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Ulips are transparent insurance products that provide a variety of options to manage your returns due to fluctuations in the markets. The fund switch option is one such facility by which you can manage your returns. Fund switching can be carried out based on your risk appetite and how you balance the equity-debt portfolios. Market-savvy investors can use the option to manage their Ulips when the market falls, to optimize the returns. For others who may not have the understanding or time to track the markets, you can leave this decision to the insurer's fund managers by opting for fund options such as asset allocation or wheel of life portfolio options.

Switch To Modify Allocation

The fund switch option is a convenient way for investors to protect their investments from market fluctuations and maximise returns by balancing their investment portfolio between debt and equity. The switching of funds should be done considering your risk appetite, volatility of the stock market and your financial goals. For instance, if you foresee a dip in the stock market, you should switch a large portion of your investment to debt/liquid funds, and switch them back to equity once the market picks up again to leverage the upswing.

Similarly, as your policy moves towards maturity or when you are approaching a milestone in life where finances are required, such as child's education or daughter's marriage, you should move a maximum portion or the required amount of your investment at the appropriate time(s) to debt/liquid funds. This will ensure that a large corpus of the investment is secure and guarantees good returns at the time of maturity or withdrawal.

Depending on the product, Ulips offer a certain number of free switches in a year.

When To Switch ?

This is also a decision that will impact returns. Let's take an example to understand this further. Mr Singh, a 30-year-old earning individual, has invested in a Ulip with a policy term of 30 years. He has opted for an al lequity fund. How should he manage his asset allocation?

Initially, Mr Singh can maintain 100% of his investment in equities. After a few years (say five), as Mr Singh's financial responsibilities increase after marriage and children, he should ideally reduce his investment in equity by 20%. He should similarly reduce equity exposure every five years and move the amount to debt funds. By reviewing the investment every year and continuing to maintain this asset allocation, it is recommended that in the last five years, Mr Singh maintain only 20% of his investment in equity funds.

How To Switch ?

Policyholders can manage their fund switches through the self service facilities offered by life insurers on their customer portals. Check with your insurer if they have secure translation process for changing the asset allocation on your Ulips. This is basically to protect the customer's interest and minimise misuse of the system.

'Automatic' Switching

If you are not market-savvy or do not have the time to keep a watch on the market, you can opt for the asset allocation fund or "wheel of life" portfolio strategy offered by some Ulips. In an asset allocation fund, the insurer's fund manager switches between equity and debt funds considering the view of the market.

In the 'wheel of life' strategy, the investment is managed in a pre-defined manner with automatic switches. By opting for the 'wheel of life' portfolio strategy, the investor puts his asset allocation on an "auto" mode wherein the investment is gradually exposed to debt from equity keeping the investor's age and outstanding term in mind. This optimises risk and returns based on the time horizon of the plan.

Studies have shown that if the asset mix is changed frequently depending on market conditions, investors can insulate themselves from the market volatility to a certain extent. Investors with a dynamic asset allocation that changes with the market level have been able to secure returns of 8-9% versus an aggressive or balanced investor. So, go ahead and use your fund switch option to get better returns or leave it to the expert fund manager.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Applications

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Fixed Rate Home Loan from HSBC

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Posted: 05 Apr 2012 05:05 AM PDT

After ICICI Bank, Axis Bank and HDFC, HSBC, too, has come up with a dual-rate housing loan product.

It allows borrowers to choose an initial fixed rate period of between one and five years, and after that migrate to a market-linked, floating rate system.

The scheme offers two options – one where the customer is not allowed to make any pre-payments during the fixed-rate period and the other where he/she can do so, as per certain terms.

The fixed rates in option 1 range from 11.25% per annum (if the initial fixed-rate period is one, two or three years) and 11.50% (fixed-rate period of five years). For the flexibility of pre-payment offered in option 2, the bank will charge 25 basis points higher than in the first option as interest.

But, if you choose the five-year fixed-rate option with flexibility to pre-pay, the structure will be a little complex. Prepayment of over 25% of the outstanding amount will attract charges of 5% in the first year, 4% in the second, 3% in the third, 2% in the fourth and finally 1% in the fifth year. Upon expiry of the fixed rate period, the interest rate will be linked to the bank's rate prevalent then. So, for the balance tenure, the loan will carry an interest rate of base rate plus 2%.

Home loan-seekers unwilling to stomach fluctuations in interest rates can consider applying for this loan.

Interest rates are expected to start softening in the last quarter of 2011-12 and, hence, it may not be a great idea to lock into any kind of fixed-rate loan scheme now.

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

Bharti AXA Mutual Fund New CIO for Fixed Income

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 05 Apr 2012 04:23 AM PDT

Bharti AXA Mutual Fund has appointed Mr. Alok Singh as Chief Investment Officer - Fixed Income, with effect from April 2, 2012. Earlier, he was the Head-Fixed Income & Structured Products with BNP Paribas Mutual Fund. Overall, he has over 12 years of experience in fixed income fund management.

Mr. Singh holds PG Diploma in Business Administration from ICFAI Business School and is a CFA.

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Wealth Transfer Strategy

Posted: 05 Apr 2012 01:23 AM PDT

Given the dynamics of wealth creation in the past two decades, Asian and Indian households have not only witnessed some of the largest absolute gains in wealth in the world, they are also poised to witness one of the largest wealth transfers in history. This takes the focus beyond wealth creation and brings attention to the questions of protection, preservation and transmission of this wealth. It is important to consider a few factors to make this process effective:

Clear Objectives

Would you like a one-time transfer of all assets or milestone-driven objectives for the next generation? Are there special situations in the family that need to be taken care of ?

Your Personal Balance Sheet

Take some time out and make a complete checklist of all your assets and liabilities, including how they are currently held and where they are located.

Identify All Beneficiaries And Omissions

Your intention should be to allocate assets to friends, families or other causes. You may also want to specify omissions with an explanation to prevent any challenges to the validity of your final plan.

Identify People To Help You In Executing Your Plan

Identifying those who can help execute your succession plan, whether as an executor or trustee, whether a close family member or a professional, is an important part of the process

Having taken a look at some of the key considerations when creating an estate plan, let us understand some of the commonly used tools in estate planning.

Joint Tenancy And Nominations

An estate can have joint ownership, ie, there can be more than one owner, allowing one owner to have access to the estate in the absence of the other(s). The limitation in this approach is that all asset classes cannot be covered and that it should also take into account different treatment for different asset types. For example, the bond/equity share nomination has an overriding effect over the Will. Hence, nominees of a share have a clear title to the share irrespective of the intentions of the deceased recorded in a Will. On the other hand, nominee of a bank account is supposed to hold the money in a trust for the legal heirs and such legal heirs can claim the money. Similarly, in the case of property, in the event of the death of a member of a society, the shares of the deceased will be transferred to the nominee, who is merely a trustee for the deceased's estate.

Writing A Will

A 'will' or testament is another relatively simple way of passing on wealth, but depending on individual circumstances, it can have its disadvantages. On the plus side, it is relatively easy to write and can be written on a piece of paper signed by its author (testator) along with two or more witnesses and it can be revoked with a new Will or amended through a Codicil as many times as one wants. On the flip side, a Will has to undergo probate in a court of law, which is a public and time-consuming court procedure, and can be significantly prolonged if the Will is legally challenged. Apart from the loss of privacy, the costs involved in such a scenario can be significant. Drafting an articulate and specific Will can mitigate some of the risks related to an ambiguous Will. Getting professional help for the purpose can make the process much more effective.

The 'Trust' Factor

Contemporary ways of achieving intergenerational wealth transfer include the setting up of pass-through vehicles such as trusts. In simple terms, a trust is a legally binding arrangement, usually evidenced in writing in a deed, under which reliable persons, 'the trustees', hold and manage the estate entrusted on them for the benefit of the 'beneficiaries'. In the case of a trust, there is no question of probate as the ownership of the assets is passed on to the trustees. It is then no more a part of the settlor's estate, and, therefore, the process is continuous and there are no delays.

Traditional Route: Gifting

Gifting is another way to affect a transfer of property if the control and possession of such a property can be given away during one's lifetime. Gifting to certain relatives is tax-free. Gifting to persons other than relatives is tax-free if gifted during marriage. However, if it involves immoveable property, stamp duty implications need to be taken into account.

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Invest Mutual Funds Online

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Debt Mutual Funds - Income Funds and GILT Funds offer good returns

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 05 Apr 2012 12:44 AM PDT

AFTER a year of global economic turmoil, the euro zone debt crisis and continuous rate hikes by the Reserve Bank of India to curb surging inflation, the dust seems to be settling a bit, allowing a brief respite while we plot our way for the year ahead.

Though recent data indicate some improvement in industrial production, housing activity and consumer spending in the US, the global situation is not expected to improve quickly, as the probability of below-par growth in the US and recession in the euro zone is fairly high.

The domestic economy, too, is facing headwinds from high inflation, high interest rates, anaemic investment and slow pace of market friendly reforms. Inflation, which has been at 9.5 per cent for quite a while, is showing signs of softening with both primary and manufacturing inflation readings falling consistently over the past couple of weeks, on account of a high base effect, good monsoon and the impact of past rate hikes. We expect the rates to remain on hold for some time before RBI starts cutting them from the start of the next financial year as inflation comes within its comfort zone.

GDP estimates are down from 8.5 per cent to around 7.5 per cent, while other macro-economic parameters such as the IIP and purchasing managers index indicate that industrial activity in a country is showing a very weak trend.

The industry will continue to be under pressure on higher interest rates, high inflation, and tight liquidity, which will translate into muted growth in the coming quarters.

So, where do we see opportunities in the next year? Macroeconomic conditions have firmly placed the spotlight on fixed income instruments with a medium to long duration.

Yields across the curve have been witnessing an upward movement over the past one year, mainly on account of higher inflation and RBI's monetary steps to curb inflation. At the moment, the flat yield curve offers a lot of value at the short to medium end of the yield curve on expectations of steepening. The 10-year Gsec benchmark has risen from a low of around 8 per cent to a high of 9 per cent and is hovering around the 8.80 per cent level.

GOI Secs are trading at their three-year high level, making them an attractive investment option. In th light of the above, we expect yields to peak out in the near future if RBI pauses on rat hikes. Persistent tight liquidity will prompt RBI to take steps for further (OMO) buy back of GOI Secs and/or CRR cut. Weak economic growth may impact the government's revenue going for ward, which will increase fiscal deficit leading to addition al supply of government papers to fund deficit. Such additional supply in GOI Sec might restrict an immediate sharp fall in yields, but at the same time increased demand due to buyback of GOI Secs in open market operations, increased FII limit and higher GOI Sec holdings by commercial banks will give the much required support to GSec yields and help improve the liquidity situation.

There is good enough demand in the short to medium tenure bonds of companies from both global and domestic investors in the light of very high running yields, moderating rate hike expectations and limited supply of bonds by good rated companies.

As spread widens between AAA-rated companies and Gsec over a period of time, we expect allocations to shift in favour on long dated corporate bonds so as to take benefit of any contraction in spreads and also high running yield on investments.

While we may see some volatility in the near term, the present shape of the yield curve does indicate that two three year bonds would benefit with yield curve steepening by rolling down the yield curve. From an investment perspective, duration funds such as dynamic bond funds, income and gilt schemes are suitable for investors with an investment horizon of at least one year and some appetite for risk and volatility as high bond fund yields at present offer a good opportunity of capital appreciation as yields start falling.

Investors with lesser appetite for risk (volatility of returns) can consider short term funds and medium to long-term FMPs, as one can expect higher gross yields, low volatility and stable returns form a moderate duration bet.

All in all, the time is ripe for investors to start adding duration to their portfolios in sync with their risk appetite.

Dynamic bond funds, income and gilt schemes are suitable for investors to invest for a year or so Investors with lesser appetite for risk can think of short-term funds and medium-term FMPs

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

UTI Wealth Builder Fund Series II

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 05 Apr 2012 12:09 AM PDT

ALTHOUGH, UTI Wealth Builder Fund Series II (UTI WBF-II) has been categorized by the Capitaline NAV India database, which FC used for arriving at the top mutual fund performers, as being an equity multi-cap fund, it is, by original design and in reality, a equity multi-cap fund with an exposure to gold or debt or both. While most equity funds have an asset allocation of 90100 per cent in equities and balance in cash or money-market instruments, UTI WBF-II's asset allocation allows for 65-100 per cent exposure to equities, 0-35 per cent exposure to gold exchange traded funds (ETFs) and 0.35 per cent exposure to debt.

No wonder then, in a year when the broad equity market has taken a harsh beating, the fund has topped in performance in the equity multi-cap catego ry with a negative return of only 1.04 per cent, while all the rest have fallen by much more. The next best equity multi-cap fund performer, for instance, is UTI's own UTI Opportunities Fund, which yielded a negative return of 6.23 per cent. The fund has an asset allocation mandate of 90-100 per cent in equities and 0-10 per cent in money market instruments and debt.

"A large part of this fund's performance has come not only because of stock picking but also because of asset allocation in gold," said Lalit Nambiar, UTI WBF-II's fund manager.

When the fund was launched in November 2008, it was ahead of its time due to its unique asset allocation. The fund has been consistently investing at least 10 per cent in its own UTI Gold ETF. "In fact, when I took over as UTI WBF-II's fund manager from my colleague a few months ago, I raised the fund's gold ETF exposure from about 10 per cent to 23 per cent," Nambiar added.

Since gold prices have risen in the present year, the fund's relatively high gold ETF component has fetched it positive returns and enabled it to give an overall performance that outshines all other equity multi-cap funds whose 0 fund's 10 largest investment in equities were in Hindustan Unilever, HDFC Bank, ITC, HDFC, Grasim Industries, Petronet LNG, GlaxoSmithKline Consumer Healthcare, Bharti Airtel, Dish TV India and State Bank of India.

On that day, the exposure to gold ETF was 16.48 per cent, all of it being in UTI Gold ETF .

UTI WEALTH BUILDER FUND SERIES II t 90 per cent asset allocation in equities would not have provided them the same leeway to avoid equities and the consequent fall in equity markets.

UTI WBF-II's present asset allocation, according to Nambiar, stood at 22.35 per cent in gold ETF , 5.25 per cent in cash and 72.40 per cent in equities.

Investors should continue to monitor the asset allocation of this fund closely.

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Invest Mutual Funds Online

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Free look Clause In Insurance - Surrender the scheme if it fails to meet expectations

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 04 Apr 2012 11:30 PM PDT

A 15-day 'free-look' period offers policyholders with the liberty to surrender the scheme if it fails to meet expectations

The biggest advantage of shopping for clothes, bags and accessories at outlets with a well-defined exchange or refund mechanism is the assurance of peace of mind. If the product fails to meet your expectations, you can always get it replaced or ask for a refund.

A similar practice also exists in the insurance industry. Termed the 'free-look' clause, it was introduced by the Insurance Regulatory and Development Authority of India (Irda) to provide succour to policyholders who have been victims of mis-selling. The clause allows policyholders to surrender the policy within 15 days after receiving it if they are not satisfied. This is applicable to health covers, with a tenure of three or more years, and life insurance policies.

Yet, grievances abound about policyholders being lured into buying policies with tall promises of spectacular returns by agents. One reason for such heartburns could be the lack of awareness about the free-look period. Another could be the withholding of policy pack by some agents to ensure that the period lapses. The agents benefit by way of continued commission inflows.

The Workings

According to the 'free-look' clause, the insurer should refund the first premium paid, after deducting the charges it has incurred, like on stamp duty, costs of medical tests and risk premium, for the period. Now, the premium applicable for the period is determined primarily on the basis of the policyholder's age, sum assured and the insurer's underwriting norms. In fact, some companies even choose to waive of the proportional risk premium (as applicable for 15 days).
The payout methodology differs slightly for traditional and unit-linked policies. The deduction philosophy is the same for both traditional and unit-linked policies — i.e expenses incurred on medical examination, mortality charges and stamp duty are deducted. The calculation methodology for traditional policy is based on the premium paid. However, for unit-linked policies, it is based on the fund value.

The 'premium' method for traditional policies involves simply refunding the premiums minus the deductions. When it comes to Ulips, the calculations can be a bit complicated.

For instance, say you had paid . 100 as premium and the insurer had invested . 80 after deducting . 20 as charges. Now, if you decide to cancel the policy by enforcing the free-look clause and the fund value has swollen to . 85 during this period, the insurer will have to return . 85 plus . 20, but after deducting stamp duty, medical and mortality charges for 15 days.

Exercise Caution

However, there have been instances of unscrupulous agents and distributor banks having sought to deprive policyholders of this comfort.

There are no mandatory norms from the regulator governing intermediaries for dispatching policy documents. There are some overall guidelines on the maximum time a company can take to dispatch a policy. If the document is sent through an agent, he/she needs to get a policy acknowledgement receipt to prove that it was delivered to the policyholder on a particular date. If the agent is unable to produce this receipt, generally, we give the benefit of doubt to the policyholder. A key point to be kept in mind is that the free-look period starts from the date of receipt of the policy and not from the date of issue. So, if you have not acknowledged the receipt, the company can't wash its hands off the matter. But, if the company has sent it directly to you via courier services, even proof of delivery will serve as acknowledgement.

The best way to avoid such hassles is to scan the policy brochure and the benefit illustration carefully before signing up for the policy itself. If you have not done so, however, you should ensure that you do not repeat this mistake during the 15-day period. To start with, you should make it very clear to the company that the policy should be sent to you directly and not through the agent. Many insurers also send a copy of the proposal form to the policyholder along with the policy pack to enable cross-verification. This ensures that the policyholder knows what he/she has signed up for.

Scrutinise Policy Conditions

Once the policy document reaches you, carry out a basic check to ascertain the accuracy of your personal information like name, date of birth and contact details. Next, make sure that the nominee's name, sum assured, premium amount, policy tenure and premium payment term are in order.

The latter is particularly important as it is not rare to see agents selling long-term policies as five year ones. The benefit illustration is another key document that you need to study, for it indicates how your money will grow year on year as well as the cash surrender value should you decide to terminate the policy before completion of its intended tenure.

They should also verify the mode of premium payment mentioned, as it could become a bone of contention. For instance, it is possible that the customer had asked for a yearly premium, but the agent ticked the half-yearly mode box instead. Remember, an incomplete form or one containing error could result in the claim being rejected. In more than 80% of cases where claims are repudiated, incorrect information is the cause. Therefore, it is wise to shed lethargy or fear of cumbersome paperwork and do it yourself – else, at least use the 15-day window to study the policy document and take action.

Life Insurance Policy

Exercise the trial-period offer to study the policy and get rid of a 'mis-sold' product

Every Life Insurance Policy has the Free-look Period

Every life insurance contract allows the policyholder to return the policy within 15 days of having received it. This is referred to as the free-look period
If you decide to surrender the policy during this period, the company is required to refund the first premium paid

However, all the charges incurred by the insurer will be deducted before the premium is refunded These could include stamp duty charges and cost of medical tests conducted before the policy was issued Also, your premium will not be refunded in its entirety. The amount applicable to the period the policy was in force will be deducted In case of a Ulip, the company will repurchase the units and refund the fund value, but the risk of fluctuation in the NAV (net asset value) will have to be borne by the insured

While most life insurers dispatch the policy directly to the insured, some companies route it through individual agents or distributing banks
At times, unscrupulous entities keen on covering up their misselling refrain from handing over the policy document to the insured during the free-look period.
Therefore, it is best to insist that the company send the policy document to your mailing address.

Also, you can approach your insurer directly and ask for a status update if your agent has failed to deliver the policy document within a reasonable period after the first premium is paid

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Applications

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

---------------------------------------------

Application form for Tax Saving Infrastructure Bond and more information

Use pre-payment penalty option to minimize loan burden

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Posted: 04 Apr 2012 10:54 PM PDT

TWO leading banks -State Bank of India (SBI) and ICICI Bank -have waived the pre-payment penalty on home loans.

While SBI has waived off pre-payment penalty for new and old customers, fixed rate loans or floating rate loans, whether the prepayment is paid from your own source or from a borrowed source, ICICI Bank, on the other hand, has waived pre-payment penalty for floating rate loans.

If your bank has not announced removal of prepayment penalty, don't worry, because it is just a matter of time before banks do so. Regulatory pressure and market competition will force more banks to waive off pre-payment penalty on home loans.

During its monetary policy on October 25, Reserve Bank of India (RBI) governor D Subbarao told Financial Chronicle, Should banks not move in the right direction (by waiving prepayment penalty), then we will do something assertive rather than cajoling them.

There is proposal to waive it in a floating rate regime, because, if the borrower had borrowed on a floating rate and if rates went down afterwards, that borrower was not getting the benefit of decline in interest rates. The borrower also could not switch to another bank because of the deterrence of pre-payment penalty.

The regulator for housing finance companies, the National Housing Board (NHB), has already asked housing finance companies (HFC) to charge uniform interest rate to old and new borrowers and has also waived off the pre-payment penalty on floating rate loans if borrowers pre-pay through any source. For home loans that are on fixed interest rate, HFCs cannot charge a pre-payment penalty if the loan is pre-closed out of one's own sources.

At present, banks charge 2-4 per cent of the loan outstanding as pre-payment charges from home loan customers.

With the RBI increasing key policy rates by 350 basis points since March 2010, home loans rates on an average have risen by 250300 basis points (3 per cent) for floating rate customers. Banks, however, reduce interest rates for new customers.

Pre-paying your loan: If you have a home loan and if your bank announces the waiver of pre-payment penalty, try and make the most of this opportunity, because this is the best option to get out of your home loan fast. Saving on the net interest is the significant advantage of pre-paying a home loan, other than the fact that you will retain the complete ownership of the house earlier than planned.

The longer the tenure, the more the interest repaid, hence, it is best to repay your home loan in the shortest loan tenure possible provided your income allows you to do so.

Experts suggest that those who have surplus funds that are not giving good returns, they should use these funds to pre-pay their loans.

Consider your tax benefits also on your home loan before pre-paying: Under Section 80 C of the Income Tax Act, a borrower can get a tax deduction of Rs 1,00,000 every year for the repayment of principal.

He can also claim deduction of up to Rs 1,50,000 per annum under Section 24(b) for the interest paid on the home loan.

Do a cost-benefit analysis taking into account the tax deductions before prepaying.

If a person is in a higher tax bracket (30 per cent), his home loan rate of interest is 11 per cent and his outstanding principal is up to Rs 14,00,000, then his effective rate of interest works out to be 7.7 per cent. Such a person should not pre-pay. However, he should consider pre-paying the outstanding amount Rs 14,00,000 because he does not get tax benefit.

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Applications

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

---------------------------------------------

Application form for Tax Saving Infrastructure Bond and more information

Franklin India Prima Plus

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Posted: 04 Apr 2012 09:59 PM PDT

THIS 17-year-old fund has come out as the 2011 topper among its large-cap peers with declared assets of more than Rs 200 crore. While broader markets as represented by Nifty have fallen nearly 17 per cent in the past 12 months, Franklin India Prima Plus managed by Anand Radhakrishnan and R Janakiraman has lost less than 9 per cent of its value in the same time. Here are some reasons why this might have occurred: As can be seen by time analysis of its historic performances, this fund is a stable performer and does relatively better than others during weak markets.

If one had invested Rs 10,000 in the fund 10 years ago, today, the investors would have Rs 98,000. In comparison, a similar investment in Franklin India Prima Plus's large-cap peers would now be worth Rs 58,000.

The similar figure for investment in Nifty including dividends would be around the Rs 52,000. This is not to say it's the best fund because there are other funds that have posted better returns. Against its benchmark S&P CNX 500, the fund appears to have done well over the over the short, medium and long term -one, three and five-year periods. However, the same is true for at least 60 per cent of its large-cap biased peers too.

But, Franklin India Prima Plus' ability to weather the market storm during bear phases is an attractive characteristic. In the past 19 complete quarters since 2006, the broader stock market (BSE 100) has given negative returns nine times. Surprisingly, this fund from Franklin Templeton pedigree has seen lower losses in eight out of those nine quarters.

On the other hand, the market has given positive returns in 10 out of 19 quarters. During these bullish periods, this fund has outperformed just four times clearly showing its quality bias may not deliv er spectacular returns during bull rallies.

In terms of portfolio, one might argue that the fund manager's caution has resulted in its 12month low losses as compared with the fund peers. With around 10 per cent cash and equivalents in hand, Franklin India Prima Plus clearly has more `gun powder' when seen in light of the lower than 1 per cent-level compared with other large-cap funds. This is also a reason why the fund is about 90 per cent invested in stocks when its competi tors are almost (98 vested in equity per cent) invested in equities.

With about 52 stocks in its last declared portfolio, one would have expected that the fund would have spread its bets widely. But that is not the case with the top three sectors accounting for 44 per cent of its money.

Or, the top 10 holdings account for nearly 44 per cent of its entire money. In terms of sectors, financial services accounts for Franklin India Prima Plus' 19.5 per cent of assets a three-year high. Similarly, around 16 per cent of its money is invested in technology stocks, also a three year high. Lastly, in case of cyclical consumer stocks as well as communication services portfolio, the fund managers appear to have put at least twice the percentage in each sector as compared with their rival large-cap peers' average.

These bets may not work.

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How to take benefit out of prepayment penalty waiver option ?

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 04 Apr 2012 08:44 PM PDT

THERE is now an open and all out war in the housing loan market with respect to the prepayment penalty on home loans, and borrowers must now be feeling happy with the manner in which things are moving. Initially, it was the National Housing Bank (NHB) that started the process by asking housing finance institutions to abolish the prepayment penalty on floating rate loans, but in recent times, even the banks have jumped on to the bandwagon. This has ensured a possibility of gaining from the situation for many people.

Banks: The banks have now started to eliminate the prepayment penalty and the two largest banks in the country have made announcements to this effect.

This is good news for the borrowers who have taken housing loans and they would want to repay the loans earlier to gain from the situation. All that they have to ensure is that they meet the conditions set for this purpose. However, there are a few small details that can halt the process, so, these must be given due attention.

Only floating rate loans: One of the things that the borrower has to check is whether the benefit of the non-payment of the prepayment charge is present for all types of loans. This might not be the case, as there could be some sort of restriction that is present on the type of loan that will actually qualify for the benefit.

Some banks and institutions actually restrict the benefit only to floating rate loans, which means that the fixed rate loans remain outside of the benefit.

The real benefit will be for all borrowers with floating rate loans and who are actually taking a hit as far as the interest rates are concerned.

Time period: The borrower also has to see whether the no prepayment charge benefit is restricted for a specific time period. If this is the case, then there would be some obstacles for several people while they go about getting the benefit of the situation. If there is no time restriction, then the borrower can plan future action, but this is one aspect that must be kept in mind as the institutions might impose a time restriction sometime in the future.

Effective savings: This is a move that can result in significant savings, as far the individual borrower is concerned. The prepayment of your home loan gives you an option to shift to a loan provider, which offers a lower rate of interest. If the borrower is paying a higher rate of interest that has climbed significantly, then, there is a need to undertake some homework on this front.

Looking for interest rates that are lower and that borrower would qualify for would be important as the starting point for the entire exercise. The next step would be deciding as to whether they would be using only financing from outside sources or whether they would also be using their own funds.

After this, an eye has to be kept on the savings that the transaction actually generates, because, this is a vital part, as there has to be some overall savings in the effort and in many cases the benefits might be visible over a longer time period.

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Credit Ratings - Credit score card

Some of the Top performing Mutual Funds are

HDFC Top 200 Fund

ICICI Prudential Dynamic Plan

DSP BlackRock Top 100 Fund

Birla Sun Life Front Line Equity Fund

Reliance Equity Opportunities Fund

IDFC Premier Equity Fund

SBI Magnum Contra Fund

Sundaram Select Midcap

UTI Dividend Yield Fund

Posted: 04 Apr 2012 08:00 PM PDT

For customers who want to know their individual credit rating scores, buying a credit information bureau's (CIB) report will take just a few minutes. However, trying to clear any lapses in that report could take a month. Besides, almost always, the onus of getting the lapses rectified will remain with the customer.

A CIB collates a customer's personal credit history from banks and other nonbanking finance companies. Customers can buy the credit scorecards from the bank or directly from the bureaus the bank has tied with. The cost is a nominal ~142 per report.

"Such reports are especially useful for customers who have multiple credit lines, like a home, auto or personal loan. Even otherwise, knowing your personal score at least once every six months is recommended," says Mohan Jayaraman, managing director, Experian Credit Information Company of India.

With the report in hand, you would also be able to resolve common problems that individual customers face. For instance, despite regular credit card payments, Vikram Rana's credit scorecard showed a three-month lag in his last credit card payment. Luckily, Rana had asked for the report before applying for a loan and had enough time to get the necessary corrections made.

However, many like Prashant Paranjpe realise the need to track one's credit history only when credit is denied. Paranjpe's request for a personal loan was rejected due to non-payment of ~856! A few months before, following a payment discrepancy in his credit card statement, the bank's collection agency agreed to 'write off' the disputed amount that he wasn't liable to pay. But, banks use the term 'write off' to describe unpaid amounts and the wrong terminology impacted Paranjpe's credit score negatively. Customers should insist on a 'reversal of charges', instead of a'write off'.

According to credit bureaus, another area of concern is the possibility of identity theft, wherein the details of one customer's identity (like residential address and so on) are used by another to buy credit for himself. Though such cases haven't been reported on a large scale, timely access to credit reports can be used to prevent any such fraud at the earliest.

However, credit bureaus say, such issues will get highlighted only when a customer points these out. So, while the data from a bureau may be right, there is no guarantee that the lender from whom they have sourced the information has updated his system. Any changes that need to be incorporated can only happen if the bank's data shows it.

The Credit Information Companies Regulation Act mandates bureaus to approach the bank and resolve any customer issues within 30 days. Most CIBs already have a system in place that follow a time frame within which the bank's nodal or higher officers are contacted to get the discrepancy corrected.

"But, the resolution of such issues may get delayed, especially when the bank contests the customer's stand," says Samir Bhatia, managing director and CEO, Equifax Credit Information Services.

Today, most banks have multiple tie ups with bureaus. In such cases, there may not be any differentiating factor in the reports and customers have the option of buying just one report.

However, customers are advised to check out reports from every bureau the bank has tied up with, if a complaint has been raised or settlements made

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