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| Posted: 19 Nov 2012 03:43 AM PST Call 0 94 8300 8300 (India) Although I would prefer largecap diversified funds, index funds are a good option for those who are starting and do not know much about investing in equities. And, this is a good time to begin investing in this asset class. Another reason to invest in index funds is absence of confidence in the market. With the Bombay Stock Exchange Sensitive Index, or Sensex, looking highly volatile with a downward, it is difficult to take a call on an equity-diversified fund. The main advantage of investing through an index fund, especially in these times, is that these are passively managed. Since the scheme invests the money, according to the index, there is little risk of active management. Then, there are costs as well. Most index funds charge 1-1.5 per cent as annual fund management fees, whereas equity diversified funds can charge 2.25 per cent. As far as returns are concerned, equity-diversified funds have returned 9.25 per cent in aone-year period, whereas index funds, such as BeES, have returned slightly over 22 per cent. Similarly, funds investing in the Sensex and the Nifty such as Franklin India Index NSE Nifty and HDFC Index Sensex have returned 11-12 per cent. And, if one takes into account the cost-saving due to lower fund management fees, the returns would be at least 100 basis points more. Although actively-managed funds tend to outperform benchmark indices such as the Sensex or the Nifty, in bad times, a wrong call by fund manager can hurt badly. An index fund mirrors the benchmark, as it invests in stocks comprising the index and in the same proportion. Their returns should ideally mirror the performance of the underlying index. For instance, the fund manager will passively invest in Nifty-50 stocks in proportion to their market capitalisation. Due to this, index funds are known as passively-managed funds. However, many times, there is a difference in returns from the index and the scheme that mirrors it. It is because there is a tracking error, which occurs when the fund manager actively manages the scheme. For instance, the Nifty has returned 11.6 per cent in the last one year, whereas the Nifty Junior BeEs has returned 9.37 per cent, a tracking error of 3.28. In the US, the tracking error that can either be positive or negative is less than a per cent. In India, this error is sometime five per cent or more. According to financial planners, you could invest up to 15-20 per cent of your portfolio into index funds. If you are an experienced investor who does not have index funds in your portfolio, fund managers advise opting for it only if you do not want to keep an active track of your portfolio. Buy index funds only if you want safety on the equity side and don't want to keep a constant watch on it. Over a longer term, equity-diversified funds will outperform index funds, especially in the case of emerging markets like India. This is because fund managers of emerging markets can pick stocks which are multi-baggers. On the other hand, fund managers in developed and mature markets do not have many such opportunities. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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| Posted: 19 Nov 2012 12:31 AM PST Call 0 94 8300 8300 (India) From where will you chip in funds if you encounter some emergency? A credit card can help you to the extent of the available credit limit and you can pay off the amount later. But it isn't easy if these emergencies come in succession. Also, the ability to pay your credit card dues is another question. Given the rising interest rate, it's definitely not the best option to revolve on your credit card. So irrespective of the fact that you have a mediclaim, a high limit credit card or dependable relatives/ friends, it's always to have your own contingency fund.
Happy Investing!!
We can help. Call 0 94 8300 8300 (India)
Leave your comment with mail ID and we will answer them
OR
You can write back to us at PrajnaCapital [at] Gmail [dot] Com
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Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs
Download Mutual Fund Application Forms
Best Performing Mutual Funds
Invest in Tax Saving Mutual Funds Download Any Application Forms Buy Mutual Funds Online Invest Online Buy Gold Mutual Funds Invest Now  | ||||||||||||||||||||||||||||||||
| How to save tax by taking a Unit Linked Insurance Plan (ULIP)? Posted: 18 Nov 2012 10:05 PM PST Invest Mutual Funds Online Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications Best Performing Mutual Funds
------------------------- Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds ) 1. ICICI Prudential Tax Plan Invest Online 2. HDFC TaxSaver Invest Online 3. DSP BlackRock Tax Saver Fund Invest Online 4. Birla Sun Life Tax Relief '96 Invest Online 5. Reliance Tax Saver (ELSS) Fund Invest Online 6. IDFC Tax Advantage (ELSS) Fund Invest Online 7. SBI Magnum Tax Gain Scheme 1993 Invest Online 8. Sundaram Tax Saver Invest Online How to save tax by taking a Unit Linked Insurance Plan (ULIP)? Unit-Linked Insurance Plan (ULIP) is life insurance solution that provides for the benefits of risk protection and flexibility in investment. Part of the premium you pay goes towards the sum assured (amount you get in a life insurance policy) and the balance will be invested in whichever investments you choose as per what is available under the scheme - equity, debt or a mixture of both. Summary of ULIP Details
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