Ulips will Bloom . Give it time

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

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

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

 

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

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

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

For best returns, remember:

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

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

Have you claimed your tax benefits

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

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

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

Rent receipt details

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

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

Details of all tax saving investments

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

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

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

Keep track of changing guidelines

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

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

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

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

 

Reducing burden from LTA

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

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

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

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

 

Medical reimbursement

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

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

WILL THE NEW TAX CODE KILL ALL TAX BENEFITS A DISCUSSION

Rajesh Kumar Thand says

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


Neeraj Kumar says

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

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

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

Ahbhay Gangurde says

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

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

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

How is Gold BeES better than any other gold etf?

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

ETF STRATEGY IN A DOWN MARKET PART II

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

ETF strategies for tackling a down market?

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

What are the five easy steps to avoid financial stress?

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

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

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

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

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

How can a retired person manage his income?

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

BEST LIC POLICY

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

CRR hike and investments in Mutual Funds

Investment in Debt oriented Mutual Funds

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

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

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

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

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

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

TN POWER FINANCE LTD OFFERS HIGH RATE OF INTEREST

PROFILE



DEPOSIT SCHEMES



TAX BENEFITS


CONTACT

Buy and Hold the following shares

Buy and Hold the following shares
| Hide replies

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

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

Buy and Enjoy Profit

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

Ramesh N asked, Currently for this FY 2009-10, I have invested Rs. 25000/- on SBI Magnum Tax gain as a tax-saving instrument. Do you think shall I go ahead with the same for the next FY? Or can you suggest me any other better tax saving mutual fund scheme? Vijay Dhamani answers, hi, in my view you should have not more than 2 ELSS. Since you have invested in Magnum this year, you can consider Franklin India Tax shield or Fidelity Tax Advantage next year Narayan Petkar asked, How much income-tax should we pay for the money that we make through MFs & shares? Vijay Dhamani answers, hi, if you have invested in equity funds, then you do not have to pay any tax on long term capital gains. Long term means that you should have sold your units/shares after 12 months from the date of purchase. On the short term gains you will have to pay tax @ 15% Ajay Tejani asked, Dear sir is it okay to Prepay home loan and close it should be continued , I have spare capacity what do you advice ? Vijay Dhamani answers, hi, I am always advised my clients to have less debt in their balance sheet. If you are in a position to prepay your debt, by all means go ahead and do it. IT will ensure that you have more peace of mind at the end of the day. Also you will be able to finally own your house. Nothing like it, go ahead and prepay. Manish Behl asked, Which is the best mutual fund to invest with moderate risk profile? Vijay Dhamani answers, hi; the best type of mutual fund for investors with moderate risk appetite would be balance funds. These funds invest 65% of the corpus in equities and 35% is invested in debt. These are treated as equity funds as far as taxation goes. No tax on long term capital gains. 15% on short term capital gains Sailaja Srinvas asked, Hi Vijay Dhamani, I am 38 years old. What is the best type of investment Vijay Dhamani answers, There is nothing like best mutual fund or best investment. You should invest in asset classes that will help you achieve your investment objective, that are suited to your risk appetite and investment horizon. Do not invest in a mutual fund or any scheme for that matter because your friend invested or your broker suggested so. Always link your investment to your objectives, risk and investment horizon. Venkatesh Rao asked, Hi, My son is 9 months old. Presently, we have 1 lakh in his kid's savings account which he got as gifts from our various relatives and friends. We want to invest this amount with an investment horizon of 15 years. Please advice how we can invest this 1 lakh to get maximum returns. Thank you. Vijay Dhamani answers, hi, start building equity fund portfolio for your son. Start an SIP in 3-4 funds if possible. I am sure in next 15 years you will be able to build a large corpus to meet his expenditure higher education Megan Dsouza asked, Which is the best tax saving scheme? Vijay Dhamani answers, In my view you can consider funds like Franklin India Taxshield and Fidelity Tax Advantage fund for your ELSS portfolio. Franklin India Taxshield is a predominantly large cap fund with small exposure to midcap stocks. It was launched in April 2009 and has since inception delivered compounded annualised return of over 30% Fidelity Tax Advantage Fund is a relatively new fund. It was launched in January 2006. The fund has the mandate to invest in stocks across the market capitalisation. The fund is a truly diversified equity fund and comes from a fund house that is known for its research and processes. The fund's compounded annualised return since inception is around 17%. Annie Verghese asked, hi, i want to make some investments for my son's future...what do you advise? Vijay Dhamani answers, hi, if you are building an education corpus for your son, then it is better to have a portfolio that comprises predominantly equity funds. I am assuming here that you have atleast 8-10 years on hand. Start building a portfolio of diversified equity funds. Ananad Mirpuri asked, How will the direct tax code affect us? Where should we invest now? Can u name us some specific schemes? Vijay Dhamani answers, hi, I am not sure how will the new tax law be like. It's better to wait and watch. For the time being invest according to the existing rules. Once the new tax laws are in place, the decision can be taken accordingly Chandershekhar Reddy asked, Hi, i am planning to invest in gold is it the right time to invest or shall i wait for some more time please advice Vijay Dhamani answers, hi, Invest in gold from an insurance point of view rather than investment. Returns from gold have been slightly more than inflation and hence it is regarded as a hedge against inflation. Also, gold is the most sought after commodity when the financial markets are in crisis. In my view an allocation of 10-15% is ideal. Invest in gold via the exchange traded funds ( Gold ETFs) as it is easy to buy and sell compared to physical gold. Never buy gold from banks as the purchase price is always higher by 4%-5%. Invest every month over the next 6-12 months Karn Sanjeev asked, Hello Sir, Name some best mutual fund for SIP in Chetan' answer Vijay Dhamani answers, hi, you can consider funds like Franklin India Bluechip fund, HDFC Top 200 Fund, Sundaram Select Midcap and DSP Black Rock Equity Fund Ved rahi asked, hi i m 40 yr old for tax saving at present i am investing 59k in lic term plan & 24k in reliance sip p.a.now pl.suggest for 17k investment to be made p.a. Vijay Dhamani answers, hi, if you have a PPF account then invest the balance in PPF. If you do not have a PPF account then opt for 5 year bank FD that qualifies for deduction under section 80C Vikas Dar asked, hi Vijay, please let us know asset allocation for young and mid aged people under various asset class. Vijay Dhamani answers, hi, there is no formula to ascertain the asset allocation though more investment advisors follow a simple thumb rule - 100 minus your age should be allocated to debt. So if you are 25 years then 75% of your savings should be allocated to equity. The logic behind this rule is that when you are young you have higher risk taking ability as you have time on your side to recoup the losses you may incur on equity investments. As you grow old, your risk taking ability goes down and hence higher allocation to debt like FD, bonds, post office schemes etc. Atul Sawant asked, Hi, I have invested in Tata Infrastructure, Reliance diversified power sector fund and Birla Frontline Equity fund and planning to invest in HDFC Top 200 fund and Principal Emerging Blue Chip fund. Please advice if this is the right choice. Vijay Dhamani answers, hi, you are investing in funds which are at the moment top performing. This may not necessarily be the case always. Always invest in funds whose performance has been consistent. While Birla Frontline and HDFC Top 200 are among my picks, I would like to give Principal Bluechip and Reliance Diversified Power Sector fund a miss. I would rather go for Franklin India Bluechip Fund Rohit Mukherjee asked, Hello Vijay Dhamani, i want to save my 50K for tax saving. Is there any other investment way apart from 80C(like mutual fund, LIC etc) and home loan interest that can help my gross salary to be reduced to some extent? Vijay Dhamani answers, hi, you can consider taking medical insurance for yourself and your dependent parents. You will get a deduction under section 80D. The deduction for you will be Rs. 15000 and for your parents also Rs. 15000. If your parents are senior citizens then they will be eligible for deduction of Rs 20,000. You can also donate some income and claim deduction under section 80G. Ravi Singh asked, i am watching stock markets from last 10-12 year and have just invested in penny stocks .... i m looking for next blue chip companies and intend to invest for long term ...say 10 -15 years? ur guidance please. Vijay Dhamani answers, hi, you seem to be on the right path finally as far as investing in equity markets are concerned. First build your portfolio with Bluechip Stocks. First focus on building your core portfolio. If you really want to play the momentum then you can keep aside 5% of your savings for this purpose. Arun Swamy asked, Hello sir, Which is the best SIP product for an investment of 4k a month invested for next 12 months period??? Vijay Dhamani answers, hi, SIP is a simple method of investing in mutual funds. This method helps to average your cost of purchase over the long run which could be anywhere between 3-5 years. It is ideal for investing in equity and balanced funds. You can invest in diversified equity funds like HDFC Top 200, DSP BR Equity Fund among others Vinay Mokashi asked, i want to invest 50000 for a year. Where should i invest Vijay Dhamani answers, hi, if you are willing to invest only for a year, then safety of capital comes first. I would recommend that you invest in a bank FD. you will have to settle for lower returns but like I said returns take a backseat if your investment horizon is one year Sumit Kapoor asked, i want to save my 30000 for tax saving. Where should i invest this money? Vijay Dhamani answers, hi, there are 3 main options that you can consider; You can invest in safe assured return product called PPF. You can consider ELSS which is a equity fund and carries higher risk. The best would be to divide the amount equally between ELSS and PPF. You can consider taking a term plan for covering the risk on your life. Life insurance premium paid qualifies for deduction under section 80C. Chetan Kabra asked, i have 1 thousand to invest per month/...were should i invest for a healthy returns in 3 to 5 year Vijay Dhamani answers, hi, if you are willing to take risk, then equity funds are an ideal option for you given your time horizon of 3-5 years. Invest via the SIP mode and ensure that you are disciplined and patient. Equity markets are known to be volatile and these 2 virtues are essential to be a successful equity investor

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

REAL ESTATE BANGALORE

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

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

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

Signs of good times?

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

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

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

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

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

Innovative channels

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

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

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

Integrated marketing

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

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

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

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

REAL ESTATE MANGALORE

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

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

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

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

RING ROAD

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

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

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

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

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

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

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

Transferable rights

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

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

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

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

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

Market melts on global cues, monetary policy fears

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

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

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

POLICY UNCERTAINTY

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

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

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

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

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

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

MH Satyanarayana Investment adviser from Hyderabad replies to queries on investments

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

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

____________________________________________________________________

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

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

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

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

____________________________________________________________________

Aditya Nair says, How to invest with 30000

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

N H Satyanarayana replies : PPF

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

____________________________________________________________________

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

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

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

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

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

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

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

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

____________________________________________________________________

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

N H Satyanarayana replies : Not clear , are you earning 21 K per month or are your saving 21 K pm please clarify. As about Aviva Life Insurance ULIPs have their shortcoming which need to be looked at

____________________________________________________________________

Sairam Virani says, With investment capacity of Rs.40000 per annum, what is your best suggestion to invest. Looking in to 10 years from now.

N H Satyanarayana replies : Start a SIP for 10 years every month 1500 in a quality MF.

____________________________________________________________________

Prasad says, i want to invest for my daughter education i have 4lakhs what should i do

N H Satyanarayana replies : Choose Tata Child plan and also UTI Mahila Scheme in wife's name . Start a SIP in a quality MF

____________________________________________________________________

Arun says, 24 yeas old. Kindly let me know which is the good scheme to get good returns. I can invest 3k for next 24 months.

N H Satyanarayana replies : Start a SIP 1000 Rs each in HDFC top 200 , HDFC equity and UTI Master fund will do the trick.

____________________________________________________________________

RAMKRISHNA BHAT OF KOCHI REPLIES TO QUERIES ON INVESTMENTS

Suresh K says, i would like to take plan for my 6 months old daughter.Could u pls suggest one also it should have tax saving for me.

RAMKRISHNA BHAT REPLIES : Since the tenure of investment is going to be more than 15 years it is advisable to take a child plan from Tata MF . Opt for Tata Child plans which is expected to give a decent return

SANJAY GUPTA says, Hi , with a view point of 5 -7 years, which fund could be bought and what return we can expect.

RAMKRISHNA BHAT REPLIES : Investment in MF in lump sum at this point is not advisable. Instead opt for a SIP in an established MF like HDFC top 200 , dsp top 100 , IDFC Premier Plan A , HDFC Equity . As far as returns are concerned , SIP will cushion all ups and downs of the markets so returns will be decent .

Madhulk says, HI Ramkrishna, I have 2 lacs Rupees that I have accumulated by investing RD, I now want to invest it in some good return not much risk investment. What do u suggest, Debt Fund or Company FD's?

RAMKRISHNA BHAT REPLIES : Neither , Debt funds are not performing well in the last 6 months and Company FDs are too risky. It is advisable to put them in Bank FDs for shorter tenure of 2 years as FD rate are likely to go up in th near future.

Raghuraman says, Hello, which investment path is better path - Term life insurance + Aggressive Equity based Mutual Funds OR ULIPs?

RAMKRISHNA BHAT REPLIES : It is advisable to buy a vanilla Life Insurance Plan and invest in a well established MF .

Nikhil Iyer of Diamond Investments Chennai replies to queries on investments

BHARATH asked, Sir, when I all set to do the redemption of my MF fund ,suddenly the market crashes, what to do to avoid losses. Kindly suggest a way out sir Nikhil Iyer answers, mutual funds allow you the benefits of returns with a relatively lower level of risk. They do not eliminate the risk factor altogether. The best way to avoid such pitfalls is to stay invested for atleast 3-5 years in a fund with a long term performance record. Prasad Murkute asked, I want to invest for my daughter education I have 4lakhs what should I do Nikhil Iyer answers, As i don't know how far is the goal or for how long will you invest. I would advise you to go for an equity heavy portfolio which would slowly move towards a higher debt component as you near the goal. Nagesh Tripathi asked, Sir, I want to generate cash for my retirement. pls suggest Nikhil Iyer answers, Get yourself a customized retirement plan made by a financial planner. It should account for your estimated monthly expenditure and certain items like medical and travel expenses which could occur on an annual basis. Sharad Kumar asked, With investment capacity of Rs.40000 per annum, what is your best suggestion to invest. Looking in to 10 years from now. Nikhil Iyer answers, Ideally your investments should be aligned to your goals. A safe bet for such a horizon would be into diversified equity funds with large cap bias like HDFC top 200 and DSP top 100. Shanawaz Khan asked, Hi, I am a beginner with 21k pm. I am having Aviva Lifelong ULIP of 20k pa with 7 lacs life cover. Other than that I have no investments. I am a father of 2-year-old son and yet another one next month. Can u suggests good investment options for me? Nikhil Iyer answers, Ideally you should get a financial planner to create a customized financial plan for your family, this would allow you to go for investments which are in line with various goals. As for the ULIP I would advise you to discontinue it and go for a pure term plan like Aviva Life Shield Plus. Amit Mishra asked, Where to invest to get maximum guaranteed funds in return other than any policies Nikhil Iyer answers, The best guaranteed returns investment as of now is the PPF which guarantees you an 8% return without asking for the charges, which seems to be the norm with the guaranteed return ULIPS Sameer mathani asked, I want to invest 2 lacs other than fds etc pls guide when and where Nikhil Iyer answers, you can go for diversified mutual funds like HDFC top 200, DSP Top 100 etc. Anand Haldipur asked, I want to invest Rs.9 Lakhs for a period of one year which I am planning to finance for my flat please, where should I invest Nikhil Iyer answers, I would advise you to go for a 1 Year FD as capital preservation is ultimate requirement for you. Daniel Mathai asked, what will happen to National Savings certificate which is going to expire in Financial year 2011 under new tax code Nikhil Iyer answers, A majority of the tax saving instruments such as NSC, five-year bank deposits, equity-linked saving scheme (ELSS), ULIPs and the senior citizen's scheme are not included under section 80C investments under the Direct Tax Code. The investments that are permitted under the new Section 66 (replacing Sec 80 C) are employee's provident fund, new pension plan, super annuation and pure insurance (if the premium paid is one-twentieth of the sum insured).

POSTAL LIFE INSURANCE

POSTAL SAVINGS SCHEME

FIXED DEPOSIT RATESAS ON JAN 26 2010

NATIONALISED BANK RATES

STATE BANK OF INDIA



CORPORATION BANK

CANARA BANK


PRIVATE BANKS

AXIS BANK


ICICI BANK


HDFC BANK

TAMILNAD MERCANTILE BANK (TMB)



IDBI BANK


COOPERATIVE BANKS

GREATER BANK


PUNJAB & MAHARASHTRA COOPERATIVE BANK LTD (PMCB)

Dewan Housing Finance Fixed Deposit — Favourable for the short term

Bank deposit rates are at rock bottom, making it hard for fixed-income investors – especially those looking for reinvestment on their recently matured deposits – to find attractive investment options. Investors with a stomach for risk can consider Dewan Housing Finance (DHFL)'s fixed deposits.

These deposits are offered at an attractive rate (pre-tax) for various maturities. However, we suggest that investors lock into deposits for shorter tenors such as one year and 500 days at this juncture. While interest rates are likely to move up over a one-year time frame, the rates offered are high enough to factor in some increase in market rates.

The rates offered by DHFL begin from 9 per cent and some of these options are compounded half yearly. For the same maturities, bank deposits currently offer rates ranging from 6 per cent to 7.25 per cent.

While the higher rates may suggest higher risk, there are several confidence-inducing factors. The company has an investment grade credit-rating, one notch below the highest level. High levels of capital adequacy (16.2 per cent as of March 31, 2009) and the secured nature of its business (housing finance) are also positives. DHFL recently raised Rs 300 crore through share sale (QIP and preferential allotment), which would have augmented capital adequacy and strengthened the balance sheet.

Special scheme

Various fixed deposit options and pre-tax interest rate are offered by DHFL. Senior citizens are given an additional rate of 25 basis points.

Short-term options are currently preferred given that the rates may trend up over the next few quarters and the less risky instruments may turn attractive.

Among the various options, the 500-day, 9.1 per cent scheme (Swayamsidha deposits) stands out thanks to its combination of good rates and shorter maturity.

The annual pre-tax yield for this works out to 9.3 per cent.

However, the option is only available for women or for joint deposits with women as the first holder.

Outside of this special scheme, investors can choose the one-year, 9 per cent or the two-year, 9.1 per cent cumulative options. These products are compounded half-yearly due to which the yields work out to be higher. These instruments also reduce re-investment risk. There is also a certificate option that pays a pre-determined amount (Rs 10,000) for initial payment of a certain sum. The yield on these certificates is the same as that of cumulative deposit options. We do not suggest the longer tenor options.

However, investors looking at steady income stream could opt for the non-cumulative options. These schemes have lower rate of interest over the cumulative option, depending on the periodicity of the payment.

These investments are also subject to re-investment risk.

DHFL is a housing finance company, with a loan book size of Rs 5,829 crore as of March 31, 2009. The company has an average loan size of Rs 6.9 lakh per borrower and has predominant presence in tier-II and tier-III cities. The net interest margin stood at 2.9 per cent for the year ended March 2009.

Business

During 2005-09, the company's asset book grew at an annualised rate of 36 per cent, yet the company managed to improve its net NPA ratio at 1.03 per cent from 1.25 per cent during the same period. For the half year ended September 2009, DHFL has posted 78 per cent growth in disbursements, which is indicative of the improving business outlook. The net profit for the first half of 2009-10 and the net profit for the year ended March 31, 2009, stood at Rs 68 crore and Rs 91 crore respectively.

The proportion of deposits is less than one per cent in the total borrowing. Majority of loans and borrowings are on floating rates which help it pass through the interest rate fluctuations. However, the maturities of the loans are of a longer tenor compared to the borrowings, which may lead to asset-liability mismatch.

When should an investor buy aspirational assets?

This article addresses the issue of when investors should buy aspiration assets. It shows the choice of assets available to investors to build such a portfolio. It also discusses how such choices are affected by their current wealth and risk appetite.

Lifestyle portfolio framework

Aspiration assets are those that will enable investors to enhance their lifestyle- move to the next tier of the wealth structure.

Logically, an investor should first protect her basic standard of living and maintain the current standard of living before striving to move to the next tier of the wealth structure. Aspiration assets then should be rightfully bought during mid-career. Yet, it is optimal to set-up protection assets, lifestyle assets and aspiration assets at the same time. Why? Investors always aspire to move up the wealth structure; a mass-affluent investor aspires to become a HNWI while a HNWI strives to graduate to an ultra-HNWI.

The desire to move up the wealth structure is largely driven by peers. That is, when an individual from a peer group has graduated to the next tier of the wealth structure, it is very difficult for others not to aspire for the same.

Setting up aspiration assets to move up the wealth structure would be catastrophic if considered in isolation of the protection assets and lifestyle assets. Why?

Suppose an individual from a peer group moves up the wealth structure through investments in real estate. Another individual wanting to follow the investment process may be assuming higher risk because real estate may not synchronize with her existing portfolio.

It is, hence, optimal to set-up a portfolio mapped to all the spectrum of lifestyle needs. The composition of the aspiration portfolio would, of course, depend on the individual's current wealth and risk appetite.

Aspiring allocation

Aspiration assets are primarily high-risk high-return assets. A typical portfolio containing aspiration assets would effectively combine alternative asset classes and alternative strategies. Alternative asset classes range from commodities to paintings and wines. Alternative strategies refer to non-traditional exposure to the existing asset classes. This ranges from investing in private equity and hedge funds to exposure in emerging and frontier markets.

It is obvious that the spectrum of aspiration assets is not accessible to all investors. Private equity and hedge funds are available to HNWIs and ultra-HNWIs. The mass-affluent investors have to primarily settle for mutual funds and direct exposure to map their aspiration needs. Consider the alternative asset class. Mass-affluent investors can take exposure to commodities and currencies through futures contracts. Exposure to commodity is also possible through gold ETFs.

Exposure to alternative strategies can be taken via emerging market funds, Global commodity funds that invest in companies in the commodity sector, leveraged strategies, domestic sector funds and funds that carry concentrated portfolio.

Investors can also consider exposure to real estate. This refers to investing in land and building for rental income and capital appreciation. Note that buying a house for self-occupation is a lifestyle asset, not aspiration asset.

Conclusion

Aspiration assets are very risky, given the characteristics of such exposure. Containing risks in the aspiration portfolio is, hence, important.

One risk management policy would be to assign a tactical exposure range to such assets as part of asset allocation policy. A conservative mass-affluent investor could consider exposure between 5 and 10 per. At the extreme, an aggressive HNWI could consider between 30 and 40 per cent. Periodic rebalancing would be necessary to ensure that the exposure remains within the tactical range.

My wife and I are both aged 32 and we have a five-year old daughter. We have been investing in mutual funds through the SIP route for the last five years. We have taken out money when we thought the market was over-heated although we did not stop the SIPs. While we have made investments in the stock market directly, our exposure is nil currently as we plan to have a strategy of investing in top mutual funds.

We are currently running SIPs in the following funds: Birla Sun Life Tax Plan, Birla Sun Life Frontline Equity, HDFC Equity, HDFC tax saver, DWS Alpha Equity, DSP BR Equity, DSPBR T.I.G.E.R, DSPBR Top 100, DSPBR Tax Saver, Sundaram Capex Opportunities, Sundaram Tax Saver, Magnum Tax Gain, HSBC Equity, ICICI Pru Tax plan, ICICI Pru Infrastructure, Reliance Tax Saver. Kindly suggest how to restructure the equity/debt, proportion.

I intend to move away from tax saving funds as I feel diversified funds are giving better returns. I also have my insurance premium and ongoing home loan for claiming tax deduction.

Ran Vijay Singh Mysore

As you have rightly mentioned, there are too many tax-saving funds in your portfolio — seven of the 16 funds are equity-linked savings schemes. It is also true that most tax saving funds have underperformed their diversified peers. The three-year lock-in does not appear to have provided any additional advantage to these funds, in terms of managing the volatility witnessed in the market or generating higher returns.

Whether it is in mutual funds or any other investment option, tax savings can only be an incidental benefit. One should not settle for tax-saving products at the cost of compromising on superior wealth-building strategies. In insurance policies too, go for those products that offer protection or pension benefits that suit your requirements; buying these products for tax deduction should not be your primary objective.

You do not really need to exit all tax funds. You can consider holding on to HDFC Tax Saver and DSPBR Taxsaver. But review their portfolio and compare performance with diversified peers at least every quarter. We would like you to add a few other diversified funds in place of tax-savers. Given your age and income profile, we assume you can stomach some risks.

We, therefore, suggest a mix of aggressive and consistent performers. Hold on to HDFC Equity, DSPBR Equity and Birla Sun Life Frontline Equity. Continue your SIPs in these funds with periodic review, before renewing the SIPs. Add some mid-cap funds such as IDFC Premier Equity and Birla Midcap. For some international exposure, buy into Templeton India Equity Income. Let these funds account for 70-75 per cent of your equity mutual fund exposure.

Game for theme?

If you are willing to take some risks through sector funds go for Reliance Pharma and switch to Sundaram Capex Opportunities instead of DSPBR T.I.G.E.R. However, you would have to time your entry in sector funds and also resort to active profit-booking. Over the next two years, invest in these funds on declines linked to broad market, rather than resorting to SIPs, and book profits by setting reasonable target returns.

Since you have dealt with direct investing as well, you can consider adding Nifty BeES and Junior Nifty BeES on market declines of 10 per cent or more. The former has been the top performer last year among the major indices. The theme funds, together with the ETFs, can account for 25-30 per cent of your equity mutual funds. Note that, unlike direct investing, where the rise and fall in your portfolio may be steep, mutual funds aim at reducing this volatility. Therefore, look for consistency in performance, rather than the fund's rank in the performance chart. Ability to beat the respective benchmark and presence in the top quartile of the performance chart are good reasons to hold a fund.

Asset allocation

You seem adequately invested in real state. While this asset class would typically dominate a good chunk of your portfolio, consider diversifying to other options such as debt and gold (though ETFs) as well. You have not mentioned your debt exposure. We presume you must be contributing to the employee's provident fund through your organisation.

You can hold about 30 per cent of your money in debt at this juncture, and hike this as and when you need to meet objectives, such as child's higher education and as you near retirement. For now, you can hold HDFC MIP Long Term and your wife can consider investing in UTI Mahila Unit Scheme. Besides these, do actively scout for fixed deposits of corporates with high creditworthiness. Check with your financial advisor on the credit rating.

Divide savings into asset classes

What is the most effective way to invest? There are few who think that it is all about timing the market. Others think it is about staying with your investments for the long-term. But the real answer is “asset allocation” or selecting and holding on to the right mix between different asset classes.

Asset allocation is basically dividing your savings into various asset classes whether equity, bonds, cash or other alternatives such as real estate.

A few FAQs:

Why is asset allocation important?

All asset classes do not move in the same direction at the same time. There are time periods when equities do well and others don't. At times bonds will do better than equities. As it is not easy for an investor to predict which asset class will fare the best at any given point of time, you spread out your investment between asset classes to capture performance trends in all of them. That helps you diversify and reduce the risk of downside. It also ensures that your portfolio value has a much smoother ride.

What is the right asset allocation?

The process of determining the mix of assets to hold in your portfolio is a very personal one. However the asset allocation that works best for you depends largely on your financial goals, time horizon and your ability to tolerate risk. The accompanying table is a brief indicator of which asset class would fit which goal.

Should I invest directly or take the mutual fund route?

There are many who ask: “Why should I pay a fee to someone else to manage my money when I can do it myself? All I have to do is read few magazines, watch a few TV channels, read a few reports and I am ready to make my own investment decisions.”

However, if you are planning to deploy your surpluses to meet your long-term goals, you need to find a specialist who will manage your assets across asset classes. After all, if you have a simple headache, you can go to a chemist's and buy a pain killer but if you have regular chronic headaches, then you will have to seek the advice of a specialist, isn't it?

Mutual funds offer convenient and cost effective ways to manage your assets. At very low charges of 0.50-2.25 per cent a year, you get to hire services of a professional investment manager whose job it is to manage and safe-keep your funds. Today, mutual funds offer products across the time horizon and risk spectrum. Whether you want to meet your short-term goals by investing in short-term funds or meet retirement dreams by investing in equity funds, mutual funds offer them all.

Should I change my asset allocation?

Yes, your asset allocation should be reviewed at regular intervals, preferably every quarter or six months, and may require changes for a few reasons — favourable markets can skew the allocation towards a particular asset class, there could be a new addition to the family or a significant change in your lifestyle. Asset allocation should keep pace with your changing needs and age. As you grow older, your capacity to take risk reduces; that too will require changes to allocation.

Finally, let us conclude with a small real-life example on the importance of asset allocation: In early 2003 I met an individual and based on his goals and risk-taking ability recommended and implemented an asset allocation of 20 per cent in cash, 20 per cent in bonds and 60 per cent in equities. We also decided to review the allocation every six months.

From 2003 to 2007, due to booming stock market, his equities valuation increased so much that this asset allocation changed to 80 per cent equity and 20 per cent in cash and bonds. In the second half of 2007 after reviewing the portfolio, I recommended that he sell 20 per cent of the equities and reinvest in debt, to get back to the planned allocations. Due to market euphoria, the investor not only ignored my advice but also cashed out on his bonds and invested the entire sum in equities. The result: a massive portfolio loss in the market fall.

I will conclude with the point that whether it is with investments or anything else in life, the right balance is the only way. Ignore temptation and follow what is right for you, and nobody can stop you from meeting your goals.

NEW TAX CODE 2011 WHAT IN STORE FOR YOU

This might happen ..
Govt has considered all the options and have come up with this.
Insider news is that , this will fetch Govt 30% extra tax than at the current tax.
consider this ...
1) Savings will not be considered from now onwards , means there is no 1 lakh limit as of now to show savings.
2) All the returns on savings what you do will be taxed.(rate not yet decided , would be anywhere between 20-30%). EET model.
3) Housing loan not considered
for the first loan
(how many of middle class will go for a second house?)
4) Many perks will be taxed in the hands of employee.
and there are so many things ...

Income tax in the coming budget

Income tax.... what expected in the coming budget? by subrata banerjee We the senior citizens between 60 and 65 have been demanding the exemption of Income Tax limits should be Rs.2,40,000/- as awarded to the citizens of above 65 years of age only. But salaried class retire at the age of 60 and their exemption limit is 1,60,000/- till thety reach 65 years of age. Why this discrimency will prevail among senior citizens. So, I earnest request our honb'le finance minister to consider sympathetically and allow all the senior retired citizens above 60 to enjoy income tax benefit upto Rs.2,40,000/-. Thank you, sir.

INCOME TAX WISH LIST

income tax by Rakesh Jain Common an would like high earners to be taxed more so that some concession can be given at lower level- 2-3 lac -10% 3-5 lac -15% 5-10lac -20% 10-15 lac -25% 15-30 lac -30% 30-50 lac -35% 50-100lac -40% 100-250lac-45% 250-500lac-50% 500-1000lac-55% 1000lac & more -60% this way govt IT revenue will increase and aam admi will get relief.super rich will be taxed more since they earn more in white and they even more in black also.justice to all.

MARKETS ON 25 JAN 2010

SENSEX TO CORRECT MORE 300 POINTS ON MONDAY 25-10-2010 by ganesh nanwar | Hide replies

SENSEX TO CORRECT MORE 300 POINTS ON MONDAY

SBI RESULT IS BAD
JAI CORP RESULTS IS BAD
SELL JAI CORP, SELL JAI CORP now it is 270 , it will come down to 256 then to 230

SELL JAI CORP, SELL JAI CORP now it is 270 , it will come down to 256 then to 230

global q also dragiing market, NIFTY TO give up 200 points very soon

bank CRR will affect very much

sell jai corp, sell jai corp

BUY SRF WHY READ ON

RFs Q3 PAT at Rs.38 crore, Revenue Improves by 17%


Gurgaon, Haryana, India, Tuesday, January 19, 2010 -- (Business Wire India)

-- Q3 FY 2009-10 revenue at Rs. 490 crore, 17% growth
-- Q3 FY 2009-10 PAT at Rs. 38 crore, a marginal increase
-- 9M FY 2009-10 PAT at Rs. 199 crore, 40% growth
-- 9M FY 2009-10 revenue at Rs. 1513 crore, 8% growth
-- SRF commissions the second line for manufacturing BOPET Film project

SRF Limited, a multi-business entity engaged in the manufacturing of chemical based industrial intermediates, posted a net profit after tax (PAT) of Rs. 38 crore during Q3 of 2009-10 recording a marginal increase over the corresponding period last year (CPLY). The company’s revenue during October-December’09 improved by 17% to Rs. 490 crore as against Rs. 419 crore during CPLY. The company’s results were taken on record by the Board of Directors this afternoon. Pursuant to the directions of SEBI, the Board also approved the withdrawal of the buy back which was announced by the company in August 2009.

The improvement in SRF’s revenue is attributable to the improved performance in most businesses. In particular, SRF’s technical textiles business continued to return a strong performance during the quarter in spite of increasing cost of raw materials. The profitability during the quarter ended on 31st December’09 was also impacted by the higher interest and depreciation costs arising from the commissioning of the second Biaxially Oriented Polyes

STOCK RECOMENDATIONS

	Stocks Recomendation by aditya saini Buy NMDC or Hold NMDC. Very fundamental stock; target 4 figures for investors as well as for traders in few weeks. STRTECH(Sterlite Technologies) IFCI KEC International SBBJ. Grab these 4 stocks along with NMDC.