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- A Bank Fixed Deposit and A Recurring Deposit
- Mutual Fund that act as a Zero Coupon Bond
- ICICI Prudential Quarterly dividend
| A Bank Fixed Deposit and A Recurring Deposit Posted: 20 Dec 2014 04:40 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
A Bank Fixed Deposit or A Recurring Deposit
Sumati Sengupta is a working woman in her late twenties. Going by the prevailing high interest rates in the market, she thinks bank deposits are an attractive investment option. However, she has no knowledge about these products and is not sure which one she should opt for. Should she choose a fixed deposit or a recurring deposit?
Both the products provide safety of investment with fixed returns over a predefined period. They also offer comparable rates of interest and similar compounding frequencies. The liquidity profile of both the deposits is also similar. Sengupta could either take a loan against the deposit or withdraw the amount before maturity, subject to some penalties. Despite these similarities, there are certain features that she should consider while making her choice.
While comparing the two products on the basis of returns, fixed deposit ranks higher. The difference is due to the fact that Sengupta would be committing the entire amount upfront and, hence, the amount would earn interest for one year. However, in the case of a recurring deposit, the value will increase incrementally every month. So, the investor would lose out on the benefit of compounding, which is available in case of fixed deposits. The longer the tenure, the higher the benefit available in a fixed deposit.
The interest received on both products will be taxed at Sengupta's marginal tax rate. However, if she were to opt for a fixed deposit, the bank would deduct tax at source (TDS) if the interest income in one year exceeds `10,000, which is not the case with a recurring deposit.
Finally and, most importantly, the amount that Sengupta can spare at a given point for such an investment will determine the product that she should opt for. In case she is looking to invest small monthly savings at regular intervals, a recurring deposit will be a more viable product. However, if she is considering a lump sum investment, then a fixed deposit would be a better choice.
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 | |||||||||||||||||||||||||||
| Mutual Fund that act as a Zero Coupon Bond Posted: 20 Dec 2014 02:34 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
A Fund which act as a Zero Coupon Bond
There is no direct way for Indian investors to simply buy and hold gilts. Here's a fund which attempts to enable that with superior tax efficiency than gilts
Sometimes, the simplest investments are also the best. For a few months now, gilts in India have offered investors an attractive buying opportunity. Gilts are government-guaranteed and carry no credit risk. With their yields hovering at 8.5 to 9 per cent, they also offer the opportunity to lock into high interest rates and profit from any future gain in prices, if interest rates fall. With inflation coming off quite sharply in recent times and global risks settling down, most people think this is the top of the rate cycle and expect the RBI to start cutting interest rates next year.
But the problem for Indian investors is, there is no direct way to simply buy and hold gilts.
Mutual fund houses run gilt funds which actively trade on gilts of differing maturities. But these carry an interest rate risk as the fund may lose money as it switches in and out of gilts. Fixed maturity plans offer one way out, but if held for less than 3 years, their returns are taxable at one's income tax slab rates. Tax-free bonds from corporates are another option, but there's no supply of them now and the interest on them is paid out every year. So you don't gain from compounding.
As fund houses grapple with different solutions to this problem, there's an interesting one from Tata Mutual Fund. The fund house has repositioned its Gilt Mid Term Fund to deliver the gains of buying and holding long-term gilts to investors. The fund's investment strategy goes thus.
It divides its portfolio into equal halves, investing one half in the gilt maturing in 2022 (8 years hence) and another half in the one maturing in 2027 (13 years hence). The fund house has hit upon this strategy instead of directly buying 10-year paper, because it is more cost effective for investors. You typically end up losing 20-30 basis points on the liquidity premium on ten-year paper and that impacts returns.
This strategy allows the fund to lock into the current high interest rates of 8.5-8.6 per cent on these gilts. The fund will thus earn regular income on these gilts and keep re-investing them in the fund, so that your returns can compound over the next 6-7 years. (Tax-free bonds don't allow you to do this). The fund plans to buy and hold these gilts until they mature. If interest rates spike over the next one year, yes the NAV may fall, but investors in the fund can avoid rate risk by holding on for the long term say 6 years or so. As the fund itself plans only on a buy and hold strategy, it will not suffer capital losses from such a spike in rates.
Though the fund is open ended and may face inflows or inflows, the two g-secs are liquid enough to provide both buying and selling opportunities.
However, interest accruals are just one part of the story. If interest rates decline from their present highs over the next three years or so, as most people expect them to, the fund will make gains from rising gilt prices adding to the returns. The fund comes at a modest expense ratio, charging only 0.35 per cent of the NAV for Direct investors and 1.1 per cent for those who buy through a distributor.
Overall, the fund house expects that, if this fund is held for over 6 years, investors can reap benefits of both the high yields and capital gains, if there are any. Because of regularly re-invested interest, you get the benefits of a 6.5 year zero coupon bond (a bond which offers you a discount on purchase instead of regular interest payouts).
So whom will the fund suit?
· Investors who have a financial goal coming up in 6 years-plus
· Investors retiring in 6 years' time. They can even set up a systematic withdrawal plan to derive regular 'income' from the fund at maturity
· Investors who want a long-term, low maintenance debt option, without credit risk and low rate risk
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 | |||||||||||||||||||||||||||
| ICICI Prudential Quarterly dividend Posted: 20 Dec 2014 12:35 AM PST Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Leave a missed Call on 94 8300 8300
ICICI Prudential Quarterly dividend
ICICI Prudential Mutual Fund has announced dividend under the following schemes:
The record date has been fixed as December 24, 2014.
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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