Top 10 ways to waste your money
1. Carry a credit-card balance
2. Buy on fancy
3. Pay to use an ATM/Petrol bunk Swipe
4. Dine out frequently
5. Let your money sleep
6. Pay too much taxes on investments / earnings
7. Waste Electricity
8. Pay banking fees (for maintaining min balance/cheque returns etc)
9. Buy things that you don’t use
10. Not reviewing your insurance features
Saturday, August 8, 2009
Monday, August 3, 2009
25 lakhs here, what you will do?
Friends,
Many friends of mine usually saying that “if we were having 25 lacs in hand, we no need to work or worry about the jobs”… I used to wonder really what kind of plans they have in their mind with that 25 lacs?, so here with I have charted down my plan with 25 lacs. Pls share your plans as well
Note: Based upon our risk category we need to choose the below ones. If you need any help in choosing pls do let me know
(Asset Class) (Amount) (Expected Return Percentage) (Amount)
1. Fixed Dep/NCD 250000 11.50% 28750
2. Liquid Fund /
Short term funds 500000 8.00% 40000
3. Gold 125000 10.00% 12500
4. MFs
(Diversified Equity/Balanced) 1000000 15.00% 150000
5. Shares 500000 20.00% 100000
6. Cash on hand 125000
Total 2500000 10.75% 331250
Monthly Income (approx) 27604
Many friends of mine usually saying that “if we were having 25 lacs in hand, we no need to work or worry about the jobs”… I used to wonder really what kind of plans they have in their mind with that 25 lacs?, so here with I have charted down my plan with 25 lacs. Pls share your plans as well
Note: Based upon our risk category we need to choose the below ones. If you need any help in choosing pls do let me know
(Asset Class) (Amount) (Expected Return Percentage) (Amount)
1. Fixed Dep/NCD 250000 11.50% 28750
2. Liquid Fund /
Short term funds 500000 8.00% 40000
3. Gold 125000 10.00% 12500
4. MFs
(Diversified Equity/Balanced) 1000000 15.00% 150000
5. Shares 500000 20.00% 100000
6. Cash on hand 125000
Total 2500000 10.75% 331250
Monthly Income (approx) 27604
Mutual Funds – An Intro
Mutual Funds – An Intro
Buying shares based upon the market mode and creating a share portfolio is a cumbersome task which needs lot of work and needs a professional management on every day basis, as a popular say “leaving the job to the right people”… MF houses is the right one which will take care of all this problems
Affordable
Almost everyone can buy mutual funds. Even for a sum of Rs 1,000 an investor can invest in a mutual fund.
Professional Management
For an average investor, it is a difficult task to decide what securities to buy, how much to buy and when to sell. By buying a mutual fund, you acquire a professional fund manager who manages your money. This is the person who decides what to buy for you, when to buy it and when to sell. The fund manager takes these decisions after doing adequate research on the economy, industries and companies, before buying stocks or bonds. Most mutual fund companies charge a small fee for providing this service which is called the management fee.
Diversification
According to finance theory, when your investments are spread across several securities, your risk reduces substantially. A mutual fund is able to diversify more easily than an average investor across several companies, which an ordinary investor may not be able to do. With an investment of Rs 5000, you can buy stocks in some of the top Indian companies through a mutual fund, which may not be possible to do as an individual investor.
Liquidity
Unlike several other forms of savings like the public provident fund or National Savings Scheme, you can withdraw your money from a mutual fund on immediate basis.
Tax Benefits
Mutual funds have historically been more efficient from the tax point of view. A debt fund pays a dividend distribution tax of 12.5 per cent before distributing dividend to an individual investor or an HUF, whereas it is 20 per cent for all other entities. There is no dividend tax on dividends from an equity fund for individual investor.
Buying shares based upon the market mode and creating a share portfolio is a cumbersome task which needs lot of work and needs a professional management on every day basis, as a popular say “leaving the job to the right people”… MF houses is the right one which will take care of all this problems
Affordable
Almost everyone can buy mutual funds. Even for a sum of Rs 1,000 an investor can invest in a mutual fund.
Professional Management
For an average investor, it is a difficult task to decide what securities to buy, how much to buy and when to sell. By buying a mutual fund, you acquire a professional fund manager who manages your money. This is the person who decides what to buy for you, when to buy it and when to sell. The fund manager takes these decisions after doing adequate research on the economy, industries and companies, before buying stocks or bonds. Most mutual fund companies charge a small fee for providing this service which is called the management fee.
Diversification
According to finance theory, when your investments are spread across several securities, your risk reduces substantially. A mutual fund is able to diversify more easily than an average investor across several companies, which an ordinary investor may not be able to do. With an investment of Rs 5000, you can buy stocks in some of the top Indian companies through a mutual fund, which may not be possible to do as an individual investor.
Liquidity
Unlike several other forms of savings like the public provident fund or National Savings Scheme, you can withdraw your money from a mutual fund on immediate basis.
Tax Benefits
Mutual funds have historically been more efficient from the tax point of view. A debt fund pays a dividend distribution tax of 12.5 per cent before distributing dividend to an individual investor or an HUF, whereas it is 20 per cent for all other entities. There is no dividend tax on dividends from an equity fund for individual investor.
Survival
Survival
“SURVIVAL” is the most important word/talk today in this tough economic situation. All corporate companies are charting out plans how we can survive in this tough economy. Of course this is more important for an Individual as well.
Since We are in the IT industry I am taking our job nature and scenario as role model to write this blog…
Replace you
As long as your depending fully yourself for your regular income there is a risk in your earning and it will always leaves you unrest. So do you really wanted to work 50 – 70 hrs per week until your retirement?
So you have to generate another income stream to get yourself from these financial blues. So you need to remove yourself from being directly involved in generating the income stream for your family
Passive Income
Try some other innovative ways to making money, which requires less of your time to generate.
• If you are good in physical fitness and related activities write an aerobic/gym tips book and get the royalty
• If you are a good photographer, auction your photographs in online
• Invest in your friend/relative business and get some margin money out of their profits
• Use your accrued capital to invest in some MIP (Monthly Income Plans) to generate return or buy a rental property
• Rent your property and get some good returns
There are ‘N’ number of ways… use your analytical knowledge to leverage more… if you need any help hope I can assists you in finding a good choice for you
My simple suggestion is don't depend on single income for your life in this kind of tough economic situations
“SURVIVAL” is the most important word/talk today in this tough economic situation. All corporate companies are charting out plans how we can survive in this tough economy. Of course this is more important for an Individual as well.
Since We are in the IT industry I am taking our job nature and scenario as role model to write this blog…
Replace you
As long as your depending fully yourself for your regular income there is a risk in your earning and it will always leaves you unrest. So do you really wanted to work 50 – 70 hrs per week until your retirement?
So you have to generate another income stream to get yourself from these financial blues. So you need to remove yourself from being directly involved in generating the income stream for your family
Passive Income
Try some other innovative ways to making money, which requires less of your time to generate.
• If you are good in physical fitness and related activities write an aerobic/gym tips book and get the royalty
• If you are a good photographer, auction your photographs in online
• Invest in your friend/relative business and get some margin money out of their profits
• Use your accrued capital to invest in some MIP (Monthly Income Plans) to generate return or buy a rental property
• Rent your property and get some good returns
There are ‘N’ number of ways… use your analytical knowledge to leverage more… if you need any help hope I can assists you in finding a good choice for you
My simple suggestion is don't depend on single income for your life in this kind of tough economic situations
Top 10 ways to waste your money
Top 10 ways to waste your money
1. Carry a credit-card balance
2. Buy on fancy
3. Pay to use an ATM/Petrol bunk Swipe
4. Dine out frequently
5. Let your money sleep
6. Pay too much taxes on investments / earnings
7. Waste Electricity
8. Pay banking fees (for maintaining min balance/cheque returns etc)
9. Buy things that you don’t use
10. Not reviewing your insurance features
1. Carry a credit-card balance
2. Buy on fancy
3. Pay to use an ATM/Petrol bunk Swipe
4. Dine out frequently
5. Let your money sleep
6. Pay too much taxes on investments / earnings
7. Waste Electricity
8. Pay banking fees (for maintaining min balance/cheque returns etc)
9. Buy things that you don’t use
10. Not reviewing your insurance features
Friday, July 24, 2009
Which is best? Fixed Deposit or Debt Funds
Unlike fixed deposits, debt funds are not risk-free assured return instruments. They are affected by interest rate fluctuations. Falling interest rates will result in rising prices of the underlying bonds while rising interest rates will result in falling bond prices. So debt funds do better in a falling interest rate scenario.
The higher the maturity profile of a debt fund, the more is its sensitivity to interest rate fluctuations. So short term debt funds are less affected by interest rate outlook than long term debt funds. Liquid funds would be a better option as they invest in short term instruments such as treasury bills, certificates of deposits and commercial papers.
Note: This article has been written in the assumption that you know about Mutual Funds. If you have any other clarifications please get back to me
The higher the maturity profile of a debt fund, the more is its sensitivity to interest rate fluctuations. So short term debt funds are less affected by interest rate outlook than long term debt funds. Liquid funds would be a better option as they invest in short term instruments such as treasury bills, certificates of deposits and commercial papers.
Note: This article has been written in the assumption that you know about Mutual Funds. If you have any other clarifications please get back to me
Market is going up? What I have to do now?
Many of my friends usually ask me about investments, retirement planning, idea in buying a home and etc related to money… And they often called me as money KumarJ, stop stop its not mean I am always running behind money or so… but I will love to make money (of course by genuine way) in smart ways…
Ok let’s come to the topic, so in the last few days many of my friends asked me when I have to invest? Where I have to invest? How much amount I have to invest?
I have answered them some nice ways… here let me share with you as well
When I have to invest?
There is absolutely no good or bad time to invest for your future all time is good… But if you are the someone whom expects a short term returns then you have to be sure when you are making investment? Since every investment clause is having its own up and peak time… you have to be sure you are entering in to the wave while it is up and not down time. If you entered in the down time then you may have to wait patience for until the same to come up…
The amount of patience will be justified by one surplus money, If you have surplus money u might have wait for some time until your investment starts giving you good returns or else you may get out with loss
Where I have to invest?
There are different investment clauses are available in the investments based upon our objective (retirement, pension, child marriage, education, buy a home…) and the remaining available years for the objective will decide our investment clause. And of course your risk appetite also plays an important role in that
But the ground rule in investment is don’t put all your eggs in the same basket… Split your investments and enjoy its returns… by the way of splitting the investment the chances of loss is very less
Many of my friends done a mistake by investing all their money in shares (one single clause) which made them empty hands while the markets went down… And they all invested at a wrong time, when the market is high (peak in the history) they invested. They might have followed the gradual investments not aggressive investment
How much amount I have to invest?
It’s purely based upon your current liquidity. It may vary based upon your age and goals. But the thump rule is as I said earlier don’t put all your eggs in one single basket.
Keep some money for your current liquidity as well, during contingency times this fund could help you to get out the problem. That too for us (IT Guyz) we must reserve some money for our rainy days
In this area you guyz can ask about any investment doubts, I will truly try to answer my level best and willing to share the lessons what myself and my friends learned out of our investments
So keep in touch and post your queries
Ok let’s come to the topic, so in the last few days many of my friends asked me when I have to invest? Where I have to invest? How much amount I have to invest?
I have answered them some nice ways… here let me share with you as well
When I have to invest?
There is absolutely no good or bad time to invest for your future all time is good… But if you are the someone whom expects a short term returns then you have to be sure when you are making investment? Since every investment clause is having its own up and peak time… you have to be sure you are entering in to the wave while it is up and not down time. If you entered in the down time then you may have to wait patience for until the same to come up…
The amount of patience will be justified by one surplus money, If you have surplus money u might have wait for some time until your investment starts giving you good returns or else you may get out with loss
Where I have to invest?
There are different investment clauses are available in the investments based upon our objective (retirement, pension, child marriage, education, buy a home…) and the remaining available years for the objective will decide our investment clause. And of course your risk appetite also plays an important role in that
But the ground rule in investment is don’t put all your eggs in the same basket… Split your investments and enjoy its returns… by the way of splitting the investment the chances of loss is very less
Many of my friends done a mistake by investing all their money in shares (one single clause) which made them empty hands while the markets went down… And they all invested at a wrong time, when the market is high (peak in the history) they invested. They might have followed the gradual investments not aggressive investment
How much amount I have to invest?
It’s purely based upon your current liquidity. It may vary based upon your age and goals. But the thump rule is as I said earlier don’t put all your eggs in one single basket.
Keep some money for your current liquidity as well, during contingency times this fund could help you to get out the problem. That too for us (IT Guyz) we must reserve some money for our rainy days
In this area you guyz can ask about any investment doubts, I will truly try to answer my level best and willing to share the lessons what myself and my friends learned out of our investments
So keep in touch and post your queries
Don`t Mix Insurance with Investments
It is always better not to mix investment with insurance. The best insurance is always considered term insurance. If you do not have reasonable coverage then you must get a term insurance.
Term insurance is like a car insurance where the premium is given to the company, in case of any untoward happening you get the sum assured and if nothing happens then the money is not returned.
Insurance should be looked at from the perspective that it is required for your dependants to cover expenses in the case of an untoward happening.
For investment purposes, a person should consider mutual funds.
Term insurance is like a car insurance where the premium is given to the company, in case of any untoward happening you get the sum assured and if nothing happens then the money is not returned.
Insurance should be looked at from the perspective that it is required for your dependants to cover expenses in the case of an untoward happening.
For investment purposes, a person should consider mutual funds.
A letter to a friend whom in mid career financial blues
Dear friends as I described earlier, I am about to start sharing my conversations and discussions what I had with my other friends... So here with I am suggested one of my friend whom in mid of his career and much worried about the retirement and savings
Hope this may help you guyz too
Mahindran, just over 40, had an interesting discussion with me last week, he said "Never in my life have I earned so much and never was financial dependence on me this high". So while he did see a steady growth in earnings over the years, he also witnessed a rise in expenses. Apart from household expenses and education expenses of two children in school, the future was playing on his mind. Retirement was slowly creeping upon him.
The expenses on higher education of his children was cause for concern. And saving for children's marriage would also be a priority for a number of parents.
Action Plan
Insurance is a priority over saving and investment. You need to start by taking a good and hard look at your insurance cover. You probably have a spouse and children who are dependent on you. So the financial impact of the loss of your life can be most severe during these years.
Since your children are in school, you will be in a position to make a realistic assessment of the money that will be needed for their higher education as well as their marriage. Both of these could be major expenses.
If something happen to you, you need to figure out whether your present insurance cover, along with your savings, will be sufficient to meet these expenses and also leave enough money to tide your spouse through the rest of her life. If not, then it makes sense to go for an additional term cover.
Decrease and Increase
Decrease your exposure to equity. While equity can still form a part of your portfolio, cut down on aggression and increase the weight of debt. If you are already invested in equity, shift your investments from aggressive equity funds towards stable large-cap funds and balanced funds. You can even sell your pure mid-cap funds as the large-cap and balanced funds will bring in some mid-cap exposure which should be sufficient for you.
By investing in balanced funds, you can have 60-70 per cent allocation to equities and about 30 per cent to debt. This will help you partake in an upside in the market as well as bring in the much needed stability to protect returns on the downside.
To protect the accumulated wealth, there are a number of fixed return instruments you can consider. You have a choice between Public Provident Fund, National Savings Certificate and five-year bank deposits. These also offer a tax benefit under Section 80C.
These investments can add a lot of value at this stage simply because they rank high on safety, your principal is guaranteed along with your returns. The assured return of 8 per cent per annum looks quite handsome considering the circumstances prevailing in the debt markets. And, should you need money, you can even take a loan against them.
As the timeframe draws closer to your saving goals, shift money from equity to safer and guaranteed avenues. Or else, when you do need the money, the market may have taken a nasty turn leaving you in the lurch.
Lesson to be learnt
You have three aims:
i. Wealth maximisation with less aggression than someone younger than you (60-70 per cent in equity).
ii. Protection of all that you have accumulated this far (30-40 per cent in debt).
iii. Protection for your family (evaluate insurance needs).
Hope this may help you guyz too
Mahindran, just over 40, had an interesting discussion with me last week, he said "Never in my life have I earned so much and never was financial dependence on me this high". So while he did see a steady growth in earnings over the years, he also witnessed a rise in expenses. Apart from household expenses and education expenses of two children in school, the future was playing on his mind. Retirement was slowly creeping upon him.
The expenses on higher education of his children was cause for concern. And saving for children's marriage would also be a priority for a number of parents.
Action Plan
Insurance is a priority over saving and investment. You need to start by taking a good and hard look at your insurance cover. You probably have a spouse and children who are dependent on you. So the financial impact of the loss of your life can be most severe during these years.
Since your children are in school, you will be in a position to make a realistic assessment of the money that will be needed for their higher education as well as their marriage. Both of these could be major expenses.
If something happen to you, you need to figure out whether your present insurance cover, along with your savings, will be sufficient to meet these expenses and also leave enough money to tide your spouse through the rest of her life. If not, then it makes sense to go for an additional term cover.
Decrease and Increase
Decrease your exposure to equity. While equity can still form a part of your portfolio, cut down on aggression and increase the weight of debt. If you are already invested in equity, shift your investments from aggressive equity funds towards stable large-cap funds and balanced funds. You can even sell your pure mid-cap funds as the large-cap and balanced funds will bring in some mid-cap exposure which should be sufficient for you.
By investing in balanced funds, you can have 60-70 per cent allocation to equities and about 30 per cent to debt. This will help you partake in an upside in the market as well as bring in the much needed stability to protect returns on the downside.
To protect the accumulated wealth, there are a number of fixed return instruments you can consider. You have a choice between Public Provident Fund, National Savings Certificate and five-year bank deposits. These also offer a tax benefit under Section 80C.
These investments can add a lot of value at this stage simply because they rank high on safety, your principal is guaranteed along with your returns. The assured return of 8 per cent per annum looks quite handsome considering the circumstances prevailing in the debt markets. And, should you need money, you can even take a loan against them.
As the timeframe draws closer to your saving goals, shift money from equity to safer and guaranteed avenues. Or else, when you do need the money, the market may have taken a nasty turn leaving you in the lurch.
Lesson to be learnt
You have three aims:
i. Wealth maximisation with less aggression than someone younger than you (60-70 per cent in equity).
ii. Protection of all that you have accumulated this far (30-40 per cent in debt).
iii. Protection for your family (evaluate insurance needs).
Sunday, July 5, 2009
Bank Deposits Vs Post Office Products
The PO products are carry a sovereign gurantee, Bank Fixed deposits (FDs) too, offer fixed and assured returns but they are not backed by an government gurantee beyond Rs 1 lakh (principal and interest together) per bank per person irrespective of no of accounts. So it is better to spread your FD over banks rather than invest a big sum in a single bank
Small Savings - Worth to have a look at them
It might seem ridiculous to talk about safe investments and sound returns at a time when the equity markets are down 34 percent since last year and a tumbline real estate market is giving most of us sleepless nights, but here are 3 tricks to increase your small savings returns without much worry
We need to balance our portfolio with equity and debt since the reality of volatile markets indicates that we need to go back to old options and invest in products that our parents relied on, the ones we turned our noses up at as too cumbersome or even too boring. But beside secure returns the sfest investment options can be cleverly tailored to suit various requirements. Here are some strategies that have been used for ages and can work wonders in these harsh times
REINVEST MONTHLY INCOME SCHEME (MIS) INTEREST
Take a 6-year, 8 percent per annum MIS, Reinvest the monthly interest in a savings account (3.5 per cent interest per annum), which will give you an annualised return of 7.53 percent after six years. Reinvesting in a recurring deposit (7.5 per cent per annum) will give you an annualised return of 7.76 per cent
LADDER NATIONAL SAVINGS CERTIFICATES (NSCs)
NSC is a 6-year instrument, Assume that you buy NSCs worth Rs 24,000 in one financial year, Instead buy NSCs worth Rs 2000 every month till your retirement, Renew every investment after six years and continue doing so until your retirement, Finally the matured NSCs will give regular income, which can be used as pension
USE YOUR PUBLIC PROVIDENT FUND
PPF is a 15-year account in which you can put up to Rs 70000 every year, After the fifth year, make partial withdrawals for tax free funds and contribute Rs 70000 as before from current income to get tax benefits
We need to balance our portfolio with equity and debt since the reality of volatile markets indicates that we need to go back to old options and invest in products that our parents relied on, the ones we turned our noses up at as too cumbersome or even too boring. But beside secure returns the sfest investment options can be cleverly tailored to suit various requirements. Here are some strategies that have been used for ages and can work wonders in these harsh times
REINVEST MONTHLY INCOME SCHEME (MIS) INTEREST
Take a 6-year, 8 percent per annum MIS, Reinvest the monthly interest in a savings account (3.5 per cent interest per annum), which will give you an annualised return of 7.53 percent after six years. Reinvesting in a recurring deposit (7.5 per cent per annum) will give you an annualised return of 7.76 per cent
LADDER NATIONAL SAVINGS CERTIFICATES (NSCs)
NSC is a 6-year instrument, Assume that you buy NSCs worth Rs 24,000 in one financial year, Instead buy NSCs worth Rs 2000 every month till your retirement, Renew every investment after six years and continue doing so until your retirement, Finally the matured NSCs will give regular income, which can be used as pension
USE YOUR PUBLIC PROVIDENT FUND
PPF is a 15-year account in which you can put up to Rs 70000 every year, After the fifth year, make partial withdrawals for tax free funds and contribute Rs 70000 as before from current income to get tax benefits
Thursday, February 19, 2009
Invest Systematically
Systematic investments in a proper way always will help any one to build a decent portfolio.
Investing in too many stocks and too many mutual funds should be avoided, since it will become a burden to track. You have to followup the SIP route for any investments, since you are investing in ups and downs of a product you can easily mitigate the risks.
Before go for an any investment you have to setup a goal for the investment, Like Children Education, Children's marriage, Retirement Corpus kind of. Based upon these goals we need to form our investment portfolio with the help of a financial advisor
Once you get the suggested portfolio from the financial advisor you can start investing systematically and consistently. Over the long period your returns must be good, provided if you follow these things
Investing in too many stocks and too many mutual funds should be avoided, since it will become a burden to track. You have to followup the SIP route for any investments, since you are investing in ups and downs of a product you can easily mitigate the risks.
Before go for an any investment you have to setup a goal for the investment, Like Children Education, Children's marriage, Retirement Corpus kind of. Based upon these goals we need to form our investment portfolio with the help of a financial advisor
Once you get the suggested portfolio from the financial advisor you can start investing systematically and consistently. Over the long period your returns must be good, provided if you follow these things
Wednesday, February 18, 2009
Economy Turmoil - What it means for you
From the earlier days, the human beings will always learn from the lessons and also they changed themselves to adapt with the environment. That’s how we are brought up our shapes differently from monkeys (whom consider our ancients…), the crisis times always change people mind set and their behavior.
The current financial turmoil also somehow reflects the same thing… Based upon the impact of the crisis the changes will happen. Now this economic crisis makes us get in to changes deeper in terms of savings and investments
In America people say this turmoil really changed the mindset of the whole generation about money, about savings and about financial risks. In India we haven’t suffer as much as that, but here also the current young generation (which means between 25 – 35) suffered a lot than their previous generation, means that ppl whom started earning after 1990s and before 1990s.
We don’t know when this will be over but I am sure the future is not the straight upward line as it was earlier. Instead it will have periodical ups and downs. I am sure that many of you may be already see that all around you or some of your friends…
So here are few tips what we suppose to do and what not suppose to do now…
Buying a Home
• Don’t rush in to buy home now, there are few golden principles are there for buying a home, if you met up them then please go ahead. If you need a home for living then there is no time for buy, Please ensure the below things before you buy that
o The EMI amount shouldn’t exceed 20% of your take home (Generally 40%, but by considering the risk of our profile 20% is good)
o Check out the property price and negotiate 50% reduction in the past peak rate
o If you want to buy for an investment better wait until Dec 2009 (In today’s news I have seen DLF has slashed 32% of rates in its existing ongoing projects…)
o Always consult an professional for a property buying
Investing in Share market
• Be sure that if you don’t have any requirement for the investment money by another 7 years.
• Please invest on any investment after you thoroughly knows about its goods and bad
• Invest systematically and phase wise, don’t put all your money in one turn
• Don’t put all your eggs in one basket
• You are not a TRADER but an investor, so please don’t have a trader aggressiveness in your self
• Investing in too many MF’s is risky and later it’s very difficult to follow up them, so invest systematically and choose a core funds and follow SIP route to invest
I have lot to say, but share my knowledge/lessons with you periodically
The current financial turmoil also somehow reflects the same thing… Based upon the impact of the crisis the changes will happen. Now this economic crisis makes us get in to changes deeper in terms of savings and investments
In America people say this turmoil really changed the mindset of the whole generation about money, about savings and about financial risks. In India we haven’t suffer as much as that, but here also the current young generation (which means between 25 – 35) suffered a lot than their previous generation, means that ppl whom started earning after 1990s and before 1990s.
We don’t know when this will be over but I am sure the future is not the straight upward line as it was earlier. Instead it will have periodical ups and downs. I am sure that many of you may be already see that all around you or some of your friends…
So here are few tips what we suppose to do and what not suppose to do now…
Buying a Home
• Don’t rush in to buy home now, there are few golden principles are there for buying a home, if you met up them then please go ahead. If you need a home for living then there is no time for buy, Please ensure the below things before you buy that
o The EMI amount shouldn’t exceed 20% of your take home (Generally 40%, but by considering the risk of our profile 20% is good)
o Check out the property price and negotiate 50% reduction in the past peak rate
o If you want to buy for an investment better wait until Dec 2009 (In today’s news I have seen DLF has slashed 32% of rates in its existing ongoing projects…)
o Always consult an professional for a property buying
Investing in Share market
• Be sure that if you don’t have any requirement for the investment money by another 7 years.
• Please invest on any investment after you thoroughly knows about its goods and bad
• Invest systematically and phase wise, don’t put all your money in one turn
• Don’t put all your eggs in one basket
• You are not a TRADER but an investor, so please don’t have a trader aggressiveness in your self
• Investing in too many MF’s is risky and later it’s very difficult to follow up them, so invest systematically and choose a core funds and follow SIP route to invest
I have lot to say, but share my knowledge/lessons with you periodically
Monday, February 16, 2009
Kindergarten Rules - Investment
Develop a Plan: For your short-term goals, make sure you're taking appropriate risks. Invest money that you'll need in the next two years to five years in cash and short-term bonds. If you've taken on too much risk for short-term objectives, pull back now. There's no telling where the bottom of this market is. It's better to cut your losses and preserve the money you already have for short-term goals. For your long-term financial goals, consider equities.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
Keep It Simple: Buy a diversified equity fund or an index fund for equity exposure and a floating-rate bond fund for fixed income exposure. These are the basics of the investment world. Sure, you can buy many other types of funds (Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc), but it's hard to go wrong with these two. To keep fund selection simple, stick with a diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from exotic speciality and sector funds, unless you have a huge risk appetite and you can take in your stride a 25% loss in a quarter.
Ignore the hot stocks and funds: If you buy this year's top-performing fund or stock, be prepared to see it at the bottom next year. The fancy academic expression for this phenomenon is -- Reversion to the Mean. But the old saying explains it just as well -- what goes up must come down.
Invest Regularly: Investing a little bit of money each month is the surest way to reduce the risk of investing, because you lessen the possibility of buying at the market top. Also, no one is smart enough to anticipate all the moves, both up and down.
Buy and Hold: Short-term trading makes more brokers than investors rich. The income tax department likes the practice, too. If you meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation.
Start Early: It is not the "market timing" but time in the market that matters. Power of compounding will turn things in your favour.
Investing is a long-term proposition. Research your investments, remember your goals, re-examine your risk, and limit how much you listen to day-to-day market commentary. And don't let your emotions overpower your sense of reason.
Saturday, February 14, 2009
Gold Glistening
Intro:
Gold will ensure liquidity and help diversify your portfolio. Invest in gold to get good returns in choppy markets and to hedge against inflation
What to DO?
* To build a corpus, buy a coin or bar of gold on your child’s birthday every year
* Buy from a reputed jeweller in your city
* Avoid buying from banks
* Buy gold ETF through a mutual fund broker. You can also use online trading portal
of brokers to buy ETF
* 2-5% of your porfolio must be in Gold
High returns. In the long term, gold earns high returns. The price of one gramme of gold has gone up from Rs 350 in 1999 to Rs 1,416 in 2009. It is also an excellent hedge against inflation. As inflation goes up, market sentiment and equity prices go down, but gold prices rise. Returns are attractive—from 1995 to 2008, gold has given a CAGR of 12.69 per cent. Gold is trading at very high rates at present— Rs 1,390.02 per gramme. But indications are that the prices would go up further. Analysts expect prices to touch Rs 1,760 per gramme this year. In fact, some even predict a high of Rs 2,200 per gramme. If you haven’t bought this year’s supply, then sooner might be better than later.
Exchange value. When it’s time to cash in on your gold, you can convert the coins into jewellery, or merely sell them at the prevailing rate. Gold coins and bars give you the full value. But, if you are converting gold jewellery into updated designs or other forms of gold, you will lose the making and design charges. Also, jewellery with stones will fetch a lower resale value.
Gold ETFs. Several fund houses sell gold ETF Benchmark Mutual Fund (MF), UTI MF, Kotak MF, Reliance MF and Quantum MF manage gold ETFs. The value of your units on the day you sell would be computed and handed over to you. This way, there is no threat of loss of value, and you don’t have to worry about safely storing your gold. In the future, some of these fund houses may even allow you to redeem units of your gold ETF into physical gold instead of cash. Another alternative is to invest in DSP Black Rock World Gold that invests in equities of global gold mining companies. Due to scarcity of precious metals globally, these companies have done well in the past few years. You can invest as little as Rs 5,000 in a gold ETF.
Tax treatment. You do have to pay capital gains tax when you sell gold in any form. If you sell within three years of buying, you are liable to pay short-term capital gains (STCG) tax. Your gains are added to your income. If you sell after holding gold for more than three years, you are liable to pay long-term capital gains (LTCG) tax. For this, you should calculate your indexed cost, which is your buying price multiplied by the cost inflation index. The difference between this and your selling price attracts 20 per cent LTCG tax.
You have to pay STCG tax on ETFs if you sell your units within a year. Here, too, your gains are added to your income. You are also liable to pay LTCG tax of 20 per cent after indexation if you sell your units after a year.
Gold will ensure liquidity and help diversify your portfolio. Invest in gold to get good returns in choppy markets and to hedge against inflation
What to DO?
* To build a corpus, buy a coin or bar of gold on your child’s birthday every year
* Buy from a reputed jeweller in your city
* Avoid buying from banks
* Buy gold ETF through a mutual fund broker. You can also use online trading portal
of brokers to buy ETF
* 2-5% of your porfolio must be in Gold
High returns. In the long term, gold earns high returns. The price of one gramme of gold has gone up from Rs 350 in 1999 to Rs 1,416 in 2009. It is also an excellent hedge against inflation. As inflation goes up, market sentiment and equity prices go down, but gold prices rise. Returns are attractive—from 1995 to 2008, gold has given a CAGR of 12.69 per cent. Gold is trading at very high rates at present— Rs 1,390.02 per gramme. But indications are that the prices would go up further. Analysts expect prices to touch Rs 1,760 per gramme this year. In fact, some even predict a high of Rs 2,200 per gramme. If you haven’t bought this year’s supply, then sooner might be better than later.
Exchange value. When it’s time to cash in on your gold, you can convert the coins into jewellery, or merely sell them at the prevailing rate. Gold coins and bars give you the full value. But, if you are converting gold jewellery into updated designs or other forms of gold, you will lose the making and design charges. Also, jewellery with stones will fetch a lower resale value.
Gold ETFs. Several fund houses sell gold ETF Benchmark Mutual Fund (MF), UTI MF, Kotak MF, Reliance MF and Quantum MF manage gold ETFs. The value of your units on the day you sell would be computed and handed over to you. This way, there is no threat of loss of value, and you don’t have to worry about safely storing your gold. In the future, some of these fund houses may even allow you to redeem units of your gold ETF into physical gold instead of cash. Another alternative is to invest in DSP Black Rock World Gold that invests in equities of global gold mining companies. Due to scarcity of precious metals globally, these companies have done well in the past few years. You can invest as little as Rs 5,000 in a gold ETF.
Tax treatment. You do have to pay capital gains tax when you sell gold in any form. If you sell within three years of buying, you are liable to pay short-term capital gains (STCG) tax. Your gains are added to your income. If you sell after holding gold for more than three years, you are liable to pay long-term capital gains (LTCG) tax. For this, you should calculate your indexed cost, which is your buying price multiplied by the cost inflation index. The difference between this and your selling price attracts 20 per cent LTCG tax.
You have to pay STCG tax on ETFs if you sell your units within a year. Here, too, your gains are added to your income. You are also liable to pay LTCG tax of 20 per cent after indexation if you sell your units after a year.
Friday, February 13, 2009
Recurring Deposit Vs Short Term Debt Fund
For an investment aimed at a short time span of one year, you should consider a bank recurring deposit. It is also preferable as you want your investment to be risk-free. One can expect similar returns from a recurring deposit and a short-term debt fund, but the former would give safety of capital along with guaranteed returns (interest) while the latter carries no such guarantee.
Think wisely - MF
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
It's a well-established cliché that we should learn from our failures.
So learn from the past failures of you and your friends and start a new begining in the world of investments
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
Traditionally, one divides mutual funds into core funds and supporting funds. Core funds are those that should form the backbone of any equity-leaning mutual fund portfolio. There can be variations, but basically core funds should be conservatively run funds that invest most of their money in large-cap companies, but could invest in any sector or industry as the market conditions justify. Depending on the investor an equity-oriented balanced fund could also be a core fund.
Beyond core funds, there are the specialty funds. These are funds that have some twist in their tail. They have some limitation on where they can invest. These could be limitations of company size, as with small-cap or mid-cap funds or of industry something else. The basic idea is that the fund manager is not free to invest in any company that he or she wants to. There are some limitations imposed by the mandate that the fund has. It should be clear to any thinking investor that there is no great need for funds which come with strings attached.
Not surprisingly, such funds are given to swinging between extremes of performance. When the market was rising, they were rising more than vanilla funds. But when the collapse started, they fell more than them.
It's a well-established cliché that we should learn from our failures.
So learn from the past failures of you and your friends and start a new begining in the world of investments
Bank FD or Debt Funds?
Debt funds (long-term) offer higher tax efficiency and liquidity as compared to fixed deposits. The interest earned from a bank FD is added to one’s income for tax purposes which is taxed as per the applicable slab of the investor. On the other hand, returns earned from a debt fund held for the long term i.e. greater than one year are treated as long term capital gains (LTCG). One can avail the indexation benefit in case of LTCG of debt funds which reduces the tax liability. LTCG is then taxed at 11.33 per cent without indexation or 22.66 per cent with indexation.
However, debt funds are not risk-free like bank fixed deposits. They invest in bonds and hence, carry credit risk and liquidity risk related to the specific instruments held by them. They are also affected by interest rate risk. Hence, the choice of whether to invest in a bank fixed deposit or a debt fund would depend on one’s risk appetite.
SIP is a suitable method of investing in equity funds because equity, as an asset class, is more volatile. For debt, one-time investment is recommended. As for saving entry load, direct investments without an intermediary are not charged entry load. But at the same time, normally, debt funds do not charge an entry load.
However, debt funds are not risk-free like bank fixed deposits. They invest in bonds and hence, carry credit risk and liquidity risk related to the specific instruments held by them. They are also affected by interest rate risk. Hence, the choice of whether to invest in a bank fixed deposit or a debt fund would depend on one’s risk appetite.
SIP is a suitable method of investing in equity funds because equity, as an asset class, is more volatile. For debt, one-time investment is recommended. As for saving entry load, direct investments without an intermediary are not charged entry load. But at the same time, normally, debt funds do not charge an entry load.
Tuesday, January 20, 2009
Gold ETF
Gold ETFs are exchange traded funds that passively track the performance of Gold Bullion. These funds buy gold with investor's money (on the behalf of investors) and convert it into units. The units of Gold ETFs can be bought or sold on the stock exchange, just like shares.
For this the investor needs a demat account. The daily net asset value (NAV) of gold ETFs is decided by the price of gold. Retail investors can only exchange their units for cash and not physical gold. This provision is only available to large investors who can get the units of the Gold ETF redeemed directly from the AMC and get the equivalent amount of physical gold.
But the minimum number of units that the AMC would accept for this redemption has to be in multiples of the Creation Unit. This creation unit is different for different AMCs, varying from 100 units to 1000 units. However, such redemptions could involve complicated tax implications.
For this the investor needs a demat account. The daily net asset value (NAV) of gold ETFs is decided by the price of gold. Retail investors can only exchange their units for cash and not physical gold. This provision is only available to large investors who can get the units of the Gold ETF redeemed directly from the AMC and get the equivalent amount of physical gold.
But the minimum number of units that the AMC would accept for this redemption has to be in multiples of the Creation Unit. This creation unit is different for different AMCs, varying from 100 units to 1000 units. However, such redemptions could involve complicated tax implications.
Thursday, January 15, 2009
Is gold as an Investment?
Gold has a lot of emotional value. But as an investment, it does not have much value. Let me make use of historical data to prove this to you,
In 1980 the cost of per gram of gold is 167.32 and in 2008 the cost of per gram gold is 1137.46. Annualised growth is 7.08%, which is very low and his could be erosioned by the inflation
So is it wrong to put money in Gold? Not exactly...
Gold has its uses, if kept as pure coins and bars:
It has high liquidity. It might take you a maximum of half hour to convert it to cash.
It is easy to procure (again half an hour) and protect (a bank locker will do) compared to other commodities.
Let investment grade (pure gold coins and bars) gold not be more than 5-10 per cent of your financial investment portfolio, as a cushion to manage inflation and emergencies. Count gold jewels as expenses, not as savings or investments.
Suppose the present value of 1000 invested in 1980 in gold (167 rupees per gram) and in sensex (110points). Now the value invested in gold would be 6811 (1137 rupees per gram) and in sensex would be 1,42,222 (15644 points)
Treat gold as a portfolio component to match inflation. It will serve you at its best that way. And if you truly love your children/friend/spouse, do not buy gold coins and jewellery; instead, buy them an index fund for the same value.
In 1980 the cost of per gram of gold is 167.32 and in 2008 the cost of per gram gold is 1137.46. Annualised growth is 7.08%, which is very low and his could be erosioned by the inflation
So is it wrong to put money in Gold? Not exactly...
Gold has its uses, if kept as pure coins and bars:
It has high liquidity. It might take you a maximum of half hour to convert it to cash.
It is easy to procure (again half an hour) and protect (a bank locker will do) compared to other commodities.
Let investment grade (pure gold coins and bars) gold not be more than 5-10 per cent of your financial investment portfolio, as a cushion to manage inflation and emergencies. Count gold jewels as expenses, not as savings or investments.
Suppose the present value of 1000 invested in 1980 in gold (167 rupees per gram) and in sensex (110points). Now the value invested in gold would be 6811 (1137 rupees per gram) and in sensex would be 1,42,222 (15644 points)
Treat gold as a portfolio component to match inflation. It will serve you at its best that way. And if you truly love your children/friend/spouse, do not buy gold coins and jewellery; instead, buy them an index fund for the same value.
Sunday, January 4, 2009
ELSS - An Overview
An ELSS is a diversified equity fund that comes with a 3-year lock-in period and offers tax benefits under Section 80C of the Income Tax Act.
Before selecting an ELSS, ensure that your investment takes into account your risk profile and the overall asset allocation of your portfolio. Remember that the higher returns from ELSS come with higher risk as they are market-linked.
CHOOSING THE FUND
The biggest advantage of an ELSS is that it allows investors to choose products according to their risk appetite. The suitability of a fund depends upon the compatibility of the fund’s strategy with the risk appetite of the investor.
The focus of the fund’s portfolio to different segments of the market, such as large-, mid- and small-cap, gives an indication of the volatility that an investor can expect in a fund. Moreover, the 3-year lock-in reduces the risk in equity investing to a great extent and allows the fund manager to choose stocks with long-term potential without liquidity concerns.
Less Aggressive Funds
SBI Magnum Taxgain
The top performing fund in the 3- and 5-year time frame, SBI Magnum Taxgain retains the flexibility to move into whichever market segment it sees opportunities in. Its mid- and small-cap focus in 2003, 2004 and 2005 reaped huge returns. The fund’s 3-year and 5-year returns of 59.93 per cent and 69.43 per cent, respectively, make it one of the top performers in this space. Since the mid-2006 market crash, it has slowly shifted focus to large-caps. At Rs 3,782 crore, it is one of the largest funds in the category and may make it difficult for the fund to take substantial exposure in the mid and small cap segments of the market. The past performance of the fund and its ability to move into various segments of the market makes it an attractive proposition for investors willing to put up with a degree of uncertainty for higher returns.
Sundaram BNP Paribas TaxSaver
A top performing fund in the category with returns of more than 45 per cent over a 3-year period, this fund again has the flexibility to invest across market segments and has done so successfully in the past.
The fund has always maintained a well-diversified portfolio with 55-60 stocks. So, even if one, or few stocks underperform, the overall performance won’t be much at risk. The fund has reduced its large-cap exposure in the last quarter of 2007 unlike most funds that increased holdings in large-cap stocks during the period. As a fund that can shift across segments, the ability of the fund manager to identify trends early enough would be crucial in the fund’s performance and is suitable for investors willing to take this risk.
HDFC Tax Saver
This is another fund for investors, who would prefer a large-cap orientation in their investment portfolio. Though the fund had benefitted by moving into the mid- and small-cap space in 2003 and 2004, it has focused on large-cap stocks in the last two years. The fund is among the top funds in the 3- and 5-year time frames though it fell in the 1-year stakes.
The 1-year rolling return of the fund at 40.55 per cent still keeps it among the top schemes with more than three years of performance track record.
Franklin India Tax Shield. This scheme is suitable for investors who like steady returns with no surprises. Its biggest advantage has been its ability to negotiate market downturns. The fund has given negative returns in only four of the 20 quarters. It finds a place on this list on the back of its consistent large-cap focus in its portfolio. The returns from the fund at 29.17 per cent, 38.65 per cent and 45.95 per cent over one, three and five years, respectively, have been steady rather than spectacular. Investors willing to trade return for the comfort and lower risk of a large-cap portfolio can consider this scheme.
AGGRESSIVE FUNDS
Principal Tax Savings Fund
This is another candidate for investors willing to take greater exposure to the mid- and small-cap segments. The fund has been among the top five schemes over one, three and five years and has consistently beaten the benchmark and the category average. The fund is suitable for investors who are willing to take a higher exposure to the more volatile small-cap segment since the fund has a substantial exposure to it. The 3-year lock-in gives the fund manager the leeway to take such calls. Nevertheless, the fund is not for the faint-hearted.
Birla Sun Life Tax Relief ‘96
This is another multi-cap fund that has been a steady performer. It has consistently outperformed both the benchmark and the category average. It took a large-cap tilt in its portfolio after the mid-2006 market crash. The fund has taken concentrated exposure to the financial services segment and has benefited from it as is evident from its 1-year return--41.66 per cent. The fund is suitable for investors willing to take greater risk associated with a higher degree of concentration both in sector and stocks.
Before selecting an ELSS, ensure that your investment takes into account your risk profile and the overall asset allocation of your portfolio. Remember that the higher returns from ELSS come with higher risk as they are market-linked.
CHOOSING THE FUND
The biggest advantage of an ELSS is that it allows investors to choose products according to their risk appetite. The suitability of a fund depends upon the compatibility of the fund’s strategy with the risk appetite of the investor.
The focus of the fund’s portfolio to different segments of the market, such as large-, mid- and small-cap, gives an indication of the volatility that an investor can expect in a fund. Moreover, the 3-year lock-in reduces the risk in equity investing to a great extent and allows the fund manager to choose stocks with long-term potential without liquidity concerns.
Less Aggressive Funds
SBI Magnum Taxgain
The top performing fund in the 3- and 5-year time frame, SBI Magnum Taxgain retains the flexibility to move into whichever market segment it sees opportunities in. Its mid- and small-cap focus in 2003, 2004 and 2005 reaped huge returns. The fund’s 3-year and 5-year returns of 59.93 per cent and 69.43 per cent, respectively, make it one of the top performers in this space. Since the mid-2006 market crash, it has slowly shifted focus to large-caps. At Rs 3,782 crore, it is one of the largest funds in the category and may make it difficult for the fund to take substantial exposure in the mid and small cap segments of the market. The past performance of the fund and its ability to move into various segments of the market makes it an attractive proposition for investors willing to put up with a degree of uncertainty for higher returns.
Sundaram BNP Paribas TaxSaver
A top performing fund in the category with returns of more than 45 per cent over a 3-year period, this fund again has the flexibility to invest across market segments and has done so successfully in the past.
The fund has always maintained a well-diversified portfolio with 55-60 stocks. So, even if one, or few stocks underperform, the overall performance won’t be much at risk. The fund has reduced its large-cap exposure in the last quarter of 2007 unlike most funds that increased holdings in large-cap stocks during the period. As a fund that can shift across segments, the ability of the fund manager to identify trends early enough would be crucial in the fund’s performance and is suitable for investors willing to take this risk.
HDFC Tax Saver
This is another fund for investors, who would prefer a large-cap orientation in their investment portfolio. Though the fund had benefitted by moving into the mid- and small-cap space in 2003 and 2004, it has focused on large-cap stocks in the last two years. The fund is among the top funds in the 3- and 5-year time frames though it fell in the 1-year stakes.
The 1-year rolling return of the fund at 40.55 per cent still keeps it among the top schemes with more than three years of performance track record.
Franklin India Tax Shield. This scheme is suitable for investors who like steady returns with no surprises. Its biggest advantage has been its ability to negotiate market downturns. The fund has given negative returns in only four of the 20 quarters. It finds a place on this list on the back of its consistent large-cap focus in its portfolio. The returns from the fund at 29.17 per cent, 38.65 per cent and 45.95 per cent over one, three and five years, respectively, have been steady rather than spectacular. Investors willing to trade return for the comfort and lower risk of a large-cap portfolio can consider this scheme.
AGGRESSIVE FUNDS
Principal Tax Savings Fund
This is another candidate for investors willing to take greater exposure to the mid- and small-cap segments. The fund has been among the top five schemes over one, three and five years and has consistently beaten the benchmark and the category average. The fund is suitable for investors who are willing to take a higher exposure to the more volatile small-cap segment since the fund has a substantial exposure to it. The 3-year lock-in gives the fund manager the leeway to take such calls. Nevertheless, the fund is not for the faint-hearted.
Birla Sun Life Tax Relief ‘96
This is another multi-cap fund that has been a steady performer. It has consistently outperformed both the benchmark and the category average. It took a large-cap tilt in its portfolio after the mid-2006 market crash. The fund has taken concentrated exposure to the financial services segment and has benefited from it as is evident from its 1-year return--41.66 per cent. The fund is suitable for investors willing to take greater risk associated with a higher degree of concentration both in sector and stocks.
PPF Account an Over view
The Public Provident Fund (PPF) is probably the most popular of all the tax-saving schemes. Under Section 88 of the Income Tax Act, you can invest up to Rs 70,000 of your income to claim a rebate of upto 30 per cent depending upon the rate of rebate applicable in your case. The PPF account may be opened at any branch of the State Bank of India (SBI) and its subsidiaries, a few branches of the other nationalised banks, and all head post offices. The minimum deposit is Rs 500.
You need a minimum investment of Rs 500 to keep a PPF account alive, and the maximum you could deposit in a financial year is Rs 70,000
Just about anyone can open a PPF account. You can open an account in your own name or in the name of a minor if you are the guardian. You can even open an account on behalf of a Hindu Undivided Family (HUF) using its income. The account can be opened even if you subscribe to a General Provident Fund or the Employees’ Provident Fund.
However, be warned: you can have only one PPF account in your name. If at any point it is detected that you have two accounts, the second account that you have opened will be closed, and you will be refunded only the principal, not the interest. Again, two adults cannot open a joint account. The account will have to be opened in only one person’s name; of course, the person who opens an account is free to appoint nominees.
A PPF account can be opened with a minimum deposit of Rs 500 at any branch of the State Bank of India or branches of its associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few nationalised like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office or general post office. After opening an account you get a pass book, which will be used as a record for all your deposits, interest accruals, withdrawals and loans.
For how long can you maintain your PPF account?
On paper, your PPF account must be maintained for a 15-year period. However, the tenure actually works out to 16 years, since you are allowed to make your last contribution in the 16th financial year. Even if you make a deposit on the last day of your account (that is, the day it is due to mature), you get a tax rebate, even though no interest accrues on the deposit.
Can you continue your account after the 15-year period?
Sure, but only in a block of five years at a time with no upper limit.
Will you have to continue investing after extending your account?
No. If you merely retain your balance, it will earn 8 per cent interest per annum till withdrawal.
What if you want to withdraw money during the extension period?
After the initial 15-year period, if you choose to extend the account and just maintain the balance, you can withdraw the entire sum in a lumpsum or in instalments. If you withdraw the money in instalments, you cannot make more than one withdrawal a year.
If you continue to deposit money in your account, you can withdraw up to 60 per cent of the balance to your credit at the beginning of each extended period (block of five years). The money can be withdrawn in a lumpsum. If you choose to withdraw it in instalments, you cannot make more than one withdrawal a year.
Do you have to notify the bank about the extension?
Yes. The Central Board of Direct Taxes (CBDT) has stipulated that after 15 years, the tax benefits under Section 88 will not accrue unless you choose to continue the account and deposit money in it.
How much money do you have to put into your PPF account?
Any amount not less than Rs 500 and not exceeding Rs 70,000 in a financial year payable in lumpsum or instalments in multiples of Rs 5. Not more than 12 instalments can be deposited in a year. However, unlike in a bank recurring deposit, you don’t need to deposit the same amount every month.
How much interest do you earn?
The interest rate is fixed periodically by the government. For now, it is 8 per cent compounded annually. The interest for a month is calculated on the lowest balance between the close of the fifth day and the end of the month, and is credited to the account at the end of each year. So, to get the maximum returns, make deposits in the first few days of the month.
How do you withdraw money from your account?
The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account. Of course, you can choose to continue the account beyond 15 years, but you will have to do so in blocks of five years.
Before maturity, you can make withdrawals within limits: from the seventh financial year, you can make one withdrawal every year of an amount not exceeding 50 per cent of the balance at the end of the fourth year or the year immediately preceding the withdrawal, whichever is lower. If, however, you have taken a loan, the amount you are eligible to withdraw will be reduced by the amount of loan you have taken.
If you choose to continue the account after 15 years and make deposits, you can withdraw up to 60 per cent of the balance to your credit at the beginning of each extended period (block of five years). The money can be withdrawn in a lumpsum. If you choose to withdraw it in instalments, you cannot make more than one withdrawal a year.
You can even retain the balance after 15 years without depositing any more money and without intimating the bank. The balance to your credit continues to earn interest till such time as you withdraw it. Of course, you can continue to make one withdrawal a year till you withdraw the entire amount.
Can you take a loan?
Yes, even before becoming eligible for a withdrawal in the seventh year, you can take a loan from the third year onwards. However, you cannot take a loan after you become eligible for the withdrawal facility. The loan amount should not exceed 25 per cent of the amount to your credit at the end of the financial year immediately proceeding the year in which you apply for the loan.
The loan is repayable in a maximum of 36 instalments at an interest rate of 1 per cent per annum. If you are unable to repay the entire loan in 36 months, you will have to pay interest on the deficit. Of course, you will not be eligible for a fresh loan until you repay the first one with interest.
Tax benefits, nominations, minors...
Benefits. Deposits (even those in the name of your spouse or minor children) are eligible for a tax rebate of upto 30 per cent under Section 88 of the Income Tax Act. What’s more, interest accruals and withdrawals are exempt from income tax, and the balance in your account is exempt from wealth tax. Further, the balance in your PPF account cannot be attached by the courts in the event of any debt liability.
Nomination. You can appoint one or more nominees to receive the money in your account in the event of your death. If you were to die before your account matures, your nominees get the money in your account after the initial lock-in period of 15 years. If you are in a transferable job, your can transfer your account to any scheduled bank or post office in the country.
Retirement planning. A PPF account is the most effective tax-saving vehicle for those sunset years which could give you amazing returns, particularly when you consider that there's at no risk at all! When used as an instrument for retirement planning, a PPF account can provide a really big corpus at the time of retirement.
You need a minimum investment of Rs 500 to keep a PPF account alive, and the maximum you could deposit in a financial year is Rs 70,000
Just about anyone can open a PPF account. You can open an account in your own name or in the name of a minor if you are the guardian. You can even open an account on behalf of a Hindu Undivided Family (HUF) using its income. The account can be opened even if you subscribe to a General Provident Fund or the Employees’ Provident Fund.
However, be warned: you can have only one PPF account in your name. If at any point it is detected that you have two accounts, the second account that you have opened will be closed, and you will be refunded only the principal, not the interest. Again, two adults cannot open a joint account. The account will have to be opened in only one person’s name; of course, the person who opens an account is free to appoint nominees.
A PPF account can be opened with a minimum deposit of Rs 500 at any branch of the State Bank of India or branches of its associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few nationalised like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office or general post office. After opening an account you get a pass book, which will be used as a record for all your deposits, interest accruals, withdrawals and loans.
For how long can you maintain your PPF account?
On paper, your PPF account must be maintained for a 15-year period. However, the tenure actually works out to 16 years, since you are allowed to make your last contribution in the 16th financial year. Even if you make a deposit on the last day of your account (that is, the day it is due to mature), you get a tax rebate, even though no interest accrues on the deposit.
Can you continue your account after the 15-year period?
Sure, but only in a block of five years at a time with no upper limit.
Will you have to continue investing after extending your account?
No. If you merely retain your balance, it will earn 8 per cent interest per annum till withdrawal.
What if you want to withdraw money during the extension period?
After the initial 15-year period, if you choose to extend the account and just maintain the balance, you can withdraw the entire sum in a lumpsum or in instalments. If you withdraw the money in instalments, you cannot make more than one withdrawal a year.
If you continue to deposit money in your account, you can withdraw up to 60 per cent of the balance to your credit at the beginning of each extended period (block of five years). The money can be withdrawn in a lumpsum. If you choose to withdraw it in instalments, you cannot make more than one withdrawal a year.
Do you have to notify the bank about the extension?
Yes. The Central Board of Direct Taxes (CBDT) has stipulated that after 15 years, the tax benefits under Section 88 will not accrue unless you choose to continue the account and deposit money in it.
How much money do you have to put into your PPF account?
Any amount not less than Rs 500 and not exceeding Rs 70,000 in a financial year payable in lumpsum or instalments in multiples of Rs 5. Not more than 12 instalments can be deposited in a year. However, unlike in a bank recurring deposit, you don’t need to deposit the same amount every month.
How much interest do you earn?
The interest rate is fixed periodically by the government. For now, it is 8 per cent compounded annually. The interest for a month is calculated on the lowest balance between the close of the fifth day and the end of the month, and is credited to the account at the end of each year. So, to get the maximum returns, make deposits in the first few days of the month.
How do you withdraw money from your account?
The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account. Of course, you can choose to continue the account beyond 15 years, but you will have to do so in blocks of five years.
Before maturity, you can make withdrawals within limits: from the seventh financial year, you can make one withdrawal every year of an amount not exceeding 50 per cent of the balance at the end of the fourth year or the year immediately preceding the withdrawal, whichever is lower. If, however, you have taken a loan, the amount you are eligible to withdraw will be reduced by the amount of loan you have taken.
If you choose to continue the account after 15 years and make deposits, you can withdraw up to 60 per cent of the balance to your credit at the beginning of each extended period (block of five years). The money can be withdrawn in a lumpsum. If you choose to withdraw it in instalments, you cannot make more than one withdrawal a year.
You can even retain the balance after 15 years without depositing any more money and without intimating the bank. The balance to your credit continues to earn interest till such time as you withdraw it. Of course, you can continue to make one withdrawal a year till you withdraw the entire amount.
Can you take a loan?
Yes, even before becoming eligible for a withdrawal in the seventh year, you can take a loan from the third year onwards. However, you cannot take a loan after you become eligible for the withdrawal facility. The loan amount should not exceed 25 per cent of the amount to your credit at the end of the financial year immediately proceeding the year in which you apply for the loan.
The loan is repayable in a maximum of 36 instalments at an interest rate of 1 per cent per annum. If you are unable to repay the entire loan in 36 months, you will have to pay interest on the deficit. Of course, you will not be eligible for a fresh loan until you repay the first one with interest.
Tax benefits, nominations, minors...
Benefits. Deposits (even those in the name of your spouse or minor children) are eligible for a tax rebate of upto 30 per cent under Section 88 of the Income Tax Act. What’s more, interest accruals and withdrawals are exempt from income tax, and the balance in your account is exempt from wealth tax. Further, the balance in your PPF account cannot be attached by the courts in the event of any debt liability.
Nomination. You can appoint one or more nominees to receive the money in your account in the event of your death. If you were to die before your account matures, your nominees get the money in your account after the initial lock-in period of 15 years. If you are in a transferable job, your can transfer your account to any scheduled bank or post office in the country.
Retirement planning. A PPF account is the most effective tax-saving vehicle for those sunset years which could give you amazing returns, particularly when you consider that there's at no risk at all! When used as an instrument for retirement planning, a PPF account can provide a really big corpus at the time of retirement.
Saturday, January 3, 2009
Debt Fund Investments
Debt funds are nothing but investing in fixed income papers. The debt markets includes corporate banks and it comes in both short term as well as long term. Even government securities are also part of this debt funds
All companies need money to run their operations. They will get this money in two ways one is through listing the company and the other one is borrowing the money from some individual or coporate lenders at specific interest rates. The borrower (i.e. the company) promising the lender that he would pay back interest at certain intervals and the principal at the end of the term
RBI the government's bank also borrow money from the market. They will borrow money on behalf of central government, such securities which matures after a year what called as Government Securities and those that mature within a year called as treasury bills.
All companies need money to run their operations. They will get this money in two ways one is through listing the company and the other one is borrowing the money from some individual or coporate lenders at specific interest rates. The borrower (i.e. the company) promising the lender that he would pay back interest at certain intervals and the principal at the end of the term
RBI the government's bank also borrow money from the market. They will borrow money on behalf of central government, such securities which matures after a year what called as Government Securities and those that mature within a year called as treasury bills.
Subscribe to:
Posts (Atom)
Posts
