Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Thursday, 1 August 2013

Debt Fund Investments are for Short Term Goals

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Such investments generate higher returns than Bank FDs, and also help save on taxes on the investment


Usha Kamble (name changed), a media professional, was recently planning to buy a health insurance policy for her family of three. She was fine with the yearly premium amount. But she was concerned that every year around the same time, she would have to cut down on some of her regular expenses to take care of the premium amount.


She was given two solutions which could lighten her burden. One was to start a recurring deposit with a bank for 12 months which, at the time of maturity, should take care of her annual premiums. The other was to start a systematic investment plan (SIP) in a debt mutual fund, from which she could redeem the premium amount each year.


The first option, a bank RD, is nearly risk-free. On the other hand, while an SIP in a debt mutual fund may not be as safe as the first one, it has the potential to earn Kamble a better tax-free return in addition to some extra returns in terms of capital appreciation too.


People in their daily lives may face a number of such situations like Kamble — it could be paying the annual tuition fee for a child, or the six-monthly payment for a coaching class, taking care of the family's annual holiday expenses, or even planning for a new car after three years.


In India, mutual funds are mostly understood as long term investment vehicles. However, the fact is there are solutions within the fund space which one can use intelligently and judiciously for better returns and also for better peace of mind. All the above mentioned expenses, and also emergency ones, can be taken care of by various debt schemes.


Most debt schemes come with some tax advantage over comparable products and, hence, chances are you would get something more than what you are actually planning for. The point to note here is that equity schemes are not suitable for meeting such short- and medium term financial goals.


For example, for meeting your short-term needs, like a payment that has to be made every six months, you can use ultra short term funds. While, for meeting your annual payments you can go for dynamic bond funds or another debt fund that does not charge exit loads for redemptions above one year. This is important because if you have to pay an exit load (which some of the debt funds charge), then your total corpus would be reduced by the amount of the exit load.


Another caveat is that ultra short term funds carry some credit risks, but given how Sebi regulates the industry, the chance for you to not meet your target is low. On the other hand, the chance of you getting more than what you are aiming from a competing product is high in case you are invested in a fund scheme. On top of all these, you also tend to enjoy better tax advantages when you invest through the fund route.


The two accompanying articles, one by Surya Bhatia and the other by Jiju Vidyadharan, give two varied perspectives to the same idea — that of using debt schemes to meet your short- and medium-term financial needs.

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 18:13 0 comments

Risks in debt funds

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

Debt funds are not entirely risk-free, as events in the wake of the RBI's July 15 measures demonstrated



Every time there is a fall in the net asset value (NAV) of debt funds, there is panic. Investors inevitably ask: if there is no default and the fund is receiving its interest income, how and why should the NAV fall? A drop in the NAV of a debt fund can trigger alarm and lead to a precipitous closure for some, as happened in 2008. The market risks in mutual funds are not widely understood, leading to accusations that these should have been avoided somehow.


Investing in a debt fund is quite different from doing so in a bond or fixed deposit. In the case of a fixed deposit, the investor agrees to an unrealistic freeze in rupee return, in exchange for convenience and simplicity. The government no longer determines interest rates in our economy, nor are they dictated by powerful institutions. We have transitioned to a market for interest rates, and this market enables money to be lent and borrowed based on the needs and views of a large number of participants.


In such a market place, there are only prices and clearing. There is no right and wrong. If a borrower is willing to pay 8% for a year, and a lender agrees to it, the exchange of money is cleared at the agreed rate. Alternatively, the borrower might be in the market today believing that rates are set to rise and, therefore, wanting to borrow today; the lender might hold the view that rates are set to fall and, therefore, may be eager to lend. We will never know the motivations, nor will we be able to identify why rates move up or down. At the end of the day, as long as everyone keeps their promise, we have a market where rates are determined efficiently and fairly.


When an investor chooses a bank deposit, he does not select the market. This is the reason he settles for a 4% rate on his savings bank account, while the bank itself lends its surplus balance for 8% in the call market. The bank is in the market for overnight funds, lending and borrowing as needed, while the saving bank depositor is standing outside, content with a fixed rate What happens when such an investor chooses a debt fund? He simply steps into the market place for borrowing and lending. Here rates change based on demand and supply and the views of various players. This investor makes 9% on his liquid fund, when money market rates are high; he makes 4% on his gilt funds, when interest rates have risen; he makes 12% on his income fund, when credit spreads fall; and he makes 16% on his short-term fund, when rates correct sharply.


A debt fund also pools in money and creates a portfolio much like an equity fund, except that it buys debt securities issued by governments, banks and companies. If a five-year bond is issued at an interest of 10%, and the fund buys it, it earns this interest like any other investor. However, since a debt fund is an open-ended product in which investors come and go as they please, it accounts for the interest income on a daily basis.

Therefore, the NAV of all debt funds will hold a component that represents this steady accrual income. This income will come to the debt fund unless there is a default. However, if interest rates move up to 11%, while this bond continues to pay 10%, you cannot have a market where the same good (same issuer, same structure, same rating, same tenure) has two prices. The old bond is less valuable since it pays less than the current market rate of 11%. Its price falls. The NAV has to correct for this new value. This is the market risk in debt funds.


Why do interest rates change? If market participants expect inflation to change, they will modify their expectations for rates. Or if they desperately need money, they will offer a high rate, as they do in March every year. Or, they may seek a different rate given their preferences arising from their own balance sheets.


Rates can sometimes change unexpectedly. Last week, the RBI decided to curb speculative positions that may be abetting the rupee's depreciation against the dollar. It wanted to make the rupee scarce to arrest its slide. A 2% hike in bank rates and in marginal standing facilities was announced. This hurt liquidity in the market and, in response, rates went up sharply.


What happened to debt funds? They were holding bonds and debt instruments, including money market instruments that were issued at historical rates. The RBI action also precipitated a change in market expectations, where players began to think that the RBI would increase policy rates too. An increase in market rates meant that the value of debt securities in the portfolios of debt funds fell.


A debt fund's steady accrued income of, say, 2p a day (that is 7.4% a year), may not be enough to cover steep changes in the value of bonds arising from variations in interest rates. However, the steadiness of 2p will also ensure that these losses are recovered over time. The funds with longer tenures have too many cash flows in the future and, therefore, correct more when interest rates increase. The shorter tenure funds typically correct less when rates change. However, if the change is both unexpected and steep, as happened on 15 July, the correction is significant.


Some investors will continue to dislike market risks and seek deposits; others will take the ups and down in their stride as long as they know the pricing is fair. Each to his own.

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 16:52 0 comments

Gold could fall another $500/oz

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

The price of gold could fall below USD 800 an ounce over a long-term horizon, a drop of some USD 500 from its current level of USD 1,294 an ounce, Duke University's Campbell Harvey told CNBC on Monday.

 

Harvey, who works at Duke University's Fuqua School of Business, said that over 2,500 years of history, the real price of gold (the nominal price adjusted for inflation) had remained roughly the same.

 

"Right now we're way above the mean," Harvey said, suggesting that the price of gold would correct over the long-term to approximately USD 800 an ounce.

 

"If you look historically, it doesn't just go down to the average and stay there. It actually goes through and falls below, then comes back up," he said.

 

The price of gold could therefore potentially go even lower than USD 800, he said. "It has been lower in recent history."

"It might not be tomorrow," Campbell added, but "the cycles go in 10-15 years, and we're well into one of these cycles."

 

He said investors mulling the price of gold should focus on demand rather than supply, which he said was "amazingly constant".

A slowdown in growth in China, as evidenced in data released on Monday which showed that growth had slowed to 7.5 percent, was one potential indicator of lower gold demand.

 

"China is a demander of gold, lower growth there means lower demand," Campbell said.

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 14:14 0 comments

Do not delay EPF withdrawal If its Idle for more than 5 years

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 


If your account is idle for over five years, there could be issues with acquiring EPF details

 

In 1999, Bangalore resident Meenakshi Harish ( name changed on request) left her job at a leading software firm to get married and settle in the US. Meenakshi returned to India in October 2010. Now that she was in India and had parents / in- laws to support her, she decided to start working. She partnered a friend to start a technology firm.

Given that Meenakshi had not been working for nine years, she had very little savings. In addition, she did not want to take her husbands help beyond his second property that she used as office space.

This was the time Meenakshi remembered her employee provident fund (EPF) corpus that was untouched. All these years, she had forgotten about it like anyone else.

The question was how to withdraw that corpus. A banker friend scared her by saying that claiming from the Employee Provident Fund Organisation (EPFO) can take an entire life. As luck would have it, it came true.

Meenakshi learnt she needed her provident fund ( PF) account number. She contacted her last employer. Though the human resource department of any firm should be able to hand over the PF account number with the help of the employee code/ number, Meenakshi was left helpless because it had been around 11 years since she had left the organisation and her details had to be searched for.

She then approached the regional EPFO office. The officials denied any help without the PF number. It took two months before she could fill the withdrawal form with her former employer.

"By the time the employer processed the form and submitted it to the EPFO, it was February 2011. In November 2011, EPFO misplaced my application/ records. I had to go through the entire process again. Since January 2012, my file is stuck with them," she says.

Typically, it should take 30- 60 days to get the claim processed but many quote a longer timeline. This does not mean everyone has a hard time. According to certified financial planner Pankaj Mathpal, claiming unclaimed PF amount gets difficult only in certain situations.

According to certified financial planner Malhar Majumder, "One can face endless problems when applying for unclaimed EPF. Hence, it is common advice to hire consultants for this job." So, what are the things you need to do here?

Requirement of documents

When you make an application to withdraw your EPF corpus, among other documents you also need to give a copy of the resignation acceptance letter from the last employer. " Some EPF offices may accept the relieving letter while some may not. There is no uniformity about which documents need to be submitted. It all depends on how each office interprets the requirement, says Majumder. According to an human resource ( HR) expert, sometimes EPFO executives wont trust your original documents and might ask you to furnish a separate letter from the last employer, stating the same things as in the experience letter

Exempted EPF

Under the exempted provident fund scheme, an organisation forms its own PF trust for its employees. The employer executes the trust deed, prepares the PF rules and nominates the trustees from among its employees for managing the trust. Apart from the fact that claiming any unclaimed money is difficult, with a trust system the problem is they have their own set of rules and you have no alternative to check the status of your application. With unexempted PF, a status check is possible.

Address change:

If your past employer is not in the same city as yours, then you can face problems. Your claim application will be processed in the city your employer is in. Therefore, getting to know if the claim application has reached the EPFO office and following up there after, becomes an issue.

Employment term &  time since resignation

Like in Meenakshis case, if you quit many years earlier, finding your details can be an issue. Many times, your former employer may not cooperate. Your employer could also refuse to cooperate if you served for a very short term with it.

May have to file multiple applications

Another HR expert says many times, EPFO does not give the entire amount accrued. This is specially problematic for those withdrawing soon after quitting or retiring. " Say one retired in December 2012; he may be paid the money accrued till March 2012. It is said the EPFO keeps some amount, say last six months or one years' contribution and interest in an escrow or intermediary account. In that case, a second application needs to be filed to get the remaining money. For this, one needs to know how much corpus had accrued in the account, which most don't know

That's why he advises people to wait for a year before claiming the corpus because then, there is no need to apply twice and the account earns interest for 36 months even without contribution.

Relationship with employer at the time quitting

A Haryana- based college professor says his last employer refused to cooperate with his EPF withdrawal because he left the institute over uncordial terms. It took the professor almost two years to get his money. Or, when one does not serve notice period and does not pay for the same, employers could not release the EPF, says Mathpal.

Approaching PF Commissioner

Experts unanimously opine that a PF commissioner can be of help in such cases.

However, getting to him/ her can sometimes be more difficult than getting the claim. Meenakshi recalls having caught the commissioner only once till now but did not get enough time to explain her issue.

Therefore, it is advised that you transfer your EPF corpus each time you switch jobs because if you need to claim from multiple employers, then you might need five- six years. Transferring the corpus can be equally tedious.

 

|To be safe, remember your employee code

|Send forms to previous employer, who will process it and send it to EPFO |Companies with PF trusts may ask you to apply to the EPFO directly

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 13:08 0 comments
Subscribe to: Posts (Atom)
Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts