SEO Simplified By Gabs Gaurs &amp; Geets

When the interest is paid out yearly – you need to use a formula called Yield To Maturity (YTM) and calculate the bond's yield. There is a nice little calculator present on this site that you can use to see how this works out. Use Series 1 and 3 and you will get a table such as the one below.

Investment Amount	Tax Slab	Effective Purchase Price	Series 1 Yield (YTM)	Series 3 Yield (YTM)
5,000	30.9%	3,455	13.89	17.19
5,000	20.6%	3,970	11.57	13.41
5,000	10.30%	4,485	9.64	10.23
Buyback Amount	———–	——-	5,000	5,000
Time in years	———–	——-	10	5
Coupon Rate			8.00%	7.50%

If you input 3,455 in Current Market Price, 5,000 in Par Value, 8.00% in coupon rate, and 10 years – you will get your yield.

This formula assumes that whatever interest payments you received were re-invested at the coupon rate, and then takes the market value of the bond to calculate your yield.

In our example, this formula will say that you invested Rs. 3,455 initially, then get Rs. 400 at the end of every year which you will continue to re-invest at 8% and reap the benefit of compounding. Now this is an assumption so if you don't actually end up investing your interest payment every year your yield will be reduced.

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Down side of investing in ETFs

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: 11 Apr 2012 05:15 AM PDT

EARLIER, the exchange traded funds (ETFs) found difficulty in being accepted as a viable investment option, but now, they are quite a rage worldwide, accepted by hordes of savvy investors.

ETFs are the best ways to take a passive exposure to asset classes such as equity (via equity index), commodity (via diversified, thematic or sectoral indices), fixed income and gold.

Indian investors, however, have taken more time than their global peers to throng to ETFs. Gold ETFs have, however, attracted many domestic investors in the past two years. Equity ETFs, particularly S&P CNX Nifty ETFs, have been around for far longer than gold ETFs and yet by the end of February, there were 4.68 lakh investor folios holding units of one or more of the existing 12 gold ETFs, whereas there were only 1.46 lakh investor folios holding units of one or more of the existing 21 non-gold ETFs, mostly equity index ETFs. The collective assets under management (AUM) of gold ETFs was also much higher at Rs 9,583 crore, compared with Rs 1,672 crore in non-gold ETFs.

But ETFs carry some risks which many ETF investors may not be aware of.

ETFs are like listed stocks and, like shareholders and traders, ETF unit holders and traders buy and sell from the stock exchange during trading hours. In fact, on the first day of listing of a new ETF, the selling is by a investor who was allotted units in the new fund offer (NFO) of that ETF.

These are never typical retail investors because the minimum subscription size is usually more than Rs 1025 lakh. In gold ETFs, for instance, NFOs require a buying investor to buy about a minimum of 1 kg of gold entailing a minimum investment of more than about Rs 25 lakh.

As a retail investor, you have to, therefore, buy or sell ETFs only when they trade on the stock exchanges. It can happen that there isn't enough liquidity as a result of which the spread is very high between the best buy price and the best sell price. When you buy or sell in such a situation, your net price can tend to be far away from the real net asset value (NAV) of the ETF.

Arbitrageurs are supposed to get attracted to mis-pricings between real time traded prices in ETF and their underlying index or asset prices. So, theoretically, if the exchange-traded price of an ETF has moved up, while the underlying index has moved down, an arbitrageur would first sell ETF units on the NSE and purchase the shares of the underlying index and submit it to the asset management company (AMC) in large creation unit lot sizes to acquire units at a lower price. But, in practice, if the liquidity in the traded ETF is low, then it won't be possible for arbitrageurs to carry out such an arbitrage.

Using ETFs to carry out a long-term investment exposure entails taking on AMC risks and the risk of the ETF shutting down. Your money is not lost, but you will face a lot of inconveniences and harassment when that ETF has to be liquidated.

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Opt for dividend payout option to reduce risk in ELSS Investment

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: 11 Apr 2012 04:51 AM PDT

THE start of the financial year is the right time to look carefully at various options for your tax-saving requirements. One of the routes that are suitable for this kind of investment is the equity-linked savings scheme (ELSS). This type of plan is suitable for those who want an exposure to equity and at the same time want to save some tax.

There are a few things that you will need to follow to ensure that the risk in the entire investment is moderated. While all these steps are no guarantee of success in terms of high returns, it does ensure that the processes are structured well. Here are a few details with respect to this area.

Limit of investments: The first thing that the investor has to decide is the amount that they would invest here out of the total tax deduction limit of Rs 1 lakh available under Section 80C.

The main point here is that since there is so much time left in the financial year to complete the requirement, the total investment can be spread over the entire year.

Many people put a lesser amount than Rs 1,00,000 here and there are a couple of points that will need attention.

The first point is that it is likely that there is some other tax-saving investments made elsewhere which will reduce the requirement for the total figure in ELSS. And if this is the case, then there is no need to lock-up a higher amount for a period of three years. The extra amount available from this action can be invested elsewhere.

The other thing is that if things are left a bit too late for investment during the year, then putting a high figure at one go might increase the risk and, hence, to keep this under control it is better to have it properly spread out.

Option chosen: Another way in which the risk can be reduced in such investments is by choosing the dividend option. When this is done then the individual will find that there is a route whereby the payout from the earnings in the investments is coming back to them and not being reinvested. So, some of their investments are being recovered since they cannot do much about the lock-in of the initial investment.

Since there is a three year lock-in on the investment, the problem is that if the dividend is not taken out and the growth option is taken, then the amount could compound, but this does not allow the investor to reduce the risk. This means that in the future if there is a time when the performance of the scheme takes a nosedive due to poor performance of the equity markets, then there would be a lesser amount that is at risk as some of the earnings have been taken out in the form of the dividends over the life of the investment.

Events impacting investment: One way in which the investor can also go about making the investment from the start of the financial year is by looking at the time period of the investment. If this is being made in one or two instalments, then this should not be in the middle of some big event that can lead to sharp movements in the market as this can have a disproportionate impact on overall investment position.

In such a position, the investor would be better off if they have chosen a time period when things are quiet and this should not be difficult to find when there is so much time left in the year. The lower the volatility, the better it is.

Though, over the life of the investment, this will not matter much, but this is just to ensure that there should not be a sharp fall in the days immediately after the purchase. If the investments are spread out evenly throughout the year, then this would cease to be a major source of worry.

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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

E - Gold through NSE

Posted: 11 Apr 2012 04:19 AM PDT

National Spot Exchange (NSEL) has extended the facility of physical conversion of e-Gold units to 1 gm gold coins to mark the completion of two years of the launch of e-Gold — India's first commodity investment product in demat form.

NSEL, promoted by Financial Technologies (FTIL), was earlier providing this facility in the denominations of 8 gms, 10 gms, 100 gms and 1 kg lots.

NSEL launched e-Series products, starting with e-Gold, in March 2010, to meet the growing demand among retails investors to divest part of their investment portfolio into commodities. The Exchange has since then added other commodities such as e-Silver, e-Copper, e-Zinc, e-Lead and e-Nickel over the last two years, e-Gold became an instant hit on the NSEL platform right from its debut, mainly because it catered to inherent demand for gold among Indians. This product has enabled the Indian retail investor to put his small savings in a weekly, monthly or yearly manner into precious metals such as gold and silver, yet without him having to deal with the hassles involved in handling physical gold.

There is also the additional benefit of getting physical delivery on-demand.

Moreover, e-Gold has offered far better returns compared to other gold investment options. Since the launch of this product, e-Gold has given a return of 67.03%, which is the highest compared to all other forms of investments in gold. In FY12, while equities as a measure of NIFTY, gave returns of only about -9.56% and some popular Gold ETFs gave around 23.32%, in comparison e-Gold gave returns of 26.41%.

According to Anjani Sinha, MD & CEO, NSEL: "The latest move to allow e-Gold delivery in 1 gm denominations is a benefit that is unique to this product alone. No other commodity investment product in Gold available in India has this facility. Certain other features such as transparent pricing, seamless trading and zero holding costs have made this product a preferred investment option for retail investors and HNIs. In e-Gold, investors have found a unique way to park their money in gold without having to worry about purity or physical security that is inherent to jewellery and physical bullion."

Currently, e-Gold comprises 17% of NSEL's total turnover in the FY12.

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Before Buying Vehicle Insurance

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: 11 Apr 2012 02:44 AM PDT

Before you hit the road in your new car, you need to insure it against any possible mishap. Hence, buying a car insurance is important. Most motor policies on offer are similar and, therefore, customers may not be able to select an option that suits them the best. However, some important factors, like brand, policy coverage, customer service, distribution and access price need to be considered before making a final decision.

Brand:

This is the single most important parameter that differentiates one insurance company from another. For the insurance industry, the moment of truth for customer is 'when he makes a claim'. One can easily check the past record of an insurance company on various parameters, including details of claim settled and time taken for claim settlement on its website. A key fact to remember is that motor insurance is portable – you can shift to another insurance company without losing any benefit you are eligible for.

Coverage:

The next important step is to select the right insurance cover that suits your requirement. A standard car insurance, commonly referred to as motor package policy, consists of a 'third-party liability' cover and an 'own damage' cover. As per the 'Motor Vehicles Act', a third-party liability insurance cover is compulsory for all vehicles plying on public roads, whereas an 'own damage' cover is not. However, opting for both these coverages is recommended as they cover both accidental damages and the risk of thirdparty losses to your vehicle. With the advent of de-tariffing in India, insurance companies are now offering attractive add-ons (example: nil depreciation, no-claim bonus protect), along with basic motor package policy.

Customer Service:

Gone are the days when one had to wait for a few months to get the copy of the car's insurance policy. Many insurance companies now focus on over-the-counter (OTC) issuance of policies. 'Agents' are provided state of-the-art technologies to ensure faster delivery of motor policies. Apart from this, some companies have been able to demonstrate significant reduction in turnaround time for other service requests like endorsements for effecting any change in an existing policy and cancellation of policies, among others.

To make the claims settlement process fast and stress free for customers if their vehicle meets with an accident, for instance, many insurance companies have tied up with garages for cashless settlement of claims. This allows customers to take delivery of their vehicle immediately post repairs, that too without paying any money to the garage. What the customer should look out in this case is the quality and number of garages empanelled by the insurance company for the provision of cashless service. A wider cashless network of garages not only provides you multiple options, but will also ensure a faster and standardised claim settlement.

Distribution And Access:

Sometimes, it is observed that one is not aware of whom to reach out to in case of any difficulty. The situation gets worse if a problem does not get resolved even after contacting the insurer – resulting in the ultimate customer experience becoming negative. A wide network and multiple distribution and communication channels have become the need of the hour for companies offering motor insurance.

Price:

The premium charged should be one of the most important criteria for buying a motor insurance policy. But the decision of buying a policy/selecting an insurer should not be solely driven by a low premium quote. The premium of a car insurance depends on its value (IDV – insured declared value) and the rate multiplier which is decided by the insurance company. The rates for all motor insurance products are based on the loss experience of the insurance company. Higher the chance of accidents, higher is the price for an insurance cover. Generally, the model of the car and the geography are the two most critical factors which decide the premium rate. However, many other factors like the age of the vehicle, occupation and daily mileage may also play a vital role in determining the premium amount.

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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

Buying a Used Car

Posted: 11 Apr 2012 02:08 AM PDT

Pre-owned car can make sense in these inflationary times. But buying one can be trickier than getting a new vehicle

If you are thinking of buying a car but are worried about the rising inflation and higher EMIs eating into your budget, you should consider buying a used car. For those learning to drive, the general advice is that they should hone their driving skills in a used car. However, buying a used car is not an easy task. Though a used car costs less, there are a lot of aspects to be considered while buying one. You should do your due diligence before buying such a car. For example, two cars of the same model would carry two different prices. The difference in price could be on account of the age of the car, how many people have driven, etc.

First Fix Your Budget

Since used cars are available in a wide variety of models and prices, the starting point would be to determine your budget before scouting for a car. The price of a car will depend on how old the car is, how many kilometres it has already been driven and the condition it is in. So, if the cost for a new model of a car is Rs 5 lakh, then you could get older versions of the model for anywhere between . 1 lakh and . 4 lakh.

Hence, it is very important that you have a budget in mind. It will make selecting a car model easier. Once you have a budget in mind, the next thing you could do is check out which models fit in that budget.

Choosing A Model

Experts advise against getting carried away while deciding the car model you wish to buy. Your choice should be governed by what kind of use you plan to put the car to and how much you can afford on maintenance. "It is important that you are not aspirational but practical when you are planning to buy a car," Sharma of Carwale.com.

Buy a relatively newer used car than an older one. If your budget is . 3 lakh, you could get a one-year-old Santro or a Wagon R. For the same . 3 lakh, you can also get a bigger car, namely a Ford Fiesta or even Honda City, but these cars could be 5-8 years old or may not be in the best of conditions.

Also, one must keep in mind that smaller cars are easy to maintain than larger ones. Servicing of a smaller car would cost anything between . 3,000 and . 5,000, while a bigger car would require as much as . 8,000 at least. Similarly, spare parts would be costly for a bigger car.

Many of us want to merely sharpen our driving skills by buying a used car, planning to graduate to a new car soon. So if you plan to use the car only for a year or so, before graduating to another car, it would be better to buy a car with a good resale value. Typically, cars in the mid-level range have good resale value, as compared with bigger cars. So, once you have decided on the model, you are ready to take a look at the available options in the market.

Checking It On The Road

When looking for a car, ask for the car's history. Most owners will tell you whether the car has been serviced at authorised showrooms or not. Go for cars that have been driven by single owners and have clocked lower number of kilometres. Different people maintain their cars in different ways. Generally doctors and Parsis are known to maintain their cars well.

Then there are people who are moving overseas and tend to sell their cars in good condition. Such cars command a higher premium than cars that have passed through multiple owners.

When checking the mechanical condition of a car, insist on a test drive. It would be better to take along a mechanic to check the condition of the car. When examining a used car, understand how much more work needs to be done in the car, or the additional cost you may incur if you were to buy it.

For this, you need to look at three important things: the insurance cost, tyres, and the dents and painting. Say you are buying a . 3-lakh car in October and the insurance expires in November. In such a case, you have to spend further . 7,000 to . 8,000 on getting the car insured immediately.

Secondly, it is advisable to replace tyres when the vehicle has run 40,000 km. So if the car has already run say 35,000 km, you would need to replace the tyres very soon. A single tyre of a midsized car like a Santro or a WagonR costs . 3,000. Replacing four tyres could cost you as much as . 12,000. These are all immediate expenses you will have to incur, so consider these costs while budgeting to buy a used car. Besides, look for things like dents in the car that require painting. It could cost as much as . 4,000 to get a dent repaired.

Things To Be Careful About

While examining a car you need to be careful about some tricks sellers might use to make a quick buck. There are many cases of the odometer being tampered with to show lower mileage to get a higher resale value for the car.

Since mileage and the age of the car are important determinants of its price, unethical dealers try tampering with these two to make a quick buck. For example, if the car has run 80,000 km, the dealer could make as much as . 30,000 more if the mileage is brought down to 40,000 km by tampering with the equipment. As a buyer, you need to be careful about these tricks, and try to see that the car condition reflects the odometer figure. For example, tyres are changed once the car has run about 40,000 km.

However, if you find a car with new tyres, and the odometer shows it has run only 35,000 km, it should ring an alarm in your mind and you should question the owner. Another thing you could check for is the paint. Is there a difference in the paint's colour visible in the car? If that is visible, chances are that the car has gone through an accident and has been repainted.

It is better to avoid cars that have met with accidents.

If you are buying a car for the first time, buy a car through a reputed dealer who has been in the trade for some time and is someone you are comfortable with. You could also consider buying from Maruti's True Value or Mahindra First Choice, which specialise in selling used cars The cars selected by them go through stringent quality tests. Hence, you are assured of a reliable product. These car dealers also give you a year's warranty, which gives you comfort as a buyer.

Just Learned Driving? Buy a Used Car

For Peace of Mind, Buy From a Reputed Dealer

1 Buying a used car is more difficult than buying a new one because used cars could differ in age, kilometers run and the way they have been maintained.

2 Buy a car based on how much you plan to use it, what its utility will be for you and how it will fit into your budget

3 If you are learning to drive for the first time, you could consider buying a used car;

4 you can buy a new car once you are confident about your driving skills

5 While examining a used car, check for odometer tampering, conditions of tyres, and dents, if any

6 It would be wise to go through a reputed used car dealer to ensure peace of mind

What You Should Pay Attention To

Odometer: Odometers may be tampered with to show that the car has run less kilo metres than it actually has. This is done to fetch higher price for the car

Exterior: Look for signs of accident or dents. Look at the tyres for signs of uneven wear and tear

Interiors: Check the condition of the battery, belt and hoses. Look for signs of fuel leakage, if any

Outstanding loans: If the previous owner has taken a loan, ensure that is settled or paid

Owned or stolen car: Check the serial number on the vehicle registration card. Make sure it corresponds to the number on the car

Past record of the car: Ask for the car's maintenance record from the owner, dealer, or repair shop. This will give you an idea about the maintenance incurred on a car

Test drive: Test drive the car in different traffic conditions. Drive it on the highway and in stop-and-go traffic

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UTI Mutual Fund NFO - UTI Fixed Term Income 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: 11 Apr 2012 12:04 AM PDT

UTI Mutual Fund has launched the new fund offer (NFO) of UTI Fixed Term Income Fund - Series XI - VIII (366 Days). The scheme will be open for subscription from April 10, 2012 to April 16, 2012.

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Invest Mutual Funds Online

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LIC Nomura Mutual Fund new FMP - LIC Nomura MF Fixed Maturity 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: 10 Apr 2012 11:30 PM PDT

LIC Nomura Mutual Fund has launched a new fund LIC Nomura MF Fixed Maturity Plan Series 50. The new fund offer (NFO) will close for subscription on April 11.

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Buyback Issues For Investors

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 10:39 PM PDT

A falling market might be depressing for investors. For promoters, it is an opportunity to raise their stake. November saw the Sensex hit a two-year low; it has had 13 companies filing documents with the Securities and Exchange Board of India for buyback offers.

Buyback of shares means repurchase using surplus cash in the balance sheet. The company's share capital reduces to the extent of shares bought back, raises promoter holding and improves earnings per share. Shareholders can participate either through the tender offer route or by selling shares in the open market, as may be decided by the company.

A buyback can be through various methods.

The first is through a tender offer, where the company makes an offer to buy a certain number of shares at a specific price, directly from shareholders. This route ensures all shareholders are treated equally, no matter if they hold a majority or a minority stake.

The other route is to make purchases in the open market, where the company acquires a certain number of shares. The company fixes a maximum price and can buy back the shares anywhere up to that particular price. Most companies prefer using this route to buy back their shares.

The biggest difference between the two is that in a tender route, the price of the buyback is fixed.

This route carries certainty on price and quantity parameters. In the open market route, the benefit to a shareholder cannot be accurately judged, since the company could have bought shares at a lower rate.

It isn't possible to always exit at the maximum price the company is willing to buy. It simply provides updates on the number of shares bought.

Investors who sell their shares in a tender route will have to pay tax according to their applicable brackets. "Since you do not pay Securities Transaction Tax in the tender route, there is no tax relief for investors.

It will be treated as business income. Whereas, in the open market route, the seller will only have to incur short-term or long-term capital gains tax, depending on how long you have been invested in the company.

From a cost angle, the difference is significant, up to 10-15 per cent.

The different transaction costs involved in a buyback offer are managers fees, payment of deposit, brokerage, advertising costs and lawyer fees.

Depending on the circumstances, investor benefits would vary depending on whether the exercise is done through tender or open market offer

The two routes of buyback: the biggest difference between the two is that in a tender route, the price of the buyback is fixed. This route carries certainty on price and quantity parameters. In the open market route, the benefit to a shareholder cannot be accurately judged, since the company could have bought shares at a lower rate.

Parameters Open market Tender offer buyback offer buyback Price Maximum price is fixed; Buyback price shares can be bought is fixed back anywhere up to that price

Shares bought Number of shares to be Number of shares to be

back bought back is fixed bought back is fixed

Duration Buyback programme can Buyback programme can go on for up to a year go on up to a month

Transaction costs are Transaction costs don't costs higher by between include brokerage and 10-15 per cent lower advertising costs are

Buyback of shares means repurchase using surplus cash in the balance sheet. It can be through various methods

The firms share capital reduces to extent of shares bought back, raises promoter holding and improves earnings per share

Shareholders can participate either through tender offer or by selling shares in the open market, as may be decided by the firm

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Should you Invest in Company Fixed Deposits?

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 10:14 PM PDT

Those who swear by fixed deposit (FD) have never had it so good. The rates offered by banks are high. Now, they have even better news from companies. There are around 100 companies offering FD schemes currently, and most of them offer at least 1% to 4% more than bank FDs. A three-year FD from Mahindra Finance, for example, gives 10.5%, while one from Jaiprakash Associates offers 12.50%. Compared with this, the State Bank of India and HDFC Bank offer 9.25% and 8.5%, respectively, for a three-year FD.

You don't need to be an investment wizard to figure out that the rates offered by the companies are the best you can pocket and you should park some money in their FD schemes.

But, don't commit the mistake of equating a company FD with a bank FD, say experts. This is because bank deposits are covered by a guarantee from the Deposit Insurance and Credit Guarantee Corporation of India, which assures repayment of . 1 lakh in case of default by a bank, but there is no such guarantee for company deposits.

The safety of the FD rests firmly on the financial position of the company. That is why you have to be extra careful while choosing and investing your money in a company FD.

When investing in company deposits, do not get lured by high interest rates. Check the past track record and financial position of a company before committing your money.

Before putting money in a company's FD, try to get a rough idea about the company and its activities. Go for listed companies as there is more information in the public domain about them.

The next thing you could do is check on the ratings for the FDs. Go for companies which have an AAA or AA rating (for their deposit schemes.

Check the promoter's background and financials of the company. If a company has a long history and is making consistent profits and paying dividends — HDFC and Mahindra Finance, for example, then your money in its schemes will be in safe hands. Both HDFC and Mahindra Finance have a sound past track record. This, along with their strong financial performance and strong parentage, makes them a good bet in the company deposit space.

If the financial performance of a company has been erratic, and the promoters are not well known, you should think twice before investing in its schemes. A case in point is Morepen Laboratories. The FD holders of the company were left high and dry without any payments. In the end, as per a scheme of arrangement and compromise with deposit holders, the company gave equity shares to fixed deposit holders. You don't want to face such a situation, especially if you are a retired person living on interest income from safe investment avenues.
In the current scenario, you should avoid putting money in real estate companies, as most companies in the sector have taken huge hit due to the high interest rates and slump in the economy. Even in the recent past, some real estate companies have been delaying repayment.

Rates High? Check Why

Whenever you come across a company paying higher interest rates, try to find out why the rates are so high. Put simply, a company should have some reason to pay a higher interest than the prevailing market rate to depositors. Most often, you would find out that the company is paying a high rate because it is in some financial trouble and the higher rate is a way to compensate investors for taking the high risk of putting money in its scheme. If you know how to ask the question, you would get the answers from distributors and financial advisors. If you are convinced with the reply, you can put money in the FD. Otherwise, look elsewhere.

Downside: Illiquid And Taxable

If the money you have is for use in an emergency, then company FD may not be the best investment option. If you have a bank FD, then in an emergency, all you need to do is walk across to your bank with the FD receipt and you can get your money back with no difficulty. Sure, there may be some penalties for breaking the FD, but you get access to the funds to be used for the emergency. But, a company FD cannot be redeemed so easily. Typically, these FDs can't be broken before six months from the date of investment. If you break it even after six months, you would get 2% lower than the promised rate. Also, it may take a minimum of three to five days to get the money back.

Also, remember that interest income from company FDs is taxable. On this front, they are similar to bank FDs. It is always better to calculate the post-tax returns from an FD. For example, if a company pays 12% on its FD, your effective return will be 8.29% if you are in the highest tax bracket. However, if you are retired or in the lower tax slab or not liable to pay tax on your income, the returns could be attractive.

Experts advise against going overboard on company FDs. You can invest up to 10% to 12% of your fixed income portfolio in company fixed deposits. If your fixed income portfolio is worth . 50 lakh, for example, then . 5-6 lakh could be invested in company fixed deposits. It would be better to spread this amount across at least four to five companies. If you are retired and depend on interest income to meet your day-to-day expenses or your monthly liabilities, the money should go into only AAA or AA-rated companies. It would not be worthwhile to chase an extra 1% to 3% return at the cost of safety. Finally, opt for cumulative schemes to maximise your returns, as the interest earned would be automatically reinvested at the same coupon rates, which will generate better yield.

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Access ICICI Bank account via Facebook

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 08:45 PM PDT

THE country's largest private sector lender ICICI bank will soon join social media platform Facebook, where it plans to allow its customers to access their bank accounts, among other services.

"ICICI bank will soon be present on Facebook. The ICICI Bank page will include a one-of-its kind 'Your Bank Account' app through which you can access your bank account information while on Facebook," the bank's executive director Rajiv Sabharwal said. In a new-year message to the bank's customers, Sabharwal said that the customers would also be able to get updates on exclusive offers through Facebook.

The bank is planning to join Facebook as part of its efforts to continue to provide "superior banking services" in 2012, in line with its 'Khayaal Aapka' (Your Care) philosophy, he wrote to the customers.

A number of companies in India and abroad are establishing a presence on social media platforms like

Facebook to reach out to their customers and get new businesses.

A survey by workplace solutions provider Regus had said that Indian companies increased their usage of social networks like Facebook, blogs, microblogging site Twitter and other online platforms in 2011 to win new business.

As per the survey, 83 per cent companies in India agreed that their marketing strategies might not succeed without social media activity, while 74 per cent companies globally endorsed this view.

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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

Single KYC registrations for investors

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Posted: 10 Apr 2012 07:53 PM PDT

Single KYC registrations for investors

THE SECURITIES regulator, the Securities and Exchange Board of India (Sebi), is in informal talks with other financial market regulators to explore the possibility of a single know your client (KYC) registration system for investors across the country's financial markets – banking, insurance and pension, in addition to stock markets.

"Sebi is currently involved in informal discussions with other financial regulators," the regulator's chairman UK Sinha said, after inaugurating the country's first KYC Registration Agency (KRA) for investors in the securities market segment. The KRA is floated by CDSL Ventures, a wholly-owned subsidiary of Bombay Stock Exchange-promoted Central Depository Services (India).

According to Sebi rules on common KYC, an intermediary (stock brokers, mutual funds and depository participants, among others) should perform the initial KYC of its clients and upload details on the system of the KRA.

When the client approaches another intermediary, the intermediary can verify and download the client's details from KRA's system. As a result, once the client has undertaken a KYC with a Sebi-registered intermediary, the investor need not undergo the same process again with another intermediary.

Stating that the KRA was a major initiative of Sebi to eliminate procedural hurdles for investors, Sinha said the new system will avoid duplication of KYC process from an investor's perspective and bring down costs and back-office work for intermediaries. Sinha said the new system will remove the disincentive for investors in switching from one intermediary to the other for better services. The level of participation in the Indian capital market by households, according to Sinha, is much below the desired level.

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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

How to choose a Term Insurance Plan ?

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Posted: 10 Apr 2012 09:57 AM PDT

Term insurance policies have become very popular in the past 12 months. Premium rates have come down, companies are advertising term plans in a big way and the online channel is very convenient. This is why sales of term plans have shot up. The company launched its click2protect online term plan earlier this year. Aviva Life Insurance, which launched its i-Life plan in May 2011 has sold more than 18,000 policies in the past 10 months. Aegon Religare Life Insurance has sold nearly 25,000 i-Term plans.

Financial planners contend that a term plan is the best form of insurance because it gives a very high cover at a low price. The premium of a term plan is a fraction of what you have to shell out when you buy an endowment plan, a money-back policy or a Ulip with the same coverage. Of course, this is also because there is no investment component in a term plan. The entire premium goes in covering the risk. Before you buy a term plan, here are a few things to consider.

How much cover do you need?

Life insurance is meant to provide the dependants of the policyholder with enough money to replace his income in case he dies. Your life insurance must take care of the following things: the basic expenditure that your family will incur, major expenses like marriage of children and other liabilities like loans. If the life cover is inadequate, it defeats the whole purpose of insurance. For instance, a good part of the 12.5 lakh insurance cover that has will go into paying the 3 lakh car loan that he has recently taken. The Goabased sole breadwinner of a family of four needs an insurance cover of at least 30 lakh.

Till when do you need the cover?

The tenure of the term plan is almost as important as the amount of cover. An insurance policy should cover a person till the age he intends to work. Till a few years ago, this was 60 years. However, a person may continue working beyond the age of 60. Moreover, late marriages and having children at a higher age mean responsibilities do not end at 60. Experts believe a person needs a life cover till at least 65 years, though it may vary according to circumstances.

Don't take a short-term cover of 15-20 years that ends when you are in your 40s. The premium will be very low because you will be insuring yourself for the non risky years. In the 40s, the need for life cover is at its zenith. If you take fresh insurance at that age, it will cost you a bomb. You might even be denied the cover if you have not been keeping well.

Choose a term plan that offers you the flexibility of fixing the tenure. Many online term plans come with fixed tenures of 15, 20, 25 and 30 years. Others don't offer insurance beyond 60 years. So, a 32-year-old will not be eligible for a 30-yearplan and will have to buy a 25-year cover, which will end when he is 57 years old. It is best to avoid such plans and opt for a policy that can be customised to your needs.

Have you factored in inflation?

Have you bought a 50 lakh cover and think it is sufficient for you? Think again. The value of 50 lakh will only be 28 lakh after 10 years assuming an inflation of just 6%. To get around this problem, some insurance companies offer plans where the cover increases by 5-10% every year or is indexed to inflation. As your sum assured would automatically increase in the coming years, it would take care of the increase in your income as well as inflation.

Inflation is high right now but may scale down in the coming months. The long-term average inflation in India is expected to be 6-6.5%. A 5% increase in the insured amount won't match inflation. If you must go for such plans, opt for either a 10% annual increase or an index-linked one.

Kotak Life Insurance offers a plan that allows you to increase your sum assured at certain stages of your life. You can raise the sum assured by up to 50% when you marry or buy a new home. A 25% increase in sum assured is allowed on the birth of a child or the first, third or fifth anniversary of policy purchase. However, your revised cover cannot be more than three times the original sum assured.

Keep in mind that the premium of such plans is higher than that of an ordinary plan. A more cost-effective solution is to review your insurance needs at every life stage and add more cover if required.

The opposite of an increasing cover is a plan where the cover comes down. Such plans are meant to cover big-ticket credits such as a house loan. The cover comes down as you repay the loan and eventually ends. Here again, experts recommend a simple term plan than go for complex offerings.

The return of premium plan, for instance, is a sham that gives the buyer the total premiums paid at the end of the plan, but the inflation-adjusted value of this sum is meagre. Paying a higher premium for this benefit is not advisable. Likewise, the single premium option is not a good idea because it frontloads the entire cost of the cover. In case of early death, the premium for the rest of the term goes waste. In a regular plan, the buyer gets the same insurance benefit by paying far less.

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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

Birla Sun Life Mutual Fund - Change in Fund Manager Birla Sun Life MIP II - Wealth 25 Plan and MIP II - Savings 5 Plan

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Posted: 10 Apr 2012 09:43 AM PDT

Birla Sun Life Mutual Fund has announced a change in the fund manager of Birla Sun Life MIP II - Wealth 25 Plan & Birla Sun Life MIP II - Savings 5 Plan, with effect from April 4, 2012. The new fund manager will be Mr. Satyabrata Mohanty and Mr. Kaustubh Gupta.

Earlier, these funds were being managed by Mr. Satyabrata Mohanty and Mr. Nishit Dholaki

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BNP Paribas Mutual Fund - Change in Fixed Income Fund Manager

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 09:04 AM PDT

BNP Paribas Mutual Fund has appointed Mr. Puneet Pal, currently Deputy Head - Fixed Income, as the Head - Fixed Income from April 1, 2012.

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Invest Mutual Funds Online

Download Mutual Fund Application Forms from all AMCs

Consider Risks, Transaction Costs, Liquidity while Calculating Return on Investment

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 07:57 AM PDT

"15%? That's kind of low, isn't it?" said the distinguished looking person to whom I had been explaining the arbitrage returns from the Indian markets. We were at a Diwali social gathering, and I did not really know him that well. I could only guess from his mannerisms and sophistication in social matters that he was also well educated about financial matters. The volatility of the arbitrage fund was only 2.5% annually, whereas the real estate prices can stay flat or go up by 25%. Also, it could be pointed out that the arbitrage fund is liquid any time you want, whereas converting the apartment into cash is no mean achievement. Overall, I could have gotten into a debate with him but the poker table was waiting, so I let it pass. That place or moment was not right to delve into the details of returns adjusted for risk, liquidity and total costs!

People tend to focus a lot on the returns and not on other characteristics of investments. The obvious primary concern besides returns should be the risk involved. Risk and return go hand in hand. We all understand that 10% from bank fixed deposit is not directly comparable with 20% from an investment in a mid-cap stock we heard from our brother-in-law. Risk is typically measured as variability of returns. So, the risk profile of a fixed deposit that gives an assured 10% returns is different from a mid-cap stock that could return 30% or lose 10%. However, the problem is that risk and returns for risky investments are not known upfront and have to be estimated. And we do not really do a good job of estimating the risk and expected returns. As the famous saying (variously attributed to Niels Bohr, Albert Einstein or Mark Twain) goes: "It is difficult to make predictions, especially about the future."

Famous researchers Tversky and Kahneman had shown way back in 1974 that people really make some major errors in estimation.

First of all, they are heavily "anchored" in their expectations. In the area of investing, anchoring can be to the most recent returns. So, if the stock went up 20% last year, we start with an assumption that the returns will be about the same again. Then we are incapable of making sufficient adjustments to the "anchored" estimate based on the information that we have or can easily get. For example, we would say that the returns should be plus or minus 5%. Historical records may show that the actual range might be from -30% to +70%.

The second issue is of liquidity. Most people are only concerned with the absolute returns and they assume that the money will be available as and when needed. Only in times of a crisis do we realise that having a lot of illiquid investments is not good if they cannot provide you the cash in time to meet your obligations.

Real estate investments may have returned 20% on an average over long periods but what would be your realised returns if you need the cash in a hurry? A lot of real estate developers have found out to their dismay that assets do not equal cash. Finally, the total costs. We need to take care of the transaction costs (for example the stamp duty in the case of real estate). What look like attractive returns may in fact be mediocre or even poor once you consider the total costs of transaction. The normal costs of brokerage, transaction and stamp duties must be considered. Even more important are the market impact costs. Market impact costs refer to the cost of getting out of a position. Let us say you own an apartment and want to sell it in a hurry to raise some cash. The price you will get will certainly be lower than the price you would get if you had some time to wait for the right buyers.

The difference in the realised price versus the fair price is the market impact. Similarly, when selling stocks, if you have to sell in a hurry and if the volume of the stock traded is not a lot, then the price will fall as you start selling. This risk is particularly large in small- and some mid-cap stocks. And, then, there are the taxes to be considered. Depending on whether you are going to pay long- or short-term capital gains, or even business income, can make a huge difference to your post tax returns. So, the next time someone tells you that a particular investment idea is going to generate 25% returns, ask them what are the risks, liquidity constraints and the total transaction costs.

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