Prajna Capital |
- Choose Debt Mutual Funds over ULIPs
- Inflation- indexed bonds from next month
- Gold reduces portfolio risk and acts as a hedge against inflation
| Choose Debt Mutual Funds over ULIPs Posted: 17 May 2013 04:52 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
In the last three years, debt products have returned around nine per cent annually, while benchmark indices gave around 4.50 per cent. Over the past two years, debt products gave nearly 10 per cent while benchmark stock indices gave a meagre three per cent.
In the last one year, equity performance has improved, that is, the benchmark indices have returned 20 per cent and around 5.50 per cent in the last six months. Compared to this, debt market products have returned 9- 10 per cent and 4.50- 5 per cent, respectively.
Given the uncertain equity markets over the past four years, investors have lost confidence in the asset class. At the same time, higher returns ( double digit) from debt products in this period saw investors park money across these category. While fixed deposits and debt funds have been seeing investments flow in for some time now, insurance industry experts are seeing investor favour debt- focused unit- linked insurance plans ( Ulips) in the past few months.
Given that Ulips as a product category has not seen the kind of traction it used to pre- September 2010, insurers are favour investors buying debt Ulips. According to a leading insurance broker, some companies are planning to launch a couple of pure debt- focused Ulips to tap the sales growth from this product.
Insurers say there is scope for good returns from debt Ulips at this point in time ( for 8.50- 9 per cent return) due to falling interest rates and rising bond yields. Also debt products are a tad less uncertain than equities, investors anyway favour them. Money is expected to flow into debt for another year or so. Typically, insurers offer equity- focussed funds, debt focussed funds and balanced funds in Ulips.
However, financial planners do not favour investing in Ulips as investment and insurance needs should be keep separate.
Ideally, insurance products cannot serve investment purpose. And I will definitely not suggest investing in debt Ulips. If an investor is conservative, not disciplined about regular investment and hence wants to combine insurance with investment, Though, such investors will also be better off with investing a smaller portion in equity for growth and the rest in debt funds," he says.
Agrees Bangalore- based certified financial planner Anil Rego. He suggests debt- oriented balanced funds for higher returns compared to Ulips. Or, a combination of fixed deposits and debt mutual funds may also work for risk- averse investors.
Given ulips cost structure, investing in debt- focused ones will not give the kind of returns that help can recover the cost of investment and earn more than inflation over the long term. Let's assume inflation will remain at eight per cent over the next 10 years and the fund management cost in Ulips is 1.50 per cent. He says debt Ulips will eat into your corpus while equity may be able to return two to three per cent more than inflation. Hence, avoid debt Ulips.
However, there are many other costs, such as premium allocation charge and policy administration cost to name a few, attached to Ulips. And if all the frontal charges are taken into account, despite the cap on these charges.
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
--------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
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| Inflation- indexed bonds from next month Posted: 17 May 2013 04:11 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
The first tranche of inflation indexed bonds (IIBs) would be issued on June 4, the finance ministry and the Reserve Bank of India ( RBI) announced today.
"Pursuant to the announcement in the Union Budget 201314, the government, in consultation with RBI, has decided to launch ( these) as instruments that will protect the savings of the poor and middle classes from inflation, and incentivise the household sector to save in financial instruments rather than buy gold," said the announcement.
The returns would be calculated by using the rate of Wholesale Price Index- based inflation of the corresponding four months ago, it said. " Final WPI with a four- month lag will be used, that is September 2012 and October 2012 final WPI will be used as reference WPI for February 1, 2013, and March 1, 2013, respectively. The reference WPI for dates between February 1and March 1, 2013, will be computed through interpolation," said RBI.
The government has been planning such bonds to wean investors away from gold, soaring imports of which are considered to have led to the high current account deficit. India's trade deficit widened to almost $18 billion in April on heavy gold import, according to data released on Monday.
Details
The IIBs would have a fixed real coupon rate and a nominal principal value that is adjusted against inflation. Periodic coupon payments would be paid on adjusted principal. "Thus, these bonds provide inflation protection to both principal and coupon payment. At maturity, the adjusted principal or the face value, whichever is higher, will be paid," said the central bank.
The initial series would be for all categories of investors, including institutional ones. In the second half of the financial year, another series would be released exclusively for retail investors. The portion under noncompetitive bidding, mainly for retail investors, has been raised from five per cent of notified value in the present issuance of bonds to 20 per cent for IIBs.
The first series would help in determining the coupon rate for the bonds through auction. This would help in benchmarking IIBs. Based on the experience in the initial issuances, a second series of IIBs for retail investors has been proposed for issue around October.
In the case of revision in the base year for the WPI series, a base splicing method would be used to construct a consistent series for indexation.
At present, 2004- 05 is used as the base year for WPI.
The index ratio would be computed by dividing the reference index for the settlement date by the reference index for the issue date.
RBI said for appropriate price discovery and market development, it was necessary to issue comparable instruments through auctions to institutional investors such as pension funds, insurers and mutual funds. This would create demand for IIBs and help in making these tradable in the secondary market. Each tranche would be issued through auctions on the last Tuesday of each subsequent month during 2013- 14.
These issuance would target various points of the maturity curve to have benchmarks. To begin with, these bonds will be issued for a tenor of 10 years. Each tranche of IIBs would be for ₹ 1,000- 2,000 crore and the total issuance would be for ₹ 12,000- 15,000 crore in 2013- 14, RBI said. The terms of issuance of IIBs for retail investors would be announced in due course. Background Lack of alternative financial instruments is often given as the reason for huge gold imports to hedge against inflation.
However, many analysts and players believed the attraction towards gold will come down, as inflation is on a downward swing. WPI- based inflation plunged to a 41- month low of 4.89 per cent in April. Consumer price index- based inflation also fell to a 13- month low, of 9.39 per cent in April, though it still was at an elevated level.
India's trade deficit zoomed to $ 17.8 billion in April, 27 per cent higher then the $ 14 bn in the same month last year. Imports were $ 41.95 bn, almost 11 per cent up over $ 37.8 bn a year before.
Imports of gold and silver jumped 138 per cent in April, due to the Akshaya Tritiya festival, considered an auspicious occasion to buy gold.
In April, India's merchandise exports rose a marginal 1.7 per cent to $ 24.2 bn, against $23.8 bn in the corresponding month last year. However, imports surged a massive 10.9 per cent. In April, gold imports alone were $ 7.5 bn, against $ 3.1 bn in the year- ago period. This constituted nearly 25 per cent of non- oil imports.
The size of gold imports is worrying the government, as it widens the trade deficit and, in turn, the current account deficit. The latter widened to a record 6.7 per cent of GDP in the third quarter of 2012- 13. The government hopes CAD will not exceed five per cent of GDP in 2012- 13. This year, it is pegged at below five per cent. "Final WPI with a four month lag will be used, that is September 2012 and October 2012 final WPI will be used as reference WPI for February 1, 2013, and March 1, 2013, respectively." 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
--------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
| Gold reduces portfolio risk and acts as a hedge against inflation Posted: 17 May 2013 02:43 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
In addition to ETFs, there are several interesting ways to invest in gold. If you do not have a demat account, you can easily buy gold mutual fund units. If you want the flexibility to convert gold units in to physical gold or keep them in demat form as long as you wish, then buying via National Spot Exchange's E-Gold platform is the best way. And if you want leverage, then the commodity exchanges are the most suitable ones. Several companies also offer gold accumulation schemes which are effective vehicles for forced gold accrual. While Alan Greenspan once said that "Gold still represents the ultimate form of payment in the world", it is also the definitive symbol of wealth and prosperity in India. And we buy gold on auspicious days to have continuing good fortune.
So, should you buy gold this Akshaya Tritiya? The unambiguous answer is yes and it not just because the prices have fallen to relatively affordable levels or because they may rise again. The real reason to buy gold should be to ensure scientific asset allocation to reduce risk and volatility in your investment portfolio. It is not just an investment but also a hedge against inflation and turmoil, apart from being an effective financial security which is highly liquid. So go ahead, buy gold today and make it part of your investment basket – there is a 5,000 year history to back your decision.
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
--------------------------------------------- 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 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 Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
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