Prajna Capital |
- Waiting Period In A Mediclaim Policy
- Diversification in investing through Mutual Funds
- Should you sell your Mutual Funds or borrow loan against Mutual Funds?
| Waiting Period In A Mediclaim Policy Posted: 24 Feb 2014 04:12 AM PST Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India) What is Waiting Period In a Mediclaim Policy? When you purchase that mediclaim policy you might not get coverage or be eligible for medical treatment immediately .Many health policies have a waiting period of one month. Only after that one month, you the policy holder is covered under the mediclaim. Hence this is called the waiting period .Only injuries arising out of accidents are covered under the policies during the waiting period. Let us consider that your policy has a clause that preexisting diseases such as hypertension and diabetes are covered after only two continuous claim free renewals. Then these two years becomes the waiting period for the pre existing diseases and you can avail medical coverage for these diseases only if you pay an additional premium on the policy. However you can get treatment for diseases which are covered under the policy but not the pre existing diseases you suffer from. 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
|
| Diversification in investing through Mutual Funds Posted: 24 Feb 2014 02:58 AM PST Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
We’ve often heard of “the secret of successful investing is to diversify their risk” – so how does one go about this? And what does diversification really mean – does it only mean that one should spread ones portfolio across various types of assets, in terms of cash, debt, shares, mutual funds, deposits etc? Or can one diversify ones portfolio even further?
Looking at the investment instruments available to investors there is plenty to choose from in each category. For example, within deposits, today investors have the choice of fixed, semi fixed, two in one accounts etc. For mutual funds also investors can diversify across liquid, balanced, growth, income etc. Coming to stocks also there is a lot of diversification possible. It’s critical to understand the basic types of stock available on the market in order to match your investment style to types of stock. The most basic way to classify stocks is by size, growth potential and returns.
When stock market experts talk about size, they’re referring to the market capitalization of a stock. “Market cap” refers to the rupee value of a company. It’s computed by multiplying the total number of a company’s shares by the current price per share. Large-cap stocks are shares of companies with the biggest market capitalization. Stocks of Reliance, ACC, Infosys, Satyam etc, are considered the most stable and successful. Their sheer size provides a cushion during recessions. Large caps are more likely to pay dividends to shareholders. But because they are more established with less room to grow, large caps are less likely than smaller stocks to give those big-time returns. A blue chip is one of an elite group of stocks of corporations that have a history of good dividend returns (in both good financial times and bad), solid management and good growth potential. Blue-chip stocks, like Hindustan Levers, ITC, etc are among the most stalwart and low-risk investments available in the stock market.
Small-cap stocks are the babies of the stock market. The upside to these stocks lies in the market perception that these stocks have a major growth potential. Orchid pharmaceuticals, Morepan lab, Aks opticfibre etc. can be classified in this category. Small caps have the potential to do even better than large-caps, in terms of returns at the bourses. Investors interested in long-term growth, hunt out the strongest small-cap prospects. The downside: Many small-cap stocks may not even have any real earnings. In the short term, these stocks can be volatile and are less likely to pay dividends.
Penny stocks are so named because their shares can often be had for mere pennies. That sounds good to frugal investors. Obviously, penny stocks have enormous growth potential. But every good shopper knows that cheap is not always a bargain. There may be good reasons that the stock is depressed in the first place. The company may be too new to have gained investor confidence, or perhaps it is in a state of financial turmoil. Journalists and professional analysts at major stock brokerages tend to ignore penny stocks, so there is little information about these companies from third-party sources, increasing the risk of fraud and thus making them less attractive. Since most penny stocks are traded on minor stock exchanges with less-than stellar reputations for overseeing their member firms, the risk of fraud is compounded. All these variables make the purchase of penny stocks risky for novices, no matter what they might hear in an Internet chat room. However, experienced investors should not rule out penny stocks altogether, because they do offer the potential for big rewards. The trick is to find the diamond in the rough.
In terms of growth potential and return growth stocks, Momentum stocks, value stocks, income stocks and cyclical stocks should all form a part of the portfolio. Growth stocks are stocks with rapidly rising profits, such as Global telesystems, Himachal futuristic, Visual Soft, NIIT etc. Technically speaking, growth stocks usually register annual earnings increase of 15-25 percent. Growth investors expect that a company with accelerating profits will also have a rising stock price. As you’d expect, while you can make lots of money in growth stocks, you can also lose a lot. This happens when professional growth investors divest from a growth stock if its growth rate slows, sending the stock price spiraling down.
Momentum stocks are like growth stocks-squared. Momentum investors buy shares in companies whose earnings are growing at increasingly higher rates. Lately, these have been technology stocks such as Infosys, Satyam, Wipro etc. Momentum investing often only works for a short period of time, but when it does, it pays off. However, momentum stocks are risky for that very reason, that it’s difficult to determine when their window of opportunity will close. The stock price can plummet rapidly.
Value – In the investing world, “value” is a euphemism for “cheap.” Value investing is like shopping for designer duds at a deep discount. Value stocks are shares of a company that is undervalued in the market relative to its future earnings potential. Perhaps the company has had a problem with profits, a poorly received product or another passing predicament that has put some downward pressure on its stock price. Or perhaps the market simply favors stocks of a different type at the moment. The important thing for value investors is to find companies whose problems are only temporary. A value investor is banking on the stock price rising to meet its true value. Stocks like Ranbaxy, Punjab Tractors, Tisco etc. would qualify as value stocks.
Cyclical stocks are another category of stocks. Petrochemical, cement, steel, etc. are all industries which have well defined industry cycles. Stocks of these move in tandem with the general economic scenario as well as the industry scenario. Cyclical investors attempt to anticipate which way the economy will go (often an iffy proposition even for economists) and invest accordingly in cyclical stocks that will benefit from a boom or bust. For example, when the economy does well and there’s a building boom, steel makers and construction companies do well. When the economy slows, so do their profits.
Income stocks are pretty much what they sound like — stocks that provide a steady stream of cash to shareholders. Income stocks, like FMCG, utilities pay relatively high dividends. Known as the choice of “widows and orphans,” Colgate used to be the classic income stock, providing a decent regular income and stable price levels. Conservative investors like this type of stock, because the dividends can cushion the blow of a sudden drop in price. Even if the ticker price takes a nosedive, the stockholder has already received a portion of the company’s profits in the form of dividends. But income stocks have a potential downside. The company’s board of directors sets the rate to be paid on dividends each quarter. They often try to maintain the payout even if the company has been losing money for a few quarters. But when a company’s stock falls, its dividend (expressed as a percentage of the stock price) may appear to go up. And if performance continues to lag, the company may not be able to pay shareholders any dividends, and this type of stock won’t seem so safe after all.
So with every type of stock there is an attached risk. One can study various kinds of stocks and then have their stock portfolio across the categories. How much weightage an investor would give to each category would obviously depend upon his or her risk profile, age and aim.
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
|
| Should you sell your Mutual Funds or borrow loan against Mutual Funds? Posted: 24 Feb 2014 02:19 AM PST Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
You can borrow up to 50 per cent of your fund value pledge your Mutual Fund
· Overdraft is available against both equity and debtMFunits
· The overdraft limit is usually around 50 per cent of the value of the units
· The value is regularly monitored for the changes and the overdraft limit is adjusted accordingly
· Only specified MF units are eligible for the facility
· Shop around for lower rates on the overdraftamong banks
One of the options available for investors in mutual fund (MF) units to raise cash is to take an overdraft facility against these units. This is usually available with most banks – private and public. At times when you require money for a short period of time, this can be a good choice as compared to selling the units.
However, before taking a final decision you need to carefully consider how exactly this works and evaluate whether it actually suits your specific need.
When to pledge
Sometimes investors may face a sudden need for funds. To meet this requirement the investor will have to either dip into his or her investments or look for some borrowings. In some cases, it may happen that the investor may decide to sell his existing investment in MFs to raise the required amount. This would mean a step back in the process of building a corpus because when the balance reduces, it will take away the benefit of compounding of the portfolio. To avoid this investors should look around for options to see that they suffer minimum financial damage at the end of the day.
Get funds through an overdraft
Several banks offer the option of taking an overdraft against MF units. The benefit of this is that the investor gets to keep the investment that they have initially made and at the same time raise funds for to meet the immediate requirement. It works like this. You go to the bank with the number of units you have in a certain MF. The units are pledged to the bank and it then agrees to lend against them up to a certain amount that is decided based upon the value of the units and the discounting factor that is available with the bank. A current account is opened with a specific limit. The investor can then withdraw the money up to the limit that has been sanctioned at the specified rate of interest. The key point here is that the withdrawal would be charged only when it is actually made. So, merely availing an overdraft limit does not impact the finances, that is, it does not involve any repayment.
Investors can pay back the money when they have the required funds and they will be charged interest only for the time that they have used the funds.
Most banks offer this facility, so investors have a wide choice of which bank to approach. It is possible to pledge units of both equity and debt MFs. But there is one restriction. This facility is available only against those MF schemes that are specified by the bank for this purpose. Therefore, it is important for to look at the list of schemes with the bank before pledging their MF units.
Another factor to keep in mind is that banks will offer only a certain percentage of the fund value as the overdraft limit. In most cases, it is 50 per cent. This means that if the value of the units is ₹ 1 lakh, then the bank will offer ₹ 50,000 as overdraft limit.
This limit will vary from banktobank. Usually, banks offer between ₹ 50,000– 2, 00,000 as the overdraft limit.
In terms of the cost, the interest rate varies between 11 and 14 per cent, depending on the bank. This is better than the rates offered for a personal loan, since overdraft against MF is a secured loan, while a personal loan is an unsecured loan. You can scout around and check which banks offer the lowest rate. If you already have a relationship with the bank, you can request for better rates. The bank will check the value of the portfolio at regular intervals, in many cases this could be weekly. This is done so that the total overdraft limit is adjusted accordingly. If the fund value dips, due to fluctuations in the market, the limit will be lowered. In case of a default the bank could ask the investor to sell the MF units in order to recover its money.
This route is Suitable for short term
This route is suitable for investors who have MF units and want a small amount for a short period. The overdraft facility ensures that their cost is limited as they will pay only for the time period that they use the funds. Also, it allows for flexibility in the paying back. So, this route is useful if you are not sure that you will be able to repay the money in a linear fashion. This option allows investors to retain their investments and at the same time raise funds against it to meet any emergency.
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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