 25 lakh for my son education, i am based in dubai.Pishuvardhan Sheth answers, hi, since your retirement is 17 years away, I would recommmend that you consider equity funds for your retirement plan. Ideally you should invest in well managed diversified equity funds with minimum track record of 3 years to show for. Also, when you make you plan aim for returns in the range of 12-15% from equity. IF you aim for higher returns, you will run the risk of missing the retirement age. Simialr strategy for your son's education
Manoj asked, Hello sir, I am a new invester.Need to invest.Starting with 50K,can you please suggest me wat will be good to invest?should i invest in share?or in MF.Please suggest. Thanks.
Pishuvardhan Sheth answers, hi, since you are new to the world of investments, I suggest that you take help of an honest and competent investment advisor. Get an investment plan made for your various life goals like retirement, education, marriage, property, etc. The plan will suggest how much investment should be done in equity/debt/gold etc. In my view MFs are the best way to build your investment portfolio.
rajrishi asked, Is retirement plans a good option or mediclaim is?Pishuvardhan Sheth answers, hi, retirement plan will take care of your post retirement expenses. These will include your day to expenditure and major expenditure like travel etc. Regualr medical expenses can be take care of by the retirement fund. To insure against any major medical cost like hospitalisation, etc medicalim is the best route.
Atul asked, i have 50000 now to invest, shd i invest in this market?
Pishuvardhan Sheth answers, hi, if you are looking at investing in equities from long term perspective then you should go ahead and invest. For investors with long term view of more than 5 years, short term trends of stock markets should not matter. Given the current scenarios stock markets look poised to give you returns of about 15% over the next 5 years.
vishalpai asked, Hello,How should one calculate how much insurance is enough?I am 27 with coverage of 40L in LIC through a money back policy.I have dependent parents.Should i go for more insurance? Pishuvardhan Sheth answers, hi, to know the amount of insurance cover one should take, you shlould calculate the Human Life Value.
asdqq asked, plz suggest best ELSS fund for 3 yr horizon????
Pishuvardhan Sheth answers, hi, you can consider funds like Franklin India Taxshield and Fidelity Tax Advantage Fund among others
vishalpai asked, Hi Good morning,What is the best option to invest now -plain vanilla funds,infrastructure/sectoral funds,bluechip funds?
Pishuvardhan Sheth answers, hi, I am of the view that investors should always invest in well managed diversified equity funds. Sector/Thematic funds should be avoided as the performance of these type of funds is dependent upon the performance of the underlying sectors. The entry and exit from the sector has to be timed well to benefit from invest in sectoral/thematic funds
MMM asked, i want to invest in balance fund. Which are top 3 in above category?Pishuvardhan Sheth answers, hi, among the balanced funds you can consider funds like HDFC Prudence and DSP BR Balanced Fund
sethi asked, invested sip rs4000 in hdfc top 200 , rs 200 sip in hdfc equity. i have incureed heay losses by investing in funds like tata indoglobal , jm agri infra , ing fof , reliance diversified , icici pru infra and now want toknow what should i do
Pishuvardhan Sheth answers, hi, you have invested in secotral/ thematic funds. These funds ofder high risk high return proposition. In my view you should exit these schemes and invest in diversified equity funds like the ones you currently hold - HDFC Top 200, HDFC Equity
deepak23460 asked, Sir,I want to secure future of my child. he is 01 yr. I would like to invest 25000/- should i invest it in MF or ULIP or Shares..Pishuvardhan Sheth answers, hi, in my view build a portfolio of mutual funds for your child. Consider having 4-5 best mutual funds schemes. I will not recommend ULIP as an investment option
sanjay19 asked, should a new investor use this correction in equities to invest now?
Pishuvardhan Sheth answers, hi, if you are long term investor then the current fall in the stock markets should be considered as an opportunity to invest. The short term trend should not deter you from investing in equity as long as the long term trend is upward which it currently is
UPENDRA asked, WHAT IS BEST INVESTMENT ROUTE FOR LONG TERM (10-15 YEARS).Pishuvardhan Sheth answers, hi, the best investment option for 10-15 years would equities. Even property will be a good option but then for property the initial investment amount required will be comparatively large.
gireesh_27 asked, Hi Pishuvardhan Sheth, I am a Doctor and working in Gulf earling nicely, but it will not long last, may by 2012 I will back to India, by that time I will have around 1 crore in my hand presently I am having 65 L with me, I am 32 yr old what are the options for investment for me, Thank youPishuvardhan Sheth answers, hi, consider making an investment plan for yourself. The plan should help you achieve the various life goals you have set for yourself. Once you have the plan in place, it will be easy for you to determine the asset allocation and the investment instruments (mutual funds/ shares/FDs)
investforfuture asked, When Equity based Mutual funds also follow the direction of market, then why would one need to invest in mutual funds at all. We can as well directly invest in equities. Your thoughts ?
Pishuvardhan Sheth answers, hi, to invest in stocks directly you need to research the company's performance and the future growth prpspects. The common investor may not have the necessary tools to analyse the company's financials. He may have to rely on his borker/friends. Mutual funds are managed by professional fund managers. They have the necessary skill sets and tools to understand the perofrmance of the company and its future prospects.
investforfuture asked, How much of one's portfolio should be in equity ?Pishuvardhan Sheth answers, hi, the thumb rule is that 100 minus one's age should be in equities. The logic behind this is that as you grow in age the risk taking ability goes down. As one progresses near retirement, more money should be allocated to safe instrument like fixed deposits etc. The thumb rule is just the starting point and may not always offer the best asset allocation mix. Also the investor's risk profile should be taken into consideration.
rrrrr asked, hi Pishuvardhan Sheth, iam investing 5000 rs every month in various mutual fund now 3rd year is going on but due to recession iam unable to pay this amount every month what to do? when can i withdraw this? and how much i will be benefited?Pishuvardhan Sheth answers, hi, if you are not able to continue with the SIPs then you can stop till your cash flow improves. However, as soon as you are in a position to invest again please do start. The benefit of SIP investment will be visible only after 5 years when you have invested through various market cycles.
Sanat asked, Hi Pishuvardhan Sheth I wanna invest Rs. 10K/month regularly for atleast next 48 months. Can you pls advice me suitable SIP(s)? Thanks in anticipation of your reply. Cheers!!Pishuvardhan Sheth answers, hi, consider funds like franklin india bluechip fund, hdfc equity fund and dsp br equity fund to start with.
dev1 asked, Hi Pishuvardhan Sheth I m 30 and need to invest in a good Unit linked pension plan. Can you suggest which is the best plan to invest 5k/month as sip.
Pishuvardhan Sheth answers, hi, in my view do not go for ULIP. ULIP combines investment and insurance . for investments you should build a portfolio of equity and balanced funds. For insurance the best option is to take a Term plan to cover the risk in case of any eventuality
riya asked, Hi......I am 32 now and have 10L savings till now out of which 6L are in FD's at 8.5% which will due in middle of 2010 and 3L in MIS which will due by 2009 dec and i have 1 L in equity whose value is 40k now. So what should i do with FD's and MIS , should i reinvest them or move some more amount in equities. thanks
Pishuvardhan Sheth answers, hi, the answer to your question lies in determing the final need for the money which you have saved. In my view you should make an investment plan for yourself and then decide the asset allocation and investment options.
einvestor asked, hi, what about investing in Quantaum FoF offer? Pishuvardhan Sheth answers, hi, its a good investment proposition given the fact that the investor does not have to build and manage his equity fund portfolio. The Quantum FoF will invest in equity funds of other mutual funds
kshiv asked, Dear sir Invested in sbi contra,hdfc top 200,dsp 100 & reliance growth through sip.how do u see my portfolio in longterm?more than 5 yrs.thanks
Pishuvardhan Sheth answers, hi, except for SBI Contra, all your funds are good. Continue you investments in the same.
singhs asked, Hello Mr Pishuvardhan Sheth, I tried asking you the same question while you were online last time, but could not get any answer. Hopefully this time... I am investing 40000 annually in the Money Plus Growth Scheme of LIC since 2007 which has a locking period of 3 years. What should i do? Keep investing or opt out after this years premium? Thanks in advance!Pishuvardhan Sheth answers, hi, you should invest for the mandatory period of 3 years. After the mandatory period is over you should stop paying further premiums
juhi asked, Hello Sir, When u say invest in equities for long term more than 5 years... do you think one should book profits at regular interval or keep on investing systematically without any withdrawals regardless of what is happening in stock market? Thanks in advance for clearing my confusion. Regards
Pishuvardhan Sheth answers, hi, yes if your returns are way ahead of the expected returns then you should certainly book profits. For e.g. if your expected return from equities is 15% and your returns are say 30%, then you should book profit by taking the excess 15% of the table and invest in low risk instruments like FDs/ Gold
gaurangpatel asked, hi, i want training regarding options....can u suggest any book or any person/institutions giving systematic knowledge of options regarding indian market.?Pishuvardhan Sheth answers, hi, you can attend trainining sessions conducted by Bombay Stock Exchange.
dev1 asked, Hi Pishuvardhan Sheth I m 30 and need to invest in a good Unit linked pension plan. Can you suggest which is the best plan to invest 5k/month as sip.
Pishuvardhan Sheth answers, hi, in my view do not go for ULIP. ULIP combines investment and insurance . for investments you should build a portfolio of equity and balanced funds. For insurance the best option is to take a Term plan to cover the risk in case of any eventuality
Udayan asked, Hi, I need to understand I am 27 and I have a cash balance of arnd 10 lacs and anrd 10 in equity and MFs I have Booked a under construction flat of 50 lacs where i have to arrange the money in next 3 yrs in phased manner, I am currently earning and 11 lacs per anum. Please advice selling timing for selling stocks and getting loans.Pishuvardhan Sheth answers, hi, if the money to be paid for construction of house is currently invested in equities, then you should start the exit immediately. As and when you get good opportunity, I recommend that you exit. You have 3 years to go before the money is to be paid. 3 years should be long enough to help you exit equities completely
bharatbalani asked, Sir, i want to invest 50000 rs every month. Where should i invest for long termPishuvardhan Sheth answers, hi, by long term if i assume 5 years and more then I would recommend that you consider investing major portion of your savings in equities. Equities are volatile but over the long term they can give you returns in the range of 12-15%
thirumalai asked, hi i am 33 years old i want to retire at age of 50, kindly advise which mutual funds i should invest to get retirement amount of 2 crores & 25 lakh for my son education, i am based in dubai.Pishuvardhan Sheth answers, hi, since your retirement is 17 years away, I would recommmend that you consider equity funds for your retirement plan. Ideally you should invest in well managed diversified equity funds with minimum track record of 3 years to show for. Also, when you make you plan aim for returns in the range of 12-15% from equity. IF you aim for higher returns, you will run the risk of missing the retirement age. Simialr strategy for your son's education
Manoj asked, Hello sir, I am a new invester.Need to invest.Starting with 50K,can you please suggest me wat will be good to invest?should i invest in share?or in MF.Please suggest. Thanks.
Pishuvardhan Sheth answers, hi, since you are new to the world of investments, I suggest that you take help of an honest and competent investment advisor. Get an investment plan made for your various life goals like retirement, education, marriage, property, etc. The plan will suggest how much investment should be done in equity/debt/gold etc. In my view MFs are the best way to build your investment portfolio.
rajrishi asked, Is retirement plans a good option or mediclaim is?Pishuvardhan Sheth answers, hi, retirement plan will take care of your post retirement expenses. These will include your day to expenditure and major expenditure like travel etc. Regualr medical expenses can be take care of by the retirement fund. To insure against any major medical cost like hospitalisation, etc medicalim is the best route.
Atul asked, i have 50000 now to invest, shd i invest in this market?
Pishuvardhan Sheth answers, hi, if you are looking at investing in equities from long term perspective then you should go ahead and invest. For investors with long term view of more than 5 years, short term trends of stock markets should not matter. Given the current scenarios stock markets look poised to give you returns of about 15% over the next 5 years.
vishalpai asked, Hello,How should one calculate how much insurance is enough?I am 27 with coverage of 40L in LIC through a money back policy.I have dependent parents.Should i go for more insurance? Pishuvardhan Sheth answers, hi, to know the amount of insurance cover one should take, you shlould calculate the Human Life Value.
asdqq asked, plz suggest best ELSS fund for 3 yr horizon????
Pishuvardhan Sheth answers, hi, you can consider funds like Franklin India Taxshield and Fidelity Tax Advantage Fund among others
vishalpai asked, Hi Good morning,What is the best option to invest now -plain vanilla funds,infrastructure/sectoral funds,bluechip funds?
Pishuvardhan Sheth answers, hi, I am of the view that investors should always invest in well managed diversified equity funds. Sector/Thematic funds should be avoided as the performance of these type of funds is dependent upon the performance of the underlying sectors. The entry and exit from the sector has to be timed well to benefit from invest in sectoral/thematic funds
MMM asked, i want to invest in balance fund. Which are top 3 in above category?Pishuvardhan Sheth answers, hi, among the balanced funds you can consider funds like HDFC Prudence and DSP BR Balanced Fund
sethi asked, invested sip rs4000 in hdfc top 200 , rs 200 sip in hdfc equity. i have incureed heay losses by investing in funds like tata indoglobal , jm agri infra , ing fof , reliance diversified , icici pru infra and now want toknow what should i do
Pishuvardhan Sheth answers, hi, you have invested in secotral/ thematic funds. These funds ofder high risk high return proposition. In my view you should exit these schemes and invest in diversified equity funds like the ones you currently hold - HDFC Top 200, HDFC Equity
deepak23460 asked, Sir,I want to secure future of my child. he is 01 yr. I would like to invest 25000/- should i invest it in MF or ULIP or Shares..Pishuvardhan Sheth answers, hi, in my view build a portfolio of mutual funds for your child. Consider having 4-5 best mutual funds schemes. I will not recommend ULIP as an investment option
sanjay19 asked, should a new investor use this correction in equities to invest now?
Pishuvardhan Sheth answers, hi, if you are long term investor then the current fall in the stock markets should be considered as an opportunity to invest. The short term trend should not deter you from investing in equity as long as the long term trend is upward which it currently is
UPENDRA asked, WHAT IS BEST INVESTMENT ROUTE FOR LONG TERM (10-15 YEARS).Pishuvardhan Sheth answers, hi, the best investment option for 10-15 years would equities. Even property will be a good option but then for property the initial investment amount required will be comparatively large.
gireesh_27 asked, Hi Pishuvardhan Sheth, I am a Doctor and working in Gulf earling nicely, but it will not long last, may by 2012 I will back to India, by that time I will have around 1 crore in my hand presently I am having 65 L with me, I am 32 yr old what are the options for investment for me, Thank youPishuvardhan Sheth answers, hi, consider making an investment plan for yourself. The plan should help you achieve the various life goals you have set for yourself. Once you have the plan in place, it will be easy for you to determine the asset allocation and the investment instruments (mutual funds/ shares/FDs)
investforfuture asked, When Equity based Mutual funds also follow the direction of market, then why would one need to invest in mutual funds at all. We can as well directly invest in equities. Your thoughts ?
Pishuvardhan Sheth answers, hi, to invest in stocks directly you need to research the company's performance and the future growth prpspects. The common investor may not have the necessary tools to analyse the company's financials. He may have to rely on his borker/friends. Mutual funds are managed by professional fund managers. They have the necessary skill sets and tools to understand the perofrmance of the company and its future prospects.
investforfuture asked, How much of one's portfolio should be in equity ?Pishuvardhan Sheth answers, hi, the thumb rule is that 100 minus one's age should be in equities. The logic behind this is that as you grow in age the risk taking ability goes down. As one progresses near retirement, more money should be allocated to safe instrument like fixed deposits etc. The thumb rule is just the starting point and may not always offer the best asset allocation mix. Also the investor's risk profile should be taken into consideration.
rrrrr asked, hi Pishuvardhan Sheth, iam investing 5000 rs every month in various mutual fund now 3rd year is going on but due to recession iam unable to pay this amount every month what to do? when can i withdraw this? and how much i will be benefited?Pishuvardhan Sheth answers, hi, if you are not able to continue with the SIPs then you can stop till your cash flow improves. However, as soon as you are in a position to invest again please do start. The benefit of SIP investment will be visible only after 5 years when you have invested through various market cycles.
Sanat asked, Hi Pishuvardhan Sheth I wanna invest Rs. 10K/month regularly for atleast next 48 months. Can you pls advice me suitable SIP(s)? Thanks in anticipation of your reply. Cheers!!Pishuvardhan Sheth answers, hi, consider funds like franklin india bluechip fund, hdfc equity fund and dsp br equity fund to start with.
dev1 asked, Hi Pishuvardhan Sheth I m 30 and need to invest in a good Unit linked pension plan. Can you suggest which is the best plan to invest 5k/month as sip.
Pishuvardhan Sheth answers, hi, in my view do not go for ULIP. ULIP combines investment and insurance . for investments you should build a portfolio of equity and balanced funds. For insurance the best option is to take a Term plan to cover the risk in case of any eventuality
riya asked, Hi......I am 32 now and have 10L savings till now out of which 6L are in FD's at 8.5% which will due in middle of 2010 and 3L in MIS which will due by 2009 dec and i have 1 L in equity whose value is 40k now. So what should i do with FD's and MIS , should i reinvest them or move some more amount in equities. thanks
Pishuvardhan Sheth answers, hi, the answer to your question lies in determing the final need for the money which you have saved. In my view you should make an investment plan for yourself and then decide the asset allocation and investment options.
einvestor asked, hi, what about investing in Quantaum FoF offer? Pishuvardhan Sheth answers, hi, its a good investment proposition given the fact that the investor does not have to build and manage his equity fund portfolio. The Quantum FoF will invest in equity funds of other mutual funds
kshiv asked, Dear sir Invested in sbi contra,hdfc top 200,dsp 100 & reliance growth through sip.how do u see my portfolio in longterm?more than 5 yrs.thanks
Pishuvardhan Sheth answers, hi, except for SBI Contra, all your funds are good. Continue you investments in the same.
singhs asked, Hello Mr Pishuvardhan Sheth, I tried asking you the same question while you were online last time, but could not get any answer. Hopefully this time... I am investing 40000 annually in the Money Plus Growth Scheme of LIC since 2007 which has a locking period of 3 years. What should i do? Keep investing or opt out after this years premium? Thanks in advance!Pishuvardhan Sheth answers, hi, you should invest for the mandatory period of 3 years. After the mandatory period is over you should stop paying further premiums
juhi asked, Hello Sir, When u say invest in equities for long term more than 5 years... do you think one should book profits at regular interval or keep on investing systematically without any withdrawals regardless of what is happening in stock market? Thanks in advance for clearing my confusion. Regards
Pishuvardhan Sheth answers, hi, yes if your returns are way ahead of the expected returns then you should certainly book profits. For e.g. if your expected return from equities is 15% and your returns are say 30%, then you should book profit by taking the excess 15% of the table and invest in low risk instruments like FDs/ Gold
gaurangpatel asked, hi, i want training regarding options....can u suggest any book or any person/institutions giving systematic knowledge of options regarding indian market.?Pishuvardhan Sheth answers, hi, you can attend trainining sessions conducted by Bombay Stock Exchange.
dev1 asked, Hi Pishuvardhan Sheth I m 30 and need to invest in a good Unit linked pension plan. Can you suggest which is the best plan to invest 5k/month as sip.
Pishuvardhan Sheth answers, hi, in my view do not go for ULIP. ULIP combines investment and insurance . for investments you should build a portfolio of equity and balanced funds. For insurance the best option is to take a Term plan to cover the risk in case of any eventuality
Periodic saving pays
Mr Gajendra Nagpal, founder and Chief Executive Officer, Unicon Financial Intermediaries, talks to Business Line on what young people should watch out for, while investing. Prior to founding Unicon, Mr Nagpal held senior positions at the regional and national levels with Kotak Securities and Indiabulls.
From your experience, what precautions should young people take with regard to their savings or investments?
Investments don’t give returns overnight. Youngsters should avoid taking bigger bets than they can actually afford. This basically means that they need to understand their financial goals depending on their cash flows, expenditure and liabilities.
One should avoid investing in non-productive assets. Lack of planning can be lethal.
Many of us may not have the social security benefits or the pension cover that our parents had. How soon should young people plan for retirement and what is the best way to do that?
Investing for retirement starts from the very first day you start earning. Investment strategies must be co-related with the retirement plans.
Correct portfolio allocation is the most important tool for retirement plans. The young can opt for risky asset classes to maximise their yields but the risk factor associated with the portfolio should constantly decrease with the increasing age. The best way to determine the portfolio allocation is to subtract your age from 100 which ideally should be the percentage of the risky assets in your portfolio. It’s important to be cognizant of future cash outflows.
In case you don’t have an employer-sponsored retirement plan, you can commit a small amount every month towards retirement plans. I would recommend young investors to take endowment plan as life cover instead of term plan as dependency on individual income increases with age.
What’s the quickest way to make your first million in investing?
Consistent asset mix is very critical; investing in stock market, real estate with your long-term money and letting it grow can help you earn your first million. The most difficult part is getting started. Hence, start investing from whatever you save after monthly expenditure.
Invest in stocks and funds with solid fundamentals and let compounding work (investing profits back) its magic for you.
The stock markets may offer high returns; but the past year clearly tells us that direct investment requires almost constant monitoring and churning of your portfolio. What other routes would you recommend to investors wanting to participate in stocks?
Investing directly in the stock market should be part of your financial goals which means that you should define your risk and reward before investing in any equity instrument.
Invest in stocks backed by fundamental research and avoid following the ‘grapevine’ method.Portfolio diversification is must to maximise the yields and to manage the risk associated with the investments. Individual investors should avoid leveraging or depending on borrowed money for investing. When it’s difficult for you to track investments due to work commitments, one can invest in good mutual funds.
How should young people plan for today’s realities of job losses and pay cuts, while making investments? Creating a budget is a way of taking control — it can help you get a realistic picture of your financial situation and give you the facts you need to begin making the emotional choices associated with money. They need to understand that small savings every month are very crucial and can act as a bail out package in hostile economic environment.
What are the safe investment options in which young investors can park their money and how do their returns compare?
Employees’ Provident Fund; Public Provident Fund (PPF); Life insurance policy (including ULIP and pension plan); National Savings Certificate (NSC) and bank fixed deposits (FDs).
From your experience, what precautions should young people take with regard to their savings or investments?
Investments don’t give returns overnight. Youngsters should avoid taking bigger bets than they can actually afford. This basically means that they need to understand their financial goals depending on their cash flows, expenditure and liabilities.
One should avoid investing in non-productive assets. Lack of planning can be lethal.
Many of us may not have the social security benefits or the pension cover that our parents had. How soon should young people plan for retirement and what is the best way to do that?
Investing for retirement starts from the very first day you start earning. Investment strategies must be co-related with the retirement plans.
Correct portfolio allocation is the most important tool for retirement plans. The young can opt for risky asset classes to maximise their yields but the risk factor associated with the portfolio should constantly decrease with the increasing age. The best way to determine the portfolio allocation is to subtract your age from 100 which ideally should be the percentage of the risky assets in your portfolio. It’s important to be cognizant of future cash outflows.
In case you don’t have an employer-sponsored retirement plan, you can commit a small amount every month towards retirement plans. I would recommend young investors to take endowment plan as life cover instead of term plan as dependency on individual income increases with age.
What’s the quickest way to make your first million in investing?
Consistent asset mix is very critical; investing in stock market, real estate with your long-term money and letting it grow can help you earn your first million. The most difficult part is getting started. Hence, start investing from whatever you save after monthly expenditure.
Invest in stocks and funds with solid fundamentals and let compounding work (investing profits back) its magic for you.
The stock markets may offer high returns; but the past year clearly tells us that direct investment requires almost constant monitoring and churning of your portfolio. What other routes would you recommend to investors wanting to participate in stocks?
Investing directly in the stock market should be part of your financial goals which means that you should define your risk and reward before investing in any equity instrument.
Invest in stocks backed by fundamental research and avoid following the ‘grapevine’ method.Portfolio diversification is must to maximise the yields and to manage the risk associated with the investments. Individual investors should avoid leveraging or depending on borrowed money for investing. When it’s difficult for you to track investments due to work commitments, one can invest in good mutual funds.
How should young people plan for today’s realities of job losses and pay cuts, while making investments? Creating a budget is a way of taking control — it can help you get a realistic picture of your financial situation and give you the facts you need to begin making the emotional choices associated with money. They need to understand that small savings every month are very crucial and can act as a bail out package in hostile economic environment.
What are the safe investment options in which young investors can park their money and how do their returns compare?
Employees’ Provident Fund; Public Provident Fund (PPF); Life insurance policy (including ULIP and pension plan); National Savings Certificate (NSC) and bank fixed deposits (FDs).
Priority sector lending propels housing finance
A decade ago, bankers in Dakshina Kannada district would not have imagined that housing finance would reach the present high. A look at the housing finance situation, especially under the priority sector lending, shows that banks in the district disbursed more than Rs 1,200 crore in a span of eight years.
The boom in the real-estate sector at the beginning of the decade and competitive marketing strategies by the banks to market housing loans have played a significant role in this growth.
Dakshina Kannada district, with an area of 4,866 sq.km, comprises the five taluks of Mangalore, Bantwal, Belthangady, Puttur and Sullia.
If everything had gone according to the district credit plan from 2000-2008, the banks in the district would have distributed around Rs 1,826.44 crore of housing loan under priority sector. However, the district managed to achieve nearly 70 per cent of the target set over these years under the priority sector disbursement. Housing loan to the tune of Rs 1,268.32 crore was disbursed to 42,641 accounts during the period from 2000-01 to 2007-08.
The beginning of the new millennium saw the banks in the district disbursing Rs 10.49 crore to 862 accounts during 2000-01, though the district credit plan for that year had set a target of Rs 43.11 crore of disbursement. However, the boom in the real-estate sector in the subsequent years seems to have triggered the growth in housing loan under priority sector.
Banks exceed targets
Banks in the district exceeded the target of district credit plan for the years from 2002-03 to 2004-05 in housing finance under the priority sector lending. The disbursement was 77 per cent above the target in 2002-03, and it went up by 21 per cent and 31 per cent of the target set under the district credit plan for 2003-04 and 2004-05, respectively.
A major chunk of the housing loan disbursement under priority sector started flowing from 2004-05. In fact, nearly one-fourth of the total disbursements in those eight years took place during 2004-05 alone. Of the Rs 1,268.32 crore disbursed since 2000-01, as much as Rs 330.17 crore was disbursed in 2004-05. The competitive strategies adopted by various banks to market housing loans during that year are cited as a reason for this growth.
One of the bank officials said that there was almost ‘interest rate war’ among the banks to offer lowest EMIs (equated monthly instalments). This spurred the growth of housing loan during that year.
Mr Arun Fernandes, a marketing executive in a private company in Mangalore who hails from Bantwal taluk, told Business Line that he opted for housing loan during 2004-05. Almost every bank went the whole hog to organise housing loan ‘melas’ during that year, apart from aggressively pushing their housing loan products at the branch-level, he said.
However, the banks did not sustain the same disbursement figures after that. The disbursement figures stood at Rs 227.54 crore and Rs 238.71 crore in the subsequent years. And they reached a low of Rs 165.42 crore in 2007-08.
Slowdown effect
The lending scene was not so rosy for the bankers during 2008-09, as the provisional figures available up to the end of the third quarter put the housing finance disbursement under the priority sector at Rs 75.16 crore.
Bank officials feel that this could be mainly because of the economic slowdown and its impact on the housing sector. Making rough estimates for 2008-09, they said that the disbursements might have crossed Rs 100 crore. Apart from economic slowdown, higher PLR (prime lending rate) slowed the disbursements during the year, they said.
In spite of the slowdown, the real-estate price did not come down drastically in the district. This has made customers adopt a ‘wait and watch’ policy to plan their dream home. This has been reflected in the lower loan disbursement figures in 2008-09, they say.
The boom in the real-estate sector at the beginning of the decade and competitive marketing strategies by the banks to market housing loans have played a significant role in this growth.
Dakshina Kannada district, with an area of 4,866 sq.km, comprises the five taluks of Mangalore, Bantwal, Belthangady, Puttur and Sullia.
If everything had gone according to the district credit plan from 2000-2008, the banks in the district would have distributed around Rs 1,826.44 crore of housing loan under priority sector. However, the district managed to achieve nearly 70 per cent of the target set over these years under the priority sector disbursement. Housing loan to the tune of Rs 1,268.32 crore was disbursed to 42,641 accounts during the period from 2000-01 to 2007-08.
The beginning of the new millennium saw the banks in the district disbursing Rs 10.49 crore to 862 accounts during 2000-01, though the district credit plan for that year had set a target of Rs 43.11 crore of disbursement. However, the boom in the real-estate sector in the subsequent years seems to have triggered the growth in housing loan under priority sector.
Banks exceed targets
Banks in the district exceeded the target of district credit plan for the years from 2002-03 to 2004-05 in housing finance under the priority sector lending. The disbursement was 77 per cent above the target in 2002-03, and it went up by 21 per cent and 31 per cent of the target set under the district credit plan for 2003-04 and 2004-05, respectively.
A major chunk of the housing loan disbursement under priority sector started flowing from 2004-05. In fact, nearly one-fourth of the total disbursements in those eight years took place during 2004-05 alone. Of the Rs 1,268.32 crore disbursed since 2000-01, as much as Rs 330.17 crore was disbursed in 2004-05. The competitive strategies adopted by various banks to market housing loans during that year are cited as a reason for this growth.
One of the bank officials said that there was almost ‘interest rate war’ among the banks to offer lowest EMIs (equated monthly instalments). This spurred the growth of housing loan during that year.
Mr Arun Fernandes, a marketing executive in a private company in Mangalore who hails from Bantwal taluk, told Business Line that he opted for housing loan during 2004-05. Almost every bank went the whole hog to organise housing loan ‘melas’ during that year, apart from aggressively pushing their housing loan products at the branch-level, he said.
However, the banks did not sustain the same disbursement figures after that. The disbursement figures stood at Rs 227.54 crore and Rs 238.71 crore in the subsequent years. And they reached a low of Rs 165.42 crore in 2007-08.
Slowdown effect
The lending scene was not so rosy for the bankers during 2008-09, as the provisional figures available up to the end of the third quarter put the housing finance disbursement under the priority sector at Rs 75.16 crore.
Bank officials feel that this could be mainly because of the economic slowdown and its impact on the housing sector. Making rough estimates for 2008-09, they said that the disbursements might have crossed Rs 100 crore. Apart from economic slowdown, higher PLR (prime lending rate) slowed the disbursements during the year, they said.
In spite of the slowdown, the real-estate price did not come down drastically in the district. This has made customers adopt a ‘wait and watch’ policy to plan their dream home. This has been reflected in the lower loan disbursement figures in 2008-09, they say.
Strategy of balancing profitability and growth
ULIPs have performed better with the turnaround in the markets in the last few months, says Mr Sashi Krishnan, Chief Investment Officer, Bajaj Allianz Life Insurance. In an interview with Business Line, Mr Krishnan discusses equity market trends and the performance of Bajaj Allianz’s debt and market-linked ULIPs. Excerpts:
What is your outlook for the markets after the recent steep climb?
Equity markets have corrected steeply in FY09 with a decline of over 35 per cent. The market is now trading at an attractive value for the long-term investor at an FY10E price earnings multiple of 15-16x after factoring in macro-economic indicators.
The RBI has continuously injected liquidity through cuts in CRR and a reduction in policy rates, resulting in a fall in interest rates by 300-400 basis points over the last six months. This has resulted in easy availability of credit and a lower interest cost for corporates, which should lead to a growth in earnings. FIIs have been one of the key players in equity markets. After the continuous withdrawal up to February, FIIs have become net buyers in March and April.
Increase in global liquidity and improvement in US markets have driven the recent equity markets rally. Valuations appear attractive, and with the macroeconomic situation stabilising, the equity market outlook for the current year should be positive.
How was the performance of your ULIP products over a one and three-year period ?
Equity funds have performed extremely well as compared with the benchmark in the last year. But they have been unable to generate substantial positive returns for the investor. Nonetheless, over a longer term, funds in the large-cap and the mid-cap have delivered healthy returns and have outperformed the benchmark comprehensively in case of Bajaj Allianz Life Insurance.
With interest rates going through a full cycle in the past year, several gilt mutual funds generated returns as high as 20 per cent. How was the performance of your debt-oriented products?
Last year has been a good one for fixed income funds in general as the interest rates have eased sharply towards the end of FY-09. Our fixed income funds have generated about 15 per cent return during the last year. While the liquidity continues to be good, we do not see further easing of the interest rates in current financial year. Thus the returns from bond funds should be moderate for the current year.
Why has your gross new premium and weighted new premium gone down by 30 per cent in the last year? This appears to be low compared with the industry average.
Bajaj Allianz Life Insurance has pursued a strategy of balancing growth with profitability. Business has slowed down and overall growth in premium has been just 10 per cent. However we are one of the few life insurance companies to show a profit of Rs 45 crore in 2008-09. In the last few months customers have realised that life insurance offers the best opportunity for long-term savings. So overall we can be optimistic about the future. Nevertheless, we are also conscious that 2009-10 would be a tough year.
New business declined by about 35 per cent while renewal premium grew by more than 100 per cent. The fact that we could increase our renewal premium substantially demonstrates our focus on persistency. At the same time we are conscious of the fact that we need to continuously come out with new products as customer’s preference is shifting fast.
What is your investment strategy in ULIPs?
We offer different categories of funds for investors. In equity, the large-cap funds would follow an investment strategy comprising of a top-down approach to investing. Investment in these funds should be the core of their equity holding for any investor of Bajaj Allianz. These funds would have an average risk profile.
Mid-cap oriented funds would follow a bottom-up approach in terms of stock selection strategy. This is a relatively high-risk product.
Over the last couple of years, we have introduced the asset allocation funds which have been a popular investment option as it gives the investor the benefit of equity and fixed income instruments depending on the prevailing market scenario. The fund manager has the flexibility to reduce equity exposure when the markets are overvalued and vice versa.
In addition to equity funds, we also offer investors the option of investing in cash and debt funds which are invested in fixed income instruments.
What is your outlook for the markets after the recent steep climb?
Equity markets have corrected steeply in FY09 with a decline of over 35 per cent. The market is now trading at an attractive value for the long-term investor at an FY10E price earnings multiple of 15-16x after factoring in macro-economic indicators.
The RBI has continuously injected liquidity through cuts in CRR and a reduction in policy rates, resulting in a fall in interest rates by 300-400 basis points over the last six months. This has resulted in easy availability of credit and a lower interest cost for corporates, which should lead to a growth in earnings. FIIs have been one of the key players in equity markets. After the continuous withdrawal up to February, FIIs have become net buyers in March and April.
Increase in global liquidity and improvement in US markets have driven the recent equity markets rally. Valuations appear attractive, and with the macroeconomic situation stabilising, the equity market outlook for the current year should be positive.
How was the performance of your ULIP products over a one and three-year period ?
Equity funds have performed extremely well as compared with the benchmark in the last year. But they have been unable to generate substantial positive returns for the investor. Nonetheless, over a longer term, funds in the large-cap and the mid-cap have delivered healthy returns and have outperformed the benchmark comprehensively in case of Bajaj Allianz Life Insurance.
With interest rates going through a full cycle in the past year, several gilt mutual funds generated returns as high as 20 per cent. How was the performance of your debt-oriented products?
Last year has been a good one for fixed income funds in general as the interest rates have eased sharply towards the end of FY-09. Our fixed income funds have generated about 15 per cent return during the last year. While the liquidity continues to be good, we do not see further easing of the interest rates in current financial year. Thus the returns from bond funds should be moderate for the current year.
Why has your gross new premium and weighted new premium gone down by 30 per cent in the last year? This appears to be low compared with the industry average.
Bajaj Allianz Life Insurance has pursued a strategy of balancing growth with profitability. Business has slowed down and overall growth in premium has been just 10 per cent. However we are one of the few life insurance companies to show a profit of Rs 45 crore in 2008-09. In the last few months customers have realised that life insurance offers the best opportunity for long-term savings. So overall we can be optimistic about the future. Nevertheless, we are also conscious that 2009-10 would be a tough year.
New business declined by about 35 per cent while renewal premium grew by more than 100 per cent. The fact that we could increase our renewal premium substantially demonstrates our focus on persistency. At the same time we are conscious of the fact that we need to continuously come out with new products as customer’s preference is shifting fast.
What is your investment strategy in ULIPs?
We offer different categories of funds for investors. In equity, the large-cap funds would follow an investment strategy comprising of a top-down approach to investing. Investment in these funds should be the core of their equity holding for any investor of Bajaj Allianz. These funds would have an average risk profile.
Mid-cap oriented funds would follow a bottom-up approach in terms of stock selection strategy. This is a relatively high-risk product.
Over the last couple of years, we have introduced the asset allocation funds which have been a popular investment option as it gives the investor the benefit of equity and fixed income instruments depending on the prevailing market scenario. The fund manager has the flexibility to reduce equity exposure when the markets are overvalued and vice versa.
In addition to equity funds, we also offer investors the option of investing in cash and debt funds which are invested in fixed income instruments.
A range to choose from - Mutual Fund Investments
If you looking to buy the equity funds that delivered the best returns this year, it may be best to have a rethink, for you shouldn’t be going by such a short return record. Funds which delivered the top returns over the past six months may not necessarily deliver an encore over the next six months. How a fund reacted to market cycles in the past is as important in choosing funds as the overall long-term track record. Choose 5-6 funds from diversifieds — large- and mid-caps, one or two thematics and an index fund to have a healthy portfolio based on how they performed across all market cycles, apart from looking at just one-, three- and five-year returns.
Taking into consideration factors such as containment of downside during market volatility and participation during market rallies as well as long-term track record, the following funds, in their respective categories, are recommended.
Large-cap options
These are safer bets as they invest in companies with reasonable earnings visibility. A systematic investment plan or lump-sum investment during market declines may be considered in such funds. HDFC Top 200 Equity, DSPBR Top 100, HDFC Equity, Franklin India Bluechip, Birla Sun Life Frontline Equity and Sundaram Select Focus are some funds that you can take exposures to. These funds have a long track record, contained downsides better than their benchmarks during market falls and outperformed during market upswings, most of the time.
Midcap track record
Birla Sun Life Midcap, Sundaram Select Midcap and HDFC Capital Builder are funds with a more than five-year track record, in which they acquitted themselves well across market cycles. IDFC Premier Equity, a little over three years old, may also be a good addition as it has delivered good returns in market upswings.
Among theme funds, Reliance Diversified Power Sector fund may prop up overall portfolio returns if its track record is anything to go by. ICICI Pru Infrastructure Fund may be an aggressive infrastructure fund addition. ICICI Pru Index Fund Nifty Plan, with its consistent track record, would be a welcome addition to your portfolio.
In constructing a core portfolio, 3-4 large-cap funds, one or two mid-cap funds and a theme fund may be chosen. Increase in the number of mid-cap funds or infrastructure may be done depending on the investor’s risk appetite.
After the Election…What they bought and sold
An election and a Budget later, the market appears to be heading back to its one-month ago levels. The period in between, however, was marked by high liquidity, what with foreign investors pumping in over Rs 3,830 crore.
Mutual fund investments, in comparison though, were a little pale, at Rs 839 crore. But, since the gross buys (about Rs 22,215 crore) were almost matched by the sells, the month may have seen mutual funds churn their portfolios significantly; especially since most of them missed out on the initial leg of rally.
Many funds may also have utilised the rally to unwind their positions in some stocks that they were forced to hold and instead move to more attractive bets. Here’s a look at what funds bought and sold last month and which stocks and sectors turned out to be favourites.
Sector choices
In a bid to ride the equity rally, fund managers appear to have added many high beta sectors to their portfolios last month. Stocks, predominantly from sectors such as oil and gas, software and banks, made it to the portfolios of many diversified equity funds.
While the expectations of a Big Bang Budget, with heightened emphasis on divestments and improving infrastructure, may have driven the funds to add to these sectors, fund houses continued to up stakes in defensives too.
Pharmaceuticals and consumer non-durable stocks also were bought last month. Funds, however, pared exposures to capital goods, metals and telecom.
Debt continued to lose favour, with funds cutting their exposure by over 15 per cent, in their keenness to up their stakes in equities.
Stock picks: What’s in?
NTPC was among the most sought after of stocks last month, with more than 34 million shares of the company being accumulated by various fund houses. Dish TV, TCS, Alok Industries, Reliance Petroleum, Shree Renuka Sugars and Unitech were among the other stocks that funds added last month. In terms of top additions (market value) to the existing holdings of equity funds, Prime Focus topped the list; followed closely by Essar Oil, Network 18, Alok Industries, Prism Cement and Jay Shree Tea and Industries.
Overall, however, fund purchases were driven more by stock- and sector-specific preferences. While a majority of the stocks added sported a large market capitalisation profile, mid-caps stocks too, in some cases, featured in the list of top additions.
Unitech was one other popular stock to be bought by fund houses. The company’s ability to fund itself and reduce its debt through qualified institutional placements in two quick successions, may have provided some confidence to the buyers.
Swaraj Mazda and Allcargo Global Logistics were among the new stocks added to funds’ portfolios in June.
What’s out?
Telecom stock Idea Cellular was the stock most sold by mutual funds, with more than 12 million shares of the company making an exit from portfolios. GVK Power & Infrastructure, Tata Steel Kingfisher Airlines, GMR Infrastructure, Hindustan Construction and Axis Bank were among the other stocks on the MF sell radar.
Here, again, quite a few of the stocks sold belonged to the large-cap category, suggesting that portfolio rejigs were based more on stock-specific fundamentals and expectations. However some funds which held stocks such as Nirma, Ansal Properties, Bilpower and Rajesh Exports until May, fully exited these in June.
Mutual fund investments, in comparison though, were a little pale, at Rs 839 crore. But, since the gross buys (about Rs 22,215 crore) were almost matched by the sells, the month may have seen mutual funds churn their portfolios significantly; especially since most of them missed out on the initial leg of rally.
Many funds may also have utilised the rally to unwind their positions in some stocks that they were forced to hold and instead move to more attractive bets. Here’s a look at what funds bought and sold last month and which stocks and sectors turned out to be favourites.
Sector choices
In a bid to ride the equity rally, fund managers appear to have added many high beta sectors to their portfolios last month. Stocks, predominantly from sectors such as oil and gas, software and banks, made it to the portfolios of many diversified equity funds.
While the expectations of a Big Bang Budget, with heightened emphasis on divestments and improving infrastructure, may have driven the funds to add to these sectors, fund houses continued to up stakes in defensives too.
Pharmaceuticals and consumer non-durable stocks also were bought last month. Funds, however, pared exposures to capital goods, metals and telecom.
Debt continued to lose favour, with funds cutting their exposure by over 15 per cent, in their keenness to up their stakes in equities.
Stock picks: What’s in?
NTPC was among the most sought after of stocks last month, with more than 34 million shares of the company being accumulated by various fund houses. Dish TV, TCS, Alok Industries, Reliance Petroleum, Shree Renuka Sugars and Unitech were among the other stocks that funds added last month. In terms of top additions (market value) to the existing holdings of equity funds, Prime Focus topped the list; followed closely by Essar Oil, Network 18, Alok Industries, Prism Cement and Jay Shree Tea and Industries.
Overall, however, fund purchases were driven more by stock- and sector-specific preferences. While a majority of the stocks added sported a large market capitalisation profile, mid-caps stocks too, in some cases, featured in the list of top additions.
Unitech was one other popular stock to be bought by fund houses. The company’s ability to fund itself and reduce its debt through qualified institutional placements in two quick successions, may have provided some confidence to the buyers.
Swaraj Mazda and Allcargo Global Logistics were among the new stocks added to funds’ portfolios in June.
What’s out?
Telecom stock Idea Cellular was the stock most sold by mutual funds, with more than 12 million shares of the company making an exit from portfolios. GVK Power & Infrastructure, Tata Steel Kingfisher Airlines, GMR Infrastructure, Hindustan Construction and Axis Bank were among the other stocks on the MF sell radar.
Here, again, quite a few of the stocks sold belonged to the large-cap category, suggesting that portfolio rejigs were based more on stock-specific fundamentals and expectations. However some funds which held stocks such as Nirma, Ansal Properties, Bilpower and Rajesh Exports until May, fully exited these in June.
Subscribe to:
Posts (Atom)
