Tuesday, December 30, 2008

Steps of Financial Planning !

1) Gathering Data, including Goals:
The first and foremost task of Financial planner is to gather information about clients financial situation. He should have all the information about the income of the clients and the expenses of the client including big ticket expenses like marriage or sending children for higher education and the time frame of each of the big events.

2) Analyzing and evaluating clients Financial Status:
Financial planner should analyze clients information to assess his current situation and determine his long term and short term goals. Determine the clients risk taking capacity as well as understand how much financial risk cover he has regarding his life, bussines, health cover and other such risk management tools.

3) Developing and presenting Financial Planning recommendations:
Financial planner should offer financial planning recommendations based on clients situation and his financial goals. FP should also explain properly each and every decision and the return and risk involved and also about the flexibility of that plan. so the client can always make informed decision

4) Implement Financial Planning recommendations:
The FP and client should agree on how the recommendations would be implemented. The client can implent on his own if he has the expertise and the FP can act as an coach. or FP can also do the implementation part as well.

5) Monitoring the financial Planning recommendations:
The plan and the financial goals should be monitored periodicaly atleast once in a quarter to maintain the status quo both the client and FP should revied and if need be change the plan depending on the clients current financial situation or as per the change in his goals.

Financial planning is not one time event. Its a continous monitoring phase.

I recommend everybody to plan and Lets plan to get Rich !

Monday, December 29, 2008

Investment Planning Fundamentals

Most of the people in India believe in savings. Right from the rich people to the kids who save via piggy bank to even the beggars who have bank accounts. Saving is very important habits period.

Majority of this saving is either lying with some care taker or in savings account or in piggy bank or simply lying in your godrej cupboard meaning its lying idle. Its sleeping

The important lessons to be learned is that its very good to save but the money which is saved should also be invested in right asset class. Your money should also work as hard as you work to earn that money. Money should keep growing keep multiplying.

anything not used today and saved for the future use can be considered savings.

The most important and common fundamentals of investment planning are
1) Start saving and investing early
2) Invest Regularly
3) Ensure higher returns with calculated risk management

(Investment of Rs 1000 per month invested in assets which gives 8% , 12%, 15% for 25 years will become 9.5 lacs, 18.78 lacs and 32.43 lacs respectively)
so two person with same amount of savings for 25 years one will end up with Rs 9.5 lacs and the other may end up with Rs 32 lacs. so one can be richer by (32.5 - 9.5 = 23 lacs) by simply changing your decision in right selection of asset class and risk management.

Mr Antulay investing Rs 5000 per month in PPF for a return of 8% compounded and Mr Bhanusali investing same amount Rs 5000 per month in ELSS which has given average return of 15% .
After 30 years
Mr Antulay had = 74.5 lacs
Mr Bhanusali had = 3.46 crores
While safety of capital is important but also taking risk in calculated and planned manner can give you huge returns.

Saturday, December 20, 2008

Bank Customers BE AWARE of online Fraud !!!! Simple steps to prevent online theft

Today I received an email in my mail box, It looks very normal but this is a MODERN DAY LIGHT robbery. If the customer's of AXIS bank who transact online fall for it and give there login and password and even more there credit card and debit card details they will be robbed of there money.

BE AWARE
1) Do NOT ever click on a link you receive in your email.
2) NO bank will ever ask for your password online
3) If by mistake if you open a link in the email you can verify with the webaddress displayed there will point to some other server address
4) In case you use online banking account EVEN on official site always type in the web address and you should only enter your login and password when it is secured meaning on the top you see https://www.xyz.com. http:// is your regular web address and https:// The 's' signifies that its secured web address

I strongly beleive that authorities should take strong action against such people and the they should make heavy penalties to the server which host such daylight robbing website.



==following is the copy of the spam email i received==

Please Confirm Your Online Banking Profile

Saturday, December 20, 2008 10:36 PM
From:
To:
undisclosed-recipients

AXIS BANK

Dear Reliable Customer,

Your online account security is important to
AXIS BANK. We confirmed a change on your banking details and if you did not authorize this change, please verify your details immediately at the secure server webform by clicking the link below...

http://www.axisbank.com/cgi-bin/netbnx/Password=logon.

This alert relates to your Online Banking Profile only.

© AXIS BANK

Monday, December 15, 2008

How to reduce the Home loan rates ?

One of my client Mr Arvin, who has taken a home loan. He was very upset and angry at the banks. He has taken a Home loan couple of years back when interest rate was around 8% since his was a floating loan, every time benchmark interest rates went up, his interest rate also went and they went such high in early 2008 that it almost reached 12%.

The banks are so smart that as soon the benchmark is declared they hike there rates with immediate effect. Now the reverse has started to happen.
The interest rates have started to come down and for banks to follow them it takes a long time. now the old customer is stuck up. and the existing ones will not get the benefit of lower rates.

The options existing customer has are as follows
1) Move the loan from the current bank to another bank but this will incur him a PREPAYMENT penalty
2) Renegotiate with the existing bank to reduce the rates but this is tough cookie to crack but still most practicable.
3) Pre - pay as much as possible in order to reduce the impact of EMI.
4) I think there has to be some ombudsman like mechanism were in customer can complaint about the banks not reducing the interest rates when benchmark indices are reduced

Kindly do share your experience if you have faced similar problems.

Saturday, December 13, 2008

Jeevan Aastha is a SINGLE premium assurance plan from LIC

LIC has recently come up with a One time single premium assurance policy in this market volatility. details of the policy are as follows according to the LIC's website.

Features:
LIC’s Jeevan Aastha is a single premium assurance plan which offers guaranteed benefits on death and maturity. The Plan is close ended and would be available for a maximum period of 45 days from the date of its launch i.e. 08.12.2008 .

Eligibility conditions and othe restrictions
a) Minimum Entry Age : 13 years (completed)
b) Maximum Entry Age : 60 years (nearest birthday)
c) Minimum Basic Sum Assured: Rs.150,000
d) Maximum Basic Sum Assured: No Limit
The basic sum assured shall be available in multiples of Rs. 30,000.
e) Policy Term : 5 or 10 years
f) Premium payment mode : Single premium only

Loan
Loan facility will be available to you under this plan , after completion of one policy year.

Surrender value

The policy can be surrendered for cash after the policy has run for at least one year. The minimum Guaranteed Surrendered Value allowable is equal to 90% of the Single premium paid excluding all extra premiums.

BENEFITS

A)Death Benefit:
On death during the first policy year: Basic Sum Assured with Guaranteed Addition.

On death during the policy term after first policy year, excluding last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition.

On death during last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition along with loyalty addition, if any

B)Maturity Benefit:
On maturity, the maturity Sum Assured along with Guaranteed Addition and Loyalty Addition, if any, shall be payable.
Maturity Sum Assured shall be 1/6th of Basic Sum Assured.

C)Guaranteed Addition:
The policy provides for Guaranteed Addition at the following rates:

  • Rs. 100 per thousand Maturity Sum Assured per year for a policy of 10 years term.

  • Rs. 90 per thousand Maturity Sum Assured per year for a policy of 5 years term.

D)Loyalty Addition:
Depending upon the Corporation’s experience the policy will be eligible for Loyalty Addition on death during the last policy year or on the Life Assured surviving the stipulated date of maturity at such rate and on such terms as may be declared by the Corporation

EXAMPLE:
A 35 year person taking 10 year plan
Single premium : 48975
Guaranteed Addition :Rs 100 per Thousand sum assured
Death Benefit : from 2nd year is 1 lakh and keeps increasing by Rs 5000 every year till the 10th year were it is Rs 1,50,000
Maturity / survival benefit : Is anywhere between Rs 1,00,000 to 1,10,000 at the end of 10 year period.

According to the LIC brochure, one will get Rs 100 per Rs 1,000 maturity sum assured per year for a policy of 10 years and Rs 90 per Rs 1,000 maturity sum assured per year for a policy for five years. This where people make mistake of doing the simple calculation and assume that the rate of return is 9% for fiveyear plan and 10% for 10-year .

A 13-year-old (minimum entry age) who opts for a cover of Rs 1.5 lakh by paying a premium of Rs 24,668 would get around 7.32%, whereas a 60-year-old (maximum age) who pays Rs 29,145 as premium would get around 5.55%.

NOTE: People who want to park there money in debt product for 10 year expecting an assured return of between 5% to 9% along with some insurance can go for it.

Friday, December 12, 2008

Sixth Pay Commission is amongts the top search term on Internet !

Look at the recent top search term by google reveals that Sixth pay commission was amongst the top searched term on internet.

Recently in November 2008 Uttar Pradesh government has approved to implement the recommendations of 6th pay commission. This scheme will benefit nearly more then 18 lakh state employees and will be applicable from first of December.

The state will have to shell out more then 4000 crore to meet the requirement of pay scale hike including Dearness allowance and
The pay scale will come in force with retrospective effect from January 1, 2006. The arrears of salary, DA and pension will be paid in three instalments in the next three years. The total burden on account of the arrears is over Rs 13,000 crore.

Part of the arrear will be paid in cash during the current fiscal 2008-09. The remaining amount will be deposited in the provident fund account of the employees in two parts in 2009-10 and 2010-11. House rent allowance will also be paid on the basis of 6th pay commission recommendation. No wonder for so many state employee would be searching the term online to find out how much more money they have made !

Good Luck to all the state employees for this long overdue bonus !

Thursday, November 27, 2008

How much Insurance should I have in this terrorizing times in which we live in ?

Thursday 27,2008 whole of Mumbai woke up to the news of the terrorist blast and many of the prime places being occupied by terrorist including the TAJ hotel and Oberoi Hotel with number of hostages. To my utter surprise it did not create any shock or alert in my mind or body. It seems that all of Mumbaikars are just used to it. Used to bomb blast, mumbai bandh, rasta roko and all other political stuff. Can you imagine how much importance the value of life has detiriorated.

Its only if our near and dear ones are affected by such tragedies we get a reaction that too for few days and then again life comes to same old routine. It sends shivers to my mind just of thought that if I am died what would happen to my family and children. NOBODY in this world can replace a Father or a Husband or a Son. It made me feel little easy that I had taken enough Life Insurance Cover for my life so that my family will be little easy economically in case of any eventuality.

I strongly recommend each and every earning member of a House be it a Husband or a Father to have enough Life protection to PROTECT there FAMILY from the unknown terrors of this times we live in .

Thumb rule is every body should be covered bare MINIMUM for more then 60 times there monthly salary. Ideal case should be 100 times of there monthly salary if possible.

Wednesday, November 12, 2008

Top performing ELSS fund for the month of October 2008

Few of the Top performing ELSS fund for the month of October 2008.

1) UTI Long Term Advantage S2 (G)
2) Sundaram Tax Saver (G)
3) Reliance Tax Saver (ELSS) (G)

Tuesday, November 4, 2008

What is a Portfolio Re-balancing strategy and how can it help me in economic downturn ?

What is portfolio re-balancing and how is it done ?

stage 1:
Lets assume initial ratio of investment is as follows
Equity : 50%
Debt : 50%

stage 2:
Markets rise rapidly and give very high returns and so the equity component grows faster as compare to debt such that now equity is more then 75%.
Equity : 75%
Debt : 25%

Since market has risen so much and there is high probability of it going down then going up. so its better to sell some of your Equity component and move it to debt fund. you can sell 25% of equity and invest this 25% in debt.
This will re-balance your portfolio to the initial ratio of 50 - 50

Stage 3:
Markets crashes dramatically and equity gives you a maybe even -ve returns and the debt gives you better return and your equity-debt ratio gets skewed such that
Equity : 25%
Debt : 75%

Now in this scenario you should rebalanced your portfolio such that you take 25% of your money from debt and invest it in Equity and make the ratio as was the case initially to 50% - 50%.

NOTE:
you can have your own initial fixed ratio maybe not 50-50 but 60-40 or vice-versa depending on your risk appetite. you can even decide the criteria when to rebalanced your portfolio but the idea is as and when markets give phenomenal results you need to book partial profit. and when the markets crash you need to invest when equity get cheap thereby you getting more units.

Happy Investing !

Monday, November 3, 2008

Mutual Funds portfolio is showing a loss ! what should I do in this markets ?

Markets by there very nature will always either go UP or go DOWN. Its a know fact over the years market will surprise most of the times to most of the people. I knew of people who predicting the markets will touch an index 25000 in january 2008 when it was around 20000 now the same people a predicting doom, they are predicting market will go down to 5000 . This may be true or may be not, but the point is markets will always surprise and you need to have patient and understand that it will behave the way it is.

The following are few Rules to follow during tough times.

1) The smartest set of investors are those who even in this trying times dont stop there investment Plans. You should continue doing your SIP in good funds.

2) Analyze your Mutual Fund portfolio or get it analyzed by a Financial professional.
Get rid of the non-performing funds. (The funds which has given comparatively lesser returns then the benchmark or it's similar comparable peer group of considerable amount of time)

3) Get rid of aggressive funds and move more of your allocation to more stable large cap funds.

4) If you cannot accept too much risk then opt for a Balanced Funds.

5) STICK to you Financial plans; do not change your investing plans with short term fluctuations in markets.

This ups and downs are more of an opportunity for us to buy things at a cheaper price.
Try to look for oppurtunity in every adversity !

Tuesday, October 21, 2008

LIC Jeeven Saral ; 250 times insurance cover of Monthly installment.

Death Benefit:
250 times the monthly premium + loyalty additions + return of premiums excluding first year premiums and extra/rider premium, if any, is payable in lump sum on death of the life assured during the term of the policy.

Maturity Benefit:
The Maturity Sum Assured plus Loyalty additions, if any, is payable in a lump sum. (e.g This can come to more then Rs. 40 lakhs if you are investing Rs 5000 per month for 25 years at the rate of 10%)

Surrender Value:
surrender value will be the greater of the guaranteed surrender value and special surrender. The plan also allows for partial surrenders.

Guaranteed Surrender Value:
The policy can be surrendered after it has been in force for at least 3 full years. The Guaranteed Surrender value will be equal to 30% of the total amount of premiums paid excluding the premiums for the first year and all the extra premiums and premiums for accident benefit / term rider.

Special Surrender Value:
80% of Maturity Sum Assured if 3 or more years’ but less than 4 years’ premiums have been paid; 90% of the Maturity Sum Assured, if 4 or more years’ but less than 5 years’ premiums have been paid and 100% of the Maturity Sum Assured, if 5 or more years’ premiums have been paid. The Maturity Sum Assured for this para will be the Maturity Sum Assured corresponding to the term for which premiums have been paid under the policy.


UTI Mastershare Declaring dividends year after year even in this bearish market as well !

UTI Mastershare Lambi race ka goda !

UTI's Mastershare has been in the market for now over more then two decades.
It has declared dividend every year since its launch in 1986.

I thought this year it will be difficult to declare dividend when there is liquidity crunch but again they have announced a dividend of 22% (Re.2.20 per unit on a face value of Rs.10/-). The record date for the dividend is October 23, 2008.
The scheme has also rewarded its investors with 3 bonuses and 2 rights during its existance.

Ms Swati Kulkarni, fund manager of the scheme said, “UTI Mastershare has a 22 year acquaintance with its investors. The scheme has consistently declared dividends year after year since its launch in 1986, irrespective of the market phases. UTI Mastershare, a large cap oriented fund, that invests, in a well diversified portfolio of fundamentally strong companies. The scheme is trusted by over 6 lakh investors and has a fund size of Rs.1689 crore”

I would recommend this Fund for the people who want regular yearly income through tax free dividends. The last five year returns is above 15% compounded annually this is when the markets are at sub 11k levels.

Thursday, September 18, 2008

LIC Health Plus Plan Table no. 901

LIC Health Plus Plan Table no. 901

Health Plus Plan Provides
1) Hospital Cash Benefit (HCB) (Initial Daily Benefit ranges from Rs 250 to Rs 2500 per day depending on amount of premium you pay)
2) Major Surgical Benefit (MSB) (200 times of HCB)
3) Domiciliary Treatment Benefit (DTB)

How it works:
*A unit linked product where premium paid will be subject to deduction of Allocation Charge. Balance credited to Policy Fund account.

*Policyholder is entitled to claim benefits for self and other members of the family as mentioned in the Policy.

*Policy Administration Charges, Premium for HCB and MSB with Service tax @ 12.36% are deducted on a monthly basis. (First year admin charges Rs.75 per month and Rs 25 per month from 2nd year). Fund Management charges of 1.25% per annum.

FUND INVESTMENT:
FUND TYPE HEALTH PLUS FUND
* Govt./ Govt. guaranteed Securities / Corporate Debt : Not Less than 50%
* Shorter investments, such as Money Market Invt. Including Govt. Securities & Corporate Debt: Not more than 90%
* Investment in listed equity shares > 10% and <50% style="FONT-WEIGHT: bold">Eligibility Conditions & Features:

Min. Premium
(in multiples of Rs 500/-) On Single life- Higher of Rs. 5000/-
and 6 times the HCB of Principal insured.

On 2 lives - Higher of Rs.7,500/- p.a. and 6 times the HCB of Pl and 3 times the HCB of other insured.

On more than 2 lives- Higher of Rs.10,000/- p.a. and 6 times the HCB of Pl and 3 times the HCB of each of the other insured.

Min. Entry Age Pl and Spouse - 18 years LBD Dependent Children -3 month completed.
Max. Entry Age Pl and insured Spouse -55 years NBD Insured Dependent Children -17 years NBD
Max. cover ceasing age Pl and insured Spouse -65 years
Insured Dependent Children -25 years
Max. cover ceasing age Pl and insured Spouse -65 years
Insured Dependent Children -25 years
Policy Term 65 years NBD of Pl minus age at entry of Pl
Mode of Payment Yly, Hly, Mly (ECS Only
Day of grace 30 days for yly /hly modes and 15 days for ECS


WHO IS ELIGIBILE
*Cover can be taken for self (Principal Insured ), Spouse, Dependent children (no limit of numbers)
*Any eligible existing spouse / children if not covered initially, cannot be covered in future.
*Any subsequent spouse (on marriage / remarriage ) or children (on birth / adoption) can be covered within one year from policy anniversary.

HOSPITAL CASH BENEFITS:
* Depending on the cover opted, HCB is payable if insured is hospitalized due to Accidental body injury or sickness
*Daily Hospital Cash Benefits at selected rate which increases by 5% at each Policy Anniversary up to a maximum of 1.5 times of Initial Daily Benefits (IDB). IDB must be in multiples of Rs 50/-
*In case of ICU, the Benefit is TWO times of the daily Hospital Cash Benefit.
*If stay in hospital exceeds a continuous period of 48 hours, then payment will be made for any continuous period of 24 hours or a continuous part thereof, which exceeds 4 hours (after having completed 48 hours).

Max annual Benefit Period
18 days in 1st Year Max. 60 days per year thereafter, inclusive of stay in ICU Max. No. of days in ICU is restricted to 9 days in 1st Year and 30 days thereafter.
Max. Benefits
Period
365 days 365 days 365 days
90 days upto age 5

MAJOR SURGICAL BENEFITS:
Principal Insured Insured Spouse Insured Children
Sum Assured 200 times of IDB of HCB of Pl 200 times of IDB of
HCB of Insured Spouse 200 times of IDB of HCB of each Child
Min. age for cover 18 yrs lbd 18 yrs lbd 18 yrs lbd
Max. age for cover 65 yrs nbd 65 yrs nbd 25 yrs nbd
Max. Annual benefit 100% of Sum Assured
100% of Sum
Assured
100% of Sum
Assured
Max. Life time
benefit
3 times the Sum Assured 3 times the Sum Assured 3 times the Sum Assured
Major Surgical Benefit as a Percentage of Sum Assured a few examples:
Open Heart Surgery 100% Lung Transplantation 100%
Implantation of Pacemaker 60% Open surgery for peptic ulcer 60%
Angioplasty (stent) 40% Replacement of Hip/ knee joint 60%
Bone marrow transplantation 60% Partial resection of liver 60%
Surgery to remove Tumor (Brain) 100% Partial excision of Thyroid/ Adrenal 40%
Renal Transplantation 100% Eye Surgery for corneal /retinal repair 40%
Nephrectomy due to medical advice 60%

WAITING PERIOD
* A waiting period of 180 days from the date of cover commencement in respect of each insured during which no HCB/MSB shall be payable.
* A child included in the policy will be automatically covered for MSB from policy anniversary on which the age lbd is 18 years without any waiting period.
* A waiting period of 90 days from the date of Revival/Reinstatement in respect of each insured during which no HCB/MSB shall be payable.
* There shall be NO waiting period for HCB/MSB in case of Accidental Bodily Injury.

Tuesday, September 16, 2008

LIC's Health Plus Plan (Unit linked health insurance plan)

LIC has come out with an Unit Linked Health Insurance plan. It's similar to your regular ULIP plan where you get risk cover of your life, In this plan you get risk cover of your health.

In this times when the health cost are always rising and getting unaffordable it becomes prudent to have a mediclaim policy or a health cover. This policy is different then your regular Mediclaim policy.

LIC's Health Plus is a very good add on policy, as it provides MAJOR SURGERY benefit of Rs.4 Lakh for a yearly premium of Rs. 12000. This policy can be continued till the age of 65 years.

Unlike most mediclaim were your premiums are gone. In this policy major part of your premium is invested and hence you can look forward for large kitty when you turn 65.

I would say if LIC would have done away with few of the charges it would have been a much better product.
Charges:
1) Admin Charge : Rs 75 per month for first year then onward Rs 25 per month
2) Fund Management Charges : 1.25% per annum

Its worth taking a look at this policy.

Monday, September 1, 2008

Top performing ELSS Fund in the month of August 2008

Following are the Top performing ELSS funds in the month of August. For the period between 1/8/2008 till 31/08/2008.

1) HDFC Long Term Advangtage - 5.9%
2) HDFC Tax Saver - 5.0%
3) Principal Personal Tax Saver - 4.4%

Wednesday, August 27, 2008

Fund Ka Funda !

Those people who want to understand and know more about Mutual Funds. you can log on to STAR TV every Sunday at 12.30 pm. The program is called "Fund Ka Funda". you do get very good advise by Mr. Dhirendra of "Valueresearchonline".

Links of various directory listing

Technorati Profile
Sublime Link Directory
Internet Link Directory
Social Networking Directory
Total Links Directory
Free web directory
Social Networking Directory

Tuesday, August 19, 2008

Enhanced features of Reliance SIP Insure !

Reliance Mutual Fund has made the following major changes to the existing SIP Insure Scheme.

1) The Insurance from third year onwards is Double your Target Amount. ( If your SIP is Rs 2500 per month for 15 years your target amount is Rs. 4,50,000. The insurance cover will be twice that amount of Rs. 9,00,000 which is same as 360 times your monthly SIP).

2) The minimum investment amount per month is now Rs. 1000 rather then Rs. 2000 earlier.

3) Following scheme has also been added under the SIP Insure.
  • Reliance Diversified Power Sector Fund – Retail Plan
  • Reliance Natural Resources Fund
  • Reliance Quant Plus Fund – Retail Plan
  • Reliance Tax Saver (ELSS) Fund
The maximum Insurance cover remains at Rs. 10,00,000

NOTE: It's a very Positive move by Reliance Mutual Fund for the long term investors. If they can also add Health Insurance also to this package then it can be an all inclusive plan for small investors.

Friday, July 25, 2008

Birla Century SIP plan! Investment plus Insurance

There is an offering from Birla Sun Life Mutual Fund called Birla Century SIP plan.
The Birla Century SIP plan claims to offer a unique combination of Investment through SIP or Systematic Investment Plan along with FREE insurance to the investor – FREE because the investor does not have to pay separately for the premium of insurance.

The benefits of Birla Century SIP plan are as follows:
• Wide Coverage: 18 years to 46 years for investor age group
• Cover continues till 55 years
• No medical check-up only a signed declaration of good health from investor
• The minimum investment monthly SIP amount is Rs. 1000 per month.
• Entry load of 2.25% and exit load of 2% upto 3 years and Nil from 3 year onwards.
• If SIP discontinues within 3 years of 1st installment: Life Cover ceases, If SIP discontinued after 3 years of 1st installment: Life Cover continues at fund value subject to maximum of 100 times monthly SIP value.

Insurance cover detail in Birla Century SIP plan are as follows
Year 1 – Insurance coverage till 10 times of Monthly SIP Installment
Year 2 – Insurance coverage till 50 times of Monthly SIP Installment
Year 3 onwards – Insurance coverage till 100 times of Monthly SIP Installment, that's why the name “Century SIP”. However, the maximum insurance value is capped at 20 Lakh Rs., irrespective of your SIP amount and investment horizon.

There are a few exceptions in which the insurance cover will not be available:
• Death due to suicide
• Death within 45 days of SIP start except when the death is due to accident
• Death due to pre existing diseases – this is the biggest and most ambiguous exception – in case someone dies of a disease like heart attack, there are always issues in proving that the disease was or was not pre-existing.

Its a very good option for investors who are looking for investment as well as insurance. Much better then your traditional insurance products or ULIP products.


Thursday, July 17, 2008

Reliance SIP Insurance ! Secure your Financial Goals

Reliance SIP Insure facility is an add on feature of life insurance cover under Group Term Insurance to individual investors opting for SIP in the designated schemes. Reliance SIP Insure provides free life insurance cover to investors at no extra cost. In the unfortunate event of the demise of an investor during the tenure of the SIP, the insurance company will pay remaining unpaid SIP installments.

Reliance SIP Insure- Benefits to the Investor
* Inculcates Savings Habit
* Rupee Cost Averaging & Eliminates the need to time the market
* Free Life Insurance Cover
* Helps to complete the planned investments
* Maturity Proceeds at NAV based prices
* Flexibility Auto Debit from 4 banks namely ICICI bank, HDFC bank, AXIS bank & HSBC

Designated Schemes in which Reliance SIP Insure will be offered
1) Reliance Growth Fund - Retail Plan
2) Reliance Vision Fund - Retail Plan
3) Reliance Equity Opportunities Fund - Retail Plan
4) Reliance Equity Fund - Retail Plan
5) Reliance Equity Advantage Fund- Retail Plan
6) Reliance Regular Savings Fund – Equity option /Balanced option
7) Reliance Banking Fund
8) Reliance Pharma Fund
9) Reliance Media & Entertainment Fund
10) Reliance Diversified Power Sector Fund – Retail Plan

Eligibility: All individual investors enrolling for investments via SIP & opting for ‘Reliance SIP Insure’ Only individual investors whose completed age is greater than 20 years and less than 46 years at the time of investment. In case of multiple holders in the any scheme, only the first unit holder will be eligible for the insurance cover. Investment Details Minimum Investment per installment: Rs.2000 per month & in multiples of Re 1 thereafter. There is no upper limit however Rs. 5556 for 15 years will give you maximum cover of Rs. 10,00,000) Minimum Period of Contribution: 3 years and in multiples of 1 year thereafter. Maximum Period of Contribution: 15 years OR till attaining 55 years of age, whichever is earlier (e.g., a person can register an SIP of maximum 10 yrs at the age of 45 yrs.) The insurance cover ceases when the investor attains 55 years of age. Mode of payment of SIP installments is only through Direct Debit & ECS ( Post Dated Cheques shall not be accepted )

Reliance SIP Insure – How does this work? An investor does a monthly SIP of Rs. 5,000 for 15 years in Reliance Growth Fund If he dies after a period of 5 yrs, then his Sum Assured= Unpaid SIP installments = 10 yrs (ie 10*12 months) X 5, 000 = Rs 6, 00,000 This amount will be paid by life insurance company to SIP investor’s nominee account* with Reliance Mutual Fund and will be invested in Reliance Growth Fund (in the same scheme in which the deceased has earlier invested)

Load Structure : The Entry Load under Reliance SIP Insure shall be same as applicable to normal purchase /additional purchase transactions in the respective designated schemes However, there will an Exit Load of 2%, if the accumulated units acquired or allotted under Reliance SIP Insure are redeemed or switched out to another scheme before the maturity of SIP tenure as opted in the respective scheme either by the SIP-Insure unitholder or by the nominee*, as the case may be.

Wednesday, July 16, 2008

UTI - Unit Linked Insurance Plan goes SIP way.

UTI-ULIP is an open-end tax saving cum insurance scheme. The investment objective of the scheme is primarily to provide returns through growth in NAV or through income distribution and reinvestment thereof. It is a unique product, which provides multiple benefits to its investors viz. Life Insurance Cover without any medical examination, Accident Cover up to Rs 50,000, tax benefits under Sec 80C of Income Tax Act, 1961, easy liquidity and ability to time investments for payment of renewal contribution.

To provide additional benefits to investors, UTI Mutual Fund has further enhanced the features of UTI-ULIP namely:

  • Target amount increased from Rs 5 lakh to Rs 15 lakh.
  • Flexibility to invest higher than the maximum target amount.
  • Higher Insurance cover upto Rs 15 lakh.
  • Fixed Term Cover introduced under the scheme.
  • Choice given to investors for Fixed or Declining Term Cover.

Membership to continue even in the event of non-receipt of installment. Premium will be paid to Life Insurance Corporation of India by redeeming existing units.
To provide greater flexibility and easy convenience to investors, UTI Mutual Fund has introduced Monthly Systematic Investment Plan (SIP) under UTI ULIP.

The features of ULIP-SIP are as under:
Minimum SIP Installment :Rs 500 and in multiples of Rs 100

Minimum Target amount under 10 year Plan
Rs 60,000 and in multiples of Rs 12000

Minimum Target amount under 15 year Plan
Rs 90,000 and in multiple of Rs 18000

Eligibility
a. Under 10 year Plan: Between the age group 12 years-48½ years
b. Under 15 year Plan:Between the age group 12 years-42½ years
Entry Load : 2.25% ; Exit Load : 2% for premature withdrawal

Tuesday, July 1, 2008

Tax savings schemes which have performed in bear as well as bull market

Following are the few of the good Top performing ELSS mutual Funds.

1) SBI Magnum Taxgain
2) Sundaram Tax saver
3) Principal Personal Taxsaver
4) ICICI Pru Tax plan

All of the above funds has given an annualized return of between 30% to 50% compounded annually as on 30th june 2008 for previous 5 years.

Note: To find out the actual returns as of today you can click on the following link. http://www.moneycontrol.com/india/mutualfunds/gainerloser/10/14/snapshot/op1/an/option/eqt/sort/yr5

Monday, June 23, 2008

Bajaj Allianz New Family Gain Equity Index Fund II (ULIP plan)

Recently my friend told me about an excellent plan he has taken from Bajaj Allianz. He says it gives insurance as well as investment benefits and he was very excited about it.
He showed me the policy booklet along with all the rules and regulations.

Following are the exact details of that plan.
Premium to be paid per annum : Rs 12000.00
Sum Assured : 4,08,000 (15 years) (His age is 31 yrs)
Allocation : 30% (97% from 2nd year onwards)
Net investments : Rs. 3600.00
Unit Price : 15.227 (as on 4/4/2008)
Number of Units : 236.4221

Mortality charges : -59.50 = -3.9075 units
Service tax charges : -10.37 = -0.6810 units
Rider Premium Charges: -24.48 = -1.6077 units
Policy Admin Charges : -50.00 = -3.2836 units
Total : 226.9423 ( 226.9423 * 15.227 = Rs. 3455.6504)
(Fund management charges is 1.25% per annum for equity fund)

Now you can decide for yourself how good is this policy when your first years premium of Rs. 12,000 is converted to an actual investments is just of Rs 3455.65
Rest of the money which is (12000 - 3455.65 = Rs8544.34) is expenses.

Even at the rate of 12% this will take approx more then 11 years to even reach original amount Rs. 12000.

TIPS: If you have already taken this policy then you can continue with it because the worst is over in the first premium itself. For people who are still looking at such policy you can go for a Term Cover for insurance and do an SIP into a good Large cap Mutual Fund. If you are less averse to risk then you can opt for a Balance fund.

Monday, June 9, 2008

Mutual Funds portfolio is showing a loss ! what should I do in this markets ?

Markets by there very nature will always either go UP or go DOWN. Its a know fact over the years market will surprise most of the times to most of the people. I knew of people who predicting the markets will touch an index 25000 in january 2008 when it was around 20000 now the same people a predicting doom, they are predicting market will go down to 5000 . This may be true or may be not, but the point is markets will always surprise and you need to have patient and understand that it will behave the way it is.

The following are few Rules to follow during tough times.

1) The smartest set of investors are those who even in this trying times dont stop there investment Plans. You should continue doing your SIP in good funds.

2) Analyze your Mutual Fund portfolio or get it analyzed by a Financial professional.
Get rid of the non-performing funds. (The funds which has given comparatively lesser returns then the benchmark or it's similar comparable peer group of considerable amount of time)

3) Get rid of aggressive funds and move more of your allocation to more stable large cap funds.

4) If you cannot accept too much risk then opt for a Balanced Funds.

5) STICK to you Financial plans; do not change your investing plans with short term fluctuations in markets.

This ups and downs are more of an opportunity for us to buy things at a cheaper price.
Try to look for oppurtunity in every adversity !

Thursday, June 5, 2008

ULIP's better product or Mutual Funds

ULIP's or Unit Linked Insurance Product are as the name suggest provides insurance as well as Investment avenue both combined into one product. Most of us human being by nature want more. so we feel very happy when we take an ULIP because it has insurance also.
but BEWARE Most of the ULIPs currently in the market has heavy upfront charges of as high as 25% to 50% of your first year premium. This products are always good only for the agent who sells them because they get high commission.

If you need an insurance then always opt for a pure vanilla Term Insurance which is the cheapest of all kinds of insurance. If you want to save money and create wealth then you can do an SIP in mutual funds (Mutual funds have and entry load of only 2.25%) which is much much less then 25% to 50% charged by ULIPs.



Wednesday, June 4, 2008

Start Investing Early !

Investing in any savings instruments must be done in a planned manner. You should always start investing as soon as possible. There are two friends Sachin and Vinod, Sachin was mature and way ahead of his time even when he was in 12th he started saving money by doing part time job and from his pocket money and he started investing Rs. 2000 per month in Mutual Funds. Vinod on the other hand was our regular college going student enjoying life and friends and those care free youthful days of colleges. soon after both of them graduated and Sachin told vinod about his investment plans that in 3 years from 12th to 15th, Sachin was able to save Rs. 2000 * 36 = Rs 72,000. plus some returns. Vinod also liked the idea and he also started investing Rs. 2000 per month in Diversified Equity Mutual Fund.

Both of them married happily and had kids and family and were busy in there professional life. After 20 years they met each other at IPL 2008 final match between Rajasthan Royals Jaipur and Chennai Superkings. It was such and coincidence and amazing feeling to meet your old college friends. Life is so much complicated that you really get a high when you meet your old college buddys. Vinod was dying all this years to meet Sachin and thank him for his advise that his suggestion of saving Rs. 2000 per month for 20 years at rate of 15% has generated him a kitty of Rs. 30,31,909.95 which was quite big amount and he was able to send his son for his higher education for his Masters Degree.

Sachin was equally happy and satisfied to see that his suggestion has helped someone achieve dreams. Sachin said he also had continued his plans of saving Rs. 2000 every month and now his kitty in 23years at the rate of same 15% has grown to Rs 48,33,095.72 . Vinod was pleasantly surprised to see that his friends had made Rs. 18 Lakhs more then him. even though he started just 3 years after him.

Sachin explained to him that since he was smart and wise and started investing ahead of Vinod by 3 years and that is the reason why by doing the same thing he was making Rs. 18 lakhs more then him.

Start Investing as early as possible !

NOTE: Even one month delay in investing could cost you (48,33,095.72 - 47,71,427.88 = Rs. 61,668 ) so every time you delay your investment plan to next month you are loosing big time money in long run.

Friday, May 30, 2008

What is Absolute Returns and what is Annualised Returns ? Which one should the investor trust while investing in mutual funds ?.

Absolute returns: Let us take an example of SBI Magnum tax gain which has given returns of 10.5% in last 1 year (as on 30/5/2008) . This is absolute returns for 1 year. Now the same fund has given an absolute returns of 1089.3%. for a 5 year period (as on 30/5/2008) meaning if you had invested Rs. One lakhs in this fund 5 years earlier it would have now been Rs. Ten lakhs and eighty-nine thousand.

Annualized returns: Using the same example Annualized returns are calculated based on adding first year returns to the principal amount for calculation of next years returns and so on and so forth. so annualized returns for the SBI Mangum taxgain scheme for 1 year was 10.5% (as on 30/5/2008) whereas for last five years annualized returns is 64.1% (as on 30/5/2008)
It still means that your Rs. 1 lakh invested in the same fund 5 years is now Rs. Ten lakhs and eighty-nine thousand.

NOTE : Mutual funds returns should be compared in Annualized returns in order to be compared with other products such as Bank FD's , ULIP's, Post Office MIS etc.

Example :
1) If you invest Rs. 100 ; after 1 year returns is 20% so end of the year it becomes Rs. 100 + 20= Rs. 120.
2) Now second year also you make a profit of 20% so your money is Rs. 120 + 24 = Rs. 144
3) After 2 years your money of Rs. 100 is now Rs. 144 so your
Absolute returns for 2 years is 44% whereas Annualized returns is 20% year on year.

Thursday, May 29, 2008

Difference between Growth, Dividend Payout and Dividend Reinvestment

Dividend Payout: Mutual Fund companies as when they keep on making profit they distribute part of the money to the investors by way of dividends. If you want to keep on taking part of profit regularly you are advised to select this option wherein you can keep on getting back money frequently.

Dividend Reinvestment: This option is similar to the first option except for the difference that dividend declared is re-invested in the same fund on the same days NAV. so all your profit is invested back in the same fund to make it grow more.

Growth: This option is for the people who have long term financial goals and they dont need money regularly. In this option mutual funds NAV will keep on growing and it will never declare dividends. so overall at the end of the investment term you get larger kitty.

NOTE: Returns per say calculated on each of this 3 option will be the same. The only difference will be the way in which you take out your money.

भविष्य को सुरक्षित बनाओ ! सीप से अपने सपने पूरे करे !

मूचल फंड में इन्वेस्ट करो और आपके भविष्य को सुरक्षित करो !
अपने भविष्य की जरूरत को समज कर उसे पुरा करने के लीये अपने बलबूते पे आज से ही फिनान्सिअल प्लानिंग का शुभ आरंभ करो !

हर महीने थोड़ा थोड़ा कर के (SIP) करे ! और अपने सपने साकार करे ! चाहे बेटी का ब्याह करना हो या बेटे को वीदेश भेजना हो आया अपने retirement के लिए लोनावाला में बंगला लेना हो ! हर चीज़ सम्भव है !
बूँद बूँद से सागर बनता है ! थोड़ा थोड़ा करके सपना पुरा होता है !

हर सलाह के लिए हमसे बेजीजक सम्पर्क करे !

हैप्पी इन्वेस्तिंग !

Wednesday, May 21, 2008

HSBC declares 10% dividend in HSBC advantage India Fund

HSBC declares 10% dividend in HSBC advantage India Fund. The record date for this Mutual Fund has been fixed as May 26, 2008.

Tuesday, May 13, 2008

Reliance SIP Insurance !

Most of the people do SIP and many of them have ULIPs or traditional LIC policies.

The latest one is the product from reliance stable. Reliance SIP Insurance !
Basically this is an excellent product most of the people would register for an SIP for say 15 year term for Rs. 5000 per month for his daughters marriage. Now if the investor dies after 2 years then in regular SIP, his investment will stop as his earnings is no more. but in "Reliance SIP Insurance" . The rest of the premiums will be paid by the insurance company till the end of the term. so for remaining 13 years the insurance company will pay the installments in place of investor. That is (5000 * 12 * 13 = Rs 7,80,000) will be paid by insurance company.

So investor can have a peace of mind and can secure his financial goals in unforeseen future.

This is really amazing product as the cheapest insurance cover in todays times is TERM INSURANCE, but just that we do not get anything in return from it, at maturity most of the people don't go for it. This will really be a good product as people can take care of there children's future. The best part is, its free under group insurance.

Happy Investing for our kids for there bright Future.
Reliance guys are innovative and proactive.

Monday, May 12, 2008

What are Different types o f Mutual Funds

Diversified Equity Fund : The most common type of mutual fund is Diversified equity fund. If you are new to Mutual Funds you should always prefer best performing Diversified Equity Fund. This kind of funds diversify there investment across sectors. The fund manager can always increase or decrease the exposure of this fund to any particular sector as and when he may find it suitable. for e.g If he thinks construction and real estate sector if going to outperform rest of the sectors then he may increase the investment of this fund more towards construction and real estate related companies. and if after few years he may think that real estate has picked and there is no room for appreciation he may reduce or totally his exposure to real estate and may switch his investment to other sunrise sector like banking and finance.

Sectoral Fund : This kinds of funds by there nature are sector specific funds. Lets say Pharma Fund is a fund which can only invest in Pharmaceutical related companies. Hence when pharma sector do well then this funds will do very well and when pharma sector goes down this fund goes down too. so this kinds of funds give very extreme performance depending on the sectors performance. so If you are bullish on a particular sector then rest of the sectors then you can invest in this kind of funds.

ELSS Fund : This are Equity Linked savings schemes. This funds always have a 3 year lock-in period which means that you can withdraw you investment only after 3 years of its investment. hence investment done in may 2008 can only be withdrawn or redeem only after may 2011.
This funds are eligible for tax benefit Under section 80C within the overall limit of Rs. 1 Lakh.

Large cap Fund : This are funds in which majority of the investment is done Large cap companies only. you can safely assume that majority of the investment will be in bse 100 companies or so. This is a must have fund in your portfolio.

Mid cap Fund :
This funds will invest majority of there investments in Mid-size companies only. This fund can be added in your portfolio for little aggression.

Small cap Fund : This fund will invest majority of its investments in Small- cap companies. This is the most risky fund among all the cap-size funds. since its most risky it can sometimes gives you very high returns over long term.

Balanced Fund :
This kind of funds are more stable and less volatile as compare to pure Equity fund. In this kind of funds there is reasonable investment in Debt and as well as Equity. hence its less volatile and more secure compare to pure equity fund.

Debt Fund :
This kind of funds are used for short term investments. This fund mostly invest in government securities and bonds. Most of this funds can give you returns between 6% to 12%. If you want to park your huge money which is just lying in bank account then its much smarter choice to invest in debt fund.

Saturday, May 10, 2008

I want to invest Rs 10,000 in Mutual Fund via SIP, what is the best strategy to go about selecting good performing Mutual funds

In this uncertain times investing in Mutual Funds should be done via SIP (Systematic Investment Plan) to remove volatility and avoid risk due the value cost averaging property of SIP.

STRATEGY1) Find out best performing funds in Diversified Equity fund category. This can be done by checking the performance of a fund over 1 year, 3 year and 5 years horizon. Double check this performance from at least 2 to 3 different sources regarding returns in percentage. The returns figure you need to look at is Annualized compounded return rather then Absolute return.

2) Split your investment of 10k in around 2 or 3 different Funds from different fund houses. say you can do SIP of 5k and 5k in two different funds or you can do an SIP of 4k, 3k and 3k in three different funds.

3) Few of the top performing funds over the years.
a) SBI contra Fund
b) HDFC Top 200 Fund
c) HDFC Equity Fund
d) UTI MasterShare
e) Reliance Growth Fund
f) Reliance Vision Fund

4) Few top performing Tax saving ELSS Funds.
a) SBI Magnum Tax Gain
b) HDFC Tax saver Fund
c) Reliance Tax saver ELSS

5) Make sure you invest in different kinds of fund maybe 1 or 2 in Large Cap Fund and 1 in Midcap Fund,

6) If you want to take very high risk for long term then you can select a small cap fund in small proportion. Strictly avoid sectoral or thematic funds.

7) Review your portfolio once in six months.

Happy Investing !

Thursday, May 8, 2008

Portfolio Rebalancing

What is portfolio re-balancing and how is it done ?

stage 1:
Lets assume initial ratio of investment is as follows
Equity : 50%
Debt : 50%

stage 2:
Markets rise rapidly and give very high returns and so the equity component grows faster as compare to debt such that now equity is more then 75%.
Equity : 75%
Debt : 25%

Since market has risen so much and there is high probability of it going down then going up. so its better to sell some of your Equity component and move it to debt fund. you can sell 25% of equity and invest this 25% in debt.
This will re-balance your portfolio to the initial ratio of 50 - 50

Stage 3:
Markets crashes dramatically and equity gives you a maybe even -ve returns and the debt gives you better return and your equity-debt ratio gets skewed such that
Equity : 25%
Debt : 75%

Now in this scenario you should rebalanced your portfolio such that you take 25% of your money from debt and invest it in Equity and make the ratio as was the case initially to 50% - 50%.

NOTE:
you can have your own initial fixed ratio maybe not 50-50 but 60-40 or vice-versa depending on your risk appetite. you can even decide the criteria when to rebalanced your portfolio but the idea is as and when markets give phenomenal results you need to book partial profit. and when the markets crash you need to invest when equity get s cheap thereby you getting more units.

Happy Investing !

Wednesday, May 7, 2008

Toll Free Numbers of Fund Houses

HDFC : 1800 233 6767
Reliance : 1800 300 11111
SBI : 1800 22 30 40

Thursday, May 1, 2008

Mutual Fund better then stock market

Call it "Power of huge money" or the "power of scale" or the "power of size" is so immense that the odds of beating them is heavily against us.

If a retail investor has just few lakhs rupees at his disposal. He just cannot afford to have analyst who can go and meet a companies management, there distribution network at the grassroot level, there clients, there auditors. But say a big Fund house can spend even a fraction of there AUM (Asset Under Management) to study the actual working of the company. (e.g Reliance Growth Fund currently has AUM of over 5,000 Crores, for them even spending 1% of this on research will work out to 50 crores). I am not talking about the things like people can bribe the insiders of company for inside reports etc.

Can any individual spend 50 CRORES just on research ? Well most of us maybe not.

So I would rather be a part of this huge giants of the financial world rather then fight against them.

Documents required for investing in Mutual Fund

Documents to be Submitted
1) Completed Application form of the respective AMC
2) Cheque in favour of the scheme you want to invest in
3) Copy of Pan card (self Attested)
4) KYC (Know your customer)document if the invested amount is more then Rs 50,000
5) ECS Auto debit form in case of SIP

Wednesday, April 30, 2008

Why Mutual Fund is better then Stock Market ?

One of my friend recently asked me why should I invest in Mutual fund when they are themselves going to invest in stock market. I can directly invest in stock market and make more profits. I said....YES definitely you can.

Its just the co-incidence that many people ask me this question all the time and I say you can If you have the knack of stock picking, If you can know when to buy a share and when to exit a stock, and if you can do the research of the companies you want to invest in. If you can keep track your portfolio consistently.

The answer always is well, I will buy when the stock of company A is down and sell when the share price goes High. but does it work so SIMPLE, theoretically yes but to implement it trust me its very very very difficult. I can tell you from my experience in stock market it really is very difficult to outperform all the time. I have seen lots of people who burned there fingers in penny stocks and so many other stories are there which were all based on tips and so on this includes yours truly as well.

There were times whenever I sold a share immediately the share price of that stock would rise. and vice versa whenever I bought a share its stock price would stumble that was learning curve before it occurred to me that I can be wrong one time , two time but not again and again. Then my eyes opened to big bad world of penny stocks.

There are operators who exactly knows the number of stocks that are out there with public and the number of stocks with the promoters. As soon as the promoters ratio is high the price will normally go up. but as and when you sell the share and the operator buys the share they usually hit upper circuit and nobody has the shares in the market except this operator and hence the price goes up and up and up. and reverse is also true as soon as the operator start selling shares nobody is there to buy it and the price goes down and down and down till it keeps on hitting lower circuits. (We usually blame ourselves for this wrong decisions)

Well give a pat on your back it was not you who made a wrong decision ! There are some bad elements who manipulate retail investors.

TIP:
1) Always stick to an 'A' group stock.
2) even better is to invest via mutual fund and you don't need to worry about making decision when to sell when to buy; Fund manager is there to have a headache while we can sleep in peace.

What is Mutual Fund ?

Well in the most simplest of terms. Take an analogy of five young friends who want to start a business together. They need say 25 lakhs to start the business. Each one of has only 5 lakhs, None of the friends can start the business on his own but all of them together can definitely start the business on a partnership basis. same way

In mutual fund during NFO (New Fund offer) the fund house decides on the objective of the fund and launch the fund. e.g recently reliance launched Reliance Natural Resources fund. The objective was to invest money in the companies which deals with natural resources like power, oil, metals etc). People who think this strategy will work will start investing the money in there own capacity. All this collected money is pooled together and Professional Fund Manager decides in which companies this money should be invested.

There are various types of Mutual Funds each with there own objective and strategy. Most new comers should stick with Large cap equity diversified fund from a reputed business house. Always while dealing with your hard earned money go after the REPUTED fund house who have great track record.

Tuesday, April 29, 2008

What is SIP; How does it work ?

SIP is called Systematic Investment Planning.

Let us say that you are a salaried person and earn around 40k per-month. You want to save tax and make investment for your retirement or for your child's higher education or for your daughters marriage. you decide to invest Rs. 1 Lakh every year and get tax benefit under sec 80c.

Instead of putting 1 lakh at one go in Mutual Fund. you split that one lakh in equal installment of Rs. 8500 per month. (1Lakh / 12 months = 8,333.33 approx 8,500 )

Benefits of doing this.
1) Its very easy to do once you sign up for an SIP application form with good ELSS scheme. you can ECS it from your salary account and Rs.8500 will be automatically invested in Mutual fund without you going through the hassle of writing cheque every month.
2) It makes you disciplined as its automated.
3) By investing regularly in small chunks you get the benefit of cost averaging your money. (Which is you buy more units when value is low and buy less units when value is high).

SIP is strongly recommended for each and every individual.

I want to save tax; What is ELSS and how can I save tax via ELSS

ELSS is nothing but E:Equity L:Linked S:Saving S:Scheme. This are mutual funds with 3 year lock-in period.

Finance minister Mr. Chidambaram has included ELSS as one of tax saving instrument,along with your regular LIC, PPF etc.

Investments in ELSS can also get you tax benefit under section 80c. This comes under the overall exemption limit of Rupees One Lakh.

Recently last two years it has been observed that most people who used to invest Rs.70,000 in PPF and rest in LIC have now started switching there investment into ELSS.

Why is that so ?
Reason 1: The lock-in is of 3 years compare to 15 years in PPF
Reason 2: Good performing Mutual Funds normally give dividends where as PPF does not.

Last and very most important reason is over a long period of say 15 years Mutual Funds has always outperformed all other asset class. In the short term however mutual fund can give you -ve return sometimes.

you will be amazed that Rs. 1 Lakh invested in SBI Magnum Taxgain 5 years ago is now more then 10 lakhs.

NOTE: I am strong believer in SIP (Systematic Investment Planning) compare to one time investment in Mutual Fund. SIP safeguards your money against market volatility.

I want to invest in Mutual Fund but I dont know to how to invest in Mutual Fund, can you explain the procedure ?

Investing in Mutual fund is very very simple.
Steps
1) Decide on the schemes in which you want to invest money.
you can check out www.valueresearchonline.com for top performing funds
2) you can directly download forms from the respective fund houses websites and fill the forms on your own and submit them to the fund house.
3) If you don't want to do the paperwork on your own find any AMFI certified agent near your vicinity, he should do all the paper work for you.
4) Feel free to call us if you need any help in Mumbai

Documents to be Submitted
1) Completed Application form of the respective AMC
2) Cheque in favour of the scheme you want to invest in
3) Copy of Pan card (self Attested)
4) KYC document if the invested amount is more then Rs 50,000

Note :
1) Always write the name of the scheme on the cheque to which you are investing in.
e.g if you want to invest in ELSS scheme called SBI - Magnum Taxgain to save tax
write the cheque in favour of "SBI - Magnum Taxgain"

2) on the Back side of the cheque again you can write following
a) Your Name
b) Application Number
c) Name of the scheme

Monday, April 28, 2008

Crorepati with just Rs. 100

This was the first lesson my grandmother taught us. We have big joint family and lots of kids in the home. Every kid had a separate piggy bank that was safeguarded in the grandmothers cupboard. It was in those early days we use to get lots of gifts during Diwali or birthdays or on some special occasion. But the seed fund was provided right at the time of birth and all the childs money is saved separately. All this money was collected by all the kids and put in there piggy bank and everybody really tried to increase there AUM :-) in a piggy bank. As years progressed we started getting pocket money and awards on various achievements in schools etc. This investment grew slowly and slowly into near about lacs by the time we achieved adulthood.

My dad told me once that he has kept just Rs. 100 for his grandchild in FD. I said "sau rupaiya mein kya hoga dad". He asked what do you think this Rs.100 will be in 50 years I said maybe one thousand or at most 2 thousand. he asked me again what will it be in 100 years. I said maybe 5 thousand at the most. He explained me with following table saying that if you invest your money in FD which gives a return of 9% year on year. Its like doubling your investment every 8th year.

1 year = Rs. 100
8 year = Rs. 200
16 year = Rs. 400
24 year = Rs. 800
32 year = Rs. 1,600
40 year = Rs. 3,200
48 year = Rs. 6,400
56 year = Rs. 12,800

64 year = Rs. 25,600
72 year = Rs. 51,200
80 year = Rs. 102,400
88 year = Rs. 204,800
96 year = Rs. 4,09,600
108 year = Rs. 8,19,200

Look at the power of compounding its exponential rise. Just Rs. 100 can make you a lakhphati.

Now if you take a look at average returns of any diversified equity mutual fund for last 10 years Its MORE then 15%. Let us safely assume an average return of 15% which means roughly doubling your money every 5 year.

1 year = Rs. 100
5 year = Rs. 200
10 year = Rs. 400
15 year = Rs. 800
20 year = Rs. 1,600
25 year = Rs. 3,200
30 year = Rs. 6,400
35 year = Rs. 12,800
40 year = Rs. 25,600
45 year = Rs. 51,200
50 year = Rs. 102,400 (Lakhpati)

55 year = Rs. 204,800 (Lakhpati)
60 year = Rs. 4,09,600
65 year = Rs. 8,19,200
70 year = Rs. 16,38,400
75 year = Rs. 32,76,800
80 year = Rs. 65,53,600
85 year = Rs. 1,31,07,200 (crorepati)
90 year = Rs. 2,62,14,400
95 year = Rs. 5,24,28,800
100 year = Rs. 10,48,57,600 (More then 10 crores)

Its amazing, its awesome, I feel like dancing once I complete 100 years :-)
But the point is maybe not 100 years not 50 years but you can definitely plan for your retirement and you can save at least Rs 100 per month for 20 years or more and you will end with handsome money when you retire.

Thats what I call Financial Independence !!

Do write your comments