Friday, December 13, 2013

Prajna Capital

Prajna Capital

Post Retirement Investment Plan

Posted: 13 Dec 2013 03:07 AM PST

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 

 

Twin benefits: Save and prepay home loan

 

Retirees earning a pension hope to manage all their finances with this income, without depending on anyone else. However, most feel this might not be sufficient, owing to the rising inflation and the desire to pass on wealth to the next generation.

 

For such individuals, there is no dearth of advice. While some say sticking to fixed deposits is the best option to ensure capital safety and sufficient funds, some suggest renting a second property. In case of a severe fund crunch, one could reverse- mortgage a house or pledge gold. But zeroing in on an option isn't easy, especially as the income flow is likely to slow, while expenses would either rise or remain the same. Also, one has to balance these factors for 20- 25 years, with the inflation sword dangling overhead.

 

Therefore, it might be sensible to avoid traditional risk- averse instruments and channel a part of the portfolio to high- risk instruments.

 

After retirement, growth of capital is important, as the income flow falls. And, a retiree might be looking at a horizon of at least 20 years, while fighting inflation… riskier instruments can be included in a retiree's portfolio.

 

Of course, the instruments have to be evaluated on factors such as risk tolerance, investment horizon, growth target, etc.

 

One should divert the portion of the portfolio not required for at least five years. Or, the surplus on which one could afford to not earn substantially.

 

Relying on settlement corpus

 

There is a large category of people who rely on the final settlement corpus they receive on retirement; in all likelihood, they might not earn a pension. Financial planners encounter such people on a daily basis. Majumder's advice for these people — start whenever you can; you would be able to save something, if not a lot. Protection of capital is very important.

 

The plan of action would, of course, depend on post- retirement needs. After setting aside enough for health care (as this is a necessity), invest 30- 40 per cent of your investment between large-cap equity funds and balanced funds (dividend payment option). If you have some high risk tolerance, a large-cap fund can be replaced with an equity diversified one. Invest the remaining amount in a combination of fixed deposit (quarterly payment option) and debt mutual funds ( dividend payment option). As there is a need to be aggressive with the investment, you could also replace pure debt funds with debt- oriented balanced funds for an equity booster.

In such situations, a (second) property that could provide rental income could be helpful. This, however, doesn't mean you buy a property with the retirement corpus.

 

Retirees should not invest in real estate. The case is different if one already has a spare property. Real estate is an illiquid asset class and requires chunky investment, which eats into one's retirement corpus. And, once the real estate market cracks, there would be very heavy losses or no exit route.

 

The best option in such situations is delaying the retirement age, if possible. An alternate employment can promise a fixed monthly income flow.

 

Large- cap funds have given 22 per cent returns through last year; equity diversified funds gave 21.5 per cent and balanced funds 18 per cent. Short- term debt funds returned 11 per cent, though in the current market, opting for medium- to long- term debt funds could be helpful (annual returns of 14.5 per cent). Debt- oriented balanced funds returned 12 per cent in the past year. State Bank of India's one- year fixed deposit is offering 8.75 per cent.

 

If you Planned late, pension will be small

 

An important question is whether the pension amount can bridge the gap. In case it cannot do so completely, but after taking the pension into account, if the gap isn't very wide, stick to debt funds and fixed deposits for 85- 90 per cent of the corpus.

 

Or, you could lock- in a portion of your money in closed- ended schemes such as fixed maturity plans ( FMPs), which can be directly compared to fixed deposits, and medium to long- term ( open- ended) debt funds, which could earn a tad more than fixed deposits. Last year, FMPs earned 8.5- 13 per cent. These schemes should account for about 20 per cent of the portfolio; the deposits portion could be lowered to 60- 65 per cent.

If the pension amount doesn't help much, opt for large- cap funds or balanced funds and earn from dividends — up to 30 per cent of the portfolio. Again, rental income, if available, could help, but the exposure should be restricted to 30 per cent to ensure this money also contributes towards savings. Here, too, delaying the retirement would be a smart move.

 

Started late then no pension

 

Here, protection of capital is more important than the two previous scenarios. Therefore, being aggressive might not be a good idea. After retirement, try to get another job, instead of losing money in high- risk instruments. Limit your risk- taking ability to debt mutual funds — up to 80 per cent.

 

Go slow with investment and build a higher corpus with the new income stream, along with periodic payments from fixed deposits and debt funds.

 

What to do Planned early, but corpus eroded?

 

Consider a case when you had planned for retirement early, but due to unforeseen circumstances, had to use the corpus before retirement.

 

Here, the need to generate 910 per cent returns to bridge the gap arises suddenly. Equity funds are the best solution, as delaying retirement at the last moment might not be easy. Opt for equity- diversified and large- cap equity funds for high returns with safety and liquidity — 45- 50 per cent of the portfolio.

 

And, if the corpus erosion isn't much, avoid taking too many risks.

 

Planned properly, but no pension

 

In this case, generating four to six per cent returns would be enough. Therefore, stick to prescribed assets and allocation. Concentrate only on fixed deposits (75- 80 per cent), debt funds ( 10- 15 per cent) and invest the rest in gold or equity.

 

Always include gold

 

Though gold prices have been falling for a month, the commodity is a must- have in all portfolios, as it is a hedge against inflation for a longer horizon ( five years or more). And, given the prices are low, this might be a good time to buy, though the prices might fall further. In the past year, gold prices fell 5.5 per cent.

Gold jewellery, however, has limited usage, as the resale value falls by 10- 15 per cent due to making charges, cautions Ladderup's Nath. The best ways to invest in gold are through gold exchange- traded funds (ETFs) or gold feeder funds. Both are offered by mutual fund houses. However, while ETFs need a demat account, feeder funds don't. And, one can invest systematically in the latter. Ideally, restrict portfolio exposure to gold to five per cent.

 

Word of caution

 

Theoretically, retirees should stay away from high- risk instruments. But one can have a little exposure in equities (10- 12 per cent of the portfolio), only if the person is not dependent on this corpus. Early retirement planning to ensure one doesn't have to bother about such things later. Investment in the best- earning fixed deposits after retirement.

 

Remember, while it is always important to revisit your investment portfolio, this thumb rule is all the more significant in the case of retirees. Here, the investment is not as much about high returns as about refraining from undue risk.

 

Some exposure in equities is fine



Usually, a home loan is one of the biggest liabilities. Considering the huge amount and the long tenure involved, it is advisable to repay the loan at the earliest.

 

And, as both the Reserve Bank of India and the National Housing Bank have abolished the penalty on prepayment of home loans ( for floating rate loans), it is sensible to prepay your home loan and save on interest.

For those lacking the financial discipline to save and build a corpus to prepay a loan, some banks offer aproduct through which one can deposit small surplus amounts into a current account. This can be offset against the due amount on the loan; this would reduce your loan tenure, as well as the interest. You could also link the loan to your salary account and withdraw only the amount required for essential expenses. This would ensure a substantial balance in the account, which could be offset against the due amount on the loan.

 

Consider a scenario in which one has availed of a home loan of ₹ 20 lakh and is paying an equated monthly instalment (EMI) of ₹ 22,000. Of this, ₹ 2,000 goes towards the repayment of principal, and ₹ 20,000 towards repayment of interest. If you deposit ₹ 10 lakh in the account linked to the home loan, the repayment on interest falls to ₹ 10,000. As the monthly EMI remains ₹ 22,000, the additional ₹ 10,000 goes towards principal allocation, which could effectively reduce the interest on the entire sum, as well as the tenure of the loan.

Compared to prepayment, this is advantageous.

 

In the case of prepayment, banks might insist at least acertain amount be paid, say an EMI or three EMIs or, in some cases, a figure of ₹ 1 lakh. But in the case of an offset balance home loan, there are no such requirements — you could deposit any amount in the account, says Vipul Patel of Home Loan Advisors, an independent mortgage advisory firm.

 

A second advantage is if you decide to prepay a home loan, you would have to part with the money but for an offset balance home loan, if you deposit a certain amount in your current account, you could withdraw the money when required. Since the interest is calculated on a daily reducing balance, even if you withdraw money, the benefit you have received would hold. But the prospective benefit would reduce.

 

However, this advantage comes with a cost--banks offering this product charge interest 25- 50 basis points higher than that on normal home loans.

 

The savings on interest payments could be substantial, depending on how much money the customer chooses to deposit in his account. It also provides the borrower liquidity in managing the deposit float, as these excess funds can be utilised freely. Finally, the customer can use this account as a regular bank account, for which a cheque book and debit card are provided for routine banking transactions. Therefore, a nominal interest rate premium is levied for this significant advantage to the customer. Many banks offer these products — HSBC offers the Smart Home, State Bank of India's has the SBI Max Gain, while Standard Chartered Bank and Citibank offer Home Saver and Home Credit, respectively.

 

Since a current account has an overdraft facility, frequent withdrawals from the account could increase the tenure of the loan.

 

Is it better to invest in other instruments and use that money to prepay a home loan? Yes. Typically, the tenure of a home loan is about 10 years. This provides an opportunity to save in other instruments in a disciplined manner; these provide higher interest compared to home loan interest.

 

For instance, instruments such as equities, mutual funds, exchange- traded funds, corporate fixed deposits and National Spot Exchange- agricultural commodities provide annual yields of more than 12 per cent through three to five years. But for such instruments, it is important to have a systematic approach, not lump sum investments to average the cost of investments and match inflation rates. This product (offset balance home loan) is suitable for borrowers who lack discipline in savings on a regular basis, or those who don't retain savings. If you decide to invest the money in an instrument and use this to prepay the amount later, you should ensure the post- tax returns are higher than the interest charged by the bank on the home loan. Only then is this option viable

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 )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 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
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

IIFCL Tax Free bonds issue oversubscribed on day one

Posted: 13 Dec 2013 02:08 AM PST

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 IIFCL's second tranche of tax-free bonds issue was oversubscribed on the first day of its launch on December 9. As against an issue size of Rs 1,000 crore, this State-owned infrastructure lender received response for Rs 1,034 crore on the first day of the bond issue.

The issue will remain open till the green shoe option of Rs 2,000 crore is fully exhausted, Harsh Kumar Bhanwala, Acting Chairman & Managing Director, India Infrastructure Finance Company (IIFCL) told Business Line.

One of the reasons for this strong response is the higher coupon rates for the second tranche as compared to the first, which closed a month ago, Bhanwala said. For the second tranche, IIFCL had offered coupon rates of 8.66 percent, 8.73 percent and 8.91 percent respectively for 10,15 and 20 years.

 

 IIFCL also plans to launch a third tranche of such bonds this fiscal. It had mobilised Rs 1,234 crore in the first tranche and had already mobilised as much as Rs 2,963 crore through private placement route.

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 )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 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
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

Steps to safe e-banking

Posted: 13 Dec 2013 12:53 AM PST

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Rajesh Kumar (name changed) had been to a tourist spot during an extended weekend holiday. He had a nice time with his family until his wallet was picked. The wallet contained Rs 10,000, two debit cards and two credit cards. He had also kept his net-banking passwords in the wallet. He had a tough time, as he was exposed to the risk of losing money through a wrongful swipe or net transfer.

Fortunately, his wife was a banker and guided him through the process to protect his money. Many of us might have gone through such an ordeal. We are exposed to an electronic risk which is much bigger than the loss of hard currency.

Net banking, plastic cards and mobile payments are convenient banking tools that allow one to spend on the go. However, you need to segregate and protect the data used for virtual banking - the debit card PIN, netbanking login ID, login password, transaction password, CVV (card verification value) number of debit or credit card, date of birth, mobile number, etc.

In India, according to the terms and conditions in credit card contracts, the bank isn't liable for any fraudulent transaction unless the customer files a report immediately. Once reported, the card holder is no longer liable. Card frauds can range from purchases made on lost or stolen cards to phishing, identity theft, etc.

Fraudsters will also try account takeovers and identity theft. The stolen data are used for transactions where the credit/debit card's physical presence is not required, such as online purchases.

Here are things to keep in mind while doing virtual banking:

Strong passwords


The password provides the access to the funds in your account. It is essential to use strong passwords, which are a mixture of numbers and letters and do not contain details a fraudster could easily guess. It is also essential not to record these at any place which can be accessed by others.

Data protection


When sharing data on the web or social networking sites, take care not to share too much information about yourself. This could be misused by fraudsters for virtual banking.

Mobile care


For those who use mobile banking, always lock your phone when not using it, to prevent unauthorised user access. This will prevent unauthorised access to your banking account.

Phishing


Be extremely cautious about any emails that appear to have come from your bank. Never click on any link in the email that asks you to enter your security details. No bank asks for such things through email. Also, look for spelling mistakes in unsolicited emails. Never respond to any that say you have won a prize for a competition that you do not remember entering or that you have inherited money from a relative whose name you do not recognise.

Avoid internet cafes for net banking


It is best to avoid using an internet cafe for net banking or online payments. There is always a possibility of data theft.

Update address and mobile number


It is important to update the mobile and address details whenever there is any change. Most banks provide SMS alerts, which can help in instant knowledge of any debit to the account.

Skimming or cloning
It is something to be cautious about, especially when travelling abroad. In this, data in your card's magnetic stripe are recorded while swiping. This information is, then, used to make duplicates. It can happen anywhere, at a fuel pump or a restaurant. So, make sure the card is swiped in your presence.

Other precautions


Be suspicious of anyone who telephones or calls at your house unexpectedly and requests banking or personal details or credit card information. To make sure you have not become a victim of identity theft, you need to keep a close check on your credit report. You can check this from a credit bureau such as CIBIL. Keep a tab on your bank statement regularly, to make sure that there are no unauthorised or wrong debits. If you notice anything suspicious, do inform your bank straightaway to ascertain whether it was a genuine payment or a fraudulent one.

Grievance escalation


The regulator has appointed an ombudsman for redressal of complaints if your bank has failed to respond satisfactorily. A bank must respond within 30 days from the date you lodged the complaint. In case of wrongful billing, the card company should provide documentary evidence within 60 days. If unsatisfied, the cardholder can go to the ombudsman.

There are some entities that provide a protection plan for any loss due to theft of a debit or credit card.

Card protection plan


This provides insurance cover for your debit or credit cards. Suppose you lose your wallet carrying multiple credit/debit cards. There can be a huge financial burden on account of theft. The solution: Take a card protection plan.

This plan is suitable for those who use multiple credit/debit cards and are prone to losing or misplacing these. A card protection plan is designed to help you safeguard all your credit, debit and ATM cards. If you lose the card, inform the service provider, who in turn will inform all issuers to cancel the cards. A few benefits of this service:

  • You can block all your cards by a single call.
  • In case you lost cash along with your cards, the service provider will provide you emergency cash assistance, subject to a limit. This advance is interest-free and you need to repay it within the stipulated days.
  • It also provides fraud protection cover to a certain limit.


To avail of the benefits, you need to report a loss within 24 hours. Card protection plans are available at costs ranging from Rs 1,145 to Rs 1,745, plus taxes.

Some banks provide insurance cover from any loss due to theft or skimming. The cost may be borne by the card issuing bank or charged to the customer in case he/she opts for a voluntary cover.

Just like physical valuables, it is important to take care of your virtual assets. By doing so, you can protect your financial assets and avoid loss. Take care of money and money will take care of you!

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 )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 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
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

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