Insurance Pension products may not help in your retirement plan

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Many of us engage in an economic activity to make a living. And with competition around we often work hard and try to give the best within our means to our family in times where inflation monster haunts us. But while we do all it takes to keep our family happy, prudent financial planning can bring in solace in our endeavor to give best to our children and even save for the golden years of retirement. Mind you, many misconceive ad-hoc investing with prudent financial planning and often think they are on the right path to meet life goals. But let's apprise you that investing along with planning is rather a serious activity and often boring, as against the excitement depicted by the market intermediaries (i.e. agent / brokers / distributors / relationship managers), glamorous business channels and friends.

 

Today, while all of us want to have a cosy retirement life ahead the onus of indeed making it cosy ahead (during the golden years) is on us as investors. There are host of investment avenues available to plan for retirement, but it is imperative that you have the right mix of asset classes in your investment portfolio, which can help you achieve your goal of retirement. Annuity in the form of pension which takes care of our cash flows during retirement is something very much desire; but it imperative to plan for the same wisely and not get lured to inappropriate products, merely getting carried away by the exuberance created by the market.

 

We have often seen investors getting hooked on pension plans offered by insurance companies, in their objective of planning for their golden years. It is noteworthy that earlier, until the new guidelines on pension products issued by Insurance Regulatory and Development Authority (IRDA) came into effect, guaranteed returns were not offered to policyholders. But now by the virtue of new guidelines from IRDA, a number of life insurance companies are planning to launch pension products that will now offer capital guarantee - where you as the insured will at least get back the total premium paid.

 

Life Insurance Corporation, HDFC Life Insurance, Birla Sun Life Insurance and ICICI Prudential Life Insurance have already launched pension products while few others including Bajaj Allianz Life Insurance and Aegon Religare Life Insurance are mulling options.

 

But should you invest in these pension products?

 

Well we are of the view that, in the process of planning for your retirement it imperative to undertake a holistic exercise considering your:

 

• age;
• income:
• expenses;
• risk appetite
• existing assets;
• existing liabilities;
• intermediate goals (which you are catering to viz. children's education and their marriage),
• nearness to goals

 

Taking into account the aforementioned along with the inflation factor (which haunts most of us and has eroding effect on our savings) would help you plan for your retirement prudently by having in place the right asset mix in your portfolio and investment avenues therein. But you need to act early, and not procrastinate executing the plan - as that may not help make your retirement life cosy. Moreover you got to refrain from digging into your retirement corpus, unless you absolutely need to (where your contingency funds are drained out).

 

The pension products from insurance companies, while they provide an annuity they do not help you optimally structure your retirement planning. The aforementioned new product launches are taking place since life insurers offering pension products withdrew them last year following IRDA's guidelines relating to pension plans that said all unit-linked pension plans (in which a part of fund is invested in stocks or bonds) should specify assured benefits on pension plans, applicable on death, surrender or maturity. So, there's no point merely getting swayed by the tall claims and sales pitch of your insurance agent. Instead it is imperative to have structured, intelligent financial plan in place for your retirement which can ensure smooth and cosy retired life ahead.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFundsInvest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

How often should you switch sectors

Invest In Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

 

For any investor, when it comes to choosing between diversification and concentration, it works as a double-edged sword. Concentration is like putting all eggs in one basket. If the stocks or the funds don't perform well or lose money, as an investor with a concentrated strategy, you would suffer losses. On the other hand, with a diversified portfolio, the good performance of some may be offset by the bad performance of the others, and hence you would probably end up getting an average return in your portfolio.

So financial planners and advisors say that you need to cut a balance between the two approaches. And such a balance could be achieved by switching from one sector to another at the opportune time, that is rotate the stocks or the sectors, although such a rotational strategy should not be undertaken very frequently. Depending upon your financial plan which is based on your risk taking ability, you may consider concentrating on 4-5 sectors and then switch from those 4-5 sectors to another 4-5 over a few years. But not all such switches should happen at the same time.

If you are invested through the mutual fund route, one of the main factors to consider for such a switch is the impact cost for the fund, which again could be the aggregate of the impact costs of the stocks in its portfolio. Usually, it is seen that funds which are invested in large cap stocks have low impact costs. Compared to this, medium and small-cap stocks come with higher impact costs. Impact cost is the price one pays in terms of the marginal higher price that the buyer has to pay in case his/her buy order is bigger and such an order can have some influence on the prevailing market price of the stock. Impact cost could also be incurred when a stock is sold, which is in terms of lower price realized by selling a large order.

One of the other main factors to consider while deciding on a sectoral switching strategy through the mutual fund route is how much time the fund manager takes to go from one sector to another. Suppose, the fund holds stocks worth about Rs 50 crore of one company and the daily turnover in counter is about Rs 1 crore. So the average time that will be taken to sell all the stocks of the company is about two and half months (if we consider 20 trading days in a month) without having any major impact on the stock's market price. The next step for the fund manager would be to deploy this money into the stock or stocks that he/she intends to invest in. Here again the fund manager has to take care of the impact costs.

Another factor to consider would be the track record of the fund manager in managing such a fund. "Often fund managers take contrarian calls on some sectors, invest in those sectors which are not performing well and then wait for the tide to turn in favour of these industries. Thus at times sector rotation funds tend to underperform for some time and investors should have the patience to remain invested in such times.

 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFundsInvest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Diversify across assets and sectors even in Mutual Fund Investing

Invest In Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

Investors should diversify to minimize the total risk in their portfolio. The main logic behind this is all sectors, or assets, do not perform well or badly at the same time. So, if one is diversified, it would insulate the portfolio from what is known as concentration risks. Like an investor can diversify across asset classes, he/she can diversify within the equity portfolio or even within the mutual fund portfolio.

In the context of mutual fund, the decision of a fund manager to shift portfolio from one sector to another is called sectoral rotation. This involves a few things on the part of the fund manager. Those are identifying the future winners and getting rid of the nonperformers. And it also entails some costs on the part of the scheme in the form of impact costs of buying and selling of securities, and brokerage paid for such transactions. So, sectoral rotation could come at a higher cost than the pure buy and hold strategy for long term investors. At times, a fund manager may find that a sector has performed over a period of 3, 4, 5 years and may not replicate the same robust performance over the next few years, he/she may decide to sell the stocks from this sector and use the money so realized to invest in stocks from another one or two sectors which could be winners over the next 3, 4, 5-year period.

Here, the main aim of the fund manager is to make smart gains for investors from the fact that not all sectors perform equally well at the same time. Also the fund manager may have seen some smart opportunities which could benefit investors and, hence, sells those which may not be the winners and gets into those sectors which may. However, investors should be able to guard themselves from those fund managers who get in and out of some sectors too frequently, because such a strategy would entail very high costs to the investors in the fund.

From the financial planning perspective, however, sectoral rotation per se should not be one of the objectives for a portfolio, planners and advisors said. They say that the financial planner and advisor should independently be able to look at the funds and then decide whether to advise any or more than one fund to their clients. Also, since each sector comes with a different level of risk, financial planners and advisors should be able to judge and then map the suitability of each scheme to each of client. Each and every plan should have different fund allocation and since sectoral and sectoral rotation funds often have substantial fluctuation, one should advise these funds after due consideration.

Financial planners and advisors also said that every investor who has invested in sectoral rotation funds and have seen underperformance over a few years should have a clear strategy of getting out of such funds. This also holds true if an investor has invested in the stocks of a few sectors directly but is stuck with underperformance.

Often, it is seen that out of say 10 sectors, 4-5 have performed very well while the rest have performed badly. In such cases, investor usually becomes emotional and sells the winners early in portfolio life cycle while holding on to losers in the hope that they would come back above water. Investors are usually averse to get out of their losers quickly, a phenomenon which in behavioural finance is called the disposition bias.

The fact is some time certain investments could be like a boat with a hole. If you don't jump out of it at the right time, and try to salvage whatever you can, in future the entire boat might sink, and the loss could be much higher.

 
Financial planners and advisors usually review a portfolio every six months to check if the portfolio is as per the original plan on track or has veered off track. And while reviewing a portfolio, the two most important things the planners and advisors look at are the performance of the funds in the portfolio and the taxation policy. At times it is seen that a change in the government's taxation policy, especially after the annual Budget, could impact the performance of some types of funds. In such a situation, a review of the funds and their future performance becomes necessary.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFundsInvest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Investing in International Funds

Invest In Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

 

The reason you should consider global investments is that by spreading your money among several markets, you achieve what stock market theorists have been propounding for years-diversification and hedging risk by spreading it across a mix of assets and markets. However, investing in international funds is tricky because each fund is radically different from the other in its investment mandate and portfolio composition.

 

Currently, three types of global funds are available: those that allow direct investing into global markets; funds that use the feeder route to invest in an existing global fund; and lastly, fund of funds that invest in several funds to achieve international exposure. Some funds have geographical focus and some invest in a sector or a theme such as agriculture or commodities. You need to decide on the kind of exposure you need to invest. There are also funds that have a domestic and international exposure such as Templeton India Equity Income or Birla Sun Life International Equity. Both are equity diversified offerings and completely unbiased towards any sector, theme, asset or region. Another aspect that you should be aware of is the tax implication when investing in international funds, funds with less than 65 per cent domestic equity exposure are taxed as debt funds, which means short term and long term gains tax applies.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax PlanInvest Online
2. HDFC TaxSaverInvest Online
3. DSP BlackRock Tax Saver FundInvest Online
4. Reliance Tax Saver (ELSS) FundInvest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) FundInvest Online
7. SBI Magnum Tax Gain Scheme 1993Invest Online
8. Sundaram Tax SaverInvest Online
9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFundsInvest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund