Prajna Capital

Systematic Withdrawal Plan (SWP)
ICICI Pru Dynamic Plan
Gold investment - Gold ETFs can be better option than Gold Bonds

Posted: 12 Oct 2015 04:54 AM PDT

Systematic Withdrawal Plan (SWP) - Invest Online

Mutual fund investors can withdraw their mutual fund investments systematically over a period of time by setting up a systematic withdrawal plan with the fund house. The funds thus withdrawn periodically are credited to the investor's bank account. These can be used to meet monthly household expenses or may be used to reinvest in some other investment product.

Form

To enroll, the investor has to to fill up a SWP form. This can be downloaded from the fund website. Investors are required to use separate forms for different schemes, plans and options.

Types of SWP

There are two variants, fixed amount and appreciation withdrawal. In the first, a fixed sum is redeemed on the SWP date.In the other, any appreciation that has happened in the scheme as on the SWP date is redeemed from fund periodically.

Dates and frequency

The investor has to choose a particular date in the month on which he would like the SWP transaction to take place. The frequency of SWP needs to be mentioned. Also, the SWP start date and end date must be mentioned in the form.

Bank details

Proceeds from SWP are credited to the default bank account registered with the fund house. However, if the investor wants the proceeds to be credited to another account, the same needs to be mentioned.

Process

The form is required to be submitted at the official points of acceptance of transactions. The SWP start date should be about a month away from the date of submission of form so as to allow processing of the request or as may be mentioned by the fund house.

In case of joint holders, all holders are required to sign the form.The fund house mentions the list of schemes that are eligible for SWP. It's a good idea to check with the fund whether the facility is offered at the time of investing.If the investor is using an online platform for mutual fund investments, he can also set up SWP online.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

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For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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Leave a missed Call on 94 8300 8300

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ICICI Pru Dynamic Plan

Posted: 12 Oct 2015 02:10 AM PDT

ICICI Pru Dynamic Plan - Invest Online

If you are looking for a fund that would defend your portfolio well, ICICI Pru Dynamic will fit your requirement. The fund managed a good 27 per cent compounded annual return since its launch in October 2002, way ahead of the 15-percent return of its benchmark S&P Nifty.

This outperformance is noteworthy as the fund has a strategy of taking active cash calls by shifting a good chunk of its assets to debt when equity valuations seem high.

The Fund

ICICI Pru Dynamic seeks to invest in equities, taking into account the price to book value of the market. It invests across market capitalisation (large, mid and small) based on the attractiveness of stock valuation across segments.

When valuations in the mid-cap space are attractive, the fund manager seeks to increase the fund's exposure to such stocks, while ensuring that such a segment does not constitute a majority of the exposure.

Although an equity fund, ICICI Pru Dynamic's mandate allows it to move even 100 per cent of its assets into debt or cash, or hedge the portfolio using derivatives. However, normally, the cash levels are mostly maintained within the range of 0-35 per cent and rarely goes above 35 per cent.

The cash calls are taken based on stock market valuations. A higher price to book value than the fair value range triggers an increase in cash levels and vice versa.

Suitability

If you look at one-year performance toppers, you will not find ICICI Pru Dynamic. This is not a fund for return chasers. If you want to participate in the equity market for the long term, but with relatively lower risks (especially risks associated with market valuations seeming too high), you can consider investing in this fund.

The fund seeks to follow a common sense approach, by increasing the equity exposure (buy more) at low market levels, and reducing the equity exposure (sell some) at higher market levels. But this approach would mean reducing equity exposure when other equity funds are fully invested, or going underweight on a sector that has premium valuations when peers hold on to it. This might also mean losing out on some short-term return opportunities.

This fund can work for you in combination with other equity funds as it can provide market-beating returns, while at the same time, providing some hedge in a bear market.

While we usually recommend the Systematic Investment Plan (SIP) route in equity funds, it may not be too risky to take small lump sum exposure to ICICI Pru Dynamic as it tries to time the market for you based on valuations.

When markets are expensive, the fund will likely move to cash, ensuring that you do not get hurt even if you time your entry in the market peak. Investors with a long-term perspective can add ICICI Pru Dynamic along with other equity funds as a part of their core portfolio.

Performance

ICICI Pru Dynamic has beaten its benchmark over five and 10-year time frames, with a compounded annual return of 16 per cent and 24 per cent respectively. Its benchmark CNX Nifty delivered 10 per cent and 16 per cent return over the same periods.

icici_pru_tax_plan_Oct29

On a rolling three-year return basis (in the last five years), the fund beat its benchmark 96 per cent of the times. While the fund's performance might seem exceptional, its rolling returns also bring out periods of underperformance (with peers), especially in a rallying market. It contains the downside well in falling markets.

ICICI Pru Dynamic's returns deviate far lesser from its average compared with peers. That means its returns swing less. For a defensive fund, these returns are justified for the risk it takes. This is also reflected in its risk adjusted returns measure (measured by Sharpe ratio), which is also higher compared with the peer group.

Portfolio

portfolio_icici_pru_tax_plan_Oct29

As of September, the fund was invested in equities only to the extent of 67 per cent, net of the Nifty Futures it held. It currently holds about 55 stocks. Over 70 per cent of the stocks are from the large-cap segment. Top 10 stocks accounts for 47 per cent of the portfolio. Banking, power and Information Technology (IT) are the top three sector holdings.

The fund's sector exposure suggests that it may have been uncomfortable with valuations in certain sectors. During September 2014, it remained relatively overweight on power, telecom and transportation sectors. It remained relatively underweight on banks and finance, auto, consumer non-durables and retailing.

Power Grid Corporation of India, HDFC Bank, ICICI Bank and SBI were its top holdings as of September 2014. The fund is managed by Sankaran Naren and Mittul Kalawadia.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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

Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

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

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

Gold investment - Gold ETFs can be better option than Gold Bonds

Posted: 12 Oct 2015 01:16 AM PDT

For a long time, the government has been trying to curb gold imports. Recently it launched two new initiatives — gold bonds and gold monetisation scheme — to control the yellow metal import and also utilise the idle gold in the country.

The benefits of these, however, seem to be limited. Gold imports are expected to fall by about five per cent in the next 12 – 18 months.

Gold bonds

These are substitute for buying physical gold. Under this scheme, RBI will issue bonds in the denomination of 2gms, 5 gms and 10 gms of gold. The maximum annual limit for investment under this scheme is 500 gms each person. The bonds would be issued for a period of five to seven years and redemption value will be decided as per the prevailing market price of gold at the time of maturity. Investors will also receive interest payout every year.

The government has also built in mechanism to protect investors from price fluctuation. If the price of gold increases, the government takes the risk of higher prices, if they fall, the investor would be given an option to roll over their holdings for an additional period of three years. However, the interest rate is yet to be decided. The investor can also take a loan against these bonds. To provide liquidity to investors, these papers will also be listed on exchanges.

The taxation will be similar to that of physical gold. The investor will need to pay long term capital gains tax at 20 per cent with indexation for holding period of over three years.

Ideal for: These papers are beneficial if an individual buys gold purely for investment purpose. Instead of purchasing physical gold they can opt for bonds, which are more efficient as banks and jewellers selling coins and bars charge a commission. These are also ideal for individuals planning to put in a lump sum amount.

Gold Monetisation Scheme

Under this, a customer needs to depost his or her gold with a bank by opening a gold savings account. It will be melted, the purity will be assessed and a gold certificate will be issued to the investor. The gold monetisation scheme will offer an annual interest rate, which is expected to be around one to two per cent.

This is not the first scheme of its kind. SBI has been running a similar scheme and offers an interest rate in the range of 0.75 per cent – 1 per cent ayear. The new scheme is designed to target the physical gold holdings with households and temples in the country.

However, it is difficult to see an investor parting with his or her gold, as the metal has sentimental value. A person may not be willing to see her inherited jewellery and long preserved holdings being melted away for meagre returns. Also, Indians usually have a cultural and emotional value towards their gold holdings, which are mostly in the form of jewellery and ornaments. People tend to pledge it only during a financial emergency, and as a last resort.

Thus pledging gold in return for a certificate or cash is also viewed as social ignominy.

As per the data release by World Gold Council, more than 50 per cent of the gold imported in India is used for weddings and ornaments.

Ideal for: An investor who has large gold holdings in form of gold coins or bars can utilise this opportunity as the scheme will provide interest pay out and also reduce the risk of holding physical gold as a reserve.

Returns from the two government schemes are marginally higher as compared to the returns from exchange- traded funds ( ETF) and gold mutual funds ( MF), which do not offer the additional yearly interest.

Rather, ETFs and MFs have an expense ratio of around one per cent. However, a systematic Investment plan ( SIP) in funds will help to generate higher returns in the long term as it reduces the average buying cost. In case prices fall, losses from SIP will be lower as compared to lump sum investments. ETFs therefore make more sense for those looking to invest small amounts regularly for a future goal, and later redeem the investments to buy gold at then prevailing price.