Prajna Capital |
- Bajaj Allianz Guaranteed Maturity Insurance Plan
- Silver not a safe Investment option for this year
- Tax benefits on donations to charity
- Understanding before investing helps to make right decision
- Removal Of Stocks From F&O Can Be A Problem For Investors
- Check your credit score online
- Buying Child Insurance
- FMP Indexation Benefit and Indexation Calculation
- Measure Your Risk taking Ability before Invest
| Bajaj Allianz Guaranteed Maturity Insurance Plan Posted: 12 Apr 2012 02:30 AM PDT Download Mutual Fund Application Forms
A single premium Unit Linked Plan. The investment objective of this fund is to provide capital appreciation by investing in a mix of debt and debt related securities.
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| Silver not a safe Investment option for this year Posted: 11 Apr 2012 11:59 PM PDT Download Mutual Fund Application Forms
SILVER bulls may be hoping that the metal's healthy first quarter price rise is the first step back towards record highs. Not so fast.
Its advocates say silver, which occupies a middle ground between industrial metals like copper and investment vehicles like gold, can benefit both from the fledgling economic recovery that is lifting copper and from the investment that is driving gold.
But record-high mine supply and questions over demand have left a long shadow over silver's underlying fundamentals, while huge price volatility last year, when the metal crashed 35 per cent in a matter of days on two occasions, has undermined its appeal to investors as a cheaper alternative to gold.
The broad investment environment is also bleaker than it was last year for friends of silver.
There are two issues that in the short term suggest we are not going to head back towards $50. One is that margins on Comex are still higher than they were last year, so investors are going to have to come back in more weight to drive the price further.
At the same time, silver turnover on the Shanghai Gold Exchange is relatively low compared to where it was last year.
Silver's volatility is probably going to provide an opportunity for investors to push it higher, if they want to.
But they are going to have to put in considerably more effort to reach the same levels as last year.
Silver hit a record near $50 an ounce a year ago on the back of rallying gold prices, after precious metals became increasingly in demand as policymakers and markets struggled to recover from the financial crisis.
A recovery in gold prices this year after late 2011's washout and decent seasonal coin buying in January have helped silver to outperform other precious metals.
But gold itself is looking like less of a safe bet than it once was. As expectations for a fresh round of quantitative easing have receded, prices have surrendered gains and are now little better than flat on the year.
As a smaller and less liquid market than gold, silver tends to outperform when precious metals prices are rising, but underperform when they fall.
Slackening appetite from investors would seriously undermine silver.
The dislocation in the valuation between the very sharply rising gold price and silver, which underperformed for 10 years, was so large that the investment community jumped on the bandwagon and drove its price high within a year.
Now we are back to the normal situation, where silver behaves much more like industrial metal. Investors are no longer looking at it as a safe-haven asset. It will probably underperform for a good few years. From a fundamental point of view, silver's foundations are looking increasingly shaky. Photography off-take, which accounted for 213.1 million ounces of annual demand in 2001, slumped to 72.7 million ounces by 2010.
Newer drivers of industrial demand such as solar cell manufacturing are also losing buoyancy. In Europe, historically the largest photovoltaic market, subsidy cutbacks from cash-strapped governments are likely to cut the pace of solar growth.
And questions over the role of China, the largest consumer of many key commodities, are increasing.
One of the drivers last year was private investor buying of silver in China Once they got their fingers burnt, they haven't been back. Record-high mine supply and questions over demand have left a long shadow over silver's fundamentals Silver's volatility is probably going to provide an opportunity for investors to push it higher Silver hit a record near $50 an ounce a year ago on the back of rallying gold prices --------------------------------------------- Invest Mutual Funds Online
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| Tax benefits on donations to charity Posted: 11 Apr 2012 10:27 PM PDT Download Mutual Fund Application Forms
WHILE making donations to a fund or a charity working for a cause can bring you inner happiness, there is something more to it. The income tax department recognises donations made by individuals towards a good cause and allows tax benefits for them.
These donations, which are deductible from taxable income, could be exempt for either 50 per cent or 100 per cent of the amount, depending on the fund or charitable institution to which the donations are made. Donations that are eligible for 100 per cent deduction include the Prime Minister's National Relief Fund and the National Defence Fund, to name a few. Donations eligible for 50 per cent deduction include the Prime Minister's Drought Relief Fund, National Children's Fund and any other registered funds or charitable institutions.
After making the donation, the fund or charitable institution will provide a receipt to the donor on which its eligibility under section 80G is mentioned in addition to its name and address, the name of the donor and the amount donated. This receipt serves as proof of the donation. Also, the receipt issued by the fund or charitable institution mentions the registration number issued by the income tax department under Section 80G and also the validity period of the registration.
The receipt is not required to be attached while filing an income tax re turn, where the individual has claimed a deduction. Nevertheless, the receipt should be kept safely in case of any future enquiry by the income tax authorities. Conditions for tax deduction: It is to be noted that these deductions are available for donations made in cash or cheque only. Donations made in kind (like providing food, clothes, blankets and medicines, among others) are not eligible for any deduction.
Also, donations that are made to foreign trusts do not qualify for deduction under section 80G.
Although, there is no restriction or upper limit for these donations, the tax benefit will be restricted to a maximum of 10 per cent of the gross total income of an individual, as specified under the Act.
In case of donations made by salaried individuals, which are eligible for deduction under Section 80G, those donations are not tax deductible from their salary by their employers while computing tax deducted at source (TDS). The tax benefit on such donations will have to be claimed by the individual on his income tax return. However, in cases, where the salaried individual has made donations to the Prime Minister's National Relief Fund, the Chief Minister's relief Fund, the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund through his employer, in which the deduction available is 100 per cent, the employer has to consider the deduction for such donations while computing TDS.
Besides making a donation to funds or charitable institutions already covered under section 80G of the Act, donations made towards scientific research, rural development and political parties are also eligible for tax deductions and are separately covered under the Act. Therefore, philanthropy may not only benefit others but also the donor, if the beneficial tax provisions are kept in mind. --------------------------------------------- Invest Mutual Funds Online
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| Understanding before investing helps to make right decision Posted: 11 Apr 2012 09:48 PM PDT Download Mutual Fund Application Forms
THERE are several aspects that an individual should consider while starting out on their financial journey in life. There are a lot of youngsters who have started earning or who are looking to be a part of the investment structure in the country.
At the same time, there are others who have now decided to be serious about their money and there are some things that they can follow so that they are able to make the most out of the situation. This will help them to ensure that they do not fall prey to some common mistakes that often occur.
Start savings and investments: There are a lot of details that a person looks at when they start out on their financial journey, but most of them are on the spending side as there are many expenses to be undertaken.
However, it is also necessary that there are some savings and investments that are also made because this will help in building some corpus for further use.
In case such a step is not taken, then there would be a position, wherein, the individual could find himself in a spot of bother when they might not have the necessary income to be able to maintain the lifestyle that they have become accustomed to. It is, therefore, necessary that some amount, preferably 15-20 per cent of the income, is set aside and invested wisely so that the future is taken care of.
Take loans that you can pay: There are a lot of occasions when there are some amounts available in the form of loans or easy credit.
The credit might be present in the form of a person loan or even a larger credit limit that is available on a credit card. In such a situation, the individual has to ensure that they are careful in actually using the benefits that are provided to them. This is essential because having some benefit just does not make this an affordable thing and hence, the use has to be restricted to all those items that can be paid back.
In this sense, if there is going to be heavy pressure in paying back the loans, then this should not be taken, and avoiding this should be the first priority rather than looking for ways later to get out of the mess that has been created.
Keep a good credit record: There will be lot of times when there are some borrowings that are undertaken by the individual. It is the responsibility of every person to ensure that these are repaid on schedule, in a proper manner, without leaving any amount outstanding. This will ensure that the credit record of the person is good right from the very beginning and that it will continue to improve building a good track record as time goes by.
Understand and then implement: In the world of finance, not knowing something is not a valid argument for taking a wrong decision and, hence, the person has to ensure that they have looked at all the details related to every activity.
This will ensure that there is no cause for disputes as well as no other problems arise on account of the fact that some detail was missed out, leading to a financial loss. Also, any disputes that arise have to be settled in a proper manner and, hence, there cannot be a situation, where, a person ignores something because this will not result in the problem actually going away. A proper understanding will help the individual in making the right choices. ----------------------------------------- Invest Mutual Funds Online
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| Removal Of Stocks From F&O Can Be A Problem For Investors Posted: 11 Apr 2012 08:46 PM PDT Download Mutual Fund Application Forms
Things got worse for Kingfisher Airlines investors. If the yearto-date fall of the share price from `66 to `24.55 wasnt enough, the stock is going to be out of the futures and options (F&O) segment from January.
While genuine investors, who own the stock, will not get directly impacted, there will be some volatility seen as January approaches. The direct impact would be that there could be some more price fall, as traders rush to square off positions.
More important, when a stock is taken out of the F&O segment by exchanges, it is a clear indication that it has suffered serious loss in market capitalisation and there are liquidity issues as well. Both are not good indicators for investors holding the stock.
The most important criteria for stocks to be included in the F&O segment are market capitalisation and liquidity. Typically, in bear markets, when the stock prices start falling, the market caps take a beating and, consequently, stocks are excluded from the space. In April 2009 when the Sensex was floundering at 11,000levels, the National Stock Exchange took 50 stocks off its F&O list.
What is more, once off the list, they would not be re-introduced in the segment for at least a year. After which, the stock would have to fulfill criteria laid down by the exchange for three consecutive months to be reconsidered.
Investors who dabble in the F&O market may not feel comfortable, as there would be some uncertainty on price movement. Your choice will depend on what call you have on these stocks. If you think that the share price is likely to fall further, then it is better to square-off your position as soon as possible.
Besides, if you wait till the January expiry, you may be caught off-guard if there are a lot of investors squaring off positions, sending prices tumbling. A mass squaring off on positions or contract settlements could lead to prices being driven down.
Other stocks taken off the F&O segment are Gitanjali Gems, Great Offshore, KS Oils and Jindal South West. For these stocks, most traders have exposure to futures contracts rather than options. The latter are quite illiquid. Options contracts are usually held in frontline stocks and not actively traded. Those holding futures contracts can follow these strategies.
BUY PARTICIPANTS: If you have bought a futures contract, then you presumably have a long-term view on the stocks performance. In this case, if you have the funds, investors can square off the position in the futures market and take delivery of the equivalent quantity in the cash market.
SELL PARTICIPANTS: If you have sold a futures contract and hold an equivalent quantity of shares in the cash segment, you are well hedged. Assume you hold 10 shares of 100 each and have sold the same amount of shares in the futures market. If the prices of the shares move up, then you will make profits in the cash segment but a commensurate loss in the futures segment. The opposite will happen if the share prices fall. Therefore, to exit your sell position without any losses, you can sell off the shares in the cash segment and square off your futures position. -------------------------------------------- Invest Mutual Funds Online
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| Check your credit score online Posted: 11 Apr 2012 07:52 PM PDT Download Mutual Fund Application Forms
CREDIT Information Bureau (India) Limited (Cibil) will now provide customers their credit reports and scores online. Individuals can now access these through a three step process.
"The physical generation of a report takes 10-12 days. But the online process would shorten the duration to about two days," said Arun Thukral, managing director, Cibil. The report can be accessed by customers as soon as the customer authentication is over, and the payment is received, he added.
In the first step, customers would have to fill an online form, with personal details like name, licence number and contact details. The second step would involve a payment of `450, by way of debit, credit cards, net banking or cash cards.
The third step would involve authentication and this would pose five system-generated questions. To prove their authenticity, customers would have to answer at least three questions. The questions would be objective, and would also carry a few options.
"The questions would be very personal, and can be answered only by real customers," said Thukral. The options would include correct answers, which would be taken from the credit report of the customers and the wrong answers would be auto-generated, he added.
In case the customer fails to answer three questions correctly, he/she would have to go through the normal procedure of sending the hard copy of the documents to complete the know-your-client procedure. Also, while the normal procedure of report generation by Cibil allows customers to pay 142 and just get the report without the score, the online procedure does not provide this option, and the customers would have to pay `450. Cibil is working on generating a credit index for companies as well. --------------------------------------------- Invest Mutual Funds Online
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| Posted: 11 Apr 2012 09:49 AM PDT Download Mutual Fund Application Forms
THERE is a bewildering range of choices available today in the child insurance plan market. There are terms bandied about -triple benefits, premium waiver and guaranteed benefits, to name a few.
Financial planning doesn't come naturally to us and when we are bombarded with such jargons, our instinct is to procrastinate (which by the way comes naturally to us). So, what should parents do?
Child insurance plans are designed to serve these needs and, if chosen well, are a solid long-term vehicle to manage a child's future. These plans inculcate a sense of discipline among parents to invest systematically over the long term. These investments can be made in funds that can earn returns that match the escalating costs of education. Finally, these plans have options that protect these future plans in the unfortunate event of death of the parents.
So, how should you choose an insurance plan for your child? Here are four simple tips: Start planning and invest for your child's future as early as possible: Insurance companies offer plans with maturity benefits structured to coincide with the child attaining 18 years in age or `timed' release of pay outs at critical life stages from 18 years onwards. These plans offer a long horizon to invest, which helps you systematically build a corpus. So, quantify your goals with a certified financial planner and choose a plan that encourages such long-term behaviour.
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| FMP Indexation Benefit and Indexation Calculation Posted: 11 Apr 2012 09:01 AM PDT Download Mutual Fund Application Forms Indexation only comes into picture when you incur capital gains, and that's because indexation helps to take into account the effect that inflation has on an asset purchase.
If you buy a house in 1985 and sell it today, there will be a huge difference in price, and it's not fair to tax you the whole difference because a large part of the difference is simply due to inflation.
Indexation makes sure that inflation is taken into account while calculating capital gains, and you are only taxed on that part of your capital gains which are over and above the price rise caused by inflation.
The table that is used for this is called the Cost Inflation Index and that's calculated by the RBI based on the inflation numbers.
Here is a link that shows you the Cost Inflation Index (CII) numbers from 1981 – 82 to 2011 – 12. The CII for the financial year 2010 – 11 is 632 and for 2011 – 12 is 711.
The CII is used to calculate what's called the indexed cost of acquisition and this number bumps up the original price to match inflation.
The way you calculate the indexed cost of acquisition is by using the following formula:
Original purchase price x (Index value in the current year / Index value in the original year)
In the case of FMPs, the original purchase price is nothing but the money you invested.
Let's say you bought a FMP of a maturity of 370 days with Rs. 1 lakh in FY 2010 – 11 and sold it in FY 2011 – 12. To calculate the indexed cost of acquisition you will input the numbers in the above formula and get the new indexed value.
1,00,000 x (711 / 632) = 1,12,500
Let's say after 370 days – the FMP rose to Rs. 1,12,500 which means it gained 12.5% in just over a year. To calculate the capital gains – you will need to subtract the indexed cost of acquisition with the selling price.
In this example both are the same so you won't end up paying any tax.
There are a couple of things to keep in mind about this – indexation only works for long term capital gains which accrue after you have held the FMP for a year, so that's why you see a lot of FMPs that have a maturity period of slightly over 365 days.
Secondly, what Direct Tax Code eliminates is the double indexation benefit of FMPs which meant that you could buy something in March 2010 and sell it in April 2012 and make it span across two financial years. The DTC won't allow this, but as far as I know FMPs will still be tax efficient when compared with fixed deposits because of the way indexation works.
Hemant has already done this comparison so you can see how the FMP returns compare with fixed deposit returns there.
Finally, Vijay brought up the point that if the maturity of the FMP is less than a year then it's better to opt for the dividend plan, and if it's greater than a year then it's better to go for the growth plan and that's because dividend distribution tax is lower than short term capital gains which become applicable if you own the FMP for less than a year. --------------------------------------------- Invest Mutual Funds Online
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| Measure Your Risk taking Ability before Invest Posted: 11 Apr 2012 08:10 AM PDT Download Mutual Fund Application Forms
Making the right investment choices is never easy. Ascertaining your risk appetite rightly should help. The market regulator, Securities and Exchange Board of India (Sebi) agrees. If the recommendations from its concept paper on 'Regulation of investment advisors' is implemented, investment advisors will have to create risk profiles of their clients before dispensing suitable investment advice. However, not all advisors seem excited about the prospect. Should investors, then, take the exercise seriously? Risk profiling, based on a set of queries answered by the client, is already practiced by most advisors (see box on queries). The client's response to possible investment scenarios and their return helps gauge risk perception. This, when considered with respect to one's age, current and anticipated assets, liabilities and goals helps determine the investor he or she is (aggressive, balanced, cautious). This, in turn, determines the ideal asset allocation for the person.
For instance, Assam-based businessman Binod Somani, 36, has an investment horizon of 12 years before needing funds for his daughter's education. His risk profile showed him to be a 'cautious investor' and, yet, he wants returns that will beat inflation. As a first time mutual fund investor, his financial planner asked him to invest in large-cap equity diversified funds. Though one-year returns from such funds have been negative, the longer term (five years) return has been 4.79 per cent.
Detractors of risk profiling say there is a difference between the person's risk perception and his actual risk-taking ability. Unless the planner bridges that gap, he won't be doing justice to the client.
For instance, take Arvind Trivedi, 25, profiled as 'very aggressive'. Trivedi has no dependents and believes he should be investing heavily into the equity markets. However, his actual risk taking ability is much lower, since he plans to settle down in the next three years. His financial planner has asked him to limit his direct equity investments to 1015 per cent of monthly income while investing in mid and small-cap and multi-cap funds. Three-year average returns on these were 28.64 and 24.93 per cent.
A person's risk perception may vary depending on external factors like market conditions or even the way the questions are framed, 'Would you mind if your investment fell from `1 lakh to `80,000 in a year, but could grow to Rs.1.65 lakh after six years?' However, the same client doesn't mind the slow pace at which his investment will grow and answers in the affirmative when the question is worded differently, 'Would you mind if your investment grew by 65 per cent in six years?', not realising both questions mean the same.
Similarly, those tracking behavioural tendencies of investors say, typically, the latter take more risk during a bull run and get risk averse during a bear run. This is exactly the opposite of how it should ideally be. So, a client's answers may be based on either greed or fear, even if the financial planner is asking rational questions.
Some thumb rules include allocating higher equity investments for younger investors and shifting to debt instruments a few years prior to one's goals. But, with each client having his own sets of views and complexities, the rules need tweaking
He advises classifying goals into short term, medium-term and long term to get the right investment tips. Goal-based financial planning would consider the impact of traditional parameters like age, income, dependents on achieving these goals and the risk profile one would see if the client has mitigated his risks related to these goals. Investors are also advised to self-assess their risk perceptions periodically.
Every change in risk perception may not necessarily warrant a change in portfolio.
However, seeking professional help may help allay fears that could otherwise result in impulsive investment decisions. Classify goals into those for the short, medium and long term to arrive at a risk mitigation plan, advise experts
A risk profile questionnaire rates responses on a scale of high, medium, or low degree of concern for situations such as:
Your portfolio failed to achieve target rate of return for your investments.
Your portfolio was worth less in "real" values due to inflation.
Your portfolio needs to wait for two-three years to recover from market losses.
You need to sell an investment at a loss for an emergency requirement. Your neighbour/relative took more risk with their investments but generated better returns than you.
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