MFtalk.com

Safe Tax Saving Investment Options

2008-12-13T19:14:00.003+05:30

After having burnt fingers in the current financial crisis and market crash, it has become a little difficult for regular ELSS investors. Though the optimistic ones will continue to SIP in ELSS Tax Saving Funds, many of us would want to invest atleast some portion in safe tax saving investment options this year.

At this point of time there are two types of risks - risk of market falling further and doubts on sustainability of the AMC or the company you invest through. Therefore all the options have been listed keeping both the risks in mind.

SBI TAX Savings Scheme

5 years + FD with the safest bank in India. Rate of Interest might vary. Currently it is 9% p.a. for general public and 9.5% for senior citizens. 1% extra for SBI Staff and SBI Pensioners. Check current rates here

Deposits can be made in multiples of Rs. 1000. Minimum Lock in Period is 5 years.

NABARD Rural Bonds

NABARD is one of the apex financial institutions of India, fully owned by the RBI and Government of India. It is one of the strongest and safest financial institution to invest in.

NABARD Rural Bonds are 5 year lock in bonds with tax saving under section 80(c) of IT Act. It offers an interest rate of 8.5% p.a. for general public and 9.00% for senior citizens. For latest rates log on to Nabard.org

There are other options like National Savings Certificate (NSC) and PPF too. However they have a higher lock in and less returns. The only benefit offered by 15 year PPF is that the returns are also tax-free which is not the case with rest of the investment options mentioned above.

If you have an apetite for risk, you can put some money in ELSS (Tax Saving Mutual Funds).

Mutual Funds and Airlines Company

2008-08-15T15:32:00.003+05:30

If you have to travel from one country to another, what will you do? Will you pick up a Boeing and take off with entire flight empty? No. For two reasons:

You drive a lot round the city but still you are not exactly an expert pilot
If you go alone, it will cost a bomb for you to hire a plane and a pilot

So what do you do? You become a part of the group that wishes to go to the same destination (share costs) and hire a pilot (professional to do the job).

This is exactly how mutual funds work. A mutual fund house (the airline company) appoints a professional fund manager (pilot) to pool and invest money from various investors (passengers) with similar investment objective (destination).

Investors get the benefit of MBAs from Harvards and IIMs of the world working for them at a negligible cost.

Real Estate Mutual Funds in India

2008-04-27T12:58:00.003+05:30

Finally, after the long wait, SEBI lays the foundation stone for Real Estate Mutual Funds in India. Though real estate funds were available to HNIs through private equity funds, now even small retail investors can invest in property through Real Estate Mutual Funds.

These funds shall be close-ended with units listed on stock exchanges, the Securities and Exchange Board of India (SEBI) said and the net asset values of the funds must be made public every day.

Such schemes shall invest at least 35 percent of their funds directly in real estate assets and the rest in mortgage-backed securities and instruments of firms engaged in the sector, it added.

They can invest up to 25 percent of their corpus in other securities, according to the statement.

"Taken together, investments in real estate assets, real estate-related securities... shall not be less than 75 percent of the net assets of the scheme," SEBI said. The asset managers should get the assets valued every 90 days.

What's in for us?

Opportunity to benefit from Real Estate Boom without investing huge sums
Good diversification opportunity in such a volatile market
If you invest in real estate just for investment, then this is going to be real hassle-free. No huge paper work, registration, broker charges, chances if fraud or your house being declared on illegal land or forest land ;)

Something to worry about...

Return might not be as good as real estate due to percentages of investments
Closed ended!
No experience or past performance to refer to

Kindly post your views on the same as comments...

Should you buy ICICI Prudential Focused Equity Fund?

2008-04-24T15:26:00.003+05:30

NFO Closes: 7th May

ICICI Prudential Focused Equity Fund in simple terms is a fund that aims to invest in 20 of the Top 200 large-cap stocks in terms of market capitalization. What that means is that investors money would be revolving amongst Top 200 companies on NSE thereby giving some stability to the portfolio, however reducing the growth chance as well.

It can be argued that one can go for Index Funds and pay less management fees, however, there is a difference between this fund and index funds. ICICI Prudential Focused Equity Fund will NOT invest in just Top 20 equities but 20 of the Top 200 companies on NSE. So there is going to be a difference in return and holdings.

ICICI Prudential AMC Chief investment officer Sankaran Naren, during launch said that the fund invest in stocks of companies which are profitable and leaders in the industry and have experienced rapid growth and have superior management skills.

Type

Options

Min. Application Amount

Open ended Equity Scheme

Retail: Growth and Dividend (Payout and Reinvestment) Institutional Option I: Growth

Retail: Rs.5000 and in multiples of Re.1 thereafter Institutional Option I: Rs.10 crores and in multiples of Re.1 thereafter

For details and to invest online visit: http://www.icicipruamc.com/pruicicin/htdocs/FocusedFund/landing.asp

Fixed Deposit or Debt Fund?

2008-04-14T09:38:00.003+05:30

So you have some extra cash which you don't want to use, atleast for now. So , what to do with it? Forget high-risk investments aka equities, equity funds etc as of now. Here we are talking about good old bank FDs or new age Debt Funds.. Well, both have their pros and cons, and hence you have to understand and decide what you are comfortable with.. Here are some pointers to help you..

Always calculate post-tax return while comparing...
Yes, in case of FD you need to pay tax on earnings according to the tax-bracket you fall in. So your actual return could be much lower than those beautifully advertised figure. In case of debt fund there is only one simple Dividend Distribution Tax (DDT), which is deducted at source. hence what you get in hand from debt funds is purely tax-free.

Liquidity?
This is where debt funds score largely over FDs. Debt funds are virtually like savings account. Deposit, withdraw, whenever. (though it's not as instant as a savings account)

Penalty and Loads..
Most of the banks charge a penalty on closing an FD before schedule. Be aware of the charge. And add to that some banks don't even allow premature withdrawal in case of special rates. However, on the other hand most debt funds don't have any entry/exit loads, barring few. So check that too..

Guaranteed Returns
Here is where FDs smile. Mutual Funds, by law, cannot guarantee returns. And in fact for very short term like 1-3 months, they might be volatile.

Best Tax Saving Funds

2008-04-05T09:31:00.002+05:30

Here are some tax saving funds aka ELSS funds that you might want to consider investing.. Just a reminder, best way to invest is through SIPs throughout the year and not just last minute shopping to save tax..

1. Principal Personal Tax Saver
One of the top performing funds of last 3 years. Worth a place in your portfolio.

2. ICICI Prudential Tax Plan
Very aggressive, and hence falls in the category of high risk high return funds. Got an ability to give really good returns, however considering the volatility in the market, you might want to keep your exposure low in this fund.

3. SBI Magnum Tax Gain
Was very aggressive till 2006, however, after that it has increased its exposure in large caps to reduce the risk. That makes this fund all the more better.

4. HDFC Tax Saver
Year after year it has proved its worth. Definitely worth a place in your tax saving portfolio

For a comparison of returns click here

Best Debt Funds

2008-03-30T11:23:00.003+05:30

Past few years have seen portfolios leaning heavily towards equity. However, smart investors are those who understand the risk and diversify their portfolio. Fixed Deposits and Debt Mutual Funds are two most common choices for risk-free investments. Infact Debt Mutual Funds are little easier to deal with (if you have an online demat account, nothing like it) and more transparent.

Easy because you can buy and sell any time without committing for a specific period in beginning and transparent because you know where your money is invested.

Check the load
Yes, it's very important. Some funds don't charge any entry or exit load. So you should go for these funds when you are using debt funds as savings account and might need to buy/redeem frequently.

There are few schemes that offer zero entry load after a specific period (say 6months or 1 year). You can go for them if you won't need your money for that period.

Approximate Returns in different types of debt funds in last one year
Money Market Debt Funds: 8.0 - 8.2 %
Debt - Short Term: 8.5 - 10.5 %
Debt - Long Term: 9.0 - 14.5%
Debt - Floating Rate: 8.7 - 9.3%

However, Debt Short term and long term have shown negative returns also. See Moneycontrol for comparison of returns.

Here are few good funds from each category. However, before investing don't forget to check their past performance, investment style, load structure and your objective. They should be in sync.

Money Market: LIC MF Liquid Fund (G) :: HDFC Cash Mgmt. Fund - SP (G) :: HDFC CMF - Savings Plus RP (G)

Debt - Short Term: Kotak Bond (Regular) (G) :: Reliance Short Term Fund (G) :: Tata Income Fund (App.)

Debt - Long Term: Birla Income Plus - Retail (G) :: Birla Income Fund (G)

Debt - Floating Rate: Kotak Floater LTP (G) :: LIC MF Floating Rate Fund (G) :: HSBC FRF - LTP (RP) (G)

HSBC: Wealth Mis-management

2008-03-08T00:40:00.004+05:30

Everyone knows about salesmen lying to sell their products. But I have the best epitome of salesmanship fraud, if I can call it that.

Mr. M from HSBC contacted me to open my Power Vantage Account. I was offered a zero balance account plus a financial planner cum wealth manager, who will research, understand my needs and manage my investments accordingly. And the best part was that I can do everything over phone. A really smart person, Mr. M trapped me in minutes. He paid a couple of visits to my office and finally my account was opened. Soon I was introduced to my relationship cum wealth manager Ms. C.

She quickly went through my documents, existing portfolio etc and suggested me a plan with few SIPs.

I was happy for few days, assuming, I have to just call and my money is taken care of. Well, now here the problems begin...

Problem No. 1: Everything over a phone but sir every time you start or stop a SIP, buy or redeem a mutual fund you have to fill this form. For the first time she came to office to get those forms filled. After that I was asked to visit their branch. And all this process takes 3-4 days (to make a simple MF investment)

Problem No. 2: How to check my portfolio worth? Its coming soon online... It was coming soon... It is coming soon.. and it's going to be coming soon forever, I guess...

Problem No. 3: Ok, there is another way to know your portfolio value. Call up or email Ms. C and she will IMMEDIATELY mail the holding statement. But again a small problem... Ms. C doesn't pick calls, doesn't answer my SMS or email for days... Reminds you of your girl-friend.. isn't it?

Problem No. 4: Ms. C is not reachable for days... And when after trying for days, I get through her phone... She says she has quit HSBC a week back. HSBC DOESN'T finds it necessary to inform me that my RM has changed. At least someone give me the new number...

And I hold the precious PowerVantage Account with free Wealth misManagement

Should you buy Birla Sun Life Pure Value Fund?

2008-02-27T09:58:00.003+05:30

This fund talks about investing in stocks and sectors that which have potential value to be unlocked. However, this is what every mutual fund supposed to do.. isn't it? Well, not necessarily.. The essential difference in this fund and other funds can be understood by the following:

Value investing is about looking for attractive bargains or stocks that are trading at discount to their intrinsic or true valuations. Value investor focuses on past performance and the current fundamentals of the company.

Whereas, growth investors believe in buying stocks with high future growth potential, no matter what the current price is.

Value investing is a conservative style of investing providing low volatility to the portfolio.

If the stock sticks to fundamental investing, it could be really be a different and useful scheme. As we know, it's not intelligent to assume that all mutual fund houses stick to fundamentals n real stocks without running behind technical grabs. No wonder so many mutual fund houses lined up for over-priced Reliance power. Not a fundamental investment by any standard.

Though I normally don't invest in Close-ended funds, this one could be an exception because real fundamental growth needs time.

Fund Manager
Ajay Argal is the designated Fund Manager for the fund. He is currently working as Senior Fund Manager at BSLAMC. He has done B Tech from IIT Mumbai & PGDM from IIM Bangalore and has over 12 years of experience in asset management business.

Ajay Argal is known for his 'stick-to-basics' theory which is very very essential for long term growth and wealth creation. In one of his interviews, Ajay Argal said "I don't get swayed by day-to-day market movements. I keep calm as I know that fundamentals will only get reflected over the long-term".. that is a real confidence booster for me especially when markets are so volatile.

Birla Sun Life Pure Value Fund looks good and is suited for the balanced risk type investors.

Download application form and offer document here...

Type of Scheme	A 3 year closed ended diversified equity scheme
New Fund Offer Price	Rs. 10 per unit
Opening Date of NFO	January 17, 2008
Closing Date of NFO	March 1, 2008
Plans & Options Available	Dividend (Reinvestment/Payout) & Growth. Default - Growth Option/ Reinvestment Facility.
Subscriptions	Rs. 5000/- and in multiples of Re. 1/- thereafter during the NFO period.
Redemption	In Multiples of Re. 1/-
Load Structure	Entry Load: N A Exit Load: Nil^&
Benchmark Index	BSE 200
Fund Manager	Ajay Argal

^& All redemptions/switch-outs made during the specified redemption period until the scheme remains closed-end will be charged balance proportionate unamortized issue expenses on the applicable NAV.

Stop Paying Entry Load

2008-02-27T09:49:00.002+05:30

Mutual Fund Investors in India have a reason to cheer. You can get away without paying Entry Load, provided you invest directly with Fund House. Though an entry load of 2.25 seems to be a small amount, however, it makes a huge difference to your earnings, especially long term.

Should you buy HDFC Infrastructure Fund?

2008-02-03T14:04:00.000+05:30

HDFC Infrastructure Fund is a 3 year close-ended Equity Scheme with automatic conversion into an open-ended scheme upon maturity. NFO closes: 21st Feb, 2008.

India is definitely looking at a huge infrastructure development for next few years at least. And after the recent market crash, the stocks of infrastructure companies are not that highly priced as few weeks back. However, if you are looking for long term investing after the market crash, then there are better options. See Which funds to invest in after the market crash?

HDFC Infrastructure Fund
Pros:

Good Fund House
No entry load
Infrastructure development opportunities in India
Good past return by other Infrastructure Funds

Cons:

Infra stocks might be overvalued again by the time this fund starts investing
3 year lock in period
Other current investment opportunities in market
Volatile market and fear of US depression

Overall there might be two reasons you can consider investing in this fund:
1. Having invested in large caps and diversified funds, you can park some money in a promising sector or

2. To take advantage of the low market valuations

If your case is 1, then you can consider putting money in existing infrastructure funds, while there prices are down and are not close-ended.

And if you want to take advantage of low market valuations, then you never know how the market would be when this fund starts investing. All the more reason to invest in existing funds now.

If I really want to participate in the India infrastructure story, I would put my money in some existing infrastructure fund and then go for a SIP probably, seeing the volatility of the market.

Which funds to invest in after the market crash?

2008-02-03T13:44:00.000+05:30

The recent market crash might have been a disaster for many, however, for long term investors, it has opened a whole new opportunity to invest their money. Several good mutual funds are down by several percentage and if you believe in future of India, this is the right time to invest in it...

Though there are many diversified and sectoral funds to choose from, at this time, it is not recommended to go for sectoral or small cap/mid cap funds. I would personally recommend to buy time tested equity diversified funds from good fund houses with an inclination towards large cap.

Here are 3 funds I would like to invest in at this point of time:

HDFC Top 200

Franklin BlueChip Fund

Reliance (RSF) Regular Savings Fund - Equity Option

Needless to say, growth option for all of them :)

Time to look at powerful Power Sector Fund

2007-10-20T19:47:00.000+05:30

Power sector is the sector in demand by investors right now and experts say its going to be the same for coming 3 years at least. And with supernatural returns, Reliance Diversified Power Sector Fund definitely deserves a slice of your portfolio.

Returns as on Oct 20th, 2007

6 mths	66.2%
1 year	100.3%
2 year	219.9%
3 year	452.9%

Assets under management, Fund Manager, Portfolio and other details here

Tax on Mutual Funds in India

2007-09-04T09:23:00.000+05:30

There are three types of taxes you directly or indirectly pay when you invest in Mutual Funds.

1. Tax to be paid by the investor

Type of Fund	Tax if redeemed WITHIN 1 year	Tax if redeemed AFTER 1 year
Equity Funds (with over 65% investment in equities)	10%	Tax-Free
All other funds	As per normal income tax rate applicable (the profits you earn are clubbed with your income)	10% or 20% (with indexation benefit)

2. Dividend Distribution Tax or DDT (Deducted at Source by Mutual Fund Company)

Though the dividend received by the investor from any mutual fund is tax free, a DDT (Dividend Distribution Tax) is deducted at source as per the following rate.

Type of Fund	Dividend Distribution Tax on Dividends
Equity Funds (with over 65% investment in equities)	0% (No Tax)
MIPs and Debt Funds	12.5%
Cash Funds and Floater Funds	25%

3. Securities Transaction Tax or STT (Deducted at Source by Mutual Fund Company)

When you redeem your Mutual Fund Units, a STT is charged according to the type of investment.

What is benchmark index of a mutual fund?

2007-08-30T21:54:00.000+05:30

In numerous mutual funds offer documents and details, you must have read somewhere or the other - 'Benchmark Index'. What are they? And what difference will it make to your investments?

Simply speaking Benchmark index is the standard against which Mutual Fund Scheme measures its performance. For example many Blue Chip Funds track SENSEX as their benchmark. It means that the scheme's investment style would be similar to SENSEX composition and the fund will try to match or outperform its return.

Some of the popular indexes are...

Major Indices		Other Indices
	S&P CNX Nifty		CNX IT Index
	CNX Nifty Junior		CNX Bank Index
	CNX 100		CNX FMCG Index
	S&P CNX 500		CNX PSE Index
	CNX Midcap		CNX MNC Index
	S&P CNX Defty		CNX Service Sector Index
			Customised Indices
			CNX Energy Index
			CNX Pharma Index
			CNX Infrastructure Index
			CNX PSU BANK Index
			CNX Realty Index

BSE Indices

BSE Sectoral Indices

BSE Dollex Indices

Should you buy ICICI Pru Indo Asia Equity Fund?

2007-08-28T16:21:00.000+05:30

Finally we have an opportunity to profit from not just Indian markets but other emerging markets from Asia Pacific as well. ICICI Pru Indo Asia Equity Fund plans to invest in Indian Equities as well as their counterparts from Korea, Taiwan, Hong Kong, Philippines, Thailand, Malaysia, Singapore, Indonesia, People’s Republic of China, Pakistan, Australia, New Zealand etc.

In my opinion this fund provides an excellent opportunity for investors to diversify their portfolio without compromising on returns, provided Asian Markets continue to do well.

Fund Objective:

ICICI Prudential Indo Asia Equity Fund is an Open-ended equity scheme that seeks to generate long term capital appreciation by investing in equity, equity related securities and or share classes/units of equity funds of companies, which are incorporated or have their area of primary activity, in the Asia Pacific region. Initially the Scheme will be investing in share classes of International Opportunities Fund (I.O.F) Asian Equity Fund and thereafter the Fund Manager of ICICI Prudential Indo Asia Equity Fund may choose to make investment in listed equity shares, securities in the Asia Pacific Region.

For further details refer to the offer document.

Should you invest in HSBC Dynamic Fund?

2007-08-28T00:28:00.000+05:30

HSBC Dynamic Fund

HSBC Dynamic Fund (HDF), a fund that seeks to capitalise on the potential upside in equity markets, and yet attempts to limit the downside risk by the active use of money market instruments and derivatives. The fund aims to normally invest in equity but can react quickly to a negative market by moving 100% of its assets into money market instruments, fixed income securities and derivatives with an aim to limit the downside risk, in the event that the fund manager is bearish on the market.

What about Tax?

The best thing about this fund is that it can become an 100% equity fund and 100% debt fund at its will. However, this puts the returns from fund in a very awkward position. In a normal equity fund, there is no tax payable on gains (Capital Gains) if you have invested for over a year. But what will happen to gains from this fund?

Invest or not?

I would just leave you with few questions...

Would returns be taxable?
If you are investing for long term, will you like to switch to debt at times and tamper with your returns?
If you are investing for short term, should you be investing in equities at all?
What would be the benchmark to track performance 5 years down the lane?

For me, its too confusing and might complicate my portfolio. I would rather manage my debt:equity ratio myself.

Key Features

Name of the Scheme	HSBC Dynamic Fund
Investment Objective	To provide long term capital appreciation by allocating funds in equity and equity related instruments. It also has the flexibility to move, entirely if required, into debt instruments at times when the view on equity markets seems negative.
Options	Dividend (Payout / Reinvestment) and Growth
Minimum Application Amount	Rs 10,000/- per application
Minimum additional investment	Rs. 1000/- and multiples of Re. 1/- thereafter
Load Structure (During NFO & ongoing basis)	Entry Load 2.5% for investments / Switch in* below Rs. 5 crores, otherwise Nil. Exit Load 1% for investments below Rs. 5 crores, if redeemed / switched out* within 1 year from date of investment, otherwise Nil. * No Load in case of switches between equity Schemes of HSBC Mutual Fund.
Systematic Investment Plan	Monthly / Quarterly Plan Monthly - a minimum of 12 cheques of Rs. 1,000 each Quarterly - a minimum of 4 cheques of Rs. 3,000 each
Offer Period	3 August 2007 to 30 August 2007
Offer Price	Available at Rs 10 per unit plus applicable load per unit during the NFO period and at NAV based prices thereafter
Minimum Redemption Amount	Rs. 1,000/- and multiples of Re.1/- thereof
Asset Allocation	Equity and equity related instruments - 0 to 100%, and Debt and money market instruments - 0 to 100%
Mode of Holding	Single, Joint or Anyone or Survivor
Nomination Facility	Available to individuals for single / joint holding.
Fund Manager	Jitendra Sriram & Mihir Vora (for equity portion) Gordon Rodrigues (for fixed income portion)

NFO Review: DWS Global Thematic Offshore Fund

2007-08-07T19:11:00.000+05:30

DWS Global Thematic Offshore Fund
Open Ended, Fund of Funds

NFO closes on 28th Aug '07

Objective:

The objective of the fund is to generate long-term capital growth from a diversified portfolio of units of overseas mutual funds. There can be no assurance that the investment objective of the Scheme will be realized

Load Structure:

Brochure : : KIM and application form : : Offer Document

DWS Global Thematic Offshore Fund is an opportunity for global diversification, reduced volatility and access to top performing stocks across the globe. Having a core global equity fund means lowered volatility in your investment portfolio as compared to other regional funds.

HDFCbank.com - The inconvenient convenient banking

2007-08-05T14:08:00.000+05:30

Some time back I got a chance to experience the Internet banking of HDFC Bank. One of my friends wanted to invest in mutual funds and since she already had a salary account with HDFC Bank it made sense to subscribe through that.

She was smart to tick Internet Banking option while applying for an account with HDFC Bank, hence she can login to HDFCbank.com and transact. However, when we logged in to the site we discovered that all we could do is check balances and transactions-history.

Click on 'Funds Transfer' - Please contact the nearest branch..
Click on 'Bill Payment' - Please contact the nearest branch..
Click on 'Mutual Funds' - Please contact the nearest branch.. huh

Nothing seems to be activated by default. Anyways after all the cribbing and sulking, we decided to visit 'the nearest branch'. Filled and submitted the form after dealing with some confused executives (they wanted us to fill the Mutual Fund Identification Number even after the whole word knew that PAN will work for mutual funds as well).

It wasn't over as yet. Even after 1 month of filling the form, account wasn't active...

Reason 1: The person you submitted form to has resigned, so we couldn't process your application.

Reason 2: We are extremely sorry. We forgot to ask for one document.

But at last all the bank visits and signing paid off. We could see the world beyond - 'the nearest branch', when we clicked on 'Mutual Funds' tab. But our happiness was short-lived.

To our surprise we discovered there was no systematic investment/withdrawal option. Just a handful of fund houses (even the big ones like SBI Magnum were missing). And a sad interface which doesn't even list the funds together. You cannot see the order you have placed after submitting the request to purchase... and so on.

Well, just to remind people at HDFC - Internet Banking is also referred to as Convenient Banking.