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Tuesday, 31 December 2013

Debt Mutual funds vs Bank deposits

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Since the start of 2012, there's been a huge debate onto the selection of appropriate investment option among Bank deposits and debt funds or debt Mutual funds. After the announcement of CRR cut by 50 basis points on January 22 this year, it is expected that RBI may move from its stance of controlling inflation to Increasing growth, which means easing of interest rates. If this is going to happen then what should an Investor do? Should they lock in their savings into highly paying fixed deposits at the rate which may not be there after few months or should they take advantage of falling interest rates by investing in debt funds. Through this article I am going to give you a brief idea on what to do after understanding the basics.

What constitutes Bank deposits?

Bank deposits comprises of saving deposits and Fixed deposits which in technical terms called as demand deposits and Term deposits. Most of the banks are offering Fixed deposits rates to the tune of 9.50% p.a for 1/3/5 year term. Senior citizens will be provided 0.5% extra. Effective 25th October'2011 RBI has also deregulated the saving account interest rates which results into many banks start offering 6%-7% on the saving account balances. But here one should understand that these rates are not permanent in nature. As and when RBI starts with its rate cut spree and liquidity starts increasing in the market, all these rates are bound to come down.



What constitutes debt Funds?

Debt funds or Debt mutual funds are those instruments where fund manager invests in the short and long term debt instruments issued by banks, corporates and even government. The papers that the fund manager purchases vary in duration of maturity so these debt funds are sometimes called as duration funds. The investment is generally in the debt papers which carries a fixed coupon rate and pays at regular intervals so debt funds are sometimes called as Income fund also. So depending on where the fund manager has invested and what's the duration of papers

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 Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest 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
    1. 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
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
Posted by at 08:53 0 comments

Changes in Unit Linked Insurance Plans

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Call 0 94 8300 8300 (India)

 

 

The first question that generally comes to your mind whenever you are subject to abuse is when reforms would come into place that would salvage your situation. Mis selling is a rampant practice in insurance. You surely know of someone who was mis sold an insurance policy? Insurance agents have not exactly covered themselves in glory and have indulged in rampant merciless selling of unit linked insurance plans. This is mainly to secure higher commissions and meet their marketing targets as these products were high profit making products for these insurance companies. What Do You Think Happened Because Of This? There is a saying " Trust Once Lost Is Forever Lost ". The result of this was these insurance products as well as agents got a bad name and the operation sell sell sell blew up in the face of these insurance companies. Mission " Clean Up " was necessary and was initiated by the " Insurance Regulatory And Development Authority Of India ". The aim of these sweeping reforms in Unit Linked Insurance Plans was to restore faith in the minds of the public in such policies and save the life insurance agencies from certain death. These unit linked insurance policies per se were not bad but the " Horses For Courses " practice was not being followed .These products were marketed as the " Be All And End All " of all insurance products.

 

For further information on the topic you can CONTACT Prajna Capital on 94 8300 8300 by leaving a missed call.

 

There Are No Shortcuts in Life

You must be knowing about the US Subprime crisis and the impact it had on the Indian Stock markets. There was a huge crash in the stock market in September 2008 leading to risk averseness among the investors in the markets. This was followed by a booming rise in the markets from May 2009 up to December 2009 and markets continue to rise higher and higher even today. This resulted in great excitement among insurance companies as they had a new weapon none of their predecessors possessed." The ULIP ". This was an instrument which combined the insurance component with an investible portion and since the markets went sky-high the potential for these instruments was immense. These policies encouraged shortcuts where premiums were payed only for about 3 years .The insurance company charged high costs and deductions on premiums and recovered their expenses and made huge profits at the cost of the customer. The result of this was a very low persistency ratio of less than 50%.Policy holders did not renew these policies and this gave a bad name to insurance agents leading to sweeping reforms in the sector." There Are No Shortcuts To Success ".

Reforms In The Unit Linked Insurance Plans

Lock In Period

You must be knowing that the lock in period for ULIP Policies was raised from 3 years to 5 years. Why Was This Done? Most of the policyholders surrendered their policies within 3 years of taking them up , the surrender value being very low. You know that the ULIP is designed such that the charges are very high initially and gradually decrease to nil. You would incur very high costs initially but these costs would gradually reduce to nil. The returns would be higher if you stay locked in for a higher period of time say 5 years .Most of the policyholders surrender these policies within three years as they do not realize any profits and suffer heavy losses and have burnt their fingers. They commit a bigger blunder to the one initially committed by surrendering these policies for very low values.

Commissions for Agents

You know that before the reforms in ULIP's came into place insurance agents profited heavily for the three years in which about 40 % of the premium amounts went as commission to the agents in the first year itself. This was followed by 10% in the second and third years respectively. This was a major incentive for the agents to mis sell the ULIP Policies. Agents fattened themselves on these commissions and the invested policy holder was left with nothing. The agent would then focus on selling a new policy to the same customer asking him to surrender the policy which obviously fetches nothing and then you would find him at your doorstep with a so called better policy. Under the new policy the insurance agents would be allowed to charge 4 % on the annual premium paid for the first 5 years. For plans of 15 years 2.25% on the annual amount will be charged.

Increase in Mortality Cover

You know that ULIP policies should compulsorily have a health cover or a mortality cover. The mortality cover for a person who enters these policies below 45 years would be 125% of the single premium in case of single premium policies. In case of regular premium policies we have 10 times the annualized premiums or (0.5 *T*annualized premium) whichever is higher. In case of a person above 45 years it would be 110% of the single premium on a single premium policy and 7 times the annualized premiums or (0.25 *T* annualized premiums) whichever is higher. At no point of time should the death benefit be less than 105% of the total premiums inclusive of the top up. So why was this done? Initially the mortality cover was 5 times the premium as most of the premium went towards commission charges. Now with the commission of agents reduced higher percentage is allocated for mortality cover .Prior to September 1st 2010 no medical test was required on a ULIP Policy .You must be wondering why it is so? .The medical cover was insufficient to match the policy holders needs .Hence as health cover was not the prime motive of these policies the medical tests never came into the picture.

New Rules Regarding Unit Linked Pension Plans

Before the reforms if you surrendered that ULPP Plan you would get only your fund value back. After deduction of charges the surrender value obtained would be very less. Under the new rule the policy is locked in for 5 years and you cannot get any surrender value during this period. You get a third of the fund value or the assured amount according to the type of your policy after 5 years. The remaining amount is locked in a compulsory annuity policy given to you on your pension plan. This locks in value for your retirement years. Now You Have To Think Carefully Before Taking That ULPP Plan. The ULPP Plan now guarantees a return of 4.5% per annum for annuity and pension products.

Surrender Value of These Policies

Before reforms you would lose heavily if you surrendered those ULIP Policies within a year or two due to any financial emergencies. You would incur surrender charges up to 90% of the fund value or the annual premium .Wouldn't you be left with almost nothing? .Now the surrender cap is INR 6000 per annum which gradually decreases with passing years and is nil from the sixth year onwards. This gives you a huge benefit vis a vis the earlier conditions where if you are now forced to surrender that policy you would get a decent surrender value.

Rules governing Guaranteed Net Asset Value Unit Linked Insurance Plans

I would like to explain to you how these guaranteed highest NAV ULIP Plans work. Let us consider a policy which has an NAV of INR 20.This policy allocates 100% of the available corpus in equity. Now there is a massive bull run in the market. The NAV is now INR 25 in the third year. The investor expects a minimum NAV of INR 25 as it is the highest NAV so far among the seven years. The insurance company will invest a proportion of this equity amount in debt instruments such that it gives an NAV of INR 25 in the next four years , where the debt instruments give a rate of return of 6-7%.The remaining proportion is in equity which he continues to invest in the market. Since there is a massive bull run inspite of allocating amounts in debt the insurer is left with huge proportions in equity. Now at the end of the 7th year NAV falls to INR 15 the policy holder expects an NAV of INR 25.Since this amount is locked in the debt instrument it is guaranteed and if he liquidates the portfolio he still gets an NAV of INR 25.The equity component reduces in the hands of the insurer at this point but since he stays invested he can pocket this amount and liquidate it when the returns are high. Similarly his returns increase in proportion to the number of units invested. The policy holder gets the highest guaranteed NAV of INR 25. The IRDA wants to ban these products on grounds of ambiguity as these are actually debt instruments masquerading as equity instruments. The policy holder thinks he has invested in an equity instrument which is actually a debt instrument.

Only In Growth Reform And Change Can True Security Be Found

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 Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest 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
    1. 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
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
Posted by at 07:54 0 comments

Choosing Financial Planner

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Call 0 94 8300 8300 (India)

 

 

 

To sum it up in one line - A Financial Planner puts client's interest first, before his own interest; since he is getting paid for giving financial advice.

 

While choosing a Financial Planner you should consider some of the points below:

 

Licenses, credentials or other certifications:

 

Anyone who charges fees for giving investment advice needs to be registered with SEBI under Investment Adviser Regulations, 2013. Already few financial planners have got their registration certificate from SEBI. So, if your financial planner is charging fees, he should be registered as Investment Adviser with SEBI. You should also ask if the planner has additional certification like CFP (Certified Financial Planner), or any other similar certification or degree relating to this field.

 

Services offered:

 

You should know what kind of services the planner offers. Services can be goal based financial planning, estate planning, mutual fund distribution, insurance agency and PMS, etc. If the planner provides distribution services, then it is easy for you to implement the financial plan. But, on the other hand there can be bias in the recommendation given by the planner since he earns commission on the investment / insurance product you implement through him. So the planner must disclose the commission that he will earn if you implement the plan through him.

 

Fees:

 

Financial Planner charges fees for preparing a goal based financial plan for your financial future. Average fees for a financial plan ranges from Rs.15,000 – 25,000. The planner may charge additional fees for estate planning (preparing a will or incorporating Trust). You should also check that the planner does not have differential fee structure if you implement plan with him and if implement by yourself from a third party. The fees paid usually covers planning and review of the financial plan for a period of one year; so you should also ask about it before entering into a contract with the planner.

 

Basis of recommendation and research:

 

You should know on what basis the financial planner is recommending particular investment or insurance instrument. You should ask if the planner has a research team or he outsources research. This is important because the planner cannot recommend any investment / insurance without studying or knowing the investment / insurance product. Also, you should ask whether your risk profile would be assessed and considered for recommending investment.

 

Client Planner interaction:

 

During the initial stage of data gathering and analyzing the financial situation, there is a lot of interaction between you and the planner. Apart from that, in the later stage after the plan presentation and implementation; the planner should review your portfolio and your goals periodically. You should ask how often your portfolio and the financial plan would be reviewed. Review is the most important part of the financial planning process.

 

These are the some of the points, which you should consider and know about the Financial Planner before choosing one for you. Some of you may not be aware that what is there in a Financial Plan and how does it look, so you can ask for a sample financial plan from the planner. Looking at the sample financial plan, you can get an overview and brief idea of what are the components of a financial plan. Since, now all Investment Advisers are under SEBI's eye; and thus they are obligated to comply with the regulations.

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 Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest 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
    1. 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
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
Posted by at 07:12 0 comments

Financial Planning and Living Happy

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)
 

1. Happiness and Sadness are inseparable. There's nothing called as opposite to each other. Everything which seems to be opposite is actually complimenting each other. You cannot enjoy one thing if you have not experienced the other. So accept the life with open hands and handle the situation as it is. Learn to recognize happiness in your life which can turn into sadness if not handled carefully. Both are state of mind.

Same way Gain and Loss or Safety and Risk compliments each other. You have to accept both. When you are looking for some investment which can generate you good returns then you should also be alive to the Risk portion in that instrument and should understand the potential losses in that. If high returns can bring happiness, then you should also accept high losses which may bring sadness. The main thing is when you are in profit, how you handle it. Do proper asset allocation.

2. Live in Present and work towards your future : Past is gone, you should not keep on cribbing about it , future is uncertain and you can't be sure on how it is going to be like. So better to learn from the past, live in present to improve your future. Try to be happy in this moment. But you have to define happiness. You should know what makes you happy and what you need to do to make yourself happy.

In Financial planning also the main goal is to keep your finances happy. The money should get the respect it deserves without compromising on your Current lifestyle, so you stay happy. Also it may, If necessary tweak upon some areas of your personal finance to increase the overall financial happiness. In reality Financial planning brings your future into present and encourages you to define every step and goal that makes you happy and design a structure to achieve those goals, and thus allows you to enjoy the journey.

"The Art of Living Lies in eliminating your troubles then in growing with them"

3) Whatever you do give your 100%: This is one of the very important learning I had from Art of Living course. You should not regret later that had you done that thing at that time, your life or experience would have been better. Either you accept it to full or ignore it completely, but whatever you are doing give your 100% to it. You can only do efforts and results are not in your hand.

Financial Planning gives you a holistic view of your personal financial life and Planner will advise on each and every aspect of your personal finances which matters to help you reach your financial and life goals. But following it in bits and pieces may not result what was expected. Concentrating only on savings or investments but ignoring insurances may prove to be risky, worrying about increase in income and not working upon reducing expenses will only increase tension. In financial planning to derive the actual benefit you have to follow it 100%.

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 Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest 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
    1. 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
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
Posted by at 06:08 0 comments
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