SEO Simplified By Gabs Gaurs &amp; Geets

Conservative investors are always in search for that elusive 1% return. And they are ready to put on the dancing shoes if they can pocket double digit returns with safety of capital and timely payment of interest. That is why many are now looking at the non-convertible debentures (NCDs) of gold loan financing companies with great interest. Who wouldn't? Look at these numbers: Yield to maturity on NCDs of Muthoot Finance, Manappuram Finance and IISL are in the range of 14% to 16%, while yields on bonds of state-run NHAI, REC and PFC are in the range of 8% to 8.5%. That is 5-6% higher — something many debt investors would be reluctant to let go. However, they would still proceed warily as most of them are worried about the safety of their investments. After all, a PSU bond comes with the government backing, while gold loan financing companies are risky.

Public sector undertakings are backed by the Government of India and many of them like NHAI, PFC have AAA rating. On the other hand, gold loan companies have a lower rating and have a single product. Also, the Reserve Bank of India has tightened the lending norms for these companies. That is why there is a huge difference in returns between these two sets of companies. Interest income from PSU bonds like NHAI, REC and PFC is tax free in the hands of investors. As compared to this, income from gold loan companies is taxable.

How To Proceed

Since you have taken your eyes off those eye-popping yields, consider these factors carefully. To begin with, consider the tax implications of your investments in these bonds. For example, the 10-year bonds of NHAI – N1. These bonds pay you a coupon of 8.2% which is tax free and are available at . 1,020, thereby giving you a yield of 8.11%. On the other hand, you have Muthoot Finance – N6, with a face value of . 1,000 and a coupon of 12.25% trading at . 966, giving you an yield to maturity of 15.58%. But the trouble is that the interest income on Muthoot Finance – N6 is taxable. So, if you are in the highest tax bracket (tax rate of 30.6%), your yield will be only 10.81%. Sure, it is still almost 3% more than the PSU bonds. With that we come to another important aspect of debt investing: Risk. PSU bonds like those of NHAI, PFC enjoy AAA rating, while Muthoot Finance enjoys a Crisil AA- rating. Manappuram Finance enjoys a CARE AA- rating.

Most gold loan companies are single product companies and carry a higher risk due to their lower rating than PSUs. Only those with appetite for risk should buy these bonds, and such bonds should not constitute more than 10% of your portfolio. If you are a risk averse investor, tax-free PSU bonds like NHAI, PFC and REC work best for you.

Another potential trouble is the longer tenure of the PSU bonds. For example, NHAI, REC and PFC come with tenures of 10 to 15 years. If you have a time-frame of two to three years, it is better to avoid 10- or 15-year bonds. This is because if interest rates move up, the bond prices will drop and you may suffer a capital loss. Buy with an objective of holding to maturity, else there is a chance of a capital loss. Investors with not much time in hand can look at other alternatives such as NCDs of L&T Finance – N5, trading at . 976 and maturing in 11 months from now in March 2013, giving a yield to maturity of 12.38%. Those with a time-frame of 2 years, could look at Dr Reddy's – N1 option, which gives a yield to maturity of 12.09%.

However, the longer tenure bonds will benefit the most when there is a drop in interest rates. The Reserve Bank of India has already cut the cash reserve ratio (CRR) — cash to be maintained by banks — by 1.25% since the beginning of 2012 and there are expectations that the central bank will cut repo rates by 25-50 basis points in the coming months.

If repo rates are cut, bond prices will move up and PSU bonds with a longer tenure will benefit the most. PSU bonds of NHAI, REC, PFC have a duration of 10 years and 15 years, where the capital appreciation will be higher when compared to gold loan companies with a duration of 1-5. For example, if interest rates fall by 1%, a 10-year bond of NHAI with a face value of . 1,000 could see a capital appreciation of . 80.

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Rebalancing the portfolio can reduce risk

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: 10 Apr 2012 06:11 AM PDT

To some, spring means cleaning, renewal and yard work. For nervous Nellies like me who still see the ghost rider of 2008 in my rear-view mirror despite the market being up sharply so far in 2012, it means rebalancing my portfolio.

There's nothing sexy about rebalancing. You simply plod through your account statements and reorient your nest egg toward your objectives while lowering risk. The crux is that if you do it right, you are purchasing less-favoured assets and selling higher-valued securities. In other words, you are buying low and selling high, which is what most investors consistently fail to do. Far too many folks buy on the way up and hope that good times will continue indefinitely, thus ignoring the downside risk.

If you don't rebalance, your portfolio gradually becomes dominated by higherrisk and potentially overvalued assets. When the eventual correction or crash comes along, the resulting fall is much steeper — if you haven't rebalanced.

I took a peek at my portfolio recently, and due to the bull run of late, I noticed that stocks comprised almost 58 per cent of our joint 401(k) and individual retirement account holdings. Since my wife and I resolved that we'd never let stocks comprise more than half of our portfolio, we'll have to make some adjustments. We still haven't completely recovered from the train wreck known as the 2008 meltdown. As you can imagine, we're more cautious these days.

For my family's portfolio, based on my age of 54, I like to invest at least half in fixed-income. As a rule of thumb, your age should roughly match your target fixed-income allocation, if you're a moderate to conservative investor. According to a study by the Vanguard Group, if a portfolio is never rebalanced, it tends to drift from its target asset allocation as the weight of higher-return higher-risk assets increases.

In terms of reducing overall portfolio risk, Vanguard researchers found that while portfolios that were never rebalanced had an average annualised return of 9 per cent from 1929 through 2009 – versus 8.5 per cent for balanced portfolios—the standard deviation (a volatility gauge) was a full 2 percentage points lower if rebalancing was done monthly.

That was for a portfolio of 60 per cent stocks and 40 per cent bonds.

For most investors, though, rebalancing is like taking the whipped cream off a pie before you eat it.

Unless you're in automatically rebalanced target-date or age-adjusted college savings portfolios, you'll have to make an extra effort to put it in motion.

In my own case, my wife and I will work with our mutual fund company (Vanguard), which provides a financial planner who can walk us through rebalancing as part of our service plan. We'll have to sell some shares of our stock funds to purchase stakes in our bond-index and treasury-inflation protected securities funds.

Most larger mutual fund companies and some brokerage houses provide auto-rebalancing, although it can get complicated outside of tax-deferred retirement accounts. Most competent registered investment advisers and certified financial planners provide this service and give you big picture advice on portfolio allocations customized to your financial goals.

Do you have a 401(k) with your employer? Ask them if they provide automatic rebalancing and set it up if they do. According to David Wray, executive director of the Plan Sponsor Council of America, a group representing employer retirement plan providers, while he's not sure how many employers provide this service, virtually all third parties who administer the plan platforms are set up for auto-rebalancing.

But don't expect your co-workers to be talking up rebalancing at the water cooler. By another estimate, while more than half of employers offer auto-rebalancing, only 7 per cent of employees use the service, according to Aon Hewitt, the benefits consultant, which polled employers last year.

Keep in mind that in taxable accounts, securities sales can trigger taxable capital gains. To simplify matters, you can choose to channel dividends and gains into a money-market account, where the funds can be used to buy shares during the rebalancing cycle.

You can set up your auto-rebalancing by date or asset level indicators – or both. Say you don't want stocks to be more than 60 per cent of your portfolio or you just want to do auto-rebalancing twice a year.

That's easily doable if your broker, employer or fund manager has this service.

At the very least, be honest with yourself and determine how much exposure you want to the stock market. Rebalancing may be a difficult and awkward discipline at first, but for the modest sacrifice you'd make in performance, you'll probably be able to sleep better at night.

If a portfolio is never rebalanced, it tends to drift from its target asset allocation as the weight of higher-return higher-risk assets increases

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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

Inflation and Insurance

Posted: 10 Apr 2012 04:40 AM PDT

Your rising income will have a natural impact on your standard of living and rising inflation will have multiple effects on an individual's consumption

YOUNG Indians today are an optimistic and confident lot ready with a blueprint for their life and goals to achieve. However, very often, they are not prepared for the vagaries of fate and how it could throw their as well as lives of their loved ones out of gear in absence of adequate financial security.

But rising inflation and planning for insurance cover are usually done in isolation, and the learning don't necessarily converge for consumers to be able to look at the complete picture. While the rule of thumb states, you should look at a life cover of around 12 times your annual income deducting your investment assets plus any liabilities. It is also important to consider another mix -your rising income and increasing inflation. Your rising income will have natural impact on your standard of living and rising inflation will have multiple effects on an individual's consumption.

As life goes on, the needs and demands of your family also grow. As the head of your family, you need to fulfill your responsibilities towards your responsibilities towards your loved ones and to provide the comfort which they need. However, life is full of uncertainties and it is a need of every individual to sustain the same lifestyle for their family even when he/she is not around.

Hence, unless you are purchasing a term life insurance policy for only a few years, inflation should be an important consideration.

The future value of money should play an important part in your calculations and, hence, the need to continuously evaluate your life insurance needs.

If you are interested in a longer term policy -for example, 20 or more years -or if you are obtaining whole life insurance, then the future value of money should play a part in your calculations.

Why is inflation consideration so important in the context of insurance? Most individuals frequently overlook the future value of money while buying insurance.

Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well-known measures of inflation are the CPI (consumer price index) which measures consumer prices, and the GDP (gross domestic product) deflator, which measures inflation in the domestic economy.

The inflation rate in India was last reported at 10.1 per cent in September 2011. From 1969 until 2010, the average inflation rate in India was 7.99 per cent.

The cost of healthcare and education have also increased rapidly, at times, much faster than other areas of the economy. So, to plan for the future needs of your family, it is wise to calculate the rate of inflation for education and healthcare independently of regular living expenses.

Inflation is a real risk for all ages since the future value of money may not support your present lifestyle.

Time factor of inflation on term life insurance policies: A term life policy is generally paid over a long period of 15, 20 or 30 years. The rate you pay for term life insurance is by definition usually a fixed rate that you pay over this span of time. Therefore, because the rate of inflation is commonly in the range of about 7-9 per cent annually, the value of the rupee decreases by this percentage each year.

This means that the purchasing power of rupee is reduced and is not able to acquire the same amount of coverage benefit in terms of money as the previous year.

The premium you pay per month for life insurance today will in rupees terms be the same, but will be less money 10 years from now due to inflation. Take this example anything that could be purchased for Rs 10 lakh in 2011, would cost Rs 45 lakh approximately in 2031 at 8 per cent inflation rate.

Solution -increasing term insurance policies: An increasing-term assurance policy may provide the flexibility to increase the `sum assured' (the cash amount that you receive upon your death) by 5-10 per cent each year to reflect the rate of inflation. Thus, it will hedge against the rising cost of living with an option of increasing sum assured.

It brings adequate financial protection at an affordable cost. Most companies also provide this enhanced insurance with appropriate rider options at nominal extra cost and reward for healthy lifestyle habits like nonsmoking, too. Some policies also have a special discount for women.
Who should buy a term plan like this? If you are concerned about the rise of inflation and you are buying a policy relatively young in life, for example, just after starting a family, this may be a suitable option for you. However, it is worth noting that the cost of your insurance premium is also likely to rise to reflect the increased sum assured. So, you would need to be certain that you would be able to support this increase. Speaking to a qualified insurance adviser to get full details about this type of policy and discuss whether an increasing term assurance policy is in fact the best policy for your circumstances would be a worthwhile exercise.

While an innovative policy incorporating inflation dynamics is the need of the day, it is also important one selects insurance providers that offer efficient claims processing services. Claims performance is an important yardstick to measure the performance of an insurance company and, hence, should play a very large role in decision making process before committing to an insurance policy. There is sufficient regulatory governance around the claims handling process and there are defined guidelines for the companies to follow. This makes it very easy for the customers to access this information and make informed choices.

As you can see, inflation does have a direct corelation with any term life policy you choose. If chosen wisely, this can efficiently help circumvent rising inflation for family, if, faced with any unforeseen circumstances

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New fund from Reliance Mutual Fund

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: 10 Apr 2012 04:14 AM PDT

Reliance Mutual Fund has launched a new fund named as Reliance Fixed Horizon Fund XXII Series 2. The new issue will close for subscription on April 10.

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Mutual Fund SIP has many forms

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: 10 Apr 2012 03:36 AM PDT

One of the worst things that the financial services industry does is to regularly take simple and effective idea and then complicate it beyond the point of usefulness. India's mutual fund industry is currently busy doing this to SIPs. Fund companies have attached a whole host of bells and whistles to SIPs. Investors should approach them with a great deal of scepticism.

SIPs are supposed to be a simple and straightforward idea. You invest a fixed sum regularly in an equity fund, regardless of market conditions. You end up buying more units when the markets are down and fewer when the markets are up. Your average price of acquisition over the long term is inevitably lower than what it would have been had you tried to time the market by trying to predict and anticipate its movements.

That's the arithmetic of SIPs. But, as I've often written, the value of an SIP is not just in the mechanics, but also in the psychology. Enhancing your returns is simple if all you have to do is to choose a fund, decide on how much you want to invest and then forget about it. In practice, the real value of such an investment philosophy is in saving you from having to think about what's happening in the market.

However, it seems that this is too simple and effective for mutual fund marketers. So they've decided to destroy this simplicity. There are suddenly a whole host of modified SIPs being offered by AMCs (asset management companies) — and some distributors too — that add what is basically an element of market-timing to SIPs. To any sensible mutual fund investor, this idea would sound like a joke, but what can they do? I guess the need to differentiate a simple product is written in every marketing textbook, regardless of the fact that this is a product where simplicity is the core attribute.

Here's a quick sampler of what is being offered. One AMC has started a system that lets you invest aggressively through an SIP by enhancing your investment amount when the BSE Sensex's PE falls below a certain range and by investing less when it goes above a certain range. Every month, the amount to be invested is decided based on the market's level. Another AMC asks you to specify a minimum and maximum limit for the monthly investment amount. The actual investment amount can be anywhere between these two levels depending on the level of the market. Another one is a complex system of triggers and preset levels. When the market trips one of the trigger levels by falling from a preset level by different amounts, then different amounts of investments can be made. Or something like that. A couple of AMCs have reengineered the STP. Here, you invest in their bond fund and then depending on the valuation level of the market, differing amounts can be transferred to select equity funds.

The only sensible enhancement to the basic SIP method I can find is the top-up option launched by one AMC. Under this, investors can start an SIP and then ramp up the monthly amount periodically. Since most people's incomes (hopefully) go up with time, it makes sense to increase the monthly SIP amount regularly. Of course, you can do this at any time with any SIP.

As an investor, you should steer clear of all the complexities of these market-timing SIPs. They just complicate the decision-making process. I suspect part of the reason for launching these is that it could give a leg-up to the otherwise mediocre funds. I mean, once a salesman convinces you that an AMC's market timing algorithm is some great invention, you may be less inclined to pay attention to the track-record of the underlying fund. In reality, your interests would be best served by focusing only on choosing a good fund and ignoring everything else.

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Bharti AXA Life Future Invest

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: 10 Apr 2012 03:04 AM PDT

This is a limited payments unit-linked life insurance policy. The term of the policy is fixed at 10 years and the premium paying term is five years.

There are two options under the plan — higher of the fund value or sum assured and sum assured + fund value. The sum assured is 10 times the annual premium if the age of the policy holder at the time of entering the policy is between 18 years and 44 years, and seven times if the policyholder is aged between 45 years and 70 years at the time of buying the policy. The policy has inbuilt double accident benefit. In case the life assured dies in an accident, an additional sum equal to the basic sum assured will be paid to the beneficiary under the policy.

Eligibility:

The minimum entry age is 18 years and the maximum entry age is 70 years. The maximum maturity age is 80 years. The minimum premium under the plan is . 18,000 per annum.

Fund Options:

You can choose from six funds. You can invest in a single fund based on your risk appetite or make allocation to multiple funds available under the plan. You can also switch between the funds and redirect your future premiums. The plan offers partial withdrawal facility after the completion of five policy years.

Charges:

There is no premium allocation charge, but the policy administration charge is 0.50% of the annual premium deducted monthly subject to a maximum of . 6,000 per year. Fund management charges are in the range of 1% to 1.35% depending on the option of funds available under the plan. The accident death benefit comes at an additional cost of . 1 per . 1,000 sum assured.

Limitations:

The maximum term under the policy is only 10 years, which may not be adequate if you are young. The policy administration charge is 0.50% of the annual premium deducted monthly, which turns out to 6% per annum. This will affect the net yield from the policy.

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REC 54EC Capital Gains Tax Exemption Bonds

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: 10 Apr 2012 02:41 AM PDT

REC 54EC Capital Gains Tax Exemption Bonds Series-8 FY13

These bonds should be the last resort to manage tax liability arising from capital gains on house property sale

What Is REC?

Rural Electrification Corporation (REC) is a listed public sector company mandated to promote and finance power projects in the country with a special emphasis on rural areas.

What Is 54EC Capital Gains Tax Exemption?

Section 54 of the Income Tax Act taxes capital gains arising from the sale of house property (difference between original cost on which indexation benefit is applied if any and present realised sale price) subject to some exemptions provided in sub-sections. Sub-section EC of Section 54 provides an exemption if the capital gains are invested in specified three-year bonds issued by REC and National Highways Authority of India (NHAI).

FOR WHOM? Individuals who have made profits from selling a house property in the past six months and those who could do so in present financial year. But, they cannot avail of other exemptions (under other sub-sections of Section 54) such as reinvestment of sale proceeds in another house.

Features:

It is a three year unsecured bonds issue with each bond carrying a face value of Rs 10,000. Maximum application allowed is for 500 bonds (Rs 50,00,000).

bank Subscription is through demand drafts or pay orders payable directly to company or through specified bank branches (see http://www.recindia.nic.in for details). Deemed date of allotment is last day of the month in which the subscription payment is effected to REC. Redemption is three years from allotment. The bonds are not transferable.

Interest Rate:

The REC bonds carry a fixed annual interest rate of 6 per cent, payable annually on June 30.

Tax Benefits:

The amount of capital gains you claim as exempt from tax will be the actual amount you invest in the bonds, the maximum being your total net capital gains or Rs 50,00,000 whichever is lower. The interest you receive on the bonds is, however, taxable as income from other sources.

Credit Rating: AAA by Crisil. LAAA by Icra and AAA by Fitch.

These bonds should be the last resort to manage tax liability arising from capital gains on house property sale because the 6 per cent interest is very low.

A better option is to reinvest the sale proceeds in a house property and seek tax exemption. If you are left with no other option but to use Section 54EC exemption, then NAHI's 54EC bonds issue is the only alternative you have. NHAI's bonds issue carries the same credit rating as REC. But since, REC's objectives carry a rural emphasis, the end-use of your funds could be considered as being nobler.

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Taurus Mutual Fund new scheme - Taurus Credit Opportunities Fund

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: 10 Apr 2012 12:52 AM PDT

Taurus Mutual Fund has filed an offer document with Sebi to launch Taurus Credit Opportunities Fund, an open-ended debt scheme. The new fund offer price is Rs 10 per unit

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Deutsche Mutual Fund new scheme - DWS Hybrid Fixed Term Fund Series

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: 09 Apr 2012 11:52 PM PDT

Deutsche Mutual Fund has unveiled a new fund named as DWS Hybrid Fixed Term Fund Series 6. The new fund offer (NFO) will be open for subscription from April 12.

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Sundaram Mutual Fund New Fund - Sundaram Fixed Term Plan

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: 09 Apr 2012 11:32 PM PDT

Sundaram Mutual Fund has launched a new fund named as Sundaram Fixed Term Plan CR.

The new fund offer (NFO) will close for subscription on April 9.

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Birla Sun Life Mutual Fund new fund - Birla Sun Life Fixed Term Plan Series

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: 09 Apr 2012 11:12 PM PDT

Birla Sun Life Mutual Fund has launched a new fund named Birla Sun Life Fixed Term Plan Series FD. The new fund offer (NFO) will open and close for subscription on April 10.

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What is the tax implication when you Sell Gifted Homes ?

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: 09 Apr 2012 10:03 PM PDT

Almost every tax payer is conversant with terms like capital gains tax and cost indexation. Yet, there are finer details regarding these which need to be understood if one has to take advantage of possible tax benefits. There have been several instances where the difference of opinion between the tax payer and the Income Tax department has resulted in the matter being debated in the courts. However, the litigation has helped clarify the fine print. One such issue was the calculation of the cost indexation benefit with respect to gifted property that has been sold.

Based on the time for which assets are held by tax payers, capital gains are either classified as long-term or short- term. Tax-payers are also allowed to index the costs linked to inflation while acquiring a capital asset, during the period of holding, while calculating long term capital gains under the Income Tax laws. The provision is a benefit given to the taxpayers to index their cost to inflation, denoted by the Cost Inflation Index (CII) released by the government every year.

As per the relevant provisions of the Income Tax Act, a tax payer can index his cost of acquisition with reference to the year in which the tax payer became owner of the asset. For instance, if a property is acquired in the year 1985 and sold in 2011, the tax payer can index his cost of buying the property for the period 1985 to 2011 and offer only the difference between the sale consideration and indexed cost as long term capital gains.

Further, the law provides that if any capital asset was acquired by way of gift, at this point there is no liability to pay capital gains tax for the recipient and it would be deferred to the point of sale of asset. In such cases, the cost of the asset shall be deemed to be the cost to the donor of the gift and the indexation shall be allowed with reference to the year the tax payer became owner of the asset. But, if one goes by a recent ruling in a case that came before the high court at Mumbai, this understanding of the law might change.

In the said case, the tax payer had filed her return of income for the assessment year 2004-05, which included long-term capital gains from the sale of a residential flat. The was originally purchased by her daughter for `50.48 lakh on January 29, 1993. By a gift deed dated February 1, 2003, she gifted it to her mother. On June 30, 2003, the mother sold the flat for `1.1 crore and offered the long-term capital gains to tax.

During assessment proceedings, the tax officer decided that as the tax payer had become the owner of the asset only in the year 2002-03, the cost of the property (deemed to be the same as cost at which the property was purchased by her daughter) could be indexed only since then. However, the tax payer contended that as the cost of acquisition was incurred in January 1993, the property had to be indexed with reference to 1993-94. The tax officer disallowed the claim and the matter went to the tribunal.

At the first appellate level, the authority ruled in favour of the tax payer and allowed the cost to be indexed from the year 1993-94. At the second level. too, payer', by virtue of the provisions for determining the period of holding as discussed earlier in this paragraph, the tax payer must be treated as having held the property from January 29, 1993. So, the cost inflation index for the year 1992-93 would be applicable in determining the indexed cost of acquisition for computing-long term capital gains.

The High Court further said the words used in the Act had to be understood in the background of the object of the provisions. Thus, although the term 'held by der a gift or will. The object could not be allowed to be defeated by excluding the period for which the said asset was held by the previous owner while determining the indexed cost of acquisition of that asset to the tax payer.

This decision comes as a major relief for tax payers. Indexing the cost for the period for which the property or asset was held by the previous owner extends the indexation period. This would offer taxpayers a substantial relief from capital gain taxes

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

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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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Sundaram Mutual Fund

Posted: 09 Apr 2012 09:04 PM PDT

Sundaram Mutual Fund

Sundaram Mutual Fund investments are managed by Sundaram Asset Management Company Limited. The sponsor of the fund, however, is the trusted SUNDARAM Finance, one of India's frontline financial services companies. The Asset Management Company was started in 1996 as a joint venture between SUNDARAM Finance (61%) and Newton Investment Management (39%). In 2002, SUNDARAM Finance acquired the 39% stake of Newton in the AMC. Sundaram BNP Paribas Asset Management is one of the largest and reputed fund houses in India. This is understandable as the fund is sponsored by two giants of the financial services industry – Sundaram Finance Group and BNP Paribas Asset Management

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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

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

Franklin India Bluechip Fund

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Posted: 09 Apr 2012 08:22 PM PDT

LAUNCHED in December 1993 as a closed-ended fund, Franklin India Bluechip Fund (FIBF) is one of the oldest private sector funds in India. It was converted into an openended fund from January 1997. FIBF has been consistently ranked among the top 30 percentile of funds in the large-cap oriented equity category in the Crisil mutual fund ranking over the last 10 quarters. In the latest rankings for the quarter ended September, the fund was ranked Crisil fund rank one.

The fund has given superior returns over longer time frames thereby achieving its objective of capital appreciation over the medium to long term. While the assets under management (AUM) of equity oriented mutual funds fell by 9.3 per cent over the past one year, FIBF's AUM increased by 18.4 per cent to `4,025 crore, over the same period. The fund is managed jointly by Anand Radhakrishnan and Anand Vasudevan.

INVESTMENT STYLE The fund predominantly invests in equity but has the liberty to invest up to 40 per cent in debt instruments and up to 15 per cent in money market securities. Within equities, the fund has maintained high exposure to large cap stocks. The fund has invested an average of 95 per cent in Crisil -defined largecap stocks over the past two years.

PERFORMANCE FIBF has delivered better returns compared to the category and its benchmark (BSE Sensex) across various time frames. Over a three year period, it has given a compounded annual growth rate (CAGR) of 27 per cent, as against 20 per cent of the category and 19 per cent of the benchmark.

Over the last one year, the fund has limited the downside by giving lower negative returns vis-à-vis the benchmark and the category. One of the reasons for this is its lower equity exposure. As of September, the fund had 90 per cent exposure to equities, as against an average 93 per cent of the category.

Another reason is that the fund reduced exposure to underperforming sectors such as capital goods and oil which gave negative returns to the extent of 35 per cent and 21 per cent respectively as against negative 17 per cent of the benchmark. The fund also increased exposure to sectors such as auto and software, which gave relatively lower negative returns (12 per cent to 15 per cent) as compared to the benchmark.

The fund has also performed well during the 2008 market fall and the recovery phase after 2008. During the market fall from January, 2008 to March 2009, the fund gave lower annualised negative returns of 34 per cent (point to point) vis-a-vis 40 per cent by the benchmark. Further, the fund gave higher annualised returns than the benchmark in the subsequent recovery. From April, 2009 to November 29, 2011, it returned 21 per cent (point to point) vis-a-vis 14 per cent by the benchmark.

It has consistently delivered superior systematic investment plan (SIP) returns over the benchmark across the time frames. A monthly SIP of 1,000 over the last 10 years would have returned a CAGR of 22 per cent. In rupee terms, the investment of `1,20,000 ( `1,000 per month over 10 years) in FIBF would have grown to `3,75,570. A similar investment in the benchmark would have grown to 2,58,309.

PORTFOLIO ANALYSIS The fund is more diversified, as compared to the category at both company and sector level. Over the past 1 year, the fund's top 10 holdings constitute 47 per cent of its portfolio vis-a-vis 50 per cent for the category— the top 10 sectors constitute 71 per cent of its portfolio as against 72 per cent for the category.

The fund has held an average 44 stocks over the past one year. As against this, the category held an average 39 holdings over the same time period.

The fund has dynamically managed its exposure towards equities over the past three years. During the crisis of 2008, the fund maintained relatively higher exposure to equities as compared to the category. This helped the fund generate higher returns when the markets rebounded from April 2009 onwards. However, owing to the market volatility over the past one year, the fund's exposure to equities has been relatively lower as compared to the category. Its equity exposure has reduced to an average 91 per cent for the quarter ended October 2011 from an average 95 per cent over the quarter ended January 2011.

Within equities, the fund has actively managed its sector exposures. During the global credit crisis in 2008, the fund increased its exposure to defensive sectors such as pharmaceuticals, consumer durables, consumer non-durables and healthcare to an average 12 per cent over October 2008 to March 2009. This was subsequently reduced to an average of five per cent in FY11. A similar approach has been adopted recently wherein the fund has reduced exposure to relatively underperforming sectors like capital goods and oil.

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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

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

Submit filled up application Collection canter near you

Gold vs Equities

Posted: 09 Apr 2012 10:19 AM PDT

Gold fares poorly than equities historically

IF YOU are under the impression that gold is the best asset class and has always given high returns, think again. A study done by apnapaisa.com on the stability and trend in returns of gold and Sensex over the past 30 years has revealed some startling facts. In order to smoothen out sudden spikes, the 10-year moving average of both these asset classes for the same period was calculated.

The analysis revealed that gold gave lower returns than equities. While the maximum returns provided by equity during the 10-year time band (1982 - 1992) were 34.69 per cent, the maximum returns provided by gold was during the 10-year period of 2001-2011 at 17.36 per cent. Thus, till date, equity has given double the returns compared with gold.

However, the minimum returns given by equities were in negative of 2.09 per cent during 1992-2002.

Gold on the other hand, never gave negative returns.

One should not forget that the subdued returns computed for Sensex during the above period are due to the bearish mood prevalent in the equity market, which may not last perpetually.

The study also showed that out of the 21 pairs of 10year moving averages, gold has given returns in double digits only five times, against 17 times given by equities as surrogated by Sensex.

Moreover, if you calculate the CAGR (compounded annual growth rate) from 1981 till date, the average returns provided by domestic gold is 9.65 per cent, just able to beat inflation, whereas, the average returns provided by equities are far higher at round 15.72 per cent, almost 1.6 times of the returns provided by domestic gold in he same period.

Future of gold: Gold may continue to provide super returns compared to Indian equities if the dollar keeps on appreciating against the rupee.

So what should you do?

Every asset class has its own period of performance.

Gold has performed spectacularly in the past five years to become a favoured asset class. However, gold does not have an intrinsic value and its value is dependant on the performance of other asset classes. Therefore, you should not invest more than 10 per cent of your investible corpus in gold.

The solution is diversification and creating a diversified portfolio with investments in debt, equities and gold, added Bhatia. If you want to invest for wealth creation, gold is not the asset class in which you should invest your major money. However, part of the investment can be made in gold for portfolio diversification. This investment should preferably be held in electronic form through various avenues like gold ETFs, gold funds or e-gold of NSE.

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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

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

Submit filled up application Collection canter near you

UTI Dividend Yield

Posted: 09 Apr 2012 10:05 AM PDT

UTI Dividend Yield is a seasoned player, which has delivered healthy returns to investors even in volatile markets. While existing investors should stay invested in the scheme, new entrants too can give it a shot to diversify their portfolio

Over six years of its existence, UTI Dividend Yield has not only rewarded its investors well, but has also taken care of their capital investments in volatile markets. The scheme's mandate to invest in stocks that have good dividend yield ensures that it invests in companies that have sustainable operating cash flows and low leveraged balance sheets. Moreover, its mandate to have 65-70% of its portfolio invested in largecap companies, makes it relatively averse to risks associated with mid-cap stocks. This mandate, however, also carries risk of losing out to peers in terms of returns if mid-caps were to outperform. But, having said that, we do not recommend this scheme for making aggressive gains but forbalancing the investment portfolio.

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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

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