Financial Articles

FINANCIAL ARTICLES

BL General

BL ETFs Vs INDEX FUNDS

BL Beware the Alpha Pains to Achieve the Alpha

BL 4 Ps for Fund Preformance

BL Direct Equity Exposure

Why Investors Prefer Active Mandates

BL : Why Rupee is Going Down

BL : Checklist Before Buying a Policy

BL : How Much to Save For Retirement

BL : Simple Rules to Mitigate Losses

Asset Allocation And Asset Classes

8 Fixed Income Options for Investment

Government Investment Schemes

Balancing Increased Longevity and Retired Life style

Understanding Financial Risk

12 Rules of Investing

Portfolio Management Services [PMS]

Importance of Fixed Income

National Pension System

Economic Indicators

Government Securities [G-Sec] Investment

4 Smart Ways to invest in GOLD

MUTUAL FUND SCHEMES with Time Horizon

25 Gems of Mutual Fund Investing

Tax Free Bonds

பாதுகாப்பான முதலீடு

Different Types of Mutual Fund

Easy Guide to Invest in Mutual Funds

MUTUAL FUND Scheme Categories

மியூச்சுவல் ஃபண்ட் முதலீடு

Asset Allocation

Liquid Funds

Family's Budget Planning Chart

Retirement Planning

New Pension System (NPS)

ANNUITY PLANS

ARBITRAGING in Volatile MARKETS

ASSET CLASSES : KNOW YOUR ASSET MIX

ACTIVELY MANAGED FUNDS

BL : GENERAL

1. Indirect Taxes are : Excise Duty, Customs Duty and Service Tax

2. ANCHOR INVESTOR :

• He can subscribe up to 30% of the reserved for QIB in an IPO.

• It will have a lock-in period of a month and can subscribe to an issue a day before the opening of the IPO.

• He can invest a minimum of Rs.10 crore.

• Through this A.I. route, Institutions will get a larger shares than they would have got as QIBs.

3. RUPEE VS DOLLAR

• If the Rupee is stronger means the rupee value will go down . If rupee is weaker means the rupee value will go up. For example, if the rupee is Rs.46.65/dollar when compared to Rs. 50.30/ dollar, means Rupee is stronger against US Dollar .

4. CALL TRADE

• Borrowing in a low-cost currency and investing in high yielding Assets.

5. U.S. Securities of Exchange Commission : US STOCK EXCHANGE COMMISSION. It is like SEBI.

6. British Stock Exchange Regulator : ‘’The Financial Services Authority’’.

7. CORE SECTORS :

• Cement, Coal , Electricity , Crude Petroleum ,Steel and Refined Petro –Products.

8. ASK SPREADS :

• Difference between the highest buying and lowest selling price in currency future trading.

9. DEBENTURE STRIPPING

• When a debenture is traded in two parts with the first part representing the principal and the second is the interest component, it is ‘ STRIPs’.

• While Stripping a debenture to improve the tradability of the interest component and the principal suffers huge erosion in the market value because , nothing left in it. Interest is the lifeblood of any debt instrument and once that is snuffed out, there is nothing to sustain it.

ETFs Vs INDEX FUNDS

INVESTMENT STRATEGY

• In ETFs, A fund house buy shares in the proportion representing an index. It then breaks up the corpus into smaller units which are listed on the stock exchange.

• In INDEX, Fund house will collect money from investors and issues units. The fund buys stocks in the same proportion of the index it is representing.

TRANSACTING

• Traded as like stocks. Buying / selling an ETF is done thro. demat accounts.

• Investors have to pay brokerage and other charges. It means that ETF units can be bought at any time during the day.

• In INDEX, Investing is done thro.’ fund distributors/directly to the fund .

MINIMUM AMOUNTS

• Even one unit of an ETF can be bought at a time.

• In INDEX, Minimum amounts specified by the fund.

EXPENSE RATIOS

• In ETFs, expense ratio range between 0.25to 1.7%.

• In INDEX, Expense ratios are higher than ETFs.

RETURNS

• ETFs will generate returns equal / higher than the underlying index.

• In INDEX, With higher maintenance expenses.

SUITABILITY

• ETFs have an edge over index funds with which you can buy /sell units.

• In INDEX, are great options for those wanting to make regular investments to ride out volatility /average costs. SIPs is easy.

BEWARE ALPHA : PAINS TO ACHIEVE ALPHA

• Investors prefer Active funds because positive alpha is rewarding. How the investors chase the alpha?.

• Investors should know factors for buying active funds and how to select funds that can generate positive alpha ?.

ALPHA REWARDS

• For example, if an average annual return of the portfolio is 25% and index is 12%. The portfolio beta [market exposure] is 1.5 and the risk –free rate is 3%. So, the Alpha here is : returns over the risk-free rate & beta and adjusted with index return. That is : 25-[3+12 *1.5] = 4%.

• Alpha will have weak correlation with market. It means that Alpha can be generated even if the market declines.

• Consistently giving Alpha by active funds will be very difficult.

• So, the investors should consider the following factors before buying active funds.

1. ALPHA STRATEGY :

• Each Alpha strategy has finite life. Over a period of time, Alpha returns will be exploited and will become Beta / market return.

2. ALPHA Of Active Managers is ZERO. Even skillful managers can have consecutive years of negative alpha. Is the fund generating Alpha due to luck / skill of the fund manager.

3. ALPHA due to security selection is good/ preferable. Generally, Alpha can be generated thro.’ sector selection

4. and not stock selection.

5. ALPHA RETURNS : It is dependent on the bench mark index.

ALPHA PAINS

• It is true that positive alpha is rewarding. But negative alpha is wealth destroying.

• Pain of suffering from negative alpha is greater than joy of positive alpha. So, investors have to evaluate the active funds before adding in their portfolio. Here, performance analysis plays important role.

PERFORMANCE ANALYSIS

• Check monthly returns of the active funds.

• Check bench mark return and Alpha is generated.

• Portfolio returns should be compared with bench mark returns to measure the Alpha returns.

• Check alpha returns with security selection and sector allocation. The objective is to find out how each factor contributes to alpha returns.

• Finally, check whether the alpha is due to luck/skill.

• Skilled alpha generators should be considered for investments.

CONCLUSION :

• It is difficult to find out skilled alpha generator fund managers, because, skillful managers suffer years of bad luck.

BL : WHEN SHOULD AN INVESTOR WORRY ABOUT FUND PERFORMANCE ? :

• Financial Plans are made to reach our Financial goals. If investments are made in various asset classes, then, the performance of these asset class needs to be reviewed.

4 PS

• Negative returns are not the only reason to review the fund.

• Returns are the end result of a process to achieve a stared goal.

• If the returns deviate from the stated goal/ process , one should evaluate the asset classes.

PEOPLE

• Check the Fund manager’s professional background , including his experience.

PHILOSOPHY

• Check the defined philosophy of the company across all market situations [ bull / bear market].

PROCESS

• What is the research and investment and portfolio

• process the company does have.

PERFORMANCE

• For given the process, check whether the performance is achievable.

• A change in any one of the 4 Ps will affect the Returns of the fund.

• Focus on the Expense ratio

• The kind of stocks a fund manager chooses for the fund will decide the capacity of the fund.

• Check if there is a change in the management of the fund house .

DIRECT EQUITY EXPOSURE: WHEN & HOW TO CONCENTRATE

• An investor should know the risk-return characters of concentrated exposure to direct equity and know to construct the direct equity exposure in the core-satellite framework.

• Concentrated exposure is not always about the no. of stocks in a direct equity portfolio. It is about the exposure to each stock in the portfolio.

WHEN TO CONCENTRATE:

• Concentrated exposure is to take selective stocks to generate higher returns.

• An investor should take such exposure only if he has the skill for security selection and or market timing skill.

SECURITY SELECTION SKILL :

• Refers to the ability to pick stocks that are likely to outperform the relevant benchmark index.

• It is based on fundamental analysis.

MAKET TIMING SKILL :

• Refers to the ability to time the Market to buy/sell decisions and profit from short term trading.

• It is based on technical analysis.

For example, if an investor believes that a particular stock will outperform the Nifty Index. So, he will increase his exposure than what the stock has in the index.

This decision is due to the investor conviction on the security [security selection] and the market timing skill and his past experience with the stock.

HOE TO CONCENTRATE:

• Concentrated exposure to direct equity should be confined to the satellite portfolio. It may be from mid-cap and small cap stocks.

• The core portfolio should contain passive exposure to broad-cap index / large -cap style index.

• So, the core –satellite portfolio will have exposure to styles.

CONCLUSION:

• A Concentrated direct equity exposure will be suitable to the investors who possess security selection skill and market timing skill.

WHY INVESTORS PREFER ACTIVE MANDATES

• Rupee reacts for both demand & supply and Sentiment.

• Active Mandate is to beat the bench mark index.

• AMCs have a view on Securities – whether they are under- valued / overvalued.

• Active return is possible if there is a strong correlation between its views and the actual outcome.

• AMC will have an Alpha strategy which is scalable. That is the AMC can apply its Alpha strategies even if its assets increases significantly.

• AMCs will rebalance its portfolio to get the un-realized alpha.

• So, from the above, it is clear that Alpha generation is possible only if the AMC applies all the above points successfully. But the problem is that AMC’s forecast is not always correct.

• Generally, if AUM of AMCs increase, then, Alpha will fade away and merges with market return/ beta. This makes it difficult for active mandates to be continually rewarding.

• Among universe of active mandates, some alpha will be successful every year. So, positive alpha will change continually. This makes it difficult for investors to choose an Active Alpha.

WHY ?

• There are 2 types of investors.

1. NAIVE INVESTORS : They will chase the returns. They will choose the funds based on its past performance / AMCs advertisements. They will not understand the risk –return trade from Active mandates. They are financially illiterate.

2. OVER CONFIDENT INVESTORS : They are Financially literate. They know the risk-reward trade They believe that they have the skill to choose an Alpha generation funds. They should be educated with investment success/ failures.

Conclusion :

•Financial and Psychological awareness programs will help the investors to know the risk- return trade before buying active mandates.

• The risk of active mandates is not just that they underperform their benchmarks but they will do so gradually till the negative Alpha is significant and recovering losses become difficult within the investment horizon.

• This does not mean that active mandate don’t have a place in the investment portfolio. Such mandates should constitute the satellite portion.

BL : WHY RUPEE IS GOING DOWN

• Rupee reacts for both demand & supply and Sentiment.

• If Sentiment is down, for example, a bad news on economy- slowing GDP, rating downgrades, policy drift , high inflation, lack of rate cuts and etc;,,then, rupee will go down.

• India is an importing country . So, need more dollars to pay for oil and gold and other imported products.

• The demand for dollars will be reduced if India gets higher capital inflows, borrowings, remittances , software earnings and etc.

OIL DEMAND

• India imports 83%of its oil requirements and raising oil prices keep the rupee under pressure.

• One US dollar decline in oil prices will help reduce the CAD by about one billion US Dollar.

• Importers are increasing their protection cover for the imported products from 2 months to 4/5 months, then, rupee will become volatile.

• Also, the exporters are not selling dollars that they earn, waiting for the rupee to depreciate further.

HIGH HEDGING COST

• If the hedging cost thro.’ forward contracts is high, then, the rupee will volatile.

BUNCHING PAYMENTS

• Bunching of payments by oil companies [for oil imports]in the spot market has increased the demand for dollar in the short term. Normally, oil companies avail credit between 3-6 months and stagger the payments. Here, if rupee depreciates drastically, they prefer their bills immediately than buying on credit. This creates a further pressure .on rupee

BL : CHECKLIST BEFORE BUYING A POLICY

• Keep Inflation on mind.

• Check what are all the Exclusions.

• Read Policy document completely.

• Check the Charges. Premium Allocation charges, Mortality charges & FMCs.

• Know how much commission the agent gets.

• Keep the policy document safe for claim settlement.

• Check premium payment options.

• Check ‘’ Top-up’’ option is available.

• Know how to change nomination.

• Know the policy lapse / renewal procedure.

BL : HOW MUCH TO SAVE FOR RETIREMENT

• The objective should be to balance your current lifestyle with post-retirement consumption.

• Your savings should be based on what you want to achieve.

• First, calculate your monthly non-discretionary expenses, that is the expenses necessary to sustain your normal lifestyle.

• Your savings every month towards retirement should be your monthly income less non-discretionary expenses plus savings required to meet intermediate goals like child education and etc.

• The amount you need to save for retirement has several factors. First, you should know how long you will live. Second, Estimate inflation during post-retirement period. Third, if there is a change in lifestyle which may require adjustment in the retirement fund.

• Start saving as much as your current lifestyle can support. Step up your savings every year.

• There is thumb rule : Calculate approximate estimated annual expense in the first year of retirement. Multiply this estimated annual expenses by 25 to arrive at an appropriate amount you need at retirement.

CONCLUSION :

• Your savings habit is more important for retirement.

BL : SIMPLE RULES TO MITIGATE LOSSES

1. Don’t invest in NFOs, unless the scheme has unique theme which is not already available.

2. Don’t to invest in Close-ended funds, unless there is a valid reason.

3. Don’t time the market. Invest thro. SIPs.

4. If you have invested lump sum, invest top-up with a small amounts on every corrections.

ASSET ALLOCATION AND ASSET CLASSES :

• Diversification is not just among Asset classes further within each of the Products.
• All Asset class should be a part of one’s investment portfolio.
• Asset Classes can be broadly classified into Equities, Gold, Real Estate , Debt & Cash.
• While Equities ,Gold & Real Estate are ‘’Growth Assets ‘’;
• Debt & Cash are ‘’ Defensive Assets’’.
• Growth Assets are high risk investments , high volatile in the short term & will generate high return over the long term.
• Defensive Assets generate stable returns in the short term & low returns in the long term.
• So, Each of the Asset classes come with different risk – return profile.

EQUITY

• Highly volatile investment.
• Interest Rate is one of the most important factor that affects this Asset class.
• Interest rate has a direct impact on the Capital expenditure of companies .
• In the raising interest rate scenario , companies will reduce their debt exposure & will postpone the capital expenditure. So, Consumption is reduced & sales of the company will come down.
• Crude Oil is another factor will affect the Equity Market.
• Global Markets & Currency rate are also important factors .
• Other Factors like , Political Stability, Market Liquidity/ Volatility & etc.

STRATEGIES TO INVEST IN EQUITY FUNDS :

1. Choose a Fund Category based on Client’s Investment Objective :

-Know Client’s investment objective.
-Choose type of Fund Category.
- Choose available Funds & decide which of them is matching his investment objective.
-Four factors will help you to choose the right type of fund .
* Universe of Sectors & Stocks : If the Fund has wide range of sectors & themes in its Portfolio, then, it is less Aggressive, due to its diversification.
* Universe of Stocks’ market capitalization : Funds with stocks of all range of market capitalization are less aggressive .
* Investment Style : Check whether the fund is Growth Vs Value –style Funds. Growth –style Fund will have higher scope of giving higher returns with additional risk.
* Portfolio Concentration : Portfolio holdings of a Fund indicate its risk. A diversified Fund with top sectors in its portfolio will have the risks associated with those sectors in the Portfolio.

2. LOOK at PAST PERFORMANCE :

-Just look at it. But, it is not an indicator for the Future return.

3. FOLLOW CORE & SATELLITE APPROACH :

• Create a Portfolio to your investors on Core & Satellite basis. Here, the Core Holdings will be Long term Wealth Creation & it should form major portion of the overall portfolio. Satellite holdings should be treated as Secondary holdings & should not be beyond 30% of the Portfolio.
Now, based on these above points, Choose the most suitable fund which has to match the Investment objectives of the Clients.

GOLD

• Is a tangible & liquid asset.
• Gold price will depend on Demand and Supply.
• Gold and US Dollar prices are oppositely correlated.

REAL ESTATE

• It is a way of diversifying your investments.
• Interest rates are main factor will have major impact on Real estate. In the Falling interest scenario, the demand for Gold will increase because of cheap credit offer by banks and it is vice versa in the raising interest rate.
• Best hedger against Inflation.
• Very Low correlation with Equity & Debt.

DEBT

• They are Income Generating investments.
• The return from the debt market instrument is known as ‘’ YIELD’’.
• They are considered as Conservative investment avenues, since the risk associated with debt funds are low.
• They are suitable for conservative investors.
• Before investing, understand the Yield Curve movement.
• Invest in the yield curve which is flat than choosing upward sloping curve.
• STRATEGIES FOR INVESTING IN DEBT FUNDS :
1.Based on Interest movements , decide whether to invest in long term / short term debt funds. This is because, the long dated papers are more sensitive to interest rate movements than short term papers in which short term bond funds invest. Also, the Yield curve will be more/ less flat, the return difference between long term bonds Vs short term bond funds will be very less. So, it is better to invest in short term debt funds.
2. Choose to invest in Liquid Funds.- Ideal for 3 months Parking and can earn around 6-7% interest. Tax structure will also be lesser than Saving Account.
3.FMPs –FIXED MATURITY PLANS : They are most ideal plans against bank FDs. The tax liability will also be lower than FDs.
4. If a Debt Fund Investor Wants to go for Long term investments [ 3-5 years ], then, some Equity exposure will be good. For this, they can consider MIPs & Capital Protection Funds .

BALANCED FUNDS

• The investors can invest in Equity or Debt oriented Balanced Funds/ Dynamic Asset Allocation Funds[ based on CPPI & DPI ]. This DAAF may give higher return than a balanced fund.
• So, DAAF can be considered than debt oriented balanced funds.

Various Factors contribute to Asset Allocation are :

1.Life Style stage.
2. Liabilities.
3. Risk Level.
Some Important Points on Asset Allocation :
• The assets that we hold should ideally match our needs and we should know what we intend to do with them.
• Allocation between assets that earn an income and the assets that grow in value over time.
• Assets that provide income are meant to serve immediate & short term needs. They will be low & steady return , mostly matching with inflation rates apart from preserving the invested capital.
• Assets that grow in value are meant for long-term needs. They will grow at inflation beating rate with higher short –term risks to the capital.
• There are 3 broad ways of Asset Allocation : If an investor who primarily needs growth, then he should have 70% in growth assets [ EQUITY ] and balance 30% in income assets.
• Similarly, if an investor need is income , then, it is vice versa on the above. Here, Retired investors are good examples. That 30% is to beat inflation.
• One has to do 2 things : First, check the portfolio once in a year. Second switch from 70% : 30%to 50% : 50% and then, 30% : 70% as her needs change.
• Every Investor’s core portfolio should be constructed in this manner.

8 FIXED INCOME OPTIONS FOR INVESTMENT

SLR RULE :

• When you are going to invest in Fixed Income Products, stick to the SLR Rule. It is Safety, Liquidity & Return.
• SAFETY : Safety of the Principal is the most important factor. Eg. : Govt/PSU Bonds.
• LIQUIDITY : The invested money can be withdrawn any time . Eg. : PPF, EPF & etc.
• RETURN : The rate of return is generated by the bond. It is also called as Coupon Rate. Return consists of both interest and capital gain/loss from the bonds.
• CAPITAL GAINS : It is the capital appreciation of the bonds.

EIGHT INVESTMENT OPTIONS :

1. PUBLIC PROVIDENT FUND [ PPF ]:

• Interest : 7.6%.
• Investment for : 15 years and extendable by blocks of 5 years.
• Age : NoRestriction.
• Taxation : Sec.80C for the investment anr Interest is Tax Free.
• Suitable for Creating wealth for the long-term without any risk.

2. VOLUNTARY POVIDENT FUND [ VPF ] :

• Interest is 8.55%.[ same as EPF ].
• Invest for : as long as one continue with EPF .
• Age : No Limit.
• Investment Amount : Depends on his salary.
• Taxation : 8OC Benefits and Interest is Tax Free.
• Suitable for : as like PPF.

3. SENIOR CITIZENS’ SAVINGS SCHEME [ SCSS ] :

• Interest : 8.30%.
• Invest for : 5 years & can be extended by 3 years.
• Age : Above 60 years.[ For VRS : 55Years ].
• Investment Amount : up to Rs.15 lakhs .
• Taxation : 80C benefit. But, Interest is Taxable.
• Suitable for : Senior Citizens who need regular income & are in lower tax brackets.

4. SUKANYA SAMRIDDHI YOJANA :-

• Interest : 8.1%.
• Invest for : Deposits can be made till the age of 14 and the maturity at 21.
• Age : 10 years or less.
• Investment Amount : Rs. 1.50 lakh a year.
• Taxation : 80C benefit. Interest is also Tax Free.
• Useful for : Girls child for building the Corpus without any risk.

5. PRADHAN MANTRI VAYA VANDANA YOJANA [PMVVY ] :-

* This is a Pension related scheme.
* Interest : 8%.
* Invest for : 10 years.
Age : Above 60 years.
Investment Amount : Up to Rs.7.50 lakh per family [ Maximum Pension of Rs.5,000/ month].
• Taxation : No 80C & Pension is also taxable.
• Useful for : Senior citizens who need regular income & are in lower tax brackets.

6. SAVINGS [TAXABLE ] BONDS 2018 [ RBI BONDS ] :

* Interest : 7.75%.
* Invest for : 7 years.
* Age : No Limit.
* Investment Amount : No Limit .
* Taxation : No 80C Benefit. Interest also Taxable.
*Useful for : Investors who need regular income & are in lower tax brackets.

7. LISTED PSU BONDS [ TAXABLE ] [ VALUES TAKEN FOR SBI BOND N5 ] :

• Interest : 8.55%.
• Invest for : 8 years.
• Age : No Limit.
• Investment Amount : No limit.
• Taxation : Interest & capital gains [ if any ] are taxable.
• Useful for : Investors who need regular income & are in lower tax brackets.

8. LISTED PSU BONDS [ TAX-FREE] [VALUES TAKEN FOR IRFC N2 ] :

• Interest : 6.29% Yield To Maturity [ YTM ].
• Invest : 9 Years.
• Age : No Limit.
• Investment Amount : No limit.
• Taxation : Interest is Tax Free. But, Capital gain, if any, is taxable.
• Useful For : Investors who need regular income & are in higher tax brackets.

GOVERNMENT INVESTMENT SCHEMES

1. PRADHAN MANTRI JAN DHAN YOJANA :

• Is a Saving Account with no minimum balance.
• The Rupay ATM –cum- Debit card has an in- built Life and Accident covers of Rs.30,000/ & Rs. 1 lakh respectively.
• An Economic weaker sections of society and people working in un organized sectors are eligible.

2. PRADHAN MANTRI JEEVAN JYOTI YOJANA :

• A Pure Protection Term Plan for Rs.2 lakh .
• Premium Rs. 330 per year.
• Anyone in the age group of between 18- 50 years who should have saving account in a bank that offers this scheme.
• Premium will be deducted from the bank account directly.

3. PRADHAN MANTRI SURAKSHA BIMA YOJANA :

* This Plan is an Accidental Insurance Policy.
• Accidental Death and Disability Cover of Rs.2 lakh.
• Premium is Rs.12 per year.
• Renewal is Every Year.
• Age : 18 to 70 years.
• Anyone who is having saving account in the bank that offer this scheme.

4. ATAL PENSION YOJANA

• Pension between Rs.1,000 to Rs.5,000/per month.
• To get a monthly pension of Rs.1,000/, a 40-year old has to invest Rs.210 per month for 20 years, while a 18-year old will have to invest Rs. 42 per month for 40 years.
• AGE : 18-40 Years who will have to contribute till he turns 60.
• Un-Organized Workers are eligible.
• Nominee will get the pension after his death and after the nominee’s death , the legal heirs can get the balance amount as lumpsum

5. HEALTH INSURANCE :

• Covers for expenses incurred during hospitalization due to illness / surgery.
• Rs.7,000 to Rs. 8,000/ per year for a cover of Rs. 50,000/.
• Age : 18-40 years.
• All individuals are eligible.

6. SUKANYA SAMRIDDHI SCHEME :

• Guaranteed annual return of 9.2%.
• Minimum contribution : Rs.1,000/ a year and the maximum s Rs. 1.50 lakh.
• Girl child age below 10 years are eligible.

7. KISAN VIKAS PATRA :

• A Secure interest rate of 8.7% and the promise to double the investment in 100 months.
• Minimum investment : Rs. 1,000 and maximum No Limit.
• All individuals are eligible.

8. POST OFFICE TIME DEPOSITS AND BANK FDs :

• Time Deposits with tenures of 1-4 years with 8.4% and 5 year deposit gives 8.5%.
• Minimum for post office time deposits is Rs.200/ and maximum no limit.
• All individuals are eligible

Balancing Increased Longevity and Retired Life style

• A retirees can withdraw the required amount from their Retirement Income Portfolio at a sustainable withdrawal rate of return.
• The Retirees should know the maximum withdrawal rate of return to balance the Longevity risk and desired retired lifestyle.
• The main objective of a retirement income portfolio is to draw cash flow for the retired life.
• Larger withdrawal can deplete the portfolio, leading to Longevity risk. That is : The risk that a retiree my outlive the portfolio. • Longevity risk will increase if the portfolio generate loss. For example, If a portfolio generates 10% lossin the first year followed by 10% gain means that the portfolio has to generate 11% just to recover the capital. Similarly, if the same portfolio generates 10% gain in the 1 st year and 10% loss in the 2nd year, which means that the portfolio has to generate 9% to recover the losses. If this difference widens with the time, the longevity risk will arise.

HOW TO MODERATE THE LONGEVITY RISK

• It can be moderated thro.’ withdrawl rate. HOW ?:
• Suppose, if a retiree buys an immediate Annuity after retirement will remove the longevity risk, since Annuity will pay a certain amount till the retiree’s death.
• But, retirees don’t prefer to have only Annuities in their portfolios.
• They can equally allocate their money into stocks, bonds and annuities also. They create Stocks- Bonds – Annuities portfolio.
• So, the retirees ‘ withdrawals rate from the portfolio should be equal to the Annuity payment. Because, Annuities are paying till the retirees’ death, this stock-bond- Annuity portfolio should have same withdrawal rate
• But the Problem in the Stock-Bond-Annuities Portfolio is subject to downside risk. To control the downside risk, it is better to to set-up side-pockets account[ ie; exposure in the money market mutual funds.
• When the porftolio generates more returns than the maximum sustainable withdrawal rate , the retirees can transfer the money to side-pocket account. This money can be used during last years of the retirement.
• So, a retirement portfolio having stock-bond – annuity portfolio should have a PURE ANNUITY’ s Withdrawal rate.

UNDERSTANDING FINANCIAL RISK

1.AGENT RISK :

• An Agent’s motivation is not inline with the investor.

2. ALPHA:

• Skill of a Fund Manager.

• Excess return above the Index .

• Important in the Capital Asset Pricing Model.

• ‘’Active Return’’ of a Fund Manager.

3.ASSET ALLOCATION :

• Balancing the risk by diversifying Investments across different asset classes to reduce the overall risk of the Portfolio.

4. ASSET CLASS :

•A group of securities have similar Financial Characteristics, behave similarly in the Market &have same rules & regulations.

• Asset classes are : Equities[ Stocks], Fixed Income [ Bonds],Real Estate [ Property] , Commodities and Cash.

5. INFORMATION RISK :

• one person has more information than the other person.

• The First person may take advantage of the second person’s knowledge/ Information deficit.

6.ATTITUDE :

• Positive or Negative evaluation of People , Object, Events , Activities & Ideas.

7. BETA :

• Systematic risk or a measure of Volatility of a Portfolio in comparision to the Market .

• Indicates the Investment is more or less volatile than the Market.

8.BALANCE OF RISK :

• Balance between risk tolerance and risk capacity.

• When the Investor is comfortable at risk level, then, the balance is achieved.

9. BASIS RISK :

• Due to imperfect Hedging.

• Mismatch between Hedged Asset’s expiry date & actual date of the selling asset.

10. BLOCK BOX RISK :

• Similar to Information Risk.

• Specific knowledge about system’s internal operations are not known.

11. BLACK SWAN EVENT RISK :

• Low-Probability with High Impact event risk which is almost impossible to forecast.

• Hard & rare to predict events which are beyond expectations in the History, Science & Technology and Finance.

12. CAPACITY FOR LOSS :

• Worse outcome than anticipated outcome without affecting achievement of Important Goals.

• Risk Capacity is evaluated by analyzing investor’s financial circumstances before final decisions are taken.

• Risk Capacity is the extent to which a risky event [ Loss ] can happen.

• Risk Capacity is Customer’s ability to absorb the falls on value of his Investments.

13. CAPITAL ASSET PRICING MODEL [ CAPM] :

• To determine rate of return of a risky asset.

• In this Model, only risk of the stock should be determined. Ie; How the stock move with the Market [beta].

14. COMMODITY RISK :

• Value of an asset will be adversely affected by the fluctuations in the prices of Commodities.

15. COMMODITY RISK :

• Failure of Understanding between Communicator and the Receiver.

16. COMPLEXITY RISK :

• Financial Investments which are complex, multi- layered & difficult to understand become the risk.

17. CORRECTION :

• Measure of the relationship between two random variables. Value can be Positive or Negative.

• Perfect Correlation will have value of 1 meaning the variables move identically in the same direction .

• If the value is Zero, means, No correlation and If it is– 1[ negative 1],means inverse relationship.

18. COST RISK :

• Unknown Costs or the level of known costs increases.

19. DEFAULT RISK :

• Also called as ‘’ Counter Party Risk’’.

• Each party in a contract & when the counter party will not meet its contractual debt obligations.

Under this, There are two risks :

1. Credit Default Risk

• Risk of loss arising from a debtor being unable to pay its loan obligations.

2. Credit Default Swap

• Is a Financial Contract in which a buyer [ who buys Corporate or Soverign Bonds] tries to hedge with issuer of the Bonds.

• Buyer of the Swap makes payments to the Swap’s seller till the maturity of the contract.

• In this case of Default, the seller has to pay the buyer’s security premium & interest between the time of default and the maturity of the bond.

20. CONCENTRATION RISK :

• Any single exposure makes losses to an entire portfolio.

• Example: Bank’s exposure to specific loans and assets.

21. COUNTRY RISK :

• Also called as’’ Sovereign Risk’’.

• When a Country / Government not complying with the terms of Loan / Debt agreement.

• Associated with Country’s Wealth / Macro–Economic Performance.

• Example : Greek Debt Crisis.

22. DIVERSIFICATION :

• Wide variety of Investments / Asset Classes to reduce Overall Volatility [ Risk ] of the Portfolio.

• Don’t to Put all Eggs in one basket.

23. DOWNSIDE RISK :

• Loss on an Investment which is less than expected.

24. EQUITY RISK :

• Price of a Stock will change.

25. EXPECTED SHORTFALL :

• Means ‘’ Expected Loss’’.

• Is calculated in addition to the value at Risk.

26. EXCHANGE RATE RISK :

• Adverse movement in the Exchange of Currencies among Countries.

• Can be hedged using Foreign Exchange Futures & Forwards.

27. GAP ANALYSIS :

• Investor’s risk tolerance can be compared with return required from Portfolio to achieve his Goals.

• Comparison of actual performance with Desired Performance.

28. GAP HEDGE [ RISK ]:

• To offset Potential Gain / Loss that may be incurred by another investment within the Portfolio.

29. HOLDING PERIOD RISK :

• The Longer the term of the Bond , Greater the chance of more attractive investment opportunity available.

30. IMPLIED VOLATILITY :

• Volatility extracted from Options. Investors’ Expectations about Future Volatility.

• Example : VIX is extracted from S& P 500 Options. VIX is often referred as an ‘’ Investor Fear Gauge ”.

31. INVESTMENT SUITABILITY :

• Investment Companies must give suitable Investment Advice & Discretionary Decisions to investors who based on that will take decision .

• Companies have to give Good Investment Advice to meet Investor’s Needs & Expectations , Goals to match risk capacity & tolerance.

32. INFLATION RISK :

• ‘’ Purchasing Power Risk ‘’.

• Cash Flow from an Investment will not be sufficient in future due to Inflation.

• A reduction in the real value of money due to increase in the price level o Goods & Services in an Economy over a period of time.

33. INTEREST RATE RISK :

• ‘’ Purchasing Power Risk ‘’.

• Called as ‘ Duration Risk’.

• Changes in Interest Rates.

• How Sensitive Bond’s Price to the changes in Interest rates.

1. Time to mature the Bond

2. Coupon rate of the Bond.

34. LIQUIDITY RISK :

• Investment becomes more difficult to buy / sell.

35. IMPLEMENTATION RISK :

• Also called as’ Mapping / Financial Plan Risk’.

• Mapping of a stated Plan with Actual Financial Plan.

36. MARKET RISK :

• Underlying Market Variables changes over time.

• Any Market Variable has an impact on the Market.

37. MARKET CONCENTRATION RISK :

• A single company accounts for very large amount of Market Transactions.

38. MEASUREMENT ERROR :

• Errors may be Systematic or random.

• Random errors are more serious as they impact the accuracy of measurement.

39. MODEL PORTFOLIO :

• called as ‘ Mapped Portfolio’.

• Pre- Constructed Collection of Investment Products.

• Wide Investments Solutions based on risk profile , asset allocation & fund selection.

40. POLITICAL RISK :

• Due to Political Change.

41. PROFIT RISK :

• Due to Changes in Profits [ Earnings ].

42.REGULATION RISK :

• Due to Changes in Rules & Regulations.

43. RISK :

• Due to Absence of Certainity.

• ctual Return may vary from Expected Return.

• Potential Gain/ Loss of the Value .

44. RISK APPETITE /ATTITUDE :

• How investors think about Financial risk.

45. RISK AVERSION :

• Investor Behaviour to reduce Uncertainity.

46. RISK CAPACITY :

• Refer Sl. No.12- Capacity for Loss.

• How much risk an investor takes to achieve his Financial Goals.

• To achieve the Goals, Details like, required corpus & time, rate of return are necessary.

• Rate of return will be used to decide the type of Investments.

47. RISK EXPOSURE :

• Investor’s reaction to the short term Gains/ Losses to his Portfolio.

• In General, Investors are more sensitive to short term market fluctuations & will frequently monitor his Portfolio.

48. RISK FREE RETURN :

• IDefault Free return of a bond with short maturity .

49. RISK GAP/ RISK MISMATCH :

• Refer Sl. No. 8- Balance of risk.

• Mis match between risk required, tolerance & capacity.

• Trade –Offs become necessary to resolve the mis match & to give suitable Financial Advice.

• Keeping the risk tolerance & capacity, investors must Trade –offs some Goals in order to achieve others.

50. RISK GROUP :

• All similar risk tolerance levels can be put into one risk group .

51. RISK INTELLIGENCE :

• To Protect the Values amid Un certainty.

• It is at Company’s level to integrate People, Processes & Systems to increase Informations available to Investors for taking improved Decision.

52.RISK OUTSIDE RISK CLASS :

• Apart from Market , Credit & Operational risks, other risks are’’ Outside Risk Class’’.

53. RISK PREFERENCE :

• Investor uses a combination of Subjective & Objective Cognitive Evaluations to generate risk preference.

54. RISK PREMIUM :

• Investment gives Excess Return than risk-free return.

• Compensation to invest in a risky asset class compared to the risk-free asset class.

55. RISK PARITY :

• Allocation of Risk to Investment Portfolio.

• When Asset Allocation is adjusted, Risk Parity can achieve Higher Sharpe Ratio.

56. RISK PROFILE :

• Individual ‘s optimum level of risk with regard to his Risk Required, Capacity & Tolerance.

57. RISK PROFILING :

• is the Process of ‘Risk Profile ‘.

58. RISK REQUIRED [ NEEDED ] :

• Investor’s Current & Future Financial Position to be considered .

• Investor’s Income, Savings, Expenses , Liabilities and Rate of Return required[ to achieve his Financial Goals ] to be considered.

59. RISK TOLERANCE :

• Individual ‘s willingness to take risk [ Potential Loss ] towards achieving the Financial Goals .

60. RISK TOLERANCE SCORE :

• A Scale shows the level of Risk Tolerance of an Investor.

• Higher the Score , the more risk seeking by Investor.

61. RISK PERCEPTION :

• Investor judges about severity of Risks.

• It can change from Investor to Investor.

• When Market is Bullish , he under-estimate the risk & Over-estimate when market is falling.

62. RE-INVESTMENT RISK :

• When Bonus/ Dividend is given, Investor could not able to find suitable investment avenue.

63. RETIREMENT ALPHA :

• To maximize Individual’s Retirement Income.

64. SEQUENCE RISK :

• If there is a steep fall in the market in the early years of Income Distribution Period[ Retirement Period ],it can have negative impact.

• Similarly, If market increases in early years & falls in later years, it can have negative impact .

65. SHARPE RISK :

• Profile of Hedging does not match Profile of Risk.

66. SHARPE RATIO :

• Excess Return/ Unit of Risk Taken at any Price Movement [Up or Down ].

67. SKIN –IN – THE- GAME :

• EMonetary Risk in an Investment.

• How much does Equity hold in an Investment.

68. SORTINO RATIO :

• Excess Return / Unit of Risk taken only at Downside Market Movement.

69. SPECIFIC RISk :

• Called as ‘ Un-Systematic Risk’.

• Affects individual asset in a Portfolio.

70. SYSTEMATIC RISK :

• Called as ‘’ Aggregate Risk’’.

• Arises from Market Structure and its Dynamics .

• Affects all Investors & Assets in the Market.

• It can’t be diversified .

• In CAPM, the Market risk is referred as ‘ Systematic Risk’ .

71. SYSTEMIC RISK :

• Risk of a collapse of a Market.

• Risk due to linkages & dependencies in the Market.

• For Example : Default of Lehman Brothers .

As the default of this Bank triggered the default of other market participants thro.’ Market linkages.

72. TAXATION RISK :

• Arises due to Tax Laws/ Systems in relation to Financial Products.

73. MARKET TIMING RISK :

• Arises due to error in timing of the Investment.

• Is the risk that an Investor takes when trying to buy/ sell a stock based on future price predictions.

• Example : Being out of Market.

74. UNCERTAINTY :

• Due to Imperfect & or Unknown information.

• Not knowing whether the information is true / false.

75. VALUE AT RISK [ VaR ] :

• Estimates how much an Investment might lose within a specified time period , often a Day.

76. VALUE assumption RISKS [ ILLIQUIDITY ] :

• Exists where the true value of traded assets when markets are Illiquid.

• It causes Market Participants stop taking at given prices because of illiquidity to provide clear price signals.

77. VARIANCE :

• Squared deviation of a random variable from its mean.

• Measures how far a set of nos. spread out from their mean.

• Small Variance indicates the data points tend to be close to the mean[ Expected Value ].

• High Variance indicates the data points are away from the mean & from each other.

78. VOLATILITY :

• The degree of Variation of a trading Price/ Value over time.

• Measured by the standard deviation or Variance. .

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12 RULES OF INVESTING

1. INVEST FOR MAXIMUM REAL RETURN :

• This means that the return on investment after Taxes & Inflation.

• This is should be the main objective of the long –term investors.

• To get the maximum real return, diversify your investments in Stocks, Bonds and other asset classes.

2. ONLY INVEST – DON’T TRADE / SPECULATE :

• How much better the relaxed, you, as the long-term investor will get the benefits.

• Be more Patient and less Emotional.

3. BE FLEXIBLE & OPEN –MINDED ON INVESTMENTS :

• The basic fact is that no one type of investment is always the best.

• Sometimes, Equity will perform better. Some other time, Bonds may perform well. In some other times, Gold may do well.

• If a particular industry/ stock become popular with investors, then that popularity may remain for a temporary period. If lost, may not return for many years.

• So, Be Flexible on and open-minded on your investments.

4. BUY LOW :

• Buy when Stock prices and demand are low.

• It is extremely difficult to go against the crowd. That is: To buy when everyone is selling/ when the things look darkest.

• But, if you buy the same securities when everyone else is buying, then, you will have the same results as like everyone. You can’t outperform the market, if you buy the Market and it will become overpriced.

• Benjamin Graham says: ‘’ Buy when most people, including Experts are pessimistic and sell when they are optimistic’’. That is: Never follow the Crowd.

• Simple in concept and difficult in Execution.

5. BUY QUALITY STOCKS WITH BARGAINS:

• Quality means that the company will have the following attributes :

1. Sales leader in the growing market.

2. Technologically leader [technical innovation].

3. Strong management team with proven track record.

4. The first among the companies to enter into a new market.

5. A well known trusted brand with a high profit –margin products.

6. BUY VALUE , NOT MARKET TRENDS / ECONOMIC OUTLOOK :

• It is the individual stocks that determine the market and not vice versa.

• Generally, investors focus on the market/ Economic trends. But, individual stocks may rise in the bear market and fall in the bull market.

• So, buy individual stocks and not the market trend/ Economic outlook.

7. DIVERSIFY IN STOCKS AND BONDS :

• No one can predict/ control the market.

• So, diversify – by industry, by risk & by country.

8. HIRE FINANCIAL ADVISER :

• To help you on planning for your Finance to achieve your life time goals, it is better to hire a financial advisor.

9. LEARN FROM YOUR MISTAKES :

• The only way to avoid mistakes is not to invest- which is the biggest mistake of all.

• Forgive yourself for your errors. Don’t become discouraged.

• Take each mistake into a learning experience.

• Analyze what went wrong and how you can avoid the same in the future.

10. OUTPERFORMING THE MARKET IS A DIFFICULT TASK :

• The real challenge is making investment decisions that should be better than those of the professional / Market.

• So, if any company that consistently outperforms the market is actually doing a superb job. But, it is very tough to outperform the market continuously.

11. THERE IS NO FREE LUNCH :

• Never invest on Sentiments. If you have any personal/ official relationship with the company, don’t invest on that basis.

• Analyze the company in depth before buying the stock.

• Never invest in IPOs. Because, the commission given to the advisors will be added into the price of the stock which most new stocks decline in value after the listing.

• Never invest solely on Tip.

12. DON’T BE FEARFUL / NEGATIVE ALWAYS :

• There will be corrections and even crashes. But, over time, the stocks do go up….and up…and up.

• Businesses will start to boom after the corrections/ crashes. Wealth will increase and stock prices will rise accordingly.

• So, if you follow the basic rule of ‘’ Buying Low and Selling High’’, then, building wealth thro.’ stocks will become true.

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PORTFOLIO MANAGEMENT SERVICES [PMS]

# PMS is suitable for '' High Net Worth Individuals " who are looking for investing Professionally in a '' Customized Portfolio of Stocks ''.

# It is a Specialized Service to '' HNI INVESTORS '' Who can invest a minimum of Rs. 50 Lakhs.

# Direct Equity Portfolio will be created separately for each and every investor.

# The Individual Portfolios will be managed by Professional Fund Managers.

# PMS is a ''Good option '' beyond Equity Mutual Funds.

TYPES OF PMS:

There are 3 types of PMS.

1. DISCRETIONARY:

# Here, PMS Manager has the '' Right to take Decisions on behalf of the Client ''.

# PMS Manager is not bounded to consult with client to take the Decisions.

2. NON-DISCRETIONARY:

# PMS Manager will suggest to the Client regarding Suitable Stocks based on his risk appetite and Decision will be taken by the Client.

# But the Trading Activities [Execution of Trades] will be done by the PMS Manager.

3. ADVISORY:

# Here, PMS Manager Will only suggests the Investment Ideas to the Client who will do both activities [selecting the Stocks and also the Trade Execution].

PMS PROCEDURE:

# For Investing in PMS, One has to Open a Bank A/C, Demat A/C & Trading A/C separately .

PMS AGREEMENT:

# One has to sign in the Agreement Form which will have the details, like, Strategies and Model Portfolio to be Followed.

# One has to give Power of Attorney to the PMS Manager, if he chooses Discretionary type of PMS.

# PMS Manager has to give a Performance Report to his Clients once in Every 6 months.

# A separate User Name and Password can be given to Client to Log-in to the website and he can view his Portfolios at any time.

# Whenever Dividend / Bonus / Interest Income / any other Amount is credited to his Bank Account,the PMS Manager has to redirect the amount to the Client Portfolio.

FEE STRUCTURE:

# PMS Fee Structure is costlier than any other Investment Options.

# It will have Entry Load, Yearly Management Fee and also Profit Sharing. This will vary from one PMS to another .

1. ENTRY LOAD:

* It may be in the range of 1% to 3%.

* It will be deducted from the Investment Amount.

2. MANAGEMENT Fee:

* It may be between 1 - 3 %, depending upon the Service Provider.

3. PROFIT SHARING FEE :

# This is based on the “Promised Return " which is agreed between PMS Manager and the Client.

4. Other FEE:

Apart from the above charges, PMS will have some more charges;

They are: 1. Custodian Fee.

2. Demat Account Opening Charges.

3. Audit Charges.

4. Transaction Brokerages.

NOTE: The above Fees are Negotiable. So, One can negotiate with the PMS and also, There is No Standard Norms is defined for PMS Fee.

ADVANTAGES OF PMS

1. A Customized Portfolio of Stocks can be created and professionally managed by PMS Manager.

2. PMS promises to outperform the Benchmark.

3. The Client will have different asset Class in his Portfolio. That is: Equity, Debt, Gold and Mutual Funds.

4. There is No Limit of investing in a single stock. The client can invest any amount in a single stock.

5. PMS Manager will keep your Requirements in mind and invest accordingly.

6. Diversified as well as Focused Portfolio can be framed depending upon the Client Profile.

DISADVANTAGES OF PMS

1. As per SEBI Rule, the minimum investment amount is: Rs.50 Lakhs.

2. PMS will not share the Losses. They share the Profits only.

3. Long Documentation Procedures. Like, Opening new Bank, Demat and Trading Accounts.

4. High Entry Load and Other Fees.

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IMPORTANCE OF FIXED INCOME

Fixed Income Investment is important for investor and in their Portfolio:

Here, Fixed Income Investment Products are explained.

1. PPF: PUBLIC PROVIDENT FUND:

* It is a 15 year Period Investment Plan.

* Deduction under Section 80C of the Income Tax Act, 1961.

* Liquidity is the greatest dis-advantage.

2. BANK FDs:

* 1month to 5 Years.

* Interest Income is Fully Taxable.

* There will be some Penalty for Pre- Closure of the FDs.

3. POST OFFICE SAVINGS:

* 1 Month to 5 Years.

* Interest Income is Fully Taxable and Section 80C benefits are available in some schemes.

* Liquidity is available with some Penalty.

4. TAX FREE BONDS:

* Maturity Period is: 10 Years and 15 Years.

* Interest is Tax Free.

* Liquidity is Moderate.

5. NCDs:

* Interest will be higher.

* Interest Income is Taxable.

* Liquidity is Poor.

6. FIXED MATURITY PLANS [FMPs]:

* 1 -5 Years and above.

* Interest will be based on Investment Period.

* Liquidity is Poor.

7. DEBT FUNDS:

* 1 Day to 5 Years and Above.

* Interest will be based on Investment Period.

* Liquidity is the Greatest Advantage.

WHY WE HAVE INVEST IN DEBT FUNDS:

The following is the reasons why we have to invest in Debt Funds:

1. More Tax -efficient than other Investment Products.

2. Very High Liquidity.

3. Ability to generate Better Returns and 5 Years.

4. Flexible Investment Periods are available, starting from 1 day to 5 Years and above.

5. We can invest thro. SIP, STP and SWP investment options for our convenience.

6. INDEXATION Benefits are available if the Investment Period is above 3 Years. This Benefit is not available in other Investment Products.

TYPES OF DEBT FUNDS:

1. High Quality Focused Funds:

* Overnight Funds

* Liquid Funds.

* Money Market Funds.

* Low, Short, Medium and Long Duration Funds.

* Banking & PSU Funds.

* Gilt with 10-Year Duration Funds.

2. High Accrual Focused Funds:

* Ultra Short Duration Funds.

* Floater Funds.

* Credit Risk Funds.

* Medium Duration Funds.

3. Cash Management Funds:

* Short term / Medium / Long term Savings Funds.

* Dynamic Solutions.

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NATIONAL PENSION SYSTEM

All Indian Citizen [Resident Indian and NRI] Aged between 18-65 years can join in the NPS.

1. It is allowed after First 3years of joining the scheme.

2. Accumulated amount can be withdrawn.

3. Withdrawal is up to 25% of the Contributions made.

4. Only 3 times during the entire period of subscription.

ADVANTAGES:

TAX Benefits:

1. For a Salaried Person:

Tax Exemption of up to 10% u/sec.CCD [1] which comes u/sec.80CCE [Rs.1.50 Lakh].

2. For an Employer:

The Employer can also claim the deductions for the Contributions made by the Employer u/sec. 80CCD[2] which is above Rs.1.50 lakh u/sec.80CCE.

3. For a Self-Employed:

Self-Employed can claim deductions of 20% of Gross Income u/sec.80CCD [1].

ADDITIONAL BENEFITS:

NPS offers freedom to decide how the money is invested.

There are two options:

1. ACTIVE CHOICE

2. AUTO CHOICE

ACTIVE CHOICE:

In Active Choice, the money will be invested in Asset Classes: E, C & G.

Asset Class E: '' Investing in EQUITIES''- Maximum 50% only.

Asset Class G : '' Investing in GOVERNMENT SECURITIES''.

Asset Class C : ''Investing in ''Other than Government Securities ''.

AUTO CHOICE :

Based on Life cycle of the subscriber , the Fund Manager will invest .

DISADVANTAGES :

1. In-efficient Taxation :

That is NPS is not an EXEMPT-EXEMPT-EXEMPT Investment.

2. 60% of the accumulated Retirement Corpus will be coming under Tax Structure.

3. Withdrawal from the Retirement Corpus is also taxable.

4. Inability to beat Inflation .

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ECONOMIC INDICATORS

Economic Indicators give you an idea on the ''Health of Our Economy '' and which direction economy is moving.

So, one should know these Indicators before making an investment.

1. BANK CREDIT GROWTH:

* Lending [Credit] activity indicates '' Confidence among Corporate to borrow for expansion as well as Consumption sentiment.

* Higher Credit Growth suggests growth in the economic activities.

2. CAPACITY UTILISATION:

* How much of Production Capacity at manufacturing Plants is being utilized will give an idea on economic growth.

*Higher Utilization suggests ''Robust Demand''.

3. BOND YIELDS:

* The movement in Government Bond Yield suggests Confidence of Bond Markets.

* A fall in Long-term bond yield can indicate ''Market expects a Recession and Future cuts in Interest rates.

* Govt.bonds is more risky assets.

4. HOUSING LAUNCHES:

* The no.of new Residential Projects are being launched indicates '' The strength of the Housing Market which is very close to the economic Growth.

* A large no.of launches suggests an upward in the economy.

5. MANUFACTURING ACTIVITY:

* Manufacturing Activity at factories indicate '' How the economy is shaping up.

* Increase in Index of Industrial Production [IIP] suggests more Demand, leading to Healthy Economic Growth.

6. INTEREST RATES:

* RBI may raise or decrease the interest rates to control Inflation.

* Lower Interest Interest Rates will stimulate the Growth.

7. CONSUMER INFLATION:

* Higher Inflation indicates Demand is Robust or supply is constrained.

* Soft Inflation implies '' either weak demand or Excess Supply''.

8. GDP GROWTH:

* GDP is the important measure of economic health. But, it has limited value since GDP gives you a lag which has already happened.

* GDP gives a definitive confirmation for Policy actions to be taken by Government.

9. CORPORATE EARNINGS GROWTH:

* Profit Growth is the confirmation of trends that have already been established.

* Strong earnings growth reflects healthy demand for Goods and Services.

10. UNEMPLOYMENT RATE:

* The no. of individuals looking for Work provides a delayed indication of the state of the economy.

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Government Securities [G-Sec] Investment

G-Sec. is '' Sovereign Bonds backed by Govt.of India [GOI] and issued by RBI on behalf of Government''.

Key Features:

The guiding Principle of G-Sec.Bonds is:

  • SAFETY
  • LIQUIDITY and
  • RETURN.

1. Safety:

They are 100% safe, since the bonds are backed by GOI. On Maturity, Principal and Interest will be paid by Govt. But, the price of the bond will be volatile. To control this volatile, simply hold the bond till the maturity. If you do, you will get the Face value of the bond.i.e; the Price at which it was issued.

2. Liquidity:

If you want to liquidate before Maturity, then, you can do the redemption thro.' Stock Exchange or Mutual Funds [if you have invested thro.' MF].

3. Returns:

Returns are Guaranteed, Fixed Interest payable Semi-Annually.Generally, G-Sec.Returns will be higher than Bank FD Return.

Periods:

G-Sec.bonds are available in short and Long term also, ranging from 91,182, 364 days to 10,20, 30 and 40 years.

Interest Income:

Interest income is Taxable as per your Tax slab.

Capital Gain Tax:

If you redeem the bonds before one year, then, it is Short term Capital Gain which is taxable as per your slab and If you redeem the bonds after one year, then, it is Long term Capital Gain which is 10% Flat or 20% with Indexation.

Conclusion:

G-Sec. are good investment option for longer duration [above 10 years] and Ideal investment for Portfolio Diversification with Low-risk and Steady Returns.

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4 Smart Ways to invest in GOLD

1. GOLD ETF:

* ETFs are '' Schemes offered by Mutual Fund Companies that are listed and traded on Stock Exchange''.

* It represents the '' Ownership in an underlying Security, Commodity or Asset''.

* Gold ETF means ''Ownership of Gold which will be held by a Custodian’’.

*Gold ETFs are listed and traded on Exchange. It can be bought and sold like, Stocks on a real-time basis.

*To invest in Gold ETFs, Demat and Trading Account to be opened.

* This is the smart way to invest in Gold and the cheapest way of buying Gold.

2. Gold Savings Bonds:

* They are also called as '' Gold Funds''.

* Gold Savings Bonds are Passive Funds.

* They are Fund of Funds schemes which invest into an underlying Gold ETF and give the returns that are close to the returns of its underlying Gold ETFs.

* Gold units are allotted in a Paper form and not like Gold ETFs where Units are in Demat Account.

*The Annual Expenses will be higher than Gold ETFs. It includes Fund Manager Charges along with the cost of Gold ETFs.

* You can invest as Lump sum or SIP.

* Gold Savings Fund Schemes are available in Mutual Funds.

3. Sovereign Gold Bonds:

* In order to tackle the current account deficit, Govt.of India introduces time to time these Gold Bonds.

* These Bonds are backed by Govt.of India as an Alternative to purchase Physical Gold.

*One can purchase these bonds via, Bank, NBFCs, Post Offices and thro.'Agents.

* They are available in denominations of Rs. 5, 10.50 & 100 grams.

*These bonds can be held in Physical [Paper] or Demat Account.

*An Individual can buy a maximum of 500 grams per year.

*These bonds have the tenure of 5-7 years. But can be redeemed before maturity by selling thro.' stock exchange.

* Here, We can earn interest at 2.50% on initial value of investments on Half-Yearly basis.

Tax Structure:

* Capital Gains made after 3 years are taxable under Long Term Capital Gain tax [LTCGT].

* Interest is also taxable.

Advantage:

* It provides interest on the investment apart from Capital Appreciation.

*This is not available in other instruments.

4. E-Gold:

* It is a Unique Investment Product launched by National Spot Exchange Limited [NSEL].

* It allows you to buy Gold in an smaller denominations of 1, 2, 3, ...grams.

* Here one unit of E-Gold is equal to One gram of Gold.

* At the time of Settlement, you can get Physical delivery of Gold. There is no storage or holding costs.

* Transaction Pattern will be similar to Equity Markets where Settlement is on T+ 2 basis.

Conclusion:

* Buying Paper form of Gold is the better option than Physical Gold because of Security Reasons and need not to worry about quality of Gold.

* There is no making charges and other hidden charges.

* Treat Gold as a Diversifier asset. Invest for Long term horizon.

* Allocate 10-15% of your entire portfolio to Gold.

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MUTUAL FUND SCHEMES with Time Horizon

Mutual Fund Schemes with the time horizon for Investment is given below.

1. Liquid/ Overnight Fund : up to One month.

2. Money Market Fund : 3- 6 months.

3. Ultra Short term Fund : 6-12 months.

4. Low Duration Fund : 12- 24 months.

5. Arbitrage Fund : 12- 24 months.

6. Short term Fund : 24-48 months.

7. Medium term Fund : 24- 48 months.

8. Equity Savings Fund : 24-48 months.

9. Income/Credit/Dynamic Bond Fund : Above 5 years.

10. Equity Hybrid Fund : Above 5 Years.

11. Equity Fund : Above 7-10 years.

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25 Gems of Mutual Fund Investing

1. Diversification.

2. Set your Goals.

3. Start to Plan before Investing.

4. Allow time work for you.

5. Don't time the Market.

6. Invest Regularly.

7. Understand Risk- Return Concept.

8. Start as early as possible even with small amount.

9. Save as much as you can.

10. Invest in an efficient Investment Plans.

11. Don't invest in risk-free investments, if your holding period is longer.

12. Follow Asset Allocation Strategy.

13. Do invest in Equity Funds, if your time horizon is above 5 years.

14. Don't keep large investments in Savings / Current Account.

15. Review your Portfolio frequently.

16. Don't expect good or bad times to last forever.

17. Invest both in Growth and Value Investment Style.

18. Switch Under -Performed Funds to Top Performing Funds.

19. Look at Fund's Investment Philosophy and Portfolio Holdings.

20. Follow Rupee Cost Averaging to minimize the risk.

21. Have only limited Funds in your Portfolio. Don't have too many Funds.

22. Expect only decent return from your Portfolio.

23. Have a Frequent Discussion with your Financial Adviser on Portfolio Management.

24. Don't chase the Return. Chase only your Goals.

25. Keep Faith on Stock Market and Invest with Hope, Confidence and maintain Patience.

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Tax Free Bonds {U/S 10 (15) (iv) (h)}

Risk-averse investors now have new options to park their money. The interest earned on these bonds will not be subject to income tax. The interest on these bonds will be paid annually (for example 31st March every year) by credit into the account of the investor. There is no cumulative option.

These bonds will be eventually listed on the Bombay and National Stock Exchange, so investors will have the option of selling them before the full term of the bond. However, the price you may get for selling before they mature will depend on market conditions.

Is effective yield the right way to look at tax-free bonds?

Investors get carried away by the effective yield on tax-free bonds. The effective yield is calculated as follows:

Effective yield = coupon rate/ (1-tax rate). Hence, for a coupon of 8.2%, an investor in the 30.9% tax bracket has an effective yield of 11.86%. The cash flow in the hands of the investor is only Rs 8.2 for every Rs 100 invested in the bonds, and the reason the yield is shown higher is due to the tax rate.

Change in tax rate will change the effective yield on the bonds.

Who should invest in tax-free bonds?

Effective yield is only relative in nature, not absolute. If the comparison is between investing in a ten-year fixed deposit of an AAA-rated bank at 8.2% which is taxable and investing in a ten-year maturity tax-free bond at 8.2%, then effective yield can be used as a measure for comparison. Investors can substitute tax-free bonds for fixed deposits as post-tax return is much better on tax-free bonds.

Investors wanting to park surplus funds in an asset that will give them an absolute return of 8.2% every year for ten years, or 8.3% every year for 15 years, irrespective of the returns available elsewhere, can invest in tax-free bonds. In such cases investors are content with the returns offered and have surplus money that can be locked in for ten or 15 years.

Come August-September, a slew of Tax free bonds are slated to hit the market, with government entities raising funds worth Rs40,000 crore during this fiscal year. The instrument seems to appealing, categorically for the investors falling in to the higher tax slab. The return on the tax free bonds is comparatively higher than other alternatives. However, it may not sound that enticing for individuals in the lower tax category, considering the availability of other investment options.

To begin with, investors who fall in to non-retail segment will fetch around 7.16% on 10 year AAA rated Tax free bond, 7.4% on 15-year and 7.48% on the 20-year instrument. Non-retail segment is defined as the investors who deploy more than ten lakhs in a particular bond issue. Retail investors are classified as individuals who invest less than ten lakhs. Retail segment will earn 7.41% on 10 year instrument, 7.65% on 15-year and 7.73% on the 20-year one. Government of India has determined a limit on the coupon for AAA-rated bonds, wherein the rate for retail investors will be fixed at 55 basis points below the yield on government securities, while 80 basis points lower for the non-retail segment.

Although the indicative yields offered are about 50-100 basis points lower than what was offered two years back, the new tax free bonds will still attract high tax bracket individuals. Tax free bonds (issued by government institutions) score much better than Bank FDs, when the yields on tax free bonds are compared with the post-tax returns on the FDs. For instance, an investor (belonging to 30% tax bracket) fetches annualised return of 7.16% on 10 year tax free bond, while one year FD may offer 8.25%. However, back of the envelope calculations reveals a post-tax return of around 5.8% on the FD, literally 135 basis points lower than the yield on the tax free bond. Also, tax is deducted at source when Banks pay more than Rs10,000 as interest payment in a year. While, listed NCDs in the demat form attract no TDS. Such post-tax return on high quality paper is unmatched in the current environment.

Besides the fixed tax free coupon, investors can also encash on the prospect of capital appreciation. Bond prices are inversely correlated with the yields, implying that bond prices go up when interest rates go down. With the monetary policy of India being data driven, there is scope for monetary easing if the macroeconomic situation permits the same. The next rate cut is primarily dependent on the progress of monsoon and its effects on inflation. Healthy monsoon and positive government action can pave the path for further reduction in interest rates. The onset of monsoon has been healthy this year; however, July rainfall has witnessed unprecedented lull. Market participants will keep their fingers crossed and expect rain gods to be sympathetic. Nevertheless, there is a wide expectation that the government will contain food inflation through effective food management policies. Better fiscal consolidation, effective reforms, improving economic growth and containment of inflation should ensure additional rate cuts to the tune of 50 basis points by the end of this fiscal year. Effectively, there is a great upside potential for the bond prices. Investors in the high tax bracket can particularly deploy money, if they want to benefit from the capital gains arising from the transition in the interest rates over the period of more than 12 months and need not hold till maturity. Bonds held for a period more than 12 months account for long term capital gains, which is taxed at 10% or 20% with indexation, whichever is lower.

IRFC Proposed private placement of Tax Free bonds:

Subject to internal approval, they are planning to float RFQ on Friday by late evening (after coupon rate calculation for next week) and planning bidding on Monday/ Wednesday i.e. July 27/ 29 and pay-in on Wednesday / Friday i.e. July 29/ 31. They are thinking to invite bids for only 10 year option (they are not likely to offer 15 and 20 year options). Issue size shall be upto the overall eligible amount i.e. Rs. 1800 crore

NHAI Proposed private placement of Tax Free bonds:

Subject to internal approval, they are thinking to hit the market next week for its first tranche of private placement with base issue size of Rs. 500 crores with option to retain oversubscription upto the overall eligible amount of Rs. 7,200 crores. They may finalize terms shortly and planning bidding on Tuesday i.e. July 28 for 2 bond options i.e. 10 year and 15 year options (they are not likely to offer 20 year options).

NTPC Proposed private placement of Tax Free bonds:

Subject to internal approval, they may think to hit the market for its private placement with issue size of overall eligible amount i.e. Rs. 300 crores. They may take internal call on the matter on Friday i.e. July 24.

IREDA Proposed Tax Free bond issue:

They are going slow on the matter. However, their board meeting is scheduled on July 28. After board meeting they may take up matter further.

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பாதுகாப்பான முதலீடு - வரிவிலக்கு பத்திரங்கள் (TAX FREE Bonds) ஒரு அறிமுகம்

பாதுகாப்பான முதலீடு - வரிவிலக்கு பத்திரங்கள் ஒரு அறிமுகம்

மிக அதிகமான மக்கள் பாதுகாப்பான முதலீட்டையே விரும்புகிறார்கள். வங்கிகள் தங்களது வட்டி விகிதத்தை குறைக்கும்பொழுது அவர்கள் சற்று கலக்கமடைந்து வேறுவிதமான திட்டங்களை நோக்கி திரும்புகிறார்கள் .மேலும் வங்கிகளிலேயே வைப்பு நிதியில் முதலீடு செய்யும் பொழுதும் வரும் வட்டித்தொகை குறிப்பிட்ட அளவை மீறும்பொழுது வங்கிகளும் வரிபிடித்தம் செய்தே வட்டித்தொகையை திரும்ப தருகிறார்கள். வரும் வட்டி தொகையிலும் வரி பிடித்தம் செய்வதை தாமதமாகவே அறிவதால் மேலும் குழம்புகின்றனர்.இவர்களின் இந்த குழப்பத்தை பயன்படுத்தி பல்வேறு விதமான மோசடி நிதி நிறுவனங்கள் பல்வேறு மோசடிகளை அரங்கேற்றுகிறார்கள். இந்த வித இக்கட்டுகளில் இருந்து காப்பாற்றும் விதமாக வருகிறது வரிவிலக்கு பத்திரங்கள் (Tax Free Bonds ).

வரிவிலக்கு பத்திரங்கள் (TAX FREE BONDS )- ஒரு அறிமுகம் .

வரியில்லாத பத்திரங்கள் (Tax free bonds) என்பது குறித்து பலரும் கேள்விபட்டிருக்கலாம். ஆனால் அது என்ன என்பது பலருக்கும் தெரியாது. முதலீட்டாளர்களுக்கு வட்டியாகக் கிடைக்கும் பணத்துக்கு வரி செலுத்த தேவையில்லை என்பதை குறிக்கும் பத்திரத்திற்கு தான் வரியில்லாத பத்திரங்கள் என்று பெயர்.வரியில்லாத பத்திரங்களின் மூலம் பெறப்படும் வருமானத்திற்கு வரி செலுத்த வேண்டிய தேவையில்லை. மேலும் மற்ற வருவாய்களுக்கு வரி பிடித்தம் செய்யப்படும் போது, இந்த தொகை அதில் சேர்க்கப்படாது.வரியில்லாத பத்திரங்கள் அரசு அங்கீகாரம் கொண்ட நிறுவனங்களின் மூலம் வழங்கப்படுகிறது. தேசிய பங்கு சந்தை மற்றும் மும்பை பங்கு சந்தை ஆகியவற்றில் வரியில்லாத பத்திரங்கள் வர்த்தகத்திற்கு பயன்படுத்தப்பட எளிய வழிகள் உள்ளன.

வரியற்ற வருவாய்

வரி இல்லா பத்திரங்களின் மூலம் கிடைக்கும் வட்டிக்கு முதலீட்டாளர்களிடம் வரி பிடித்தம் செய்யப்படுவது இல்லை. இத்தகைய பத்திரங்களில் இருந்து கிடைக்கும் வருமானத்திற்கு வரி கிடையாது. மேலும் இந்த வருமானம் வரி செலுத்துவோரின் மொத்த வருமானத்தில் ஒரு அங்கமாக கருதப்படாது. அதாவது நீங்கள் செலுத்த வேண்டிய வரியை கணக்கிடும்போது, இந்த பாண்ட்களிலிருந்து கிடைக்கும் வட்டி வருவாயை உங்கள் மொத்த வருவாயோடு சேர்த்துக் கணக்கிட வேண்டிய அவசியமில்லை.

நீங்கள் ஒரு வங்கியில் டெபாசிட்டை தொடங்கி அதன் மூலம் பத்தாயிரம் ரூபாய் வட்டி வருமானால் அதனை மொத்தவருமானத்தில் கணக்கில் கொள்ளவேண்டும். ஆனால் வரிச் சேமிப்புப் பத்திரங்கள் வாங்கினால் அதனைக் கணக்கில் கொள்ள வேண்டியதில்லை. எனவே இதன் மீது நீங்கள் எந்த வரியையும் செலுத்த வேண்டியதில்லை என்பது தெளிவாகிறது.

இத்தகைய பத்திரங்கள் அரசு மற்றும் தனியார் சேர்ந்து நடத்தும் நிறுவனங்கள் மூலம் வழங்கப்படுகிறது. எனவே, இது மிகவும் பாதுகாப்பானதாக கருதப்படுகிறது. இந்திய அரசாங்கம் கிரேக்கத்தின் வழி சென்று கடன் நெருக்கடி பிரச்சனையில் சிக்கினால் மட்டுமே இந்தகைய பத்திரங்களுக்கு பாதிப்பு ஏற்படும். இந்த பத்திரங்கள் தேசிய மற்றும் மும்பை பங்குச் சந்தைகளில் விற்கப்படுகின்றன. எனவே, இது முதலீட்டிற்கு நீர்மைத்தன்மையை வழங்குகிறது. எனினும், இத்தகைய பத்திரங்கள் பங்கு போல் பெரிய அளவில் வர்த்தகம் செய்யப்படுவதில்லை.

வட்டி விகிதங்கள்

வட்டி விகிதங்கள் வீழ்ச்சியடைந்து வரும் இந்த நேரத்தில் அரசாங்கத்தின் வரி இல்லா பத்திரங்களில் செய்யப்படும் முதலீடு ஒரு நேர்மறையான பந்தயம் ஆகும். இந்த பத்திரங்கள் நீண்ட கால முதலீட்டை தேர்ந்தெடுத்து, இரண்டாம் நிலை சந்தை வழியாக வெளியேற நினைக்கும் முதலீட்டாளர்களுக்கு ஒரு வரப்பிரசாதமாகும். இந்த பத்திரங்களில் முதலீட்டாளர்கள் முதலீடு செய்ததன் மூலம், கடந்த ஆண்டு அவர்கள் முதலீட்டு நிறுவனத்தை பொறுத்து 8.20 முதல் 8.35 சதவீதம் வரை வரி இல்லா வருமானத்தை பெற்றார்கள். இத்தகைய பத்திரங்களை வரி சேமிக்கும் பத்திரங்களுடன் ஒப்பிட்டு குழம்பக் கூடாது. வருமான வரி சட்டம் 80 சிசிஎப் பிரிவின் படி, வரி சேமிக்கும் பத்திரங்கள் மூலம் கிடைக்கும் வருவாய், வரி செலுத்துவோரின் மொத்த வருமானத்தில் ஒரு அங்கமாக கருதப்படும்.

இதில் எதற்காக முதலீடு செய்ய வேண்டும்?

நீங்கள் ஏற்கெனவே வரி செலுத்திக் கொண்டிருக்கும் பட்சத்தில் இதில் எதற்காக முதலீடு செய்ய வேண்டும்? என்ற கேள்வி தோன்றலாம். உண்மையில் இது மிகவும் நல்ல கேள்வி. ஒரு நபர் அதிகபட்ச வரி அடைப்புக்குள் (30.9% வரி விகிதம்) இருக்கிறார் என்று வைத்துக் கொள்வோம். இந்த பாண்ட்கள் மீதான அவரது வரி விதிப்புக்கு முந்தைய ஈட்டமானது, 10 வருடங்கள், 15 வருடங்கள் மற்றும் 20 வருடங்கள் வரையிலான காலகட்டங்களுக்கு தலா 11.96%, 12.64% மற்றும் 12.52% என்ற விகிதங்களில் இருக்கும். ஒரு வங்கி ஃபிக்ஸட் டெபாசிட் உங்களுக்கு அளிக்கக்கூடிய அதிகபட்ச விகிதம் 9.25% மட்டுமே ஆகும்.

20% வரி அடைப்பு

இப்போது நீங்கள் 20% வரி அடைப்புக்குள் இருக்கிறீர்கள் என்று வைத்துக் கொள்வோம். இந்த பாண்ட்கள் மீதான வட்டி மூலம் உங்களுக்குக் கிடைக்கக்கூடிய ஈட்டம் 10 வருடங்களுக்கு 9.9% ஆகவும், 15 வருடங்களுக்கு 10.45% ஆகவும், 20 வருடங்களுக்கு 10.33% ஆகவும் இருக்கும். இதுவும் வங்கி ஃபிக்ஸட் டெபாசிட்களை விட அதிமானதே.

பாதுகாப்புக்கு உத்தரவாதம்

உயர்ந்த மதிப்பீடு மற்றும் அரசு ஸ்தாபனம் போன்ற அம்சங்கள் இதன் பாதுகாப்புக்கு உத்தரவாதம் அளிக்கின்றன: ஆர்இசி என்பது மத்திய அரசுக்கு சொந்தமானதொரு நவரத்னா ஸ்தாபனமாகும். அதனால் இந்த பாண்ட்கள் பாதுகாப்பு ரீதியில் உச்சபட்ச உத்தரவாத்துடன் திகழ்கின்றன. மேலும் இவற்றின் அதிக பட்ச பாதுகாப்பை குறிக்கும் வண்ணம் ஏஏஏ (AAA) என்ற மதிப்பீடு சான்றிதல் இந்த பாண்ட்களுக்கு வழங்கப்பட்டுள்ளது.

யாரெல்லாம் இதில் முதலீடு செய்யலாம்?

வெளிநாட்டு-வாழ் இந்தியர்கள், தகுதி வாய்ந்த அயல்நாட்டு முதலீட்டாளர்கள், தனிநபர் சில்லறை முதலீட்டாளர்கள் மற்றும் பிரிவினையற்ற இந்துக் குடும்பங்கள் (HUF) ஆகியோர் முதலீடு செய்யலாம்.

லாபகரமான முதலீடு!!

பாண்ட் ஈட்டங்கள் வீழ்ச்சியடைந்து கொண்டிருக்கும் தற்போதைய காலகட்டத்தில், எதிர்காலத்தில் விநியோகிக்கப்படக்கூடிய வரியற்ற திட்டங்கள் இத்தகைய அதிகமான வட்டி விகிதங்களுடன் வழங்கப்படுமா என்பது சந்தேகமே. இவை அனைத்தும் ஆர்இசியை கட்டாயமாக சப்ஸ்கிரைப் செய்ய வேண்டிய ஒன்றாகத் தோற்றமளிக்கச் செய்கின்றன.

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Easy Guide to Invest in Mutual Funds

1. Upto 3 months : Invest in Liquid Funds.

2. 3-6 months : Money Market Funds.

3. 6months to 1year : Ultra Short term Funds.

4. 1 -2 years : Low Duration Funds.

5. 2 -3years : Short term Funds.

6. 3-5 years : Medium term Funds.

7.Above 7 years : Dynamic Bond Funds. The above funds will not be invested in Stocks Market.These Funds are "the best alternative to Bank FD". So, There is no Volatile in the invested amount.

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மியூச்சுவல் ஃபண்ட் முதலீடு ஏன் பெஸ்ட்? பதில் தரும் 13 காரணங்கள்
இன்றைய தேதியில் நீண்ட கால முதலீட்டை மேற்கொண்டு, வாழ்க்கையின் எதிர்காலத் தேவைகளைப் பூர்த்தி செய்துகொள்ள நினைக்கும் ஒருவருக்கு மியூச்சுவல் ஃபண்ட் என்பது மிகப் பொருத்தமாக இருக்கும்.ஏன், வேறு முதலீட்டு வகைகள் எல்லாம் இல்லையா, அதில் முதலீட்டை மேற்கொள்வதன் மூலம் நமது எதிர்காலத் தேவைகளைப் பூர்த்திசெய்துகொள்ள முடியாதா என்று நீங்கள் கேட்கலாம். மற்ற எல்லா முதலீடுகளையும்விட மியூச்சுவல் ஃபண்ட்தான் பெஸ்ட் என்பதற்கு 13 காரணங்கள் உள்ளன. இந்தக் காரணங்களை நீங்கள் தெரிந்து கொண்டால், நீங்களும் மியூச்சுவல் ஃபண்ட் முதலீட்டை நிச்சயம் தேர்வு செய்வீர்கள் என்பதில் சந்தேகமே இல்லை. அந்தக் காரணங்கள் இதோ:

1. மிக, மிக வெளிப்படையான முதலீடு!இன்று நீங்கள் ரூ.1 லட்சத்தை எடுத்து வங்கி டெபாசிட்டில் போடுகிறீர்கள் என்று வைத்துக் கொள்வோம். அந்த வங்கி உங்கள் பணத்தை யாருக்கு கடனாகக் கொடுக்கிறது என்ற விவரம் உங்களுக்குத் தெரியாது. உங்களது டெபாசிட்டுக்கு, வங்கி உங்களுக்குக் கொடுக்கும் வட்டி எவ்வளவு சதவிகிதம் என்பது மட்டும்தான் தெரியும். உங்களது பணத்தை என்ன வட்டி விகிதத்துக்குக் கடன் கொடுக்கிறது என்பது உங்களுக்குத் தெரியாது.அதுபோல், லட்சக்கணக்கான இந்தியர்கள் முதலீடு செய்யும் எண்டோவ்மென்ட் இன்ஷூரன்ஸ் திட்டங்களில் வசூலிக்கப்படும் பணத்தை, இன்ஷூரன்ஸ் நிறுவனங்கள் எதில், எப்படி முதலீடு செய்கின்றன என்பது யாருக்கும் தெரியாது. ஆனால், மியூச்சுவல் ஃபண்டுகளில் நீங்கள் முதலீடு செய்யும் பணம் எங்கெங்கு, என்னென்ன சதவிகிதத்தில் முதலீடு செய்யப்படுகிறது என்பதைத் தெள்ளத் தெளிவாக 365 நாளும் தெரிந்துகொள்ளலாம். மேலும், கிம் (KIM – Key Information Memorandum) என்ற புத்தகத்தில் மியூச்சுவல் ஃபண்டுகள் தங்களது ஒவ்வொரு திட்டமும் எங்கு, எவ்வாறு முதலீடு செய்யும் என்பதை விண்ணப்பப் படிவத்துடன் வெளியிடுகின்றன. அதில் கூறியுள்ளபடிதான் ஒரு மியூச்சுவல் ஃபண்ட் நிறுவனம் முதலீட்டினை மேற்கொள்ளும். இதில் பெரிய மாறுதல் ஏதும் இருப்பின், அனைத்து முதலீட் டாளர்களுக்கும் உடனடியாகக் கண்டிப்பாகத் தெரிவிக்க வேண்டும்.நீங்கள் வாங்கிய இடத்தின் தினசரி விலை என்னவென்று தெரிந்துகொள்ள முடியாது. ஆனால், மியூச்சுவல் ஃபண்டுகள் தினசரி என்ஏவியை வெளியிடுகின்றன. எனவே, மியூச்சுவல் ஃபண்டுகள்போல் மிகவும் வெளிப்படைத்தன்மை நிறைந்த வேறொரு முதலீட்டைக் காண்பது மிக மிக அரிது.

2. நிலத்தைவிட, தங்கத்தைவிட பாதுகாப்பானது!இன்றைய தினத்தில் தங்கத்தை வாங்கி வீட்டில் வைத்திருப்பதன்மூலம் ஆபத்தை நாமே விலை தந்து வாங்குகிறோம். பெண்கள் நகையை வீதிகளில் அணிந்து செல்லக்கூட பயப்படு கிறார்கள். அவற்றைப் பாதுகாப்பாக வைப்பதற்குப் பணம் கொடுத்து வங்கிகளில் லாக்கர் வாடகைக்கு எடுக்க வேண்டியிருக்கிறது. லாக்கரில் திருடுபோனால் அதற்கு வங்கி உத்தரவாதம் ஏதும் தராது.இது இப்படி இருக்க, இடத்தை (Plot) வாங்கினால், அதில் யார் எப்போது ஆக்கிரமிப்பார்கள் என்பது தெரியாது. நிலத்தைக் குத்தகைக்குவிட்டாலும் சில பிரச்னைகள் வரவே செய்கிறது.ஆனால், மியூச்சுவல் ஃபண்டுகள் மிகவும் பாதுகாப்பான முதலீடு. நீங்கள் குறிப்பிட்டுள்ள உங்கள் வங்கிக் கணக்கைத் தவிர, வேறு எந்தக் கணக்குக்கும் செல்லாது. எனவே, பாதுகாப்பு பற்றி எந்தக் கவலையும் இல்லாமல் நிம்மதியாக இருக்கலாம்.

3. உங்களைத் தவிர யாருக்கும் தெரியாது!நீங்கள் பெரிய வீடு வைத்தி ருந்தால் ஊருக்கே தெரியும். தங்க நகைகளை அணிந்து கொண்டு சென்றால் ஊரார் அனைவருக்கும் தெரியும். நீங்கள் எம்பிஏ (M – Mercedes Benz; B – BMW; A – Audi) காரை ஓட்டிக் கொண்டு சென்றால், நீங்கள் எவ்வளவு பெரிய பணக்காரர் என்று உலகத்துக்கே தெரிந்துவிடும். அதனால் நண்பர்களும் உண்டாகலாம்; எதிரிகளும் உண்டாகலாம்.ஆனால், நீங்கள் மியூச்சுவல் ஃபண்டுகளில் வைத்திருக்கும் தொகை எத்தனை கோடியானாலும், நீங்கள் சொன்னால் தவிர, வேறு யாருக்கும் தெரிய வாய்ப்பில்லை. உங்கள் முதலீடு மற்றவர்களுக்கு தெரிந்து, உங்கள் நிம்மதி பறிபோய்விடுமோ என்கிற கவலை இல்லாமல், நீங்கள் நிம்மதியாகத் தூங்கலாம்.

4. அள்ளித்தந்த ஃபண்டுகள்!பங்கு சார்ந்த மியூச்சுவல் ஃபண்ட் திட்டங்கள் கடந்த காலத்தில் லாபங்களை முதலீட்டாளர்களுக்கு அள்ளித் தந்திருக்கின்றன. கடந்த காலங் களில் ஃபிக்ஸட் டெபாசிட் வருமானங்களைப் போல் 2 – 3 மடங்கு வருவாயை ஒவ்வொரு ஆண்டும் தந்துள்ளன. இனிவரும் காலங்களிலும் இது தொடர வாய்ப்புகள் அதிகம்.கடந்த 10, 15, 20 ஆண்டுகளில் பங்கு சார்ந்த மியூச்சுவல் ஃபண்டுகளில் முதலீடு செய்தவர்கள் ஆண்டுக்காண்டு கூட்டுவட்டி அடிப்படையில் 20 சதவிகிதத்துக்கும் மேலான வருமானத்தைச் சுலபமாகச் சம்பாதித்துள் ளார்கள். ஏறக்குறைய 21 ஆண்டுகளுக்குமுன் ஒருவர் செய்த முதலீடான ரூ.1 லட்சம் இன்று 80 லட்சத்துக்கும் மேலாக உள்ளது. இதுபோல் இனிவரும் காலத்திலும் பிற சொத்துக்களுடன் ஒப்பிடும்போது, ஓர் உயரிய வருமானத்தைத் தர வாய்ப்புகள் அதிகம். ஏனென்றால், இந்தியாவின் பொருளாதார வளர்ச்சி அந்த அளவுக்கு முக்கியமான விஷயமாக உள்ளது.

5. பணவீக்கத்தைத் தாண்டிய வருமானம்!நாம் செய்யும் எந்த முதலீடாக இருந்தாலும், அது பணவீக்கத்தைத் தாண்டி வருமானம் தர வேண்டும். உதாரணத்துக்கு, பணவீக்கம் 7% என்றால், நமது முதலீட்டின் வருமானம் அதைவிட சில சதவிகிதங்கள் அதிகமாக இருக்க வேண்டும்.ஆனால், நம் நாட்டில், ஒரு சில ஃபிக்ஸட் டெபாசிட் திட்டங்களே பணவீக்கத்தைவிட ஒன்றிரண்டு சதவிகிதம் அதிக வருமானம் தருகிறது. தங்கமோ, மிக நீண்ட காலத்தில் மட்டுமே, பணவீக்கத்தை ஒட்டிய வருமானத்தைத் தருவதாக இருக்கிறது. ஆக, எளிதில் காசாக்கக்கூடிய முதலீட்டு வகைகளில் பணவீக்கத்தைப்போல் இரண்டு, மூன்று மடங்கு வருமானத்தைத் தரவல்லது பங்கு சார்ந்த மியூச்சுவல் ஃபண்டுகள் மட்டும்தான்!

6. சிறு துளி; பெரு வெள்ளம்!நீங்கள் இன்று ஒரு இடத்தையோ அல்லது வீட்டையோ வாங்கச் சென்றீர்களேயானால், உங்களிடம் நிறைய பணம் தயாராக இருக்க வேண்டும். அல்லது வங்கியில் கடன் பெற்று வாங்க வேண்டும்.நீங்கள் ஒரு தொழில் ஆரம்பிக்கிறீர்கள் என்றால், அதற்காக பல காலம் பணத்தைச் சேர்த்து வைத்திருக்க வேண்டும். அல்லது கடன் வாங்கித் தொழிலை ஆரம்பிக்க வேண்டும். ஆக, நல்ல வருமானம் தரும் முதலீடுகளுக்கு நீங்கள் மொத்தமாகத் தொகையை வைத்திருந்தால்தான் முதலீடு செய்ய முடியும்.ஆனால், பங்கு சார்ந்த மியூச்சுவல் ஃபண்டுகளில் முதலீடு செய்வதற்கு ஒரு பெருந்தொகையைத் திரட்டிக்கொண்டுதான் முதலீடு செய்ய வேண்டும் என்கிற அவசியமில்லை. மாதத்துக்கு ரூ.250-லிருந்து உங்களது முதலீட்டை ஆரம்பிக்கலாம். அதீத வளர்ச்சியுள்ள ஒரு முதலீட்டு வாய்ப்பில் பங்கேற்பதற்கு, இதைவிடக் குறைவான அளவில் வேறு எந்தச் சொத்திலும் ஒருவர் முதலீடு செய்ய முடியாது. ஒவ்வொரு மாதமும் 4,000 ரூபாயை அடுத்த 25 வருடங்களில் வருடத்துக்கு 15% வருமானம் தரக்கூடிய மியூச்சுவல் ஃபண்ட் திட்டங்களில் ஒருவரால் முதலீடு செய்ய முடியும் எனில், 25 ஆண்டு களுக்குப் பின் அவர் ஒரு கோடீஸ்வரர்!

7. பரவலாக்கம் தரும் ஒரே முதலீடு!நீங்கள் ரியல் எஸ்டேட்டில் உங்களது முதலீட்டை பரவலாக்க வேண்டும் எனில், ஒவ்வொரு ஊரிலும் சொத்து வாங்க வேண்டும். உங்களது தொழிலில் ரிஸ்க்கை குறைக்க வேண்டுமானால், வெவ்வேறு விதமான தொழில்களை ஆரம்பிக்க வேண்டும். தேவைப்பட்டால் பல நாடுகளில் உங்களது தொழிலை நிறுவ வேண்டும். பங்குச் சந்தையில் நீங்கள் முதலீடு செய்தீர்களென்றால், உங்களது முதலீட்டை பரவலாக்க சில ஆயிரம் அல்லது சில லட்சம் ரூபாயாவது வேண்டும்.ஆனால், மியூச்சுவல் ஃபண்டுகளில் ஒரு ஆயிரம் ரூபாயை முதலீடு செய்தீர்களேயானால், அது இந்தியாவில் உள்ள பல துறைகளைச் சார்ந்த நிறுவனங்களில் முதலீடு செய்யப் படுகிறது. இதன்மூலம் உங்கள் முதலீட்டின் ரிஸ்க் வெகுவாகக் குறைக்கப்படுகிறது. கடன் சார்ந்த மியூச்சுவல் ஃபண்ட் திட்டங்களுக்கும் இதுவே பொருந்தும்.

8. செபியின் கடும் சட்டதிட்டங்கள்!இன்று இந்தியாவில் லட்சக்கணக்கில், கோடிக்கணக்கில் பணம்புரளும் ரியல் எஸ்டேட் துறைக்கு இதுவரை ஒருங்கிணைந்த கட்டுப்பாட்டு வாரியம் கிடையாது. ஆனால், இந்தத் துறையில்தான் நம்மவர்கள் அதிகம் முதலீடு செய்து வருகிறார்கள். பல லட்சங்கள் கொடுத்து வாங்கிய அடுக்குமாடிக் குடியிருப்பின் கட்டட புரமோட்டர் சொன்னபடி, கட்டித்தரவில்லை எனில், நீங்கள் யாரிடம் சென்று புகார் செய்வீர்கள்? அவர்கள் கொடுக்கும் விற்பனை கையேட்டில், அவர்களைப் பற்றிய புகார் இருந்தால், யாரிடம் முறையிட வேண்டும் என்பது தெரியாது.நீங்கள் வாங்கும் தங்க ஆபரணத்தில், அதிருப்தி இருப்பின் யாரிடம் சென்று முறையிட வேண்டும் என்று கடைக்காரர் தரும் ரசீதில் அச்சிடப்பட்டுள்ளதா? ஆனால், நீங்கள் மாதம் ரூ.250 முதலீடு செய்யும் மியூச்சுவல் ஃபண்ட் கையேட்டில், யாரிடம் புகார் செய்ய வேண்டும் என்பது அச்சிடப்பட் டிருக்கும். அவ்வாறு அவரும் செவி சாய்க்கவில்லை எனில், நீங்கள் செபியிடம் புகார் செய்யலாம். ஆகவே, மியூச்சுவல் ஃபண்ட் நிறுவனங்கள், கடும் சட்ட திட்டங்களுக்கு உட்பட்டு செயல்பட்டு வருவது, முதலீட்டாளர்களுக்கு இரட்டிப்புப் பாதுகாப்பு ஆகும்.

9. குறைவான செலவு, புரொஃபஷனல் நிர்வாகம்!மியூச்சுவல் ஃபண்ட் நிறுவனங்கள், தலைசிறந்த கல்லூரிகள்/ பல்கலைக்கழகங்களில் இருந்து வெளிவரும் திறமையான மாணவர்களையே வேலைக்கு எடுக்கின்றன. அவ்வாறு உருவாக்கப்படும் திறமையான அனலிஸ்ட்டுகள் மற்றும் ஃபண்ட் மேனேஜர்களைக் கொண்டு, தங்களது திட்டங்களை நிர்வாகம் செய்கின்றன.பல இடங்களில் பணம் அதிகம் முதலீடு செய்பவர் களுக்கென்று தனிக் கவனிப்பு இருக்கும். ஆனால், இங்கோ நீங்கள் ரூ.5,000 முதலீடு செய்தாலும் சரி, ரூ.500 கோடி முதலீடு செய்தாலும் சரி, இருவருக்குமே ஒரே மேனேஜ்மென்ட் டீம்தான்.

10. முதலீடு செய்வது எளிமை!மியூச்சுவல் ஃபண்டுகளில் முதலீடு செய்வது, பல முதலீடுகளைத் தொடங்குவதைக் காட்டிலும் மிகவும் எளிமையானது. ஒரே ஒருமுறை கேஒய்சி (KYC – Know Your Customer) படிவத்தைப் பூர்த்திசெய்து கொடுக்க வேண்டும். அது இந்தியாவில் உள்ள அனைத்து மியூச்சுவல் ஃபண்ட் நிறுவனங்களுக்கும் சென்றடைந்துவிடும். அவ்வாறு கொடுக்கும் போது உங்களின் பாஸ்போர்ட் சைஸ் புகைப்படம், அடையாளச் சான்று மற்றும் முகவரிச் சான்றுக்கான நகல்களைக் கொடுக்க வேண்டும்.பிறகு உங்களிடம் வங்கி சேமிப்புக் கணக்கு காசோலையுடன் இருக்க வேண்டும். அவ்வளவுதான், நீங்கள் முதலீடு செய்யத் தயார். விண்ணப்பப் படிவத்துடன் ஒரு காசோலையை வைத்துக் கொடுத்துவிட்டால், யூனிட்டுகள் அன்றைய விலையில் வாங்கப்பட்டு விடும்.

11. தேவைக்கேற்ப சாய்ஸ்கள்!நீங்கள் நமது மத்திய அரசாங்க பாண்டுகளில் முதலீடு செய்ய வேண்டுமா, அமெரிக்காவில், ஜப்பானில், ஐரோப்பாவில், சீனாவில் முதலீடு செய்ய வேண்டுமா, இந்திய கார்ப்பரேட் நிறுவனங்களின் அல்லது பொதுத்துறை வங்கிகளின் பாண்டுகளில் முதலீடு செய்ய வேண்டுமா, இந்தியாவின் வங்கித் துறையில் அல்லது மருந்துத் துறையில் அல்லது இன்ஃப்ரா துறையில் முதலீடு செய்ய வேண்டுமா,தங்கத்தில் முதலீடு செய்ய வேண்டுமா, மிகக் குறுகிய காலத்துக்கு ரிஸ்க் இல்லாமல் வங்கிகளைவிட அதிக வட்டியில் முதலீடு செய்ய வேண்டுமா, நீண்ட காலத்துக்கு ரிஸ்க்குடன் கூடிய அதிக வருமானத்தில், வருமான வரி இல்லாமல் முதலீடு செய்ய வேண்டுமா? உங்களின் ஒவ்வொரு எண்ணத்துக்கும் முதலீட்டு வாய்ப்புக்கள் மியூச்சுவல் ஃபண்டுகளில் உண்டு.

12. தேவைப்படும்போது பணம்!நிலத்தையோ அல்லது வீட்டையோ நீங்கள் நினைத்த நேரத்தில் விற்க முடியாது. தங்கத்தை விற்கப்போனால், சந்தை விலை ஒன்றாக இருக்கும்; கடைக்காரர் வேறொரு விலைக்குக் கேட்பார். இந்த இரண்டு சொத்துக்களையும், வேண்டிய போதெல்லாம் பிரித்து சிறிது சிறிதாக விற்க முடியாது.ஆனால், மியூச்சுவல் ஃபண்டுகளில் திட்டத்தைப் பொறுத்து ஒரு நாளிலோ அல்லது ஒரு வாரத்துக்குள்ளோ பணம் உங்களுக்குக் கிடைத்துவிடும். தேவைப்படுகிற அளவு நீங்கள் பணத்தை எடுத்துக் கொள்ளலாம். அது ரூ.5,000-ஆக இருந்தாலும் சரி, ரூ.50 லட்சமாக இருந்தாலும் சரி.

13. வருமான வரி இல்லை!பங்கு சார்ந்த மியூச்சுவல் ஃபண்ட் திட்டங்களுக்கு, ஒரு வருடத்துக்குமேல் வைத்திருக்கை யில் வருமான வரி ஏதும் இல்லை; கடன் சார்ந்த திட்டங்களுக்கு, மூன்று வருடங்களுக்குமேல் வைத்திருக்கையில் மிகவும் குறைவான வருமான வரி கட்டினால் போதும். ஆனால், ஃபிக்ஸட் டெபாசிட், தங்கம் மற்றும் ரியல் எஸ்டேட் உள்பட எல்லா முதலீடுகளுக்கும் வருமான வரி கட்டியாக வேண்டும்.கடன் சார்ந்த மியூச்சுவல் ஃபண்ட் திட்டங்களில் உங்கள் முதலீடு மூன்று ஆண்டுகளுக்கு மேல் இருக்கையில், பணவீக்கத்துக்கு அட்ஜஸ்ட் செய்தபிறகு இருக்கும் லாபத்துக்கு வரி கட்டினால் போதுமானது. அவ்வாறு கட்டும் வரியின் சத விகிதம் மிகவும் சொற்பமாகத்தான் இருக்கும்.இதுவே, நீங்கள் ஃபிக்ஸட் டெபாசிட்டுகளில் முதலீடு செய்யும்போது, வரும் வட்டிக்கு உங்கள் வருமான வரம்பில் உள்ள சதவிகிதத்தில் நீங்கள் வரிச் செலுத்த வேண்டும்.மேலும், கடன் சார்ந்த திட்டங்களில் நீங்கள் பணத்தை வெளியில் எடுக்கும் ஆண்டில்தான் வரித் தாக்கலுக்குக் கொண்டு வரவேண்டும். ஆனால், ஃபிக்ஸட் டெபாசிட்டில் வட்டி உங்கள் கைக்குக் கிடைத்தாலும் கிடைக்காவிட்டாலும் நீங்கள் வரிச் செலுத்த வேண்டும்.

இத்தனை பாசிட்டிவ் அம்சங்கள் நிறைந்த மியூச்சுவல் ஃபண்ட் முதலீட்டில் நீங்கள் முதலீடு செய்ய ஒருமுறைக்கு இருமுறை யோசிக்க வேண்டிய அவசியமே இல்லை என்பது மட்டும் நிச்சயம்!

மியூச்சுவல் ஃபண்ட் முதலீட்டில் நீங்கள் முதலீடு செய்ய தொடர்பு கொள்ளவும் - +91 99943 00763

ASSET ALLOCATION

Before allocating Various Asset Classes , The Following Steps are important :

1.To Understand and Analyse Investor’s Needs/ Goals. That is : Investor’s Short –Term, Medium-Term and Long-Term Goals.

2. To Recommend the Investment Strategy based on the above needs/ goals.

ASSET ALLOCATION STRATEGY:

There are two Strategies are followed in Asset Allocation.

1. Strategic Asset Allocation :

  • This is meant for ‘’ Achieving Our Long Term Goals’’.
  • It focus only on Goals/ Needs & Not on Markets.

2. Tactical Asset Allocation :

  • It focus only on ‘’Markets’’
  • Whenever there is an Opportunities in the Market , this strategy can be utilised to get Higher Portfolio Returns.

So, It is for an Advisor to decide which strategy to follow based on Investor’s Needs/Goals.

  • Liquid Funds are nothing but,’’ Savings Account [ SB ACCOUNT ] ’’ in a Mutual Fund
  • Bank Savings Account gives 3.5% Interest per annum for the minimum balance only between the 10th and the last day of that month.

For example, If your SB Account Balance is Rs.100 as on 10 th of a month and if you deposit Rs.1 lakh on 11 th of the month , you will get an interest on the minimum balance of Rs.1,000/ as on 10 th at 3.5%.

Suppose, if you have zero balance at the start of a month and you deposit Rs.1,000/ on 11 th of the month and withdraw it on 31 st of Next month [ie;after 51 days], then, you will get Zero interest for the both months.That is from 10 th of the month to 31 st of next month balance is Zero.

  • Interest from Savings account is calculated at simple interest basis and will be credited at the end each calendar quarter.
  • Interest income from Savings account is taxable at applicable tax rates. So, The net return will be very low.

If you work out annual inflation is around 8%, then, your post tax return will be negative 6%.

  • It is an ideal alternative option for savings account.
  • Liquid Funds will invest only in Commercial Papers, Short –term Corporate Debt , G.Sec.
  • The income which is generated primarily on interest accrual.
  • Ideal investment avenue for short term parking of money.
  • Better Post tax return than bank savings account.

RETIREMENT PLANNING

Most People think that Retirement Planning is a Complicated one and avoid to plan for their Retirement.

But, It is not.

*Retirement Planning has two aspects

  • 1. ‘’ Save as much as you can ‘’&
  • 2. ‘‘Invest as much as you can’’.

The earlier you start to invest, the more money you will have at the time of Retirement.

Here, I have given 10 easy steps that help you to calculate and compute how much money is needed to reach the Goal.

10 EASY STEPS :

1. SPLIT CURRENT MONTHLY EXPENSES INTO TWO :

One : Expenses that continue even after Retirement.

1. Groceries. 2. Phone Bills. 3. Electricity Bills. 4. Medical Expenses. 5. Rent. 6. Clothing.

7. Annual Vacation. 8. Fuel and Vehicle Maintenance. 9. Gifting.

Second : Expenses likely to stop after Retirement :

1. Travelling for work. 2. Professional Clothing. 3. Home loan for EMI. 4. Kid’s Education.

  • Experts say that Medical Expenses may actually go up during Retirement years.
  • Expenses during Retirement age should be equal to the Current Regular Expenses.

2. CALCULATE EXPECTED INCOME AFTER RETIREMENT :

  • Calculate your total income from all sources. Also, include income from Property [ if any].

3. CALCULATE NET INCOME NEEDED IN RETIREMENT :

  • Here, calculate the net requirement by deducting the value in Step 2 from Step 1.

4. CALCULATE THE FUTURE VALUE OF THE ADDITIONAL INCOME NEEDED DURING RETIREMENT :

  • Due to Inflation, a monthly expense of Rs. 1 lakh per month will balloon to Rs. 5.74 lakh in 30 years and Rs.32.99 lakh in 60 years.
  • The Following formula will give you how much money you will need in future.
  • Future Value = Net Income needed *[ 1= Inflation]^no.of years till 60.

5. CALCULATE THE RETIREMENT CORPUS NEEDED AT 90 :

  • Since life Expectancy is increasing now, Every should plan for a longer Retirement age.
  • So, the Retirement corpus has to last nearly 25-30 years after he retires at 60.
  • If a person retires at 60 and needs an additional income of Rs.1 lakh per month after retirement, he will need a retirement corpus of Rs. 2.57 crore to sustain till 90 years.
  • That is : Multiply your value from Step 4 to know your Actual requirement.

6. FIND OUT HOW MUCH YOU HAVE ACCUMULATED :

  • Calculate all your accumulated corpus dedicated for Retirement thro.’ Various investments, like, PPF,EPF, NPS,Mutual Funds,Pension Plans,ULIPS & Others.

7. CALCULATE HOW MUCH YOUR CURRENT RETIREMENT CORPUS WILL GROW TO :

  • Calculate how will the current corpus grow.
  • It all depend on your investment allocation. Higher the corpus if your retirement corpus is loaded with Equity-Oriented Investments.
  • So.The Future Value at 60 = Current corpus *[1+Assumed Return]^ no.of remaining years .

8. CALCULATE THE ADDITIONAL CORPUS NEEDED FOR RETIREMENT :

  • Once the total retirement corpus needed at 60 and how much the existing corpus will grow by 60 is calculated , then compute the additional corpus required .
  • That is : Just Deduct the value in Step7 from the value in Step 5.

9. BE SAVED PER MONTH FOR ADDITIONAL RETIREMENT CORPUS :

  • If you do start early, you will find it easy to generate the required retirement corpus.

10. ADD UP ONGOING INVESTMENTS TO KNOW HOW MUCH MORE TO INVEST :

  • Lastly, you need to add up all regular retirement investments .
  • Deduct this amount from the value got it in Step 9 to find out how much additional contribution is needed per month.

New Pension System
  • NPS is introduced by Govt.of India in 1st Jan.2004 and governed by PFRDA[ Pension Fund Regulatory & Development Authority of India].
  • If one wants to have ‘’ Low Cost Savings for His Retirement’’, this is an ideal Investment Plan.
  • NPS is an ”Easily Accessible , Flexible , Portable and Tax –Efficient Retirement Savings Account.
  • An individual contributes to his Retirement and his Employer can also co-contribute for the welfare of the the Employee.

Who can Join :

  • Indian Citizen – Resident and NRI.
  • Age : Between 18-65 years[ as on the date of Joining.
  • Salaried or Self-Employed.

NPS Architecture :

  • PFRDA
  • CDA- Central Record Keeping Agency.
  • NPS Trust & Trust Bank
  • Pension Fund Managers
  • Annuity Service Provider[ ASP]
  • Custodian : Stock Holding corporation of India
  • POP : Point of Presence and
  • Subscriber

NPS Benefits :

  • Attractive Retirement Planning and Investment.
  • Market Linked Returns.
  • Freedom to choose Pension Fund Managers & Asset AllocationPlans.
  • Portability : change of Fund Mangers,Asset Allocation , Location or Employment.
  • Choose your own Contribution : contribution can vary each year.
  • Exclusive Tax benefits upto Rs. 50,000/ u/s 80CCD[1B].

Key Features of NPS :

  • Every individual subscriber will get a PRAN CARD [ Permanent Retirement Account Number].
  • PRAN Card will have 12 digit Unique no.and issued by Govt.of India.
  • Can be used as ID Proof.
  • It is fully Transparent, web-enabled & easy to understand.
  • Subscriber can avail following services thro.’ Online : Can view his details including, Transaction History, current NAV, Units allotted ,Investment value and etc.
  • Exclusive Tax benefits upto Rs. 50,000/ u/s 80CCD[1B].
NPS : Type of Accounts

TIER I Account :

  • It is a Compulsory Account.
  • Minimum contribution per transaction : Rs.500/.
  • Contribution is also Compulsory.
  • Withdrawal is allowed.
  • Minimum contribution per year : Rs.1,000/.
  • Can do Un-limited contributions.
  • Tax Benefits is eligible.

TIER II Account :

  • It is an Optional Account.
  • Contribution is Voluntary
  • Minimum contribution per transaction is: Rs.250/.
  • Minimum contribution per Year is : NIL.
  • Can do Un-limited contribution.
  • No Tax benefits.

Pension Fund Managers:

  • SBI Pension Fund Managers.
  • LIC Pension Fund Mangers.
  • Icici-Prudential Pension Fund Maners.
  • Kotak Mahindra Pension Fund Managers.
  • Reliance Capital Pension Fund Mangers.
  • UTI Retirement Solutions Pension Fund Managers.
  • Birla Sunlife Pension Fund Mangers and
  • HDFC Pension Fund Mangers.
Investment Options

1. Scheme A:

  • Allocation cannot exceed 5 %.

2. Scheme C:

  • Allocation can be up to 100%. Investment will be in Fixed Income other than G.sec.

3. Scheme E:

  • Allocation cannot exceed 75%. Investing in Equities.

4. Scheme G:

  • Allocation can be up to 100%. Investing in G.sec.

5. Auto Choice : [ Life Cycle Funds ] :

  • Conservative Life cycle Funds.
  • Moderate Life cycle Funds.
  • Aggressive Life cycle Funds.

NOTE :

  • Investment in Scheme C, E & G are based on the age of the subscriber.
  • Re-alignment of Portfolio can be done once in a year on the date of the subscription.
TAX BENEFITS
  • Salaried Individual :
  • Employer Contribution : Deduction up to 10% of salary [ Basic + DA] from Taxable Income u/s 80CCD[2]. This is over & above the limits u/s 80CCE.
  • Employer Contribution : Deduction up to 10% of salary [ Basic + DA] within overall ceiling of Rs. 1.50 lakh u/sec.80CCE .
  • Voluntary Contribution : Deduction up to Rs.50,000/ u/s 80CCD[1B] from Taxable Income for additional contribution to NPS.
  • For Self- Employed : Investment up to 20% of Gross Annual Income is exempt u/s 80CCD[1] subject to Rs.1.50 lakh limit u/s 80 C.
WITHDRAWALS :
  • 1st Withdrawal : After 3 Years and up to 25% of Invested Amount.
  • 2nd Withdrawal : After 1st withdrawal and up to 25%of Invested Amount.
  • 3rd Withdrawal : After 2nd withdrawal and up to 25%of Invested amount.
  • 25%of the contribution amount will be allowed for specific purposes, like , Child Higher Education & Marriage, Buying Home , Medical Expenses & etc.
Pre –Mature Exit :
  • Can be done only after10 years.
  • 20%of Fund Value can be withdrawn.
  • Remaining 80%has to be purchased as ‘’ ANNUITY”.
MATURITY BENEFITS :
  • Maturity Benefits will be given when the subscriber attains the age of 60 years.
  • Following options are available at Maturity.
NORMAL MATURITY :
  • 100% withdrawal is allowed if the Fund Value is less than or equal to Rs. 2 lakh.
  • If the Fund Value is more than Rs.2 lakh, then, the withdrawal is maximum 60% of Fund Value. It can be withdrawn in Lump sum or in 10 equal installments.
  • Minimum 40% of the Fund Value should be used to Purchase ‘’ Annuity’’.

Extension of Scheme :

  • Subscriber can extent his NPS up to the age of 70 years.
DEFERRED ANNUITY :
  • Can defer the decision to invest in Annuity for 3 years.
ANNUITY PLANS :
  S.No.   Annuity Scheme   Annuity Description
1. Annuity for Life Annuity is paid during the Life time of Annuitant. On Death, Annuity stops.
2. Annuity is guaranteed for 5,10,15 or 20 Years and for the Life there after. Annuity is paid during the life time of Annuitant.
3. Annuity for Life increasing At simple rate of 3% per annum Annuity is paid during the life time of Annuitant. on Death Annuity ceases.
4. Annuity for Life with return of Purchase Price. Annuity is paid during the life. On Death,Purchase Price is Returned to Nominee.
5. Annuity for life with 50% Annuity is paid during the Life time of Annuitant. On Death, 50% is paid to Spouse. On Death of Spouse, Annuity Ceases.
6. Annuity for Life with 100% Annuity is paid during the Life time of Annuitant. On Death , 100% is paid to nSpouse. On Death of Spouse, Purchase Price is returned to Nominee.
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ANNUITY PLANS

• Annuity Products are designedPlans helps in achieving Financial Independence in the Post Retirement Age

WHY ANNUITY ?

• One of the most important risks that a person faces in his life is ‘’ the risk of Living too Long ‘’.
• To simply put, the risk of outliving the income & resources.
• The Expenses to provide a regular cash flow after be incurred in the post retirement age have to be taken care during the working age of a person.
• It requires to accumulate a corpus with an However, keeping Inflation & other associated factors, the savings accumulated from the earnings may not be adequately take care of one’s post retirement age.
• So, the most popular measure for this is the’’ Annuity Plans ‘’.

WHAT IS ANNUITY ?

• It is also called as’’ up-side-down’’ of the life insurance company by paying the premiums. Insurance company thenprinciple.
• That is : When a person buys an Annuity Plan, he pays back this deposit thro.’ monthlythe insurer a specified capital sum , may be in installments, in return for a promise from the insurer to make a series of payments with a fixed rate of interestto the insured as long as he lives.
• It will pay a given amount periodically to the investor[ Annuitant ] during his life time .
• It will pay immediately or on a future date.
• No part of the premium is returnable on death.
• Since Annuity is payable till he lives. That is the insurer stops paying the annuity upon the death of the insured.

TYPES OF ANNUITY :

There are types :

1.IMMEADIATESINGLE PREMIUM ANNUITY. :

• An Annuity Plan in which the insured pays the premium in a single installment .

2. IMMEDIATE ANNUITY

• It is also known as ‘’ Straight Life Annuity’’.
• Annuity starts immediately after one month, 3 months, 6 months or 1 year after the date of the purchase of the Annuity.
• It will be paid in installments : Monthly, Qly, Hly / Yly.
• This Annuity Plan is usually purchased with a single premium.
• The Annuity payments are assured throughout Life, but ceased on Death.

3. IMMEDIATE ANNUITY CERTAIN :

• Here, The benefit Payments are payable for a certain specified period & thereafter throughout the life.
• The minimum Certain specified period is 5 years.
• During the period [ certain period ], in the event of death of the Annuitant, the benefit of the guaranteed payments will be made to the Nominee.

4. DEFERRED ANNUITY. :

IMMEADIATE ANNUITY • Pay a large sum as a single premium to an insurance company and get an annuity payment of your choice[ Mly/ Hly/ Yly].
• The annuitybenefit payments are based on a specified interest rate.[ Check starts only after the current interest rate with the insurance company].specific period.
• Rates will also vary with age of the investor.
• Annuity starting age from 50-60.
• The later you purchase an annuity, the higher will be the amount of pension paid. This is because , the insurance company has to pay annuity for the remaining years . So, if you are older , then, you will get higher annuity.
• From Tax angleThis specific period is known as’’ Deferment Period’’
• The benefit payments begin at the end of the deferment period.
• In the event of Death of the Annuitant during the deferment period & before the beginning of the benefit payments, the premium paid will be eligible for tax deduction u/s 80C, The annuity income till the death will be taxable as per your slab.returned to the Nominee.

5. DEFERRED ANNUITY CERTAIN :

• Here, you pay Are similar to the premium today to receive the annuity [pension] after particular years. CHOOSE THE RIGHT OPTIONS :
• Checkimmediate Annuity Certain Plan, with all insurance companies which company pays you the highest return.
• You can also plan in the following ways : Investing in Pvt. insurance Companies during accumulation and start your annuity from LIC, Since LIC gives you a higher rate of pension.
ANNUITY OPTIONS:
There are 3 options arethe benefit payments available.
1. Annuities for life at a fixer rate.
2. Annuities for a defined periods, in the range of 5-20 years.
• If you don’t survive during thisa minimum guaranteed period, your spouse will receive the pension till her life or you can opt for pension with return of purchase price or a part of it to your spouse on death..
3. Increase your Pension every year by3 -5%.
Note : The choice once selected could not be altered.
• General Opinionmain point here is that you can choose assured pension for 20 years or Fullthe deferred annuity to spouse after your deathconcept will applicable here.

6. JOINT / SURVIVOR ANNUITY

• This Annuity Plan will be purchased by a Husband & his wife.
• The benefit payments will be given as long as any of the two lives is surviving.
• That is the benefit payments will be payable till the death of both the joint annuitants.

• Annuity Products are designed to provide a regular cash flow after retirement.
• It requires to accumulate a corpus with an insurance company by paying the premiums. Insurance company then pays back this deposit thro.’ monthly payments with a fixed rate of interest.
TYPES OF ANNUITY :
There are types :
1.IMMEADIATE ANNUITY.
2. DEFERRED ANNUITY.

IMMEADIATE ANNUITY

• Pay a large sum as a single premium to an insurance company and get an annuity payment of your choice[ Mly/ Hly/ Yly].
• The annuity payments are based on a specified interest rate.[ Check the current interest rate with the insurance company].
• Rates will also vary with age of the investor.
• Annuity starting age from 50-60.
• The later you purchase an annuity, the higher will be the amount of pension paid. This is because , the insurance company has to pay annuity for the remaining years . So, if you are older , then, you will get higher annuity.
• From Tax angle, the premium paid will be eligible for tax deduction u/s 80C, The annuity income will be taxable as per your slab.

DEFERRED ANNUITY

• Here, you pay the premium today to receive the annuity [pension] after particular years.
CHOOSE THE RIGHT OPTIONS :
• Check with all insurance companies which company pays you the highest return.
• You can also plan in the following ways : Investing in Pvt. insurance Companies during accumulation and start your annuity from LIC, Since LIC gives you a higher rate of pension.
ANNUITY OPTIONS:
There are 3 options are available.
1. Annuities for life at a fixer rate.
2. Annuities for a defined periods, in the range of 5-20 years.
If you don’t survive during this period, your spouse will receive the pension till her life or you can opt for pension with return of purchase price or a part of it to your spouse on death.
3. Increase your Pension every year by3 -5%.
Note : The choice once selected could not be altered.
General Opinion is that you can choose assured pension for 20 years or Full annuity to spouse after your death.

ARBITRAGING in Volatile MARKETS :

• Arbitrage Funds aim to take the advantage of the arbitrage opportunities that exist between the cash and the futures market to generate return.
• It is based on the mispricing between the cash and the derivative market.
• This fund will seek the Price mis match in all the 3 Markets : Equity, Derivative and Forex.
• There are 3 important Participants in the Cash Market : 1.Speculator.2.Arbitrageur and 3. Investor.
• In Future Markets, the Investor is replaced by the Hedger.

ARBITRAGEUR :

• Is an Intermediary who helps in Price Discovery mechanism in all markets, viz; Equity , Derivative or Forex.
• He tracks the prices across the chosen two market and checks the momentary price differences based on the demand and supply in the market.
• The Price difference is ‘’ an opportunity ‘’ for the Arbitrageur.

SPECULATOR :

• He provides the Liquidity to the markets.
• There will be a time gap and difference in price & quantity at which the buyer and seller plan to do a transaction.
• He tries to gain from this difference and fills the time gap by giving quotes to the buyer and seller on a continuous basis.
• This provides Liquidity to the market.

IMPORTANT POINTS :

• Arbitrage Funds returns will be more or less in line with Liquid Funds /Floating Rate Funds or FMPs with very little risk.
• These Funds may have exit load. Pls. check before investing.
• The returns are linked to the expiry of the contracts[which happens on the last Thursday of the month].So, one should be careful on redemption.
• The downside deviation is lesser than the equity diversified funds.
• So, Arbitrage Funds can be a good alternative to invest our short –term money. Also, Post-Tax returns will be higher with a reasonable degree of Safety and Surety.

ASSET CLASSES : KNOW YOUR ASSET MIX

• Diversification is not just among Asset classes further within each of the Products.
• All Asset class should be a part of one’s investment portfolio.
• Asset Classes can be broadly classified into Equities, Gold, Real Estate , Debt & Cash.
• While Equities ,Gold & Real Estate are ‘’Growth Assets ‘’;
• Debt & Cash are ‘’ Defensive Assets’’.
• Growth Assets are high risk investments , high volatile in the short term & will generate high return over the long term.
• Defensive Assets generate stable returns in the short term & low returns in the long term.
• So, Each of the Asset classes come with different risk – return profile.

EQUITY

• Highly volatile investment.
• Interest Rate is one of the most important factor that affects this Asset class.
• Interest rate has a direct impact on the Capital expenditure of companies .
• In the raising interest rate scenario , companies will reduce their debt exposure & will postpone the capital expenditure. So, Consumption is reduced & sales of the company will come down.
• Crude Oil is another factor will affect the Equity Market.
• Global Markets & Currency rate are also important factors .
• Other Factors like , Political Stability, Market Liquidity/ Volatility & etc.

STRATEGIES TO INVEST IN EQUITY FUNDS :

1. Choose a Fund Category based on Client’s Investment Objective :
-Know Client’s investment objective.
- choose type of Fund Category.
- choose available Funds & decide which of them is matching his investment objective.
-Four factors will help you to choose the right type of fund .
* Universe of Sectors & Stocks : If the Fund has wide range of sectors & themes in its Portfolio, then, it is less Aggressive, due to its diversification.
* Universe of Stocks’ market capitalization : Funds with stocks of all range of market capitalization are less aggressive .
* Investment Style : Check whether the fund is Growth Vs Value –style Funds. Growth –style Fund will have higher scope of giving higher returns with additional risk.
* Portfolio Concentration : Portfolio holdings of a Fund indicate its risk. A diversified Fund with top sectors in its portfolio will have the risks associated with those sectors in the Portfolio.
2. LOOK at PAST PERFORMANCE :
-Just look at it. But, it is not an indicator for the Future return.
3. FOLLOW CORE & SATELLITE APPROACH :
• Create a Portfolio to your investors on Core & Satellite basis. Here, the Core Holdings will be Long term Wealth Creation & it should form major portion of the overall portfolio.
Satellite holdings should be treated as Secondary holdings & should not be beyond 30% of the Portfolio.
Now, based on these above points, Choose the most suitable fund which has to match the Investment objectives of the Clients.

GOLD

• Is a tangible & liquid asset.
• Gold price will depend on Demand and Supply.
• Gold and US Dollar prices are oppositely correlated.

REAL ESTATE

• It is a way of diversifying your investments.
• Interest rates are main factor will have major impact on Real estate. In the Falling interest scenario, the demand for Gold will increase because of cheap credit offer by banks and it is vice versa in the raising interest rate.
• Best hedger against Inflation.
• Very Low correlation with Equity & Debt.

DEBT

• • They are Income Generating investments.
• The return from the debt market instrument is known as ‘’ YIELD’’.
• They are considered as Conservative investment avenues, since the risk associated with debt funds are low.
• They are suitable for conservative investors.
• Before investing, understand the Yield Curve movement.
• Invest in the yield curve which is flat than choosing upward sloping curve.
• STRATEGIES FOR INVESTING IN DEBT FUNDS :
1.Based on Interest movements , decide whether to invest in long term / short term debt funds.
This is because, the long dated papers are more sensitive to interest rate movements than short term papers in which short term bond funds invest. Also, the Yield curve will be more/ less flat, the return difference between long term bonds Vs short term bond funds will be very less. So, it is better to invest in short term debt funds.
2. Choose to invest in Liquid Funds.- Ideal for 3 months Parking and can earn around 6-7% interest. Tax structure will also be lesser than Saving Account.
3.FMPs –FIXED MATURITY PLANS : They are most ideal plans against bank FDs. The tax liability will also be lower than FDs.
4. If a Debt Fund Investor Wants to go for Long term investments [ 3-5 years ], then, some Equity exposure will be good. For this, they can consider MIPs & Capital Protection Funds .

RBALANCED FUNDS

• The investors can invest in Equity or Debt oriented Balanced Funds/ Dynamic Asset Allocation Funds[ based on CPPI & DPI ]. This DAAF may give higher return than a balanced fund.
• So, DAAF can be considered than debt oriented balanced funds.
Various Factors contribute to Asset Allocation are :
1.Life Style stage.
2. Liabilities.
3. Risk Level.

ACTIVELY MANAGED FUNDS

• Any Fund Managers ability to outperform a Passive Benchmark decreases as the Industry grows. HOW? :
• As the active industry grows, more money chases opportunities to outperform Passive bench marks and such opportunities become harder for managers to find.
• If the industry shrinks, less competition among the remaining active managers who make it easier to find mispriced securities & outperform.
• For example, think of active managers as Police officers and mispricing as a crime. If there were no officers patrolling the streets, there would be more crime. But as the no. of officers increases , the crime will decrease.
• Similarly, When industry grows , the Alpha decreases and vice versa. So, there is an inverse relationship between Alpha and Industry Size.
• A smaller Industry should perform better in the future.