Prajna Capital

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• Mutual Fund Review: Magnum NRI Investment Fund - FlexiAsset Plan
• Study shows, Investing in fund of funds may actually raise risk
• How secure is your credit card?
• Mutual Fund Review: Kotak Opportunities
• Stick to Good Fund Manager who Can Multiply Your Investment
• What are the Cost involved in Mutual Funds?
• Mutual Fund Review: HDFC Multiple Yield Fund
• Stock Review: Praj Industries
• What should you do with Home loans?
• Understand the concept before investing in structured products
• Mutual Fund Review: LIC Nomura MF Short Term Plan
• Stock Review: KPIT Cummins
• Bharti AXA Mutual Funds – Its Schemes
• Mutual Fund Review: HDFC Growth Fund
• Use Company Annual Reports to make Investment decisions
• All about Public Provident Fund (PPF) account

Mutual Fund Review: Magnum NRI Investment Fund - FlexiAsset Plan Posted: 29 Aug 2011 04:51 AM PDT Objective The investment objective of the scheme will be to provide attractive returns to the Magnum holders either through periodic dividends or through capital appreciation through an actively managed portfolio of debt, equity and money market instruments. Income may be generated through the receipt of coupon payments, the amortization of the discount on the debt instruments, receipt of dividends or purchase and sale of securities in the underlying portfolio. Asset Allocation Instrument % of Portfolio of Plan A & B Risk Profile Corporate Debenture and Bonds/PSU, FI, Government guaranteed Bonds including Securitized Debt and In Up to 90% of the investments in debt instruments Medium to High Of which Securitized Debt Not more than 30% of the investments in debt instr Medium to High Government Securities Up to 100% of the investments in debt instruments Low Equity and equity related instruments Atleast 10% and not exceeding 80% at any time High Derivative Instruments Within approved limits Low Cash and Call and Money Market Instruments Up to 25% Low Scheme Highlights 1. All Plans have Growth and Dividend Options. 2.The returns under the Growth option to be through capital appreciation only, The FlexiAsset Plan to follow an Asset Allocation Model wherein depending on market conditions/based on certain triggers, the Fund Manager can take a view on the percentage of investments that can be allocated to equity. 3. This Plan would have a minimum of 10% investment in equity related instruments which can be increased up to 80% depending on market fundamentals. 4. The investment universe for equity stocks will be limited to such equity stocks that form a part of BSE-100. 5. The scheme will declare NAV, Sale and Repurchase prices on all business days. 6. All Plans will have separate asset classes and will declare separate NAVs for different options. 7. Dividends distributed under the scheme will be subject to a dividend distribution tax of 12.5% and will be tax free in the hands of the investor. Investments in Mutual Funds by NRIs are fully repatriable in case the funds are remitted through NRE/FCNR accounts. Short-term/Long-term Capital Gains would be subject to a withholding tax of 30%/20%. Minimum Application Rs. 50,000 and multiples of Rs. 1,000. No maximum limit. Entry Load Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and above - NIL Exit Load Investments below Rs. 5 crore, exit within 6 months from the date of allotment – 1%, Investments below Rs. 5 crore, exit between 6 months & 12 months from the date of allotment – 0.5%, Investments below Rs. 5 crore, exit after 12 months from the date of allotment – Nil, Investments of Rs. 5 crore and above– Nil SIP Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months Minimum amount SWP A minimum of Rs. 1000 can be withdrawn every month or quarter by indicating in the application form or by issuing advance instructions to the Registrars at any time.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Study shows, Investing in fund of funds may actually raise risk Posted: 29 Aug 2011 04:13 AM PDT Funds of funds with more than 20 underlying managers are more exposed to tail risk EVER since the financial crisis, the fund of hedge funds model has been under fire. Such firms, which sell baskets of hedge funds to investors, charge too much, investors have complained. And the investments, said to offer diversification, did little to buffer the market losses of 2008. Now, it appears, that diversification could actually put them at more risk, according to a forthcoming study. Not only do funds of funds with more than 20 underlying managers begin to lose the benefit of diversification, they are also more exposed to tail risk events (or highly unlikely, devastating occurrences), according to the study, led by Stephen Brown, a finance professor at New York University's Stern School of Business. They "may believe that excess diversification reduces tail risk exposure, but the data suggests that tail risk increases with the degree of diversification," according to the study, which has been accepted for publication by the Review of Asset Pricing Studies. The reason, in part, is because when a fund of funds has a large number of underlying managers; it begins to track indexes more broadly in extreme event situations. While, hedge funds in normal times do not necessarily track the market, extreme events often increase correlations. When they are aggregated, that risk exposure is concentrated, Brown said. Nearly half of the 3,767 funds of funds studied for the paper have more than 20 funds. The focus in the industry has been misplaced. What is the sweet spot, the optimal diversification? That's the wrong question. The right one is what's the appropriate amount of diversification for the amount of assets under management.

How secure is your credit card? Posted: 29 Aug 2011 02:44 AM PDT Credit cards have become an integral part of our life, but concerns about its security and vulnerability is an ongoing issue. Credit card frauds are rising at an alarming rate. Card associations and banks on the other hand have been trying hard to enhance card security features to minimize frauds and misuses. Here is a look at the security features introduced by card issuers and banks in the current scenario. Verified by Visa/Mastercard SecureCode A significant upgrade in credit card security features came with the introduction of 'Verified by Visa/MasterCard Secure Code programme' or second factor authentication. It addresses the credit and debit card transactions over internet. Earlier, to do an online transaction, the only information needed was your credit card number, expiry date and the CVV number printed on the back of the card. It is easy to obtain this information as they are exposed when you handover your card at hotels, shops or petrol stations. Fraudsters can use this data for online transactions where physical presence of the card is not needed. With the introduction of the Verified by Visa/MasterCard Secure Code programme, apart from card information, the customer needs to provide an additional password like that of a debit card, to make the transaction secure. This is to authenticate any online transaction. EMV Chip The EMV chip addresses security concerns while the card is physically swiped in a machine. When cards are being swiped on an electronic device, all the information stored on its magnetic strip gets extracted for verification. Fraudsters can extract this data from swiping machines and use them to make a duplicate card through a process called cloning. This duplicate card can be used for online transactions and your credit account gets billed. The susceptibility of magnetic strip cards forced the card associations to come up with an innovative solution - the EMV (Europay, MasterCard and Visa) chip. It stores the data securely in a highly encrypted format which is difficult to skim off and thereby reduces the chances of extraction. It also relies on a digital signature scheme based on public key techniques to confirm the data's legitimacy. As the transaction is being processed, any tampering or unauthorised alteration of data is detected and the transaction will be declined. India is slow in adding this security feature. In India, the card acceptance mechanism at many merchant outlets is still not equipped with the process. So, the Indian card manufacturers need to issue cards with both EMV platform and magnetic strips. The card makers ensure that the new cards will have a magnetic strip, but the card's confidential data will be stored on the chip. The magnetic strip facilitates the transaction where EMV processing is not available and at the same time data will not be skimmed. Second Level Authentication for IVR Transaction Even though second-level authentication has been introduced for online transactions, telephonic transactions with Interactive Voice Response (IVR) started using second-level authentication with a PIN or a password this year only. So, now a customer making an IVR transaction would need to provide an additional password, just like he does on the Internet, so that fraudsters would no longer use the information on your card for IVR transactions. Credit Card Protection If you happen to lose your wallet while traveling in India or abroad, earlier you need to call each card issuer separately to get the cards blocked. To ease this situation, a solution in the form of Credit Card Protection (CPP), exists. CPP India comes with a 24-hour toll-free helpline and a world wide cover. One free call to this number will block all your cards on request with additional features like emergency travel cash assistance, fraud protection, valuable document registration and lost card replacement assistance. This service can be availed by taking a membership with CPP which costs around Rs.1000/- to Rs.1500/- annually. Stay Safe Although many security features have been introduced, still you can be a victim of the most common trap —phishing. Beware of mails appearing like coming from your bank/ card company asking for your card details or personal information. They will contain an unsolicited link, which when clicked will be directed to a fraud website looking similar to that of your bank. The chances of clicking them unknowingly are fairly high and you will end up exposing your confidential information. So, as far as credit card transactions go, be cautious. Here are a few pointers: Type the URL yourself and don't rely much on search engines as there are chances for clicking similar duplicate sites. Look for the prefix 'https' in the website addresses. The 's' in https stands for secured. Keep in mind that no bank/card company would ever ask for confidential information through email/phone under any circumstance.

Mutual Fund Review: Kotak Opportunities Posted: 29 Aug 2011 01:28 AM PDT   Kotak Opportunities has been an average performer for long. Existing investors may give it some more time to make a turnaround. If you have booked profits, then look for other options. New investors should track its performance for a few months before taking a call. Kotak Opportunities shot into the limelight in 2007 with astute calls on the hot sectors at that time — infrastructure and financials. But playing through the market momentum cost the fund dearly in 2008 after the carnage in financial, power and infrastructure sectors. In 2009, the fund went overweight on power, construction and infrastructure as the Congress victory in the elections was perceived as a boost for reforms and infrastructure spending. However, execution delays and sloppiness in issue of fresh orders derailed the sector. This impacted the fund's performance. Having burnt its hands twice, Kotak Opportunities is now playing safe with healthcare and staples.     -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Stick to Good Fund Manager who Can Multiply Your Investment Posted: 29 Aug 2011 12:52 AM PDT A manager may be the difference between the best and worst funds. Here's how you can find the right one    Does a mutual fund manager make a difference to your investment? The answer may not be as easy as you think, since most best-performing mutual funds have moved away from individualistic fund management to process-driven methods, limiting the scope of an individual's role in investment decisions. In fact, many fund managers would speak at length about how the "system" their fund house has in place makes their task of picking stocks easy even though it restricts their freedom. Still, the question is important, especially after recent reports that the Securities and Exchange Board of India (Sebi) may ask fund managers to disclose to investors their track record of managing money. Let us take a look at the universe of large-cap funds over the past five years. According to Value Research, an independent mutual fund tracking firm, the topper in the category is DSP Blackrock Top 100 Fund, with an annualised return of 17.63%, while LIC Nomura MF Opportunities is at the bottom, with a return of 5.65%. The BSE Sensex, the bellwether of the stock market, has returned 11.25% in the same period. This shows that there is a difference of 12% in returns between the best and the worst funds in a single category and that there are funds which fail to beat even the broad market benchmark. Surely, the fund manager of the first fund must have done something extra to beat the returns of the Sensex and also peers. According to experts, there are two things that could produce extra returns. One is the investment philosophy set by the chief investment officer in an AMC and the other is the "calls" that the individual fund manager makes. It is the fund manager who, over a period of time, generates that extra alpha over the benchmark through proper stock selection and risk management. Role Of The Fund House Broadly, there are two types of fund houses: one is process-driven and the other gives autonomy and freedom to the fund managers. Those falling in the first category follow a strong, process-driven investment style and the fund manager's role is to function within the parameters defined by the fund house. Those in the second category give flexibility to the fund managers in taking major investment decisions, like investing in small-caps and unlisted companies, churning the entire portfolio, and taking huge sectoral positions. Both methods have their merits and demerits. Funds whose returns depend on the calls of the fund manager may underperform in case of a change in the fund manager, while those that follow a strict process and backups could be better equipped to handle such changes. In short, the fund manager can make a difference if he is given a good platform to perform by the fund house. Each fund house represents a certain investment philosophy, history and expertise, and these factors do impact the way a manager handles a scheme. That is why financial planners insist that it is important to get the fund house right. There are as many as 43 different asset management companies (AMCs) in India. So how does one distinguish one from the other? We choose a fund house based on the pedigree, fund managers' experience, the size it has, past performance, the expertise it can bring in and the frequency of communication. Managing a corpus running into thousands of crores of rupees requires a good team and cannot remain a one-man show. The kind of support that the fund house gives in terms of processes, risk management systems and infrastructure helps attract good fund managers. There are fund houses, like HDFC and Franklin Templeton, which have managed to retain talent over long periods of time. This has helped their schemes perform consistently over a long period of time. "We give fund managers complete independence within boundaries, which helps attract good talent. Now, the crucial question is: how do you assess whether the good talent pool, including your fund manager, would make a difference to your investments? The Person Behind The Fund Do a background check of the person who is primarily responsible for managing your scheme. The manager may have been an analyst earlier or a fund manager at some other organisation, so check his track record there. His work experience will give you some idea about him. If he has been an analyst at the same fund house, he will understand and implement the philosophy of the fund house better. Check the performance of his funds to get a better picture of his capabilities. Sure, past performance is no guarantee for future returns, still it definitely gives a good indication about his expertise. For an investor looking for returns, it is the judgement of the fund managers that they should rely on. The only metric that they have to go by in this regard is the track record of the fund managers. The Management Style The investment strategy and process of the fund manager should be easy and simple to understand. It would be great if the fund manager and you have the same objectives. So if you are conservative and are looking for stable returns without a lot of volatility, it may make sense to go with a fund manager who follows the value investing approach. If you are a growth investor and want aggressive returns, you could choose a fund manager who takes extra risk for returns. However, you need to understand that in this case the fund may be a lot more volatile, with both returns and losses generally on the higher side. Awards Awards are given by media houses and professional mutual fund tracking companies. If a fund manager consistently wins awards, it indicates that his performance is amongst the best of the lot. If your fund manager scores high on these counts, chances are that he may make a difference, however small, to your returns.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

What are the Cost involved in Mutual Funds? Posted: 28 Aug 2011 11:48 PM PDT The two main costs incurred are: 1) Expense Ratio: Annual expenses involved in running the mutual fund include administrative costs, management salary, overheads etc. Expense Ratio is the percentage of assets that go towards these expenses. Every time the fund manager churns his portfolio, he pays a brokerage fee, which is ultimately borne by investors in the form of an Expense Ratio. Therefore, higher churning not only leads to higher risk but also higher cost for the investor.   2) Exit Load: Due to SEBI's recent ban on entry loads, investors now have only exit loads to worry about. An exit load is charged to investors when they sell units of a mutual fund within a particular tenure; most funds charge if the units are sold before a year. As exit load is a fraction of the NAV, it eats into your investment.   Try investing in a fund with a low expense ratio and stay invested in them for longer duration. -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Mutual Fund Review: HDFC Multiple Yield Fund Posted: 28 Aug 2011 10:07 PM PDT Objective To regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme's assets in equity and equity related instruments. Option/Plan Growth Option, Quarterly Dividend Option, Monthly Dividend Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. Exit Load(as a % of the Applicable NAV) In respect of each purchase / switch-in of Units upto and including Rs. 10 lakhs in value, an Exit Load of 0.50% is payable if Units are redeemed / switched-out within 6 months from the date of allotment. In respect of each purchase / switch-in of Units greater than Rs. 10 lakhs in value, an Exit Load of 0.25% is payable if Units are redeemed / switched-out within 3 months from the date of allotment. Minimum Application Amount For new investors : (Growth & Quarterly Dividend Option) – Rs.5000 and any amount thereafter under each option. (Monthly Dividend Option) . Rs. 25000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Stock Review: Praj Industries Posted: 28 Aug 2011 10:07 PM PDT Praj Industries has successfully transformed into a better business model. Up till now, the company had only an ethanol-base dependency and then moved into the water and waste-water management systems. If we look at the company's Q1 results, the contribution started taking place into the books of the company. Going forward, it could possibly be 25-30% of the overall pie of revenue in next one-and-a-half to two years. The company's ethanol story is now gaining momentum. They have been getting newer orders from the international markets on the ethanol businesses and the business is quite robust. The model is scaling up and order book has started getting a bit stronger than what it used to be in last year or so. Valuations are still above 13-14 price to earning (PE) ratio. If you keep an eye on this company, the market gives you an opportunity in this nervous situation.

What should you do with Home loans? Posted: 28 Aug 2011 09:18 PM PDT If you have mortgaged your home, true to the word's original Latin meaning, it could well end up being a pledge until death. The latest rise in the Reserve Bank of India's rates will result in banks raising their lending rates by 25-50 basis points. For the home loan borrower, this translates into ongoing loans extending for years beyond the original tenure or paying higher equated monthly instalments (EMI). Since home loan rates have already moved 250 basis points up, existing borrowers will be hit the hardest. Renegotiating: A borrower wishing to reduce the interest burden could look at renegotiating with his bank. Some banks and housing finance institutions do offer are deduction in interest rates to retain customers. The fee for restructuring could be anywhere between 0.5-1 per cent of the applicant's balance principal amount at the time. However, renegotiation would also mean the loan will be treated as a fresh one. Bankers say decisions will be taken on a case-to-case basis, with the reduction and fee charged being their discretion. Balance transfer: An option for existing customers is to look at balance transfer, by moving to a new bank. Again, the loan is treated as a new one. Bankers do not encourage it, charging a 1.5-2 per cent penalty. They only allow entire prepayments without a penalty if you are able to prove it is from your own funds. They quote RBI reports to say there have been substantial rises in salaries, proof enough that interest rate rises can still be serviced. If one is currently paying 11.50 per cent for a loan of Rs 80 lakh with a 20-year tenure, a drop of one per cent in the interest rate after the first year would lead to a reduction in EMI by Rs 4,100 and a total savings of Rs 50,000. A new loan account will mean one-time processing fee and mortgage charges. Processing fees are Rs 5-10,000 for salaried persons and could be 0.5 per cent of the loan amount for self-employed individuals. Mortgage fees would be 0.2 per cent of the loan amount. The new interest rate should be lower after considering all the transfer costs. Just aone per cent differential will not be enough. Existing borrowers should transfer their loans from floating rates and link it to the base rate (new loans are all linked to the base rate since this regime was introduced; existing borrowers have to approach the bank to shift). This will reduce stickiness of the loan, an advantage when rates go down, as they inevitably will over the longterm tenure typical of a home loan. Most banks had a home loan-specific benchmark rate and the extent of change when rates cretion. It would enable a rise and fall in line with market conditions. Strategy:  During the first few years of any home loan repayment, the interest component is higher. In case of a switch, customers would pay higher prepayment charges to their existing banks. But if the differential between transfer cost and old rates supports the cause, do it. Customers in the middle of their loan tenure, mostly after five to seven years, could look at switches, provided the savings on the interest paid is substantial, versus the costs being borne by them. Opting for a balance transfer during the last leg of home loans may not be worth the shift. During this time, the EMIs go towards principal payments. Those who borrowed under special rate schemes (fixed cum-floating loans) prevalent during the past two years would be able to sustain the rate rises for now. The special schemes offered low rates in their initial fixed rate regime for two to three years and they will only feel the impact of higher rates once they move to the floating rate regime. Such borrowers need not move at all.

Understand the concept before investing in structured products Posted: 28 Aug 2011 08:31 PM PDT    Also some structured products. That is how most of the conversations with investment experts end these days. Ask them for an ideal portfolio and chances are that you would hear something like a little bit of debt instruments, some equity products and, yes, you guess it, some structured products. No wonder, there are many skeptics who make fun of these products. They claim these products are designed to confuse customers and offer them the false comfort of maximum returns. Point noted, but you don't have to steer clear of these products without even trying to find out what they are all about. Structured products are customized products that comprise various financial instruments like derivatives, stocks, bonds and debentures with different investment strategies, in one investment basket. Or, simply put, it's a pre-packaged product which invests in various underlying assets such as equity indices, stocks, commodities and interest rates. The performance of the product depends on the returns offered by these products. "Most structured products that are sold in India, have principal protection function as the key element. It simply means the full protection of principal if the investment is held till maturity. Structured products are designed to facilitate highly customized risk return objectives.    Take a look at the example of a simple Nifty-linked capital protection structure. You are investing, say, Rs 100 in a product with a tenure of 40 months. Of this, Rs 80 is invested in debt securities, yielding a return of 6-7% per annum. Thus, over a period of 40 months, you could get Rs 20 as interest on these debt securities. Hence, this ensures that your capital of Rs 100 is protected. The balance of Rs 20 is invested in the Nifty index. If the Nifty doubles in 40 months, Rs 20 will become Rs 40. Thus the value of your Rs 100 will be Rs 140 at the end of the period, giving you an absolute return of 40%. On the other hand, if the Nifty were to fall by say 50%, then Rs 20 invested would become Rs 10, thereby giving you Rs 110 back. This strategy ensures that at any given time your capital is protected and you will get Rs 100 back at the end of 40 months.    While this is a simple structure, more complex structures using quantitative strategies could be deployed depending on the risk profile of the investor to generate higher returns.    Structured products are privately placed and typically offered to high net worth individuals. Structured products are issued in the form of NCDs (Non convertible debentures), whose returns are linked to an underlying stock index such as the Nifty or a basket of stocks. Sophisticated structured products, depending upon the market conditions can be specially created for a set of clients and privately placed. The ticket size generally is Rs 10 lakh upwards. Typically, these products are designed by foreign banks and a few domestic financial institutions. They are distributed by wealth management firms, typically foreign and private sector banks to their high networth clients. One product could differ from the other based on its tenure, participation rate and trigger conditions. With their popularity increasing, they are also available in the form of mutual fund products, mostly as debt schemes in the form of fixed maturity plans (FMPs).    These products were initially offered to meet the needs of high net worth investors. However, they are now being offered to retail investors as well. The benefit of investing in these products would be that a sophisticated investor can theoretically take direct exposure in derivatives. However, the size required for direct access is not possible in most cases.    These products were in big demand from HNIs early in 2008. But after the collapse of US investment bank Lehman Brothers, investors started fearing the issuer's ability to return the principal. This has forced banks to search for simpler and more transparent options. The market for structured products was virtually shut for a while. The renewed interest in these pre-packaged products now indicates a return of confidence in the issuers.    According to experts, most retail investors would find it difficult to grasp the complexity of these products. These days some banks have aggressively started pushing structured products to retail investors through their broking networks. Whether retail investors adequately understand the complicated structure of these products, which often has embedded options and implicit fees, is questionable. Also, the liquidity on premature redemption is cause for worry in most structured products, including even the listed ones.    Though most structured products offer "principal guarantee" function, which offers protection of principal if held, until maturity, there are also non-capital protected structured products, where the principal amount is not guaranteed. This exposes an investor to the risk of losing his capital. If we compare capital guaranteed structured products with FD's, mutual funds, equities, the degree of principal protection is higher in structured products and FDs. However, the liquidity is very low in structured products, though they have the potential of giving higher returns on maturity.    Structured equity products provide higher returns to investors on their investments by adopting a view and accepting certain risks. However, these products do not talk about the credit risk involved in the debt component. Some of the structured products claim to perform across various market conditions. These products are designed in such a way that the fund can have a large cash component. If the fund manager doesn't utilize the entire fund, this will hurt the fund's performance in the longer duration.    According to experts, the major concern with these products is the lack of rating, which makes it extremely difficult for retail investors to evaluate some structured products. The Securities and Exchange Board of India (Sebi) has asked credit rating agencies not to rate non-capital protected structured products. Without rating, it has become difficult for issuers to sell these products to investors. Structured products are not as simple as they appear. Since these schemes use a blend of investment strategies, it is difficult for most investors to understand the strategy driving the fund.    That is why most investment experts believe that it would take a while before investors would be ready to park money in structured products. The issuers will have to strive to make it more transparent and easy to understand. On their part, investors need to satisfy themselves that they understand the product very well and it suits their investment and return objective. Do you need structured products? >> Just because everyone is speaking about structured products is not a valid reason for you to park your money in them >> These products are pre-packaged products that invest in a variety of instruments in debt, equity, derivative, currency and so on >> Though most structured products offer capital protection option, there are products that don't offer protection of capital   >> Try to understand the product, the strategy behind it and the risk involved before signing up for it >> Don't take all the claims at face value, there are chances that some of the strategies may not work all the time >> Structured products are not the panacea for all your financial troubles. It is okay to say no if you can't comprehend them.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Mutual Fund Review: LIC Nomura MF Short Term Plan Posted: 28 Aug 2011 07:44 PM PDT Objective: The investment objective of the Scheme is to generate income by investing in a portfolio of quality short term debt securities. Options : The Scheme offers Investment under the Growth & Dividend option. In Dividend option, investor can choose from dividend payout / dividend re-investment option. Minimum Investment: Rs. 10000/- Easy Liquidity: Fixed Maturity Plan provides investors with easy liquidity where investors can redeem their investments at authorised centres.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Stock Review: KPIT Cummins Posted: 28 Aug 2011 07:43 PM PDT The core business activity of implementation of the SAP or Oracle projects and the other IT projects, and with the Cummins dependency, all have been growing with around 25-30% rate of growth. The trigger in this particular company is the new product. Their JV with Bharat Forge is likely to launch the energy saving device Revolo for the automobiles in this financial year and KPIT Cummins has the IPR for that, so they get 7.5% royalty. At the same time being the 50% partner in this company, they have the advantage of getting the revenue coming into it. In the full year 2012-13, this product could self generate between Rs 300-500 crore of top line and KPIT's shares with royalty could be between Rs 55-60 crore. For a Rs 9 crore equity company, a sizeable chunk of money is likely to come next year from this area of activity. The company has successfully started building IPR-based embedded product, which could find its way into some other products going forward. A Rs 1,000 crore company transforming into Rs 2,000 crore over next two-and-a-half and three years looks pretty interesting from investment point of view.

Bharti AXA Mutual Funds – Its Schemes Posted: 28 Aug 2011 11:07 AM PDT   Bharti Axa Investment managers is a joint venture between bharti ventures and AXA Investment Managers. They have professional fund managers who focus more on performance and excellence.   Equity Funds:   ·                           Bharti AXA Tax Advantage Fund ·                           Bharti AXA Equity Fund ·                           Bharti AXA Focussed Infrastructure Fund ·                             Hybrid Fund:   ·                           Bharti AXA Regular Return Fund ·                             Debt Funds:   ·                           Bharti AXA Liquid Fund ·                           Bharti AXA Short Term Income Fund ·                           Bharti AXA Treasury Advantage Fund ·                           Bharti AXA Fixed Maturity Plan – Series C – Plan 1 ·                             Benefits of Investing Online:   ·                           You can purchase, switch, redeem and order any transactions like change of bank accounts etc online. ·                           There is no need for you to contact the broker or any intermediate person for the transaction. ·                           You can view all the portfolio details of your folios online. ·                           You can generate Account Statements; view the past transactions and any other details. ·                           You can update your personal details online.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Mutual Fund Review: HDFC Growth Fund Posted: 28 Aug 2011 10:07 AM PDT Objective The primary investment objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. Option/Plan Dividend Plan,Growth Plan. The Dividend Plan offers Dividend Payout and Reinvestment Facility. Entry Load (as a % of the Applicable NAV) In respect of each purchase / switch-in of Units less than Rs. 5 crore in value, an Entry Load of 2.25% is payable. In respect of each purchase / switch-in of Units equal to or greater than Rs.5 crore in value, no Entry Load is payable. Exit Load (as a % of the Applicable NAV) In respect of each purchase / switch-in of Units less than Rs. 5 Crore in value, an Exit Load of 1% is payable if units are redeemed / switched-out within 1 year from the date of allotment. In respect of each purchase / switch-in of Units equal to or greater than Rs. 5 Crore in value, no Exit Load is payable.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

Use Company Annual Reports to make Investment decisions Posted: 28 Aug 2011 09:18 AM PDT They show how strong companies are financially and the direction they are headed, details that can help you make investment decisions    It is that time of the year when annual reports of companies find their way to investors by e-mail or snail mail, or both. Average investors, however, pay very little attention to the reports, which are the most critical and exhaustive communication from companies to their investors. In most cases, the fat reports are disposed of with old papers, without being opened, or are consigned to the recycle bin if they are received by email. According to investment experts, this is not the best practice for smart investors. An annual report can tell you a lot about the company you have invested in: it will inform you how the company has performed in the year that has gone by and offer some idea about the direction it is headed in the coming year or near future. In fact, for an average investor, the annual report is the only financial document they get from the company. Sure, one would have tracked news about the company on television or newspaper. Or read experts' take on the quarterly results of the company. However, the fact remains that the annual report is the only document the company is obliged to send to its shareholders. It is said the devil is in the details. When one selects stocks, in addition to looking at the business, management and valuation, one needs to take a close look at things in the annual report — balance sheets, income statements and cash flow statements. DON'T GO BY PHYSICAL APPEARANCE Don't be fooled by the design, look and feel of the annual report. Companies are free to design annual reports in any way they want. There is no rule that specifies the number of pages, the shape or size, or the quality of production and so on of an annual report. While some balance sheets are thick and run into hundreds of pages, some may be lean. Some companies come up with plain vanilla annual reports with simple fonts, and pay little attention to page layouts and displays, while others use high quality paper and lay great emphasis on design to ensure that the annual report is pleasing to their shareholders. Investors should never get carried away by the physical appearance of the annual report. They should rather focus on how much information it contains. MANAGEMENT DISCUSSION AND ANALYSIS While you savour those glossy pages, don't get enamoured by them. What matters are the details in the section where the company shares its views on the direction the company plans to take, how it thinks the year ahead is going to be for the industry and how the company will fare — in short, things that will help you make investment decisions. While there are some companies who do have meets and conference calls for analysts regularly, some others are not so forthcoming. For example, some multinational companies share very little with analysts even if they are kind enough to convene an analysts' meet. It is a quick SWOT analysis and gives us everything at a glance. If investors can read the previous year's discussion together with this year's, it would give them a better indication of the management's quality. Also, it would be very difficult to get facts and figures about certain industries as there may be only a few companies operating in the sector. If a company is into managing e-waste or recycling, one would have to rely even more on management discussions to get an idea about the company. FINANCIAL STATEMENTS, BALANCE SHEET Spend a few moments on this section, which contains the most crucial numbers concerning a company. It gives you clues about the financial strength of the company. Look at the profit and loss account and income statement, as they will tell you how the company is performing — how much profit the company is making and what its earning are from core operations. In a rising interest rate scenario, I would look at the debt on the company's books. This is because profitability is bound to come down when interest cost goes up. He also looks at things like international currency loans, as there is a currency risk involved there. Then there are things like inter-group loans, investments. Things like debtor days (which indicates how quickly cash is being collected from debtors) and inventory are not there in the quarterly results. Hence, one needs to look at them carefully in the annual report. Another important item is loans and advances to group companies. If a loan has been given to a subsidiary company without charging any interest, it has to be justified Then there is the crucial auditors' report. In most cases, it will state that the profit and loss account and balance sheet give a true and fair view. However, look for cases where they tell you if the management has been up to things that are unacceptable or has used unethical accounting practices. Then, there are notes to accounts. Take the example of BHEL. In its results declared this year, BHEL has modified the accounting policy on employee benefits in respect of leave liability. The impact due to the change in the accounting policy for the year 2010-11 is an increase in profit before tax of . 240.8 crore. OTHER THINGS In the case of manufacturing companies, analysts find it interesting to take a look at the production figures and the installed capacity to get an idea of the efficiency level of the company. There are analysts who look at items like related party transactions, salaries and perks paid to key managerial employees and ESOPs issued during the year. One could look at the number of independent directors in the company, to understand the strength of its board, and check if there are some eminent personalities. Some annual reports also have a summary of the 10-year financial summary, which gives you the growth in income and profits at a glance. Lastly, the annual report also has the attendance slip form, which gives you the right to attend the annual general meeting (AGM) — making a trip to the AGM and see the top management in action would give you a first-hand experience of the company.

All about Public Provident Fund (PPF) account Posted: 28 Aug 2011 08:07 AM PDT    Public Provident Fund (PPF) is a long-term debt investment product offered by the Indian Postal Service. It is a secure product that offers tax benefits and easy liquidity in the latter half of the account tenure. Various sections outlined here will provide you with all the information you need on PPF. Where can you open a PPF account?     It can be opened in any head post office, general post office, selection grade post office, any branch of the State Bank of India and some branches of other nationalised banks. Who can open a PPF account?     It can be opened by any adult in his name or as guardian of a minor. Only one account can be opened in the name of a person. A NRI is not eligible to open a PPF account.    However, if a resident individual opens a PPF account and then subsequently becomes a NRI, he can continue to subscribe to the PPF account that he had opened before he became a NRI. How much can one invest?     You can invest a maximum of Rs 70,000 in the PPF account in a year. The minimum amount to be invested to keep the account active is Rs 500 in a year. Regardless of the yearly amount you wish to invest, you can invest the whole amount as a lump sum or in 12 monthly installments. Tenure and interest rate     A PPF account matures after 15 financial years elapse from the date of opening the account. The current rate of interest offered is eight percent per annum compounded annually. A subscriber can close the account in the 16th financial year. The account can also be continued with or without subscription for a further block of five years. Loan and premature withdrawal     Loans can be availed from the third financial year excluding the year of deposit. Amount of such loans must not exceed 25 percent of the amount that stood to the account holder's credit at the end of the second year immediately preceding the year in which the loan is applied for. A fresh loan is not allowed when a previous loan or interest is outstanding. Interest is charged at a rate of one percent if repaid within 36 months and at six percent on the outstanding loan after 36 months.    Withdrawal is permissible from the seventh financial year from the year of opening, limited to one in a financial year. Amount of withdrawal is limited to 50 percent of balance at the end of the fourth preceding year less the amount of outstanding loan, or 50 percent of balance at the end of immediate preceding year of withdrawal less amount of outstanding loan, whichever is lower. Tax benefits     Deposits made in a PPF account annually are deductible from taxable salary under Section 80C. Deposits made are completely exempt from wealth tax. Interest earned is tax-free.    PPF is suited for the retired and self-employed whereas Employee Provident Fund (EPF) is better-suited for the salaried, purely from investment and returns point of view. Although EPF is mandatory for the salaried individuals, employed personnel can contribute voluntarily to their EPF account too. This contribution is in excess of the 12 percent (on basic salary) contribution that you mandatorily make and that your employer matches. This is called Voluntary Provident Fund (VPF).    VPF also earns the same interest as EPF. Although both PPF and EPF/VPF offer comparable benefits and features, since EPF/VPF earns 9.5 percent interest to eight percent interest on PPF, EPF/VPF is recommended for the salaried individuals.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   Invest in DSP BlackRock Mutual Funds Online   Invest in Reliance Mutual Funds Online   Invest in HDFC Mutual Funds Online   Invest in Sundaram Mutual Funds Online   Invest in Birla Sunlife Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in Edelweiss Mutual Funds Online   Invest in IDFC Mutual Funds Online

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