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With rising interest rates, both EMI and loan tenure may go up to unmanageable levels A better solution will be to make home loans part of priority sector lending for PSU banks

THE next time you plan to take a home loan for buying your dream home, be doubly cautious and careful. And if there is a running home loan and if you are not monitoring it on a regular basis, then you may eventually end up passing on the loan burden to your grand children. Believe it or not, in this era of increasing interest rates, such a precarious situation can actually come up and ironically this can happen "legally".

Consider this. Someone who had taken a loan of say Rs 20 lakh for 20 years at an interest rate of 9.5 per cent in 2006, may now have to pay for another 32 years and that too at an increased interest rate of 15 per cent. Not only have the EMIs gone up, but the tenure has also been increased from 240 months to 458 months.

Interestingly, while initially sanctioning a home loan, most of the banks take into account factors like years of service left, how long would the borrower remain creditworthy and so on. However, there seems to be no such mechanism followed by the banks while reengineering the debt or readjusting the tenure against increased interest rate. If it is assumed that the person, who was given a home loan for 20 years, would actually reach the age of super annuation at the end those 20 years, extension of his tenure from 240 months to 458 months would mean one would have to go on paying EMIs even 18 years after his retirement.

Even if this reminds you of the days of mhajans or private money lenders, it may not be a case of catching the banks on the wrong foot, because there must have been some fine prints somewhere within the hundreds of pages of documents one signs before getting a loan.

The banks would say that they have three options: to increase the EMI amount, to increase the tenure or a mix of both to get the loan adjusted against an increased interest regime. Therefore from the banks' perspectives, it is perfectly legitimate to increase the EMI amount and tenure both.

The problem lies in the fact that you are only paying interests in the initial five years. Even after paying your EMIs without any default for five years, you would see that your principal outstanding remains the same. Unfortunately, here there are more ways than one to protect the interest of the banks but there is no mechanism to safeguard or protect the interest of the borrowers.

There are options like paying some lump sum amount to bring down the tenure or prepayment or foreclosure of the loan, if you can afford to do that. RBI has also issued instruction that banks cannot impose any penal charges for prepayments. That may well be still only on paper. There has to be some monitoring mechanism to see if all banks are adhering to this instruction.

Once the apex bank ensures that the banks have actually done away with penal charges on pre-payment of home loans, then solutions for a common borrower would be to let his/her loan be taken over by some other bank at a lower interest rate or to insist that his/her existing bank brings down interest rate on the basis of his payment track record.

Actually PSU banks are always a much better choice when it comes to home loans. But since they take much longer time in processing and approval, people move to private sector banks.

Therefore a better solution will be to make home loans part of their priority sector lending for PSU banks. Let there be a priority sector target for disbursement of home loans in case of PSU banks. Then things would move faster.

While that may take some time to come through, the borrowers now have an option to opt for a discounted home loan, courtesy Power Circle, the Mumbai head quartered fledgling company, which comes up with a platform to offer additional discounts for purchasing almost everything electronics, real estate, cars, apparels, watches, dining outs at restaurants, entertainment and what not.

With growing competition, choices before consumers are increasing. Consumers are looking for discounts for buying virtually anything and everything.

Manufacturers and retailers are forced to oblige them. We thought if this is true with any product, why shouldn't this be true with loan products? And since we have been closely associated with the real estate sector and with housing being one of the prioritised categories for the consumers, we thought it appropriate to assist home buyers with our extra discount range

Our model is simple. We are a consumer group. We safeguard the interest of the consumers/customers. We don't charge anything from the consumers. We arrive at a pre-negotiated terms with the vendors and we operate as exclusive partner of a vendor. We pass on a large part of our margins, that we get as exclusive partner, to the consumers .

Unlike DSAs, none from Power Circle is going to bug you. You can connect with them at your sweet will and at your convenience and chose your best home loan deal. And If your home loan can come at atleast 1.2-1.5 per cent cheaper rate, to start with.

For so long you have been enjoying discounts of various degrees for buying FMCG, white goods and so on. Time to check out if this new mechanism works well for aspiring homebuyers.

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Invest Mutual Funds Online

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Tax Free Bonds and Tax Saving 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: 13 Apr 2012 04:24 AM PDT

Tax-Free Bonds	Tax-Saving Bonds
Investment under tax free infrastructure bonds is taxable	Investment under tax saving infrastructure bonds is taxable (deduction upto Rs 20,000 allowed for FY 2011-12)
Interest earned on tax free infrastructure bonds is not taxable (tax free).	Interest earned on tax saving infrastructure bonds is taxable annually.
Tax free bonds offers reasonable returns	Tax saving bonds offers better returns

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Invest Mutual Funds Online

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Equity Investment is not for risk averse 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: 13 Apr 2012 04:00 AM PDT

Retail investors turn away from equity investments as various factors are affecting returns and instruments like bonds and debentures have become more attractive

YOU can double your profit the day the stock is listed sir. This was in 2008 when the IPO of the power company belonging to a major business house was the talk of the town. He invested Rs 45,000 to pick up 100 stocks of the company at Rs 450 per share.

But, with stocks trading in the range of Rs 70-120, there is barely any chance for him to even recover his investments, forget doubling it. Not willing to sell at huge losses and not making money either, these days he does not even log into his demat account.

That has been the state of mind of many retail equity investors in India. All those who invested in the hope of reaping huge returns during the bull run of 2005-08, are now sitting on mounting losses or have exited the markets entirely.

The increasing influence of various global factors in the performance of Indian stock markets and the emergence of other attractive instruments like bonds and debentures has resulted in distrust of the retail investor in equity investments.

Many retail demats are dormant: The number of retail demat accounts have largely remained stable over the past few years. Many retail demat accounts are inactive, and there is hardly any trading happening in those accounts.

There were times during the bull run, when stock broking and securities services firms clocked net profits of over Rs 100 crore. These days, there is hardly any money to be made in brokerages and commissions, experts say, and broking firms are also diversifying.

Companies like India Infoline, India Bulls and Religare, which started off as broking firms, get a majority of their revenues from diverse business like mortgage, real estate, power and gold loans.

An IPO route is usually the most preferred route for new investors to enter the equity markets. There were times between 2005 and 2007 when the entire retail portion of 35 per cent in an IPO would be fully subscribed. Now the retail portions of most of the IPOs go unsubscribed.

Bank deposits, bonds, debentures become attractive: In India, bond markets usually perform well only when the equity market is

low and interest rates are high. With stock market performance being highly volatile and uncertain, this year turned out to be a particularly good year for tax free bonds, tax-saving bonds and retail non-convertible debentures. The high interest rate scenario also urged many new companies to raise public funds offering attractive interest rates.

According to National Securities Depository (NSDL), the value of investments in bond and debt instruments as on March 24, has been Rs 102, 20,453 million, against Rs 53,342,168 in the equity markets, showing the clear shift in favour of debt instruments.

Will RGESS bring back retail investors to equity markets? One of the most talked about announcements in the recent Union budget has been the Rajiv Gandhi Equity Savings Scheme (RGESS), which promises a 15 per cent tax deduction for an investment of up to Rs 50,000 by a new investor in the equity markets.

The move that was intended to encourage retail investors to enter the equity markets has received thumbs down from broking firms as well as mutual fund managers.

Though the intentions behind launching the scheme is laudable, the scheme has a major lacuna.

A first-time retail investor should ideally follow the mutual funds route to invest in the equity market rather than invest in shares directly. Mutual funds offer a diverse basket of investments and are managed by experts.

How can one expect a first time retail investor to choose wisely three to four stocks from among the 7,000 odd stocks listed in the market today.

Apart from the ambiguity surrounding the definition of the 'new investor' to whom the tax deduction would apply, financial experts also question the rationale behind offering tax breaks for equity investments.

People invest in equity only for high returns and not for tax benefits. What is the point in getting a tax-deduction if your investment has shrunk.

There are retail investors who have seen various ups and downs in the equity market, believe in the markets and are hanging around. And there are those who believe it is a good time to make some good buys as the time is ripe and valuations are cheap. There are also moments like the Coal India IPO, which resulted in a sudden spurt of retail demat accounts being opened to subscribe to the IPO. But, will the common investor come back to the equity markets in a big way like he did in 2005-07? Most experts doubt.

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Motor Insurance - How to Get Best Deal?

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: 13 Apr 2012 02:30 AM PDT

Save 20% on your car insurance. You may have noticed this or similar such claims screaming for your attention from the wayside hoardings on your drive to office. Instinctively, you ask yourself: Really? Is it possible?

Typically, you would have forgotten all about it by the time you reached office. But, if you had fallen for the claim, would you have managed to reduce your motor insurance premium by 20%? Not really, say insurance experts. If you are buying a new car, it is definitely easy to get a "very cheap" cover. However, if you are shopping for a cover for your old car, don't look for hefty savings, they warn. You can instead try your luck online for a small saving, they say.

Some insurers offer the best insurance rates to customers going online through the website. Generally, the savings quoted in advertisements are in comparison to the premium offered by other insurers for the same vehicle.

As for those fabulous offers that come with the new car, it is a different ballgame. Car manufacturers, dealers and insurers bundle offers, offering free insurance or subsidised 'one-rupee' insurance covers as a part of the package deal.

With car sales dipping by the day, car manufacturers are aggressively marketing these bundled offers to incentivise prospective car buyers. However, the story is totally different when it comes to renewing your car insurance cover. This is because a number of factors, such as the loss experience, make and model of the car, RTO location, fuel type and so on come into play in determining the premium amount.

Your claim history also has a say in the premium amount. If you haven't made any claim in the previous years, then you get a benefit from the insurance company in form of a no-claim bonus (NCB). If you are a good driver with no or less claims history, you still stand a good chance. However, you can try your luck online and try to get multiple quotes for car insurance to see whether you can save some money.

Cash In On Web Offers

Insurers say online insurance covers are cheaper by at least 5%. The logic is simple. The online medium lowers transaction costs for the insurance company and the company passes on this benefit to the customer in the form of lower premium rates.

"For renewals, one can look for quotes from multiple insurance companies. Some of the companies offer the best quote when customers go online," says Amitabh Jain, VP - customer service (motor), ICICI Lombard.

Insurance aggregators have made the task easier for car owners to get multiple quotes from different insurance companies. These portals, such as Policy Bazaar, Click2insure, Insurance Mall, etc, which are just like travel portals, give premium quotations based on the make and model of a car.

Unlike a standalone agent who represents a particular insurance company, an aggregator collates information of different insurers. If an individual wants a cashless claim for his Hyundai car, an aggregator can guide him to HDFC Ergo and a Maruti car owner to National Insurance. We are in a position to guide the customer by mapping his needs and guide him to the right product.

This will help you identify the best insurance deal available for the make and model of your car. Besides aggregator websites, you can also check with a couple of authorised service stations to get an idea as to which insurer offers the best deal for your car's make and model.

However, the initial premium quotes given by the aggregator is based purely on the make and model of the car. The final quote may vary based on finer details of the car. Once you identify the insurer offering the cheapest insurance deal, cross-check the final price offered by the aggregator and the company website before purchasing the policy.

You can renew your policy online even if you would have originally bought a policy from your car dealer. Like a first-time buyer, you have to key in the relevant information and sign up for the policy that suits your requirement. The online shopping website will courier the scanned copy of a cover note and subsequently replace it with the original policy document. The cover note is the actual proof in your hands till you get the original document.

Most of these websites have secured payment gateways to carry out online transactions. Also look for "https" in the URL address of a website — the 's' indicates the site is secured.

Check For Tie-Ups With Neighborhood Garage

If you frequent the garage/service station in your neighborhood for regular servicing, you can check out the premium quotes offered by those garages in tie-up with insurers.

Often big dealers have tie-ups with specific insurance companies and become a part of their cashless network. In such cases, the garage owners/employees themselves take care of issues related to claim settlement because of the nature of their professional relationship.

The flip side, however, can be that they may overcharge you in the final bill which will add some loading to your renewal premium.

In such cases, you can seek an independent online premium quote from the insurer who has tied up with the service station. You may benefit from lower rates and still enjoy the benefits of the tie-up arrangement between the service station and the insurance company.

Compare Price And Features

Don't just settle for the cheapest cover available. Many insurance policies look similar, but there are a few important factors you should pay attention to.
For example, you should not opt for lower insured declared value (IDV) in a bid to opt for lower premium. IDV is the compensation you get in case of theft or total loss of vehicle due to accidental damage.

Ideally, the IDV should not be less than 15% in the second year and 20% in the 3rd year.

Secondly, you should look at the claims history of the company. Car insurance being claim intensive, car owners have to look for the insurer's experience and the claim settlement history. In fact, rating agencies have rated insurance companies based on their claim-settlement history.

Factors that Increase Car Insurance Premium

1 Diesel car

Reason: People use it for longer drives, on highways and as commercial vehicles due to cost efficiency. This increases the risk of an accident

2 LPG and CNG car

Reason: It has an element of risk, especially if the LPG/ CNG kit is not factory-fitted

3 Geography and RTO registration

Reason: The northern belts of the country as well as some belts in southern India are categorised as risky zones based on claims experience and history. Hence, vehicles from these parts of the country are subjected to relatively high premium

4 Imported car or spare parts

Reason: Lower cost efficiency if the service station has to import spare parts

5 Rash driving and frequent claims

Reason: You lose out on no-claim bonus and the insurer will load the premium amount to factor in the risk factor

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Invest Mutual Funds Online

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Max New York Life Partner Plus

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: 13 Apr 2012 12:16 AM PDT

Max New York Life Partner Plus is basically an endowment scheme that also ensures a regular income to the policyholder post retirement. The scheme provides for an annual payout of 7.5% of the sum assured to the policyholder from 61 years of age to 75 years or the death of the policyholder, whichever is earlier. The policyholder can choose a premium-paying term of 3, 7, 10 or 20 years.

Key Features

Max New York Life Partner Plus not only ensures annual payouts for 15 years but also pays a lump sum amount, equal to the sum assured, to the policyholder on maturity, ie, attaining 75 years of age. The scheme may also pay a certain percentage of sum-assured as bonus from the third policy year onwards. The same, however, is not guaranteed and is subject to the company's discretion.

Policy Benefits

Assuming the age of the policyholder to be 30 years, the premium payable under Max New York Life Partner Plus under different premium paying terms and the resultant maturity benefits are illustrated herewith…

The unique selling point of Max New York Life Partner Plus is the tax-free guaranteed annual payouts in the retirement years that make this product akin to a regular pension product. Unlike other pension products in the market, the policyholder need not convert his/her investment into annuity on maturity. However, with premiums being fairly high, the policyholder will turn out to be an absolute beneficiary provided he/she survives until the age 75, which will ensure receipt of not only all annual payments but also a lump sum receipt on maturity. The nominee here is entitled to only the sum assured on the death of the policyholder. Max New York Life Partner Plus thus suits those seeking a regular pension in the sunset years. Those seeking a healthy life cover may do well to buy a term plan.

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Invest Mutual Funds Online

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e-filing of I-T returns must for those earning over Rs 10 lakh

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: 12 Apr 2012 11:49 PM PDT

THE government has made it mandatory for individuals with income of over Rs 10 lakh to file their tax returns for 2011-12 electronically.

E-filing has been made compulsory for the person who is an individual or a Hindu undivided family, if his or its total income, or the total income in respect of which he is or it is assessable under the act during the previous year, exceeds Rs 10 lakh for assessment year 2012-13 onwards, the income tax department said.

E-filing for such individuals was optional till 2010-11.

Income tax department had received a record number of 1.64 crore e-returns in 2011-12 financial year.

"We have done it to encourage people to go for e-filing of returns. This makes the entire process faster. However, digital sig nature is not mandatory for them," a finance ministry official said.

At present, business houses with receipts of Rs 60 lakh and professionals with income of Rs 15 lakh are mandatorily required to e-file their return with digital signature.

As on March 31, there were 19,684,592 taxpayers who had registered for e-filing. The new tax returns forms also ask assesses to furnish details of donations made for claiming tax deductions.

Besides, the government has made it mandatory reporting of assets held by individuals abroad, including financial interest in any entity, overseas.

Furnishing of return by such a resident would be mandatory irrespective of the fact whether the resident taxpayer has taxable income or not, the finance minister had said in the budget.

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Invest Mutual Funds Online

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SBI Mutual Fund new debt fund - SBI Debt 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: 12 Apr 2012 11:05 PM PDT

SBI Mutual Fund has announced the launch of new fund offer (NFO) of SBI Debt Fund Series 366 Days -1. The new fund offer would be open for subscription from April 16.

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Invest Mutual Funds Online

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Fixed deposits of NBFCs good alternative to banks

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: 12 Apr 2012 09:17 PM PDT

Interest ranges from 9.5-11%, which is more than what banks offer

FIXED deposits (FDs) being offered by several non-banking financial companies (NBFCs) at attractive interest rates are an opportunity for those looking to cash in on the high interest rate regime.

Companies that are offering FDs include Dewan Housing Finance, Mahindra Finance, Shriram Transport, HDFC, Sundaram Finance and First Leasing Company of India.
Matter of interest: FD rates offered by NBFCs range from 9.5 to 11 per cent, which are more than FD rates offered by banks. FD rates offered by banks for more than one-year tenure are in the range from 8.25 per cent to 9.25 per cent.

Attracted by higher rates, retail investors are subscribing to these FDs.

Corporate FDs are popular with subscribers, although, people are not going whole hog because bank FDs have also become attractive. Still, there is a difference of 1 to 1.5 per cent.

He said FDs were being lapped up by investors as the interest cycle has peaked. It is a good idea for those who want to lock in now, whether it's banks or companies' FDs.

Players: State Bank of India's FD rate for one-year to 10-year periods is at present 9.25 per cent, while private sector ICICI Bank's FD rates vary between 8.25 and 9.25 per cent for deposits lower than 15 lakh.

Retail interest in FDs: For Sundaram Finance, which has one of the largest retail deposit bases among NBFCs in India with 2,36,000 depositors, the renewal rate for deposits is more than 78 per cent, according to the company.

Sundaram's total deposits are over Rs 1,094.91 crore.

HDFC has a customer base of over 10,00,000 depositors and over Rs 25,000 crore in deposits.

Added advantages for privileged customers: Dewan Housing Finance (DHFL) presently offers one of the highest rates for FDs at 10.50 per cent for one-year to seven-year periods for an amount below Rs 25 lakh.

DHFL 's Aashray Deposit Plus also offers Rs 1,00,000 free accidental death insurance for all depositors.

The rates offered are higher for amounts above Rs 25 lakh. DHFL offers 10.75 per cent to ordinary customers and 11 per cent for privileged customers.

Payment of interest: All these companies pay interest accrued to investors every quarter or month directly to the customers' bank account through the electronic clearance system (ECS) on a fixed date. Still, it is important to check the company's past record in making timely interest payments before investing.

Interest payments are made on 25th of the month every quarter by Shriram Transport.
Check ratings before investing: It's also important to check the rating of the FD before investing money.

A company FD with AA rating can be considered to be a good investment.

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Invest Mutual Funds Online

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How to select a 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: 12 Apr 2012 08:33 PM PDT

Mutual funds offer the most convenient way of investing in equity, debt and money markets. The increased participation of Indian investors bears testimony to the fact that there is a widespread realisation of the same. Also over the years, the Indian mutual fund industry has grown manifolds, not only in terms of size but also in terms of offerings. While on one hand that is good; the increased number of offerings has also given rise to a state of dilemma in the mind of investors. They often get confused when it comes to selecting the right Mutual fund from the plethora of funds available. And even worse, many investors think that 'any' mutual fund can help them achieve their desired goals.

The fact is, not all funds are the same. There are various aspects within a fund that an investor must carefully consider before short-listing it for making investments. In this article we highlight some of those aspects.

1) Comparisons: A fund's performance in isolation does not indicate anything. Hence, it becomes crucial to compare the fund with its benchmark index and its peers, so as to deduce a meaningful inference. Again, one must be careful while selecting the peers for comparison. For instance, it doesn't make sense comparing the performance of a midcap fund to that of a largecap.

Don't compare apples with oranges'

2) Time period: It's pertinent for investors to have a long term (at least 3-5 years) horizon if they wish to invest in equity oriented funds. Hence, it becomes important for them to evaluate the long term performance of the funds. This does not imply that the short term performance be ignored. Performance over the short term should also be evaluated; however, the focus should be more on the long term performance. Besides, it is equally important to evaluate how a fund has performed over different market cycles (especially during the downturn). During a rally it is easy for a fund to deliver above-average returns; but the true measure of its performance is when it posts superior returns than its benchmark and peers during the downturn.

Choose a fund like you choose a wife - one that will stand by you in sickness and in health

3) Returns: Returns are obviously one of the important parameters that one must look at while evaluating a fund. But remember, although it is one of the most important, it is not the only parameter. Many investors simply invest in a fund because it has given higher returns. In our opinion, such an approach for making investments is flawed. In addition to the returns, investors must also look at the risk parameters, which in-turn explain how much risk the fund has taken to clock higher returns.

4) Risk: Risk is normally measured by Standard Deviation. It signifies the degree of risk the fund has exposed its investors to. Higher the Standard Deviation, higher the risk taken by the fund to clock returns. From an investor's perspective, evaluating a fund on risk parameters is important because it will help them to check whether the fund's risk profile is in line with their risk profile or not. For example, if two funds have delivered similar returns, then a prudent investor will invest in the fund which has taken less risk.

5) Risk-adjusted return: This is normally measured by Sharpe Ratio. It signifies how much return a fund has delivered vis-à-vis the risk taken. Higher the Sharpe Ratio, better is the fund's performance. From an investor's perspective it is important because they should choose a fund which has delivered higher risk-adjusted returns. Infact, this ratio tells us whether the high returns of a fund are attributed to good investment decisions, or to higher risk..

6) Portfolio Concentration: Funds that have a high concentration in particular stocks or sectors tend to be very risky and volatile. Hence, investors should invest in these funds only if they have a high risk appetite. Ideally, a well diversified fund should hold no more than 40% of its assets in its top 10 stock holdings.

Make sure your fund does not put all its eggs in one basket

Invest in funds with a low turnover rate

The two main costs incurred are:

1) Expense Ratio: Annual expenses involved in running the mutual fund include administrative costs, management salary, overheads etc. Expense Ratio is the percentage of assets that go towards these expenses. Every time the fund manager churns his portfolio, he pays a brokerage fee, which is ultimately borne by investors in the form of an Expense Ratio. Therefore, higher churning not only leads to higher risk but also higher cost for the investor.

2) Exit Load: Due to SEBI's recent ban on entry loads, investors now have only exit loads to worry about. An exit load is charged to investors when they sell units of a mutual fund within a particular tenure; most funds charge if the units are sold before a year. As exit load is a fraction of the NAV, it eats into your investment.

Try investing in a fund with a low expense ratio and stay invested in them for longer duration.

Among the factors listed above, while few can be easily gauged by investors, there are others on which information is not widely available in public domain. This makes analysis of a fund difficult for investors and this is where the importance of taking the help of a mutual fund advisor comes into fore.

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Principal Conservative Growth 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: 12 Apr 2012 09:11 AM PDT

Given the incessant volatility in equity markets, the presence of well-managed balanced funds has become the saving grace for several portfolios.

Balanced funds are equity-oriented hybrid funds having a mix of equity and debt in their investment portfolio. In terms of performance, they generally lag diversified equity funds during the equity market rallies. Nevertheless, a well-managed balanced fund can add significant value to the investors' portfolio, by limiting the downside risk during bearish market phases. These funds are suitable for investors with a moderate risk profile, since they benefit from timely asset allocation, by being invested in a single avenue. Moreover balanced funds have the ability to create wealth for their investors over longer time frames.

Principal Conservative Growth Fund (PCGF) is one such open ended balanced scheme from the stable of Principal Mutual Fund. Launched in January 1998, the fund has completed over 13 years of existence now. The Fund has an objective "to provide long term capital appreciation and regular income by investing in equity and equity related instruments and also in debt and money market instruments."

How PCGF has fared vis-à-vis its peers

(NAV data is as on September 8, 2011. Standard Deviation and Sharpe ratio is calculated over 3-Yr period. Risk-free rate is assumed to be 6.37%)

Chart above depicts that Principal Conservative Growth Fund has been a market performer over 5 year time horizon however in the recent past; it has grossly underperformed not only the competition but also the benchmark.

So far PCGF has not indulged in aggressive churning and has followed a buy and hold portfolio strategy. Being an equity oriented balanced fund, it holds 68% of its assets in equities and 32% in debt and cash as on July 31, 2011. Its debt component is comprised of debt instruments enjoying high credit rating while its equity holdings are predominantly in mid and small caps. Top 10 stocks constitute 32.1% of the total corpus as on July 31, 2011.

Fund Manager Profile

Name of the Fund Manager	Mr. P.V.K.Mohan (Equity)	Mr. Shobit Gupta (Fixed Income)
Total Work Experience	16 years	13 years
Managing the fund since	May-10	May-10
Qualifications	B.Tech PGDM	PGDBA/CFA

PCGF has exposed its investors to a higher volatility and despite its mid cap dominated portfolio, it appears that PCGF has missed an exuberant rally in the mid cap space, in the past couple of years. It has completely failed to accelerate on the returns front. This makes it a high risk-low return investment preposition.

PCGF has been around for more than a decade now and has been managed by an experienced team. Despite of that it has failed to reward even the long term investors on the risk adjusted basis. We believe that conservative investors would be better-off investing in funds which have a proven track record across the market cycles. You should always take an expert opinion before investing, as holding merely funds for the longer duration wouldn't ensure better returns but better fund management coupled with patients surely does

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