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Fund managers suggest retail investors look at monthly income plans (MIPs) in the current market environment. Reason: Fixed income is performing very well (giving nine per cent and more interest) and they believe equities will see an uptrend towards the later part of this calendar year.

MIPs are debt-oriented schemes that generally invest up to 75-80 per cent of their corpus in debt instruments and the remaining in equity instruments. MIPs aim to provide reasonable returns on a monthly basis. The debt investments ensure stability and consistency while the equity instruments in the portfolio boost returns.

Given that 2011 was the year of debt, the returns on MIPs have been decent. For instance, HDFC Multiple Yield has given 10.74 per cent in the past year, ICICI Prudential Blended Plan B Option I returned 8.95 per cent, Birla Sun Life MIP II Savings 5 returned 9.48 per cent and DSPBR MIP gave 9.95 per cent, to name a few. In the same period, the Bombay Stock Exchange Sensitive Index or Sensex lost over eight per cent and the National Stock Exchange S&P CNX Nifty slid around seven per cent, as on March 27, according to Value Research.

MIPs are an all-season product for any type of investor, as it can earn you good returns whether the tide shifts to equities or to debt. MIPs are typically advised to retired individuals because it helps as a source of regular income for them. But, others could opt for the growth option.

MIPs offer both growth and dividend options. The dividends are free in the hands of the investors though the fund house pays a dividend distribution tax of 13.53 per cent. But, if you are looking for regular income, then the dividend option cannot always be relied upon. The payouts would be at the discretion of the fund house and subject to availability of distributable surplus.

Of course, you cannot expect very high returns from this product if equities are doing well as the asset class forms a small part here and hence the returns are capped.

Investors have at least two years horizon to make the most of this instrument. Presently, one stands to gain from MIPs because the market is at the peak of the interest rate cycle and the net asset value (NAV) of MIPs rises due to increase in bond prices. There is an inverse relation between interest rates and bond prices.

However, MIPs only to those with very low risk appetite, as such individuals would not be averse to lesser returns. Those with higher risk appetite will not be satisfied with such returns.

Hence equity-oriented balanced funds will work more in favour of an investor. An aggressive balanced fund can give a better rate of return than an MIP, while giving both the safety of a debt instrument and boost from equities. And, this will appeal to more number of investors. Equity balanced funds have returned a nominal 0.36 per cent in the past year

Another advantage of an equity balanced fund is that it gets treated as an equity fund at the time of taxation. This means if you stay invested for more than a year, your money is fully exempt from tax. Due to higher debt component, MIPs get the benefit of indexation (20 per cent with indexation and 10 per cent without it) if invested in for over one year.

Equity-oriented balanced funds are riskier than MIPs. Balanced funds invest around 60-70 per cent in equities and the remaining in debt

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

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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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Invest Long Term to gain from Mutual Funds

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Posted: 20 Apr 2012 02:20 AM PDT

The current volatility in the stock market may nudge investors to pull out their investments. But past trends show that long-term equity play has not disappointed investors. So it may not be a bad idea to put up a brave front and hold on for a little longer, feel fund managers.

Equity market investors would be more than happy to put behind memories of 2011, which saw many of them booking big losses as major indices lost more than 20% of their value during the year.

Also, sharing this sympathy is the group of investors who chose to invest in the equity market through mutual funds, albeit for a shorter time frame. Prominent equity schemes have lost between 12% and 25% of their net asset value during the year, making many of the existing investors ponder over the futility of mutual fund investing.

However, for those deliberating exiting mutual fund investments, citing last year's failed performance, a hindsight overview of the performance of equity schemes over a longer tenure, is likely to compel them to put their redemption plans on hold.

An analysis of all equity schemes (growth option) that have been in existence for at least 10 years reveals that average returns by these schemes over a 10-year haul has been more than 700%, which is nearly double the return generated by the Nifty during this period. Schemes such as Reliance Growth & Vision, HDFC Top 200, HDFC Equity & HDFC Taxsaver, Franklin India Prima and DSP Blackrock Opportunities are a few of those to have returned more than 1000% in absolute gains to investors during this period. In monetary terms, this translates into a return of more than 1,00,000 today for every 10,000 invested in any of these schemes in 2001.

This 10-year investment tenure includes market rally that began in 2004-05 until the end of January 2008, taking the Sensex from levels of 5000 to 21000, the severe meltdown in 2008 and the dramatic recovery in 2009, not to forget the downturn seen in the current calendar year. Despite these odds, those with strong conviction to stay put with their investments, have undoubtedly been rewarded generously.

The kind of returns generated by these equity mutual fund schemes are far more superior to those generated by traditional savings instruments such as the Public Provident Fund or tax-free bonds issued from time to time and carrying an investment tenure of 10 to 15 years.

While there is no denying that traditional savings instruments carry limited risk and offer guaranteed returns; equity schemes, though high on risk, have also known to handsomely reward risk takers. It is, however, up to the investors to cap that risk that they would like to partake while investing in equities.

To illustrate, schemes like Franklin India Bluechip is famed as a follower of traditional investment philosophy to simply invest and hold stocks of popular large-cap, blue-chip companies, without taking undue market risks. This scheme has returned about 940% absolute gains over the past 10 years. While these returns may not appear as ambitious as 1850% absolute gains clocked by Reliance Growth since December 2001 till date, they are nevertheless more than sufficient to take care of the appetite of conservative investors from the equity market, provided these investors are ready to stay invested for a longer time frame.

Long term investing is the key to make money in the equity market and this fact has been reiterated not only by investment advisors and fund managers but also the noted investment guru Warren Buffet who has said,
"I never attempt to make money on the stock market. I buy on the assumption that they would close the market the next day and not re-open it for five years."

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs

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

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

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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Invest Mutual Funds Online

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What is a tax deduction?

Posted: 20 Apr 2012 01:06 AM PDT

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1. What is a tax deduction?

A tax deduction is simply an item that helps you reduce your taxable income by the amount of the deduction. So by utilizing that particular deduction, you can reduce the amount of income tax by reducing the amount of your taxable income.

For example: If you have a taxable income of Rs. 2,50,000 for the financial year, and you invest Rs. 70,000 in PPF and Rs. 30,000 in Equity Linked Savings Schemes, then your taxable income is: Gross Taxable Income: Rs. 2,50,000

Deductions:
PPF: Rs. 70,000
ELSS: Rs. 30,000
Total Deductions: Rs. 1,00,000
Net Taxable Income: Rs. 1,50,000

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Best Performing Mutual Funds

Largecap Funds:

DSP BlackRock Top 100 Fund

ICICI Prudential Focused Blue Chip Fund

Birla Sun Life Front Line Equity Fund

Large and Midcap Funds

ICICI Prudential Dynamic Plan

HDFC Top 200 Fund

UTI Dividend Yield Fund

Mid and SmallCap Funds

Reliance Equity Opportunities Fund

DSP BlackRock Small & Midcap Fund

Sundaram Select Midcap

IDFC Premier Equity Fund

Small and MicroCap Funds

DSP BlackRock MicroCap Fund

Sector Funds

Reliance Banking Fund

Reliance Banking Fund

Gold Mutual Funds

Relaince Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund

HDFC Gold Fund

Consider Rate of Inflation when Deciding Life Insurance Cover

Posted: 19 Apr 2012 11:53 PM PDT

Inflation is the buzzword these days. However, most people don't include inflation into the picture while reviewing or assessing their insurance needs. While the rule of thumb states, you should look at a life cover of around 12 times your annual income deducting your investment assets plus any liabilities; it is also important to consider another mix - your rising income and increasing inflation. Your rising income will have natural impact on your standard of living and rising inflation will have multiple effects on an individual's consumption. As life goes on, the needs and demands of your family grow too. As the head of your family, you need to fulfill your responsibilities towards your loved ones and provide the comfort which they need. However, life is full of uncertainties and it is a need of every individual to sustain the same lifestyle for their family even when he/she is not around.
Hence, unless you are purchasing a term life insurance policy for only a few years, inflation should be an important consideration; the future value of money should play an important part in your calculations and hence the need to continuously evaluate your life insurance needs.

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

Why is inflation consideration so important in the context of insurance?

Most individuals when they purchase insurance, one consideration that is frequently overlooked is the future value of money. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the domestic economy. From 1969 to 2010, the average inflation rate in India was 7.99%.

Time Factor of Inflation on term life insurance Policies

A term life policy is generally paid over a long period of 15, 20 or 30 years. The rate you pay for term life insurance is by definition usually a fixed rate that you pay over this span of time. Therefore, because the rate of inflation is commonly in the range of about 7 -9% annually, the value of the rupee decreases by this percentage each year. Which means, the purchasing power of rupee is reduced and — is not able to acquire the same amount of coverage benefit in terms of money as the previous year. The premium you pay per month for life insurance today will in rupees terms be the same, but will be less money 10 years from now due to inflation. Take this example – anything that could be purchased for . 10 lakh in 2011 would cost . 45 lakh approximately in 2031 at 8% inflation rate.

Solution: Increasing Term Insurance policies

An Increasing Term Assurance policy may provide the flexibility to increase the 'sum assured' (the cash amount that you receive upon your death) by 5-10% each year to reflect the rate of inflation. Thus it will hedge against the rising cost of living with an option of increasing the sum assured. It brings adequate financial protection at an affordable cost. Most companies also provide this enhanced insurance with appropriate rider options at a nominal extra cost and reward for healthy lifestyle habits like non smoking etc, too.

Who should buy a term plan like this?

If you are concerned about the rise of inflation and you are buying a policy relatively young in life, for example just after starting a family, this may be a suitable option for you. However, it is worth noting that the cost of your insurance premium is also likely to rise to reflect the increased sum assured, so you would need to be certain that you would be able to support this increase. Speaking to a qualified insurance adviser to get full details about this type of policy and discuss whether an increasing term assurance policy is in fact the best policy for your circumstances would be a worthwhile exercise.

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs

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

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

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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How to Insure Parents when not in Group Cover

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Posted: 19 Apr 2012 11:07 PM PDT

With many companies placing curbs on parental cover, one has to look for solutions outside. Some alternatives

An insurance cover from the employer is a huge source of comfort for many individuals. Especially, because it also covers their elderly parents or in-laws. In fact, many people consider the employer's group health policies extremely valuable because otherwise they would find it difficult to obtain a health cover for their elderly parents due to higher cost of premium.

However, many organisations are placing curbs on parental coverage and, in certain cases, completely withdrawing the facility. A recent study released by insurance broking firm Marsh India reiterated this point.

Complete sponsoring of parental coverage by companies has dropped from 51% in 2010 to 40% now. Twenty-five percent of the participants insist on employee contribution now against 20% last year, while 35% of the companies have withdrawn this facility completely. Some companies had capped the benefits provided to employees' in terms of parental coverage and the trend continues this year as well.

The move is prompted by high claims ratio that may push up the subsequent year's premiums. Since claims arising out of parental coverage are likely to be high, companies are scaling down these benefits to reduce costs.

Worse, according to the survey, this trend is likely to continue next year too.

If Your Parents Are Senior Citizens

This is perhaps the most difficult situation to manage. Especially, if they have been entirely dependent on your employer's group cover so far. Buying a fresh cover at this age is bound to be an expensive affair. Also, you may have to be content with a smaller range of benefits you (and your parents) were used to under the group cover.

The first thing that is required while scouting for covers at this age is a change in mindset. They (employees and their parents) have to realise that there may be no perfect product available. They should be open to an imperfect solution.

Individual policies will not cover everything and they need to understand that it is better to have something rather than being without a cover.

If your parents are senior citizens, you should consider buying dedicated health policies offered by companies like National Insurance, Star Health & Allied Insurance and Bajaj Allianz. Moreover, while buying a policy you need to remember the product could come with co-pay ratios, ranging from 10% to 25%. Essentially, this means that for every claim of . 100, you will have shell out . 10-25 from your pocket before the company chips in with the balance. Then, of course, you will have to factor in high premiums and also, deductibles as well as sub-limits that place ceilings on room rent, operation theatre charges or surgeon fees. Again, this means that any cost over and above what the policy promises to discharge will have to be borne by the policyholders.

If Your Parents Are Under 60

Like in the case of senior citizens, buying a new policy is unlikely to be a simple process. But, if they have been dependent entirely on the group cover offered by your employer so far, you need to buy an independent cover for them as soon as possible. Apart from the compromises mentioned earlier, you need to carry out a meticulous cost benefit analysis before zeroing in on a policy. Even though they are not senior citizens, premiums charged at their age cannot be termed economical. Hence, it is critical to ascertain the tradeoff between benefits and costs. Also, there are no dedicated policies targeted at this age-group, which means that the number of policies to be studied goes up, making the task all the more onerous.

Irrespective of the age, it is best to go for covers that promise life-long renewal or at least up to the age of 80. After all, there is no point replacing a group cover with an individual one only to see it expire in 5-10 years. This is applicable to senior citizens' policies too.

In addition, you need to take into account permanent exclusions in the policy. For instance, some health insures today seek to exclude heart-related conditions, high blood pressure or cholesterol from the scope of coverage for life. If your parents are yet to cross the age of 60 and enjoy good health, buying an independent cover should not be put off, even if your company has not decided to restrict parental coverage.

Don't Ignore Group Cover

The key benefit of any group health scheme including parents in the floater policy is the coverage of pre-existing illnesses. Now, individuals whose employers have decided to withdraw parental coverage have no choice but to scout for standalone covers in the market or create a health fund. But those who have merely seen reduction in benefits need to consider other factors. While it is best to have an independent cover at all times, it doesn't mean that your employers' scheme — even in its contracted form — is completely redundant. If such employees find premiums for fresh cover unaffordable, they can go for top-up covers.

If policyholders feel that such group mediclaim covers fall short, they can opt for a top-up cover.

This will kick-in only after a particular limit in the basic policy is breached. Thus, they can make good any shortfall at a cost lower than that of a fresh policy. Similarly, if your company is willing to continue parental cover provided the employee foots that premium, you should opt for it. Likewise, introduction of a copay clause shouldn't deter you either. It would be a small price to pay for the benefits you would be getting in return.

Benefits under group schemes are wider, most notably coverage of pre-existing diseases, and hence, these two arrangements would work in your favour.

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs

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

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

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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Birla Sun Life Top 100

Posted: 19 Apr 2012 10:17 PM PDT

Birla Sun Life Top 100's performance has lagged that of its peers. However, it has shown the potential to protect investors against downside risk in volatile markets vis-à-vis the broader market indices. One can stay invested for now

Launched in 2005, Birla SLTop 100 has experienced both the bearish and the bullish trends of the market, but has failed to make any significant impact on investors. This is because while the scheme's performance runs parallel to its benchmark, its peers with similar objective have ended up outperforming the markets by good margins. However, there is a visible improvement in the performance in the last couple of years. BSL Top 100 has returned -0.7% against -3.1% returns by the Nifty over the past two-year period while in the last one year, it has delivered -16% against Nifty's -18.7%. Though not spectacular, this performance means we should track the scheme in the coming months.

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs

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

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

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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MetLife Smart Child Plan

Posted: 19 Apr 2012 09:43 PM PDT

Met Smart Child plan is a regular premium unit-linked child plan from MetLife India Insurance Company.

POLICY FEATURES

Minimum age at entry: 18 years
Maximum age at entry: 55 years
Minimum age of beneficiary (Child): 90 days
Maximum age of beneficiary (Child): 17 years
Minimum annualised premium: Rs 18,000 p.a.
Policy Term 10/15/20 years

Sum assured: 10 times the chosen annualised premium only The policy offers differentiated death benefit. On death of the parent, the sum assured is paid immediately to the beneficiary and all the future premiums are paid by the insurer. These future premiums are paid into the balancer fund, which invest in a combination of equity and debt. The plan comes with six unitlinked funds for customers with varying risk appetite. Customers have an option of unlimited switches between the available funds to take care of a changing risk appetite. Under the systematic transfer option you can invest your premium in Protector II Fund and your fund will be automatically transferred from Protector II Fund to Flexi Cap Fund at the end of every month.

Policies with 15 and 20 year term have a loyalty additions benefit of 2% and 3%, respectively. These loyalty additions will be paid even on demise of the parent.
The fund will charge 7% in the first year, 6% in the second year and from third year onwards a charge of 5% will be levied on the premiums before investing. The administration charges will be . 10 per month during first to fifth year and from sixth year onwards the administration charges become . 35 per month. The fund management charges will range from 1.10-1.25% and the mortality charges will be calculated on the basis of the attained age of the parent.

This makes it a very expensive plan especially if the premium amount is low. If you want to still invest in this Ulip, ensure you pay a high premium amount and stay invested for 20 years to get optimal returns.

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs

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

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

HDFC TaxSaver

ICICI Prudential Tax Plan

DSP BlackRock Tax Saver Fund

Birla Sun Life Tax Relief '96

Reliance Tax Saver (ELSS) Fund

IDFC Tax Advantage (ELSS) Fund

SBI Magnum Tax Gain Scheme 1993

Sundaram Tax Saver

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Application form for Tax Saving Infrastructure Bond and more information

Health for Wealth - How to buy Health Insurance ?

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Posted: 19 Apr 2012 07:46 PM PDT

HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves.

There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like:

■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan.

■ Buy a comprehensive health cover that fulfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insurance service is becoming expensive and unviable for the employers at large and you should avoid the risk of remaining underinsured in this context at any point of time. Plan for inflation by taking a higher sum insured to protect yourself against increasing hospital costs.

■ Partner with a health insurer you can trust with your family's health: When it comes to health, it's always 'family first' as we tend to prioritise the health of our loved ones over own well-being.

You should opt for an adequate health insurance cover that secures your family, both husband and wife, parents, grandparents, parents-in law, children, grand children, brother, sister, sister-in-law and other members of your extended family.

It is advisable to select an insurer who can establish a direct relationship with you and your family.

■ Take a health promise for yourself and your loved ones: Take a "health promise" for yourself and your loved ones and get support for a change in health management behaviours around you.

■ Last but not the least, enjoying good quality life closely depends upon how healthy, active and energised we feel. Focus on wellness and preventive management to help you to lead healthier, happier and more successful lives.

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

Invest Tax Saving Mutual Funds Online

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

Download Tax Saving Mutual Fund Application Forms from all AMCs