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| Post Tax returns should beat inflation Posted: 27 Jun 2014 04:54 AM PDT Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
Post Tax returns should beat inflation
The old saying `a penny saved is a penny earned' does not apply these days, thanks to inflation, resulting in that penny being worth less over a period of time. Moreover, most individuals confuse savings with investments, not realizing that there is a huge difference between the two. Savings is the amount of income left after expenses. Deploying savings to earn returns is an investment activity. Thus, the very first step is to make the money work for you as hard as you have worked to earn it.
There are various types of investments but broadly speaking, they can be categorized into property, fixed income, equity and gold, among others.
For example, putting money in stocks or equity mutual funds counts as in vestment; buying property is an investment too. The objective of an investment should always be to beat the rate of inflation.
Once you have decided on the investment instrument, you need to understand two critical aspects
(1) The impact of inflation on the returns you earn from it and
(2) the impact of tax on the returns.
Impact of inflation on returns Inflation eats away your savings, bit by bit, and you cannot afford to ignore the corrosive effect that rising prices can have on the value of your assets. It has been rightly said by Milton Friedman that "Inflation is a taxation without legislation."
For instance, Rs 100 earned will be worth just Rs 94 after a year if it is not invested and the inflation rate is 6%. That is why you must always be on the look out for investments whose returns are more than the prevailing inflation rate.
Thus, you will always face the challenge of beating inflation. To fight inflation, the key is to invest in products which gives you a higher rate of return than inflation, and ultimately leave you with a surplus to meet your goals.
Understanding post-tax returns The tax impact is a very widely ignored aspect of investments and one that many a times leaves us com paring apples with oranges.
Let's understand this with the help of an example. Let us assume that an investment in a bank FD earns you 9% interest annually. Also suppose you are in the 30% tax bracket and the inflation rate is 7%. You will observe above that the returns post tax is less than inflation. What this implies is that you have a negative real return.
If you had instead parked your funds in even a fixed maturity plan, the return would have been approximately 8.5% per annum (post tax). However, unfortunately most individuals are not aware of this and would compare the 9% (pre-tax) return with the 8.5% (post tax) return from FMPs and assume that the former is more lucrative.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
| BNP Paribas Dividend Yield Fund - Invest Online Posted: 26 Jun 2014 07:59 PM PDT Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
BNP Paribas Dividend Yield Fund
Investment Objective
The scheme aims to generate long term capital growth from an actively managed portfolio of equity and equity related securities, primarily high dividend yield stocks. High dividend yield stocks are defined as stocks of companies that have a dividend yield in excess of 0.50 per cent.
Analysis
Over the last five years, this fund has built up an enviable track record for providing a generally better track record of producing returns when the equity markets are booming and protecting those returns when they are slumping. After an iffy start, its track record has improved, first gradually and then, post 2009, quite sharply.
The results can be clearly seen in the fund's Value Research Star Ratings. It's lifetime average rating is 3.6 stars, while it's rating over the last 12 months is 4.9. In fact, over the last 22 months, only twice has it scored four stars; the rest of the months have all been five star. This outstanding record is backed by seven straight years of beating the benchmark.
After October 2007, this fund has never lagged the benchmark. Over this period, it has gained a total of 55 per cent over the benchmark, which translates to 7 per cent per annum. As relative returns go, this is a most impressive number. As the fund has very recently changed its benchmark from the BSE Sensex to the CNX200, these long-term comparisons are based on the former index.
In terms of its portfolio construction, the fund has generally stuck closely to that of the category. This means that about half the assets are in large cap stocks, 20 to 30 per cent in mid-caps and the rest in smaller companies. However, this pattern has been broken since May 2013, when it has sharply turned towards large-cap stocks, but hasn't lessened its small cap exposure.
As the name indicates, the fund is designed as a dividend yield fund and not a multi-cap fund. However, given the diverse characteristics of companies that tend to have high dividend yields, it is effectively in that category. The mandate is to identify the best companies with high dividend yield stocks with a dividend yield in excess of 0.5 per cent, across the markets caps. We do not have portfolio limits for market caps. However, we are always conscious that the portfolio should be well diversified across sectors.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
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 Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms ---------------------------------------------
Best Performing Mutual Funds
B. Large and Midcap Funds Invest Online
C. Mid and SmallCap Funds Invest Online
D. Small and MicroCap Funds Invest Online
E. Sector Funds Invest Online
F. Tax Saver Mutual Funds Invest Online 1. ICICI Prudential Tax Plan 2. HDFC Taxsaver
G. Gold Mutual Funds Invest Online
H. International funds Invest Online 1. Birla Sun Life International Equity Plan A 2. DSP BlackRock US Flexible Equity 3. FT India Feeder Franklin US Opportunities 4. ICICI Prudential US Bluechip Equity 5. Motilal Oswal MOSt Shares NASDAQ-100 ETF |
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