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| Long Term Investment Options in India Posted: 02 Nov 2015 03:48 AM PST Are you planning to take any long term investment decision in near future? Do you know what are the long term investment options available currently? Generally when an investment is done for a period of more than 5-6 years or even more than 10-15 years, it is called as long term investment.
When someone starts saving money for his/her child's education expenses, marriage etc. that come under long term investment. One can choose from a wide range of such investment products as per risk bearing capacity. Being a long term investor has its own cons, as these types of investments need huge commitment & patience. Before you opt for the long term investment options, you should always set aside certain amount for some urgent crisis which may bring any type of financial obstacle. In this article, I will share 10 such long term investment options in India. With these you can smartly diversify your investment portfolio & grow your money further. Long Term Investment Options in IndiaPPF (Public Provident Fund) AccountPublic Provident Fund or PPF is one of the best and secure long term investment options in India which is totally tax free. PPF account opened in any bank or post office is one of the best long term investment products. Under this, the money will be locked for a period of 15 years and earn compound interest. In addition, one can also extend the PPF account in extension of 5 years block. But less liquidity is a big negative for PPF account. You can partially withdraw your investment only at the end of 6th year. However there is an option of taking loan on the balance of PPF account. Investing in Mutual FundMutual Funds investments are generally preferred by people who want to invest in equities and bonds with a balance of risk & return. In recent years, investing in stock market via Mutual fund has gained huge popularity. Many people are getting educated and want to taste the equity market. And for that, mutual funds are the best way to enter. One can invest in mutual fund for longer time by systematic investment plan (SIP) and get a much better return compared to other investment products. SIP helps to build a portfolio over a longer time horizon with small investments at regular intervals which reduces the risk of instability in the market. Direct Equity or Share PurchaseDo you know how to analyze a share or stock before you buy? If you can do that, then investing in direct stocks could be the best option for long term point of view. Even though investing in direct stock is risky, but if one can invest for a long term of more than 15 years, higher return is expected. There are 2 ways in which you can invest in equities:
It is recommended that you should not make frequent trades as you are in the market for the long run. In this way all your funds will go into commission. As an investment option, investing in equity shares is considered to bring a high level of risk associated with it.
Real Estate InvestmentReal estate is a booming industry in India. It has huge prospects in all the major sectors like housing, commercial, manufacturing, hospitality, retail etc. As an individual investor, buying a flat or a plot could be the best decision for your investment portfolio. Real Estate is termed as the "money making industry" in the country. Real estate investments in India guarantee a return of 30% to 100% annually. But to avail that benefit, one has to do a proper research and then buy some property in such places where prices could go up to some significant level in next 5-10 years horizon. Investing in Gold in various waysGold is an evergreen investment product, as the liquidity is always there. One can invest in gold anytime in any format like Gold deposit scheme, Gold ETF, Gold bar, Gold mutual fund etc. In long term of more than 10-15 years point of view the return will be definitely good. In case of the Gold deposit scheme introduced in budget 2015, the investor can deposit/ invest minimum of 200 gm gold in exchange for gold bonds. The bond will hold a tariff free interest rate of 3% – 4% with a lock in period of 3 to 7 years. Gold bonds are not entitled to any kind of capital gains of tax and wealth tariff. According to the investor's preference, the insured amount can be accrued back in terms of cash or gold. Post Office Savings Schemes (POSS)Post Office Savings Schemes are popular for their higher return. The monthly income plan of POSS is mostly suitable for retired individuals or people with regular income needs. Being a govt. savings scheme, it has very low risk. Also there is no TDS in a POSS. Post Office offers various schemes such as National Savings Certificates (NSC), National Savings Scheme (NSS), Kisan Vikas Patra, Monthly Income Scheme and Recurring Deposit Scheme. Among them, NSC for 10 years is a good post office investment option with a guaranteed return amount. In case you don't want to take risk and the investment period is of 10 years, then NSC can provide a decent return on investment. Company Fixed DepositsCompany FDs are preferred over bank FDs for their higher interest rates. Corporate FDs are instruments used by companies to borrow money from small investors. You need to select the investment period carefully as the money cannot be withdrawn before maturity. Unlike bank FDs, The corporate fixed deposit schemes are not covered under any Insurance benefit. These instruments are not governed by the Reserve Bank of India. So Company FDs are mostly suitable for those long term investors who can bear some amount of risk. Invest in attractive IPOsInitial Public Offerings or IPOs are often presented as "Once in a Lifetime" opportunities as they happen only once for every company. IPOs are very attractive, if launched by a reputed company. IPOs are little different from the average stocks as they have many unique risks associated with them. The uncertainties associated with IPOs are mainly because of the lack of available information. To make a wise investment decision, try to learn as much as you can about the company. Generally most companies want long-term investors who will hold their stock. In such a case one can put some money for a longer period of time and get benefited. Buy any ULIP plan for a long termUnit linked insurance plans or ULIPs invest in equities and debt markets. The ups and downs are captured by the net asset value (NAV). Although ULIPs are not recommended product due to the various charges, but if you are investing for a long period of time then ULIP can also give a decent return of 7-8% on investments. Besides that, one can also get income tax exemption on investment as well; means the net yield will be much higher. ULIPs offer tax benefits under Section 80C. Maximum Rs 1.5 lakhs of deduction can be claimed under this. Also the redemption proceeds are tax-free under Section 10(D). Invest in BondsIf you are not comfortable with mutual fund or direct equity market investments, then investing in bonds could be a good options. There are many good bonds which actually give a decent return in long term. You may opt for Govt. 10 year bond which is currently giving an interest rate of 7.70%. As the govt. sets the interest rates on bonds based on the inflation, you may also go for Inflation Indexed bonds. Conclusion Though past performance of any product is not always a guarantee for their future performance, then also it is advised to buy any investment product which has a good track record over last few years and which charges low management fees. To diversify your investment portfolio, try to distribute your risk in various stocks, mutual funds, bonds & debentures and other different instruments. It is advised that, you should not invest more than 10% in any of your investment plan of your portfolio. In this way, you will remain protected if any of the particular sectors collapses. Share your experience & thoughts if you have invested in any of the above mentioned long term investment options. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online
Invest in Tax Saver Mutual Funds Online 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 OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 |
| Posted: 02 Nov 2015 03:07 AM PST Bank Of Baroda  Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online
Invest in Tax Saver Mutual Funds Online 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 OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 |
| Monthly Income Plans of Mutual Funds Posted: 02 Nov 2015 02:37 AM PST Fade-up with high volatility in share market? Looking for safe source to invest some money to earn steady monthly income? If yes, than while searching for the most appropriate investment avenue you must have come up with Monthly Income Plans of Mutual Funds as you answer. But before investing in Monthly Income Schemes of Mutual Funds, you should know the pitfalls and limitations of these plans.
What is Monthly Income Plans of Mutual Funds?Monthly Income Plans offered by Mutual Fund Houses are nothing but a debt oriented mutual fund schemes which give you income in form of dividends. MIPs invest about 70% to 80% in debt instruments such as government securities, corporate bonds, money market instruments and debentures and remaining 20% to 30% in equities and cash. The income you get in form of dividends can be taken out in various intervals such as monthly, quarterly, half-yearly or yearly. Similar to every other mutual fund scheme MIPs too come in two variants.
Under MIP Dividend Option you will be given an income in form dividend at regular interval, if any. You can choose the intervals in which you wish to receive dividend i.e. monthly, quarterly, half-yearly or yearly. Please note the dividend received by you is tax-free but AMC paying out the dividend is required to pay the DDT @ 15% with cess and surcharge also which eventually reduces your dividend in the first place.
Under MIP Growth Option no money is paid out you. The profits earned from the invested amount will keep growing and you will get accumulated amount with all the profits only at the time of redeeming the mutual fund units. The benefit you reap in growth option is higher than dividend option because the compounding works wonders for longer terms but your profits may get reduced due to taxation. (Discuss later in the article).
Pitfalls of Monthly Income Plans of Mutual FundsYou must have got the basic understanding of both the options of Monthly Income Plans of Mutual Funds. But there are few limitations or say myth which you should know before parking your money into MIPs. Below points are solely regarding Monthly Income Plans i.e. MIP with Dividend Option. No Guaranteed Regular Income/DividendFirst of all, you cannot expect to get regular income aka dividend. Since MIPs invests in debt as well as equities, the certainty of profits are not sure. On top of it, regulation guiding Mutual Funds clearly states that dividend can only be paid only from the surplus/profits and not from the capital. For example, if the NAV of MIP increases from Rs.10 to Rs.13, than fund can declare dividends only out of the surplus of Rs.3. Hence, if the fund's NAV decreases due to market swings or rate reductions, there may not be any dividends.
Track records of the existing 26 Monthly Income Plans also shows that for the last five year (since September 2010) only half of them were able to pay regular dividends. This means the chances of receiving regular dividends is just 50%. In short it can be said you cannot only rely on MIPs for your basic living expenses.
Not Zero RiskAs you have already read that MIP invests around 70% to 80% in debt instruments and remaining 30% in equities and cash, not only equity part offers volatile returns, debt part also exposed to volatility due to interest rate movements. For instance, if interest rates go up, the old bonds having bearing less coupon rate may become less attractive, results in reduction in their market price. Due to this MIP may show negative returns also. Further, debt part of MIP also includes corporate bonds in its portfolio and in case these bonds makes default in payment of interest or capital, than there may be significant capital erosion in the fund. Double Digit Return FigureThere are few misunderstanding/mis-selling happens in MIP. First one is due to lack of knowledge of investor and second one is due to high commission structure of agents. Double digit return is the foremost lucrative point of buying MIPs. This is the only reason of picking MIP instead of Bank Fixed Deposits. But the returns of 10% to 20% as stated by the agents in recent times accrue to the growth option of MIPs not in dividend option. Since growth options bears the benefit of compounding with no withdrawals, the returns from Growth Options are far better than that under the same fund's Dividend Option. Remember, under dividend option, NAV gets reduced to the extent of dividend paid. So if NAV of the fund before paying out dividend of Rs.3 was Rs.25 than post payment, the NAV would fall to Rs.22 per unit. Apart from the above, due to high commission structure of the agents particularly in case of MIP (as much as 1-1.5% unlike 0.5-.75% in Equity funds), these MIPs are tagged as "Safe Funds" and "Income Guaranteed Funds" which we have seen not the case. Another heart breaking point is that most of the MIPs have higher expense ratio (around 2% or more) than other debts funds which eats into the overall returns.
Taxation of Monthly Income PlansMIPs are debt oriented mutual fund schemes and thus the tax treatment will be same as debt funds: Short Term Capital Gains: Redeeming MIPs units before 3 years (earlier 1 year) would be short term capital gains and attracts tax. The profits would be added to your income and taxed as per your slab rate. Long Term Capital Gains: In case the units of MIPs are sold after holding for 3 years, than the gains may be long term capital gains. The profits would suffer from flat tax rate of 20% (plus 3% cess) after indexation. Short Term and Long term Capital Loss: In case you have incurred short term or long term losses in MIP, you can set off it against capital gains in the same year or can carry forward in next 8 years to set off against future capital gains. Tax on Dividends: Dividends received by the investor are tax-free but company paying dividend is required to pay dividend distribution tax of 15% (plus cess and surcharge). MIP vs Fixed Deposits / POMIS
Conclusion:Investors with low risk-appetite i.e. retired or semi-retired persons or conservative investors can find Monthly Income Plans better than Bank FD but have to keep in mind that return of MIP is linked to market and thus exposed to volatility. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online
Invest in Tax Saver Mutual Funds Online 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 OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 |
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