Prajna Capital

Different Kinds Of Mutual Funds
Types of Insurnace you need
What to do with Insurance Policy that is not good

Posted: 13 Jul 2016 04:23 AM PDT

Different Types Of Mutual Funds

Mutual funds is a trust that pools money from a group of investors sharing common financial goals and invest the money. In other words, a mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. Financial intermediaries or investment companies carry out detailed analysis on the market conditions and then invest this money in a diversified manner to minimize risk and maximize the rate of return on the investment.

Every Mutual Fund will either be categorized under Growth or Dividend Option.

Growth Option: In these Kind of Mutual Fund whatever Dividend is given by the Mutual Fund time to time according to the Performance will be invested back in that Mutual Funds & No. of Units will be allotted for that Dividend Money.

Dividend Option: Mutual Funds Provides Dividend to Investors time to time. This Dividend is Tax Exempted & No Income Tax is levied on it.

Types Of Mutual Funds

By Structure

While launching a new schemes, Mutual Funds declares whether this will be an open ended scheme (i.e. there is no specific date when the scheme will be closed) or there is a closing date when finally the scheme will be wind up. Thus, according to the time of closure schemes are classified as follows:

Open Ended Schemes: Open ended mutual funds are those mutual funds that do not have a fixed maturity. You can buy and sell these funds anytime throughout the year.

Close Ended Schemes : These types of funds are open only during certain period of time, not through out the year like open ended mutual funds. And if you invest for this type of mutual fund then your fund will get locked for that particular period which varies between three to fifteen years. You can sell or redeem your units only after your lock in period completes.

Interval Scheme : Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units are available for purchase or sale during a selected period.

By Investment Objective

Growth Scheme: Growth Schemes are also known as equity schemes. As this invest mainly in equities with the aim to provide capital appreciation over medium to long term.

Income Scheme: Income Schemes are also known as debt schemes. As this invest mainly in fixed income securities such as bonds and corporate debentures with the aim to provide regular and steady income to investors. Capital appreciation in such schemes may be limited. These are low risk and aim at a fixed current income .

Balanced Schemes: Also called Hybrid funds, aim is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced schemes is to invest in a combination of equity and debt. Equity ensures the growth and debt instrument ensures the steady income to the investors.

Money Market Schemes: These Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper etc..

Other Schemes

Tax Saving Schemes: These are equity linked saving schemes (ELSS) schemes that offers tax rebate to the investors under Section 80 C and have a compulsory lock in period of three years.

Index Schemes : Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index.

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Types of Insurnace you need

Posted: 12 Jul 2016 11:52 PM PDT

The basic purpose of insurance is to cover risks in your life, not offer returns. Still, most people confuse it with investment because of the products in the market that offer both. While you may not feel much need for any kind of cover when you are young, it's best to know about the various types at the start of your financial life. The lure of tax saving and the urgency to get tax planning components in place at the end of financial year can push one to make unwise choices.

Life insurance:

The term plan offers a big cover for a small premi um, but you do not get any returns.Then, there are traditional plans, which include endowment and moneyback policies. These offer small covers for a high premium, and low rates of return. Finally, there are Ulips, which are market linked insurance plans with a lockin period of five years and provide a low cover for a high premium, but offer market-linked returns.

The last two are typically used as a wealth creation tool because of returns, but remember that in case of traditional plans, the rate is low, usually 5-6%, and you can earn higher returns by investing in other instruments.

At this point, the only life cover you may need is a term plan, but this too, only if you have financial dependants or large liabilities in the form of debt.

Health insurance:

The broader categorisation includes the basic indemnity plan, which covers hospitalisation expenses, for an individual, and the family floater plan, which includes your entire family in a single cover. Growing incidence of lifestyle diseases and rising medical costs make it essential to have a health insurance. Also, a health plan provided by an employer may not be enough to hedge one against the rising cost of healthcare services

You should have `3-5 lakh basic health plan at this stage, depending on whether you stay in a metro or a tier IIIII city. So if your company insures you for `2 lakh, buy an independent top-up plan for `3 lakh as it will be cheaper than a regular policy. Consider a family floater plan only when you are married and have kids; don't include your parents because the premium is determined by the age of the oldest member. Also, don't just consider low premium as a criterion. Look at the claim settlement ratio, hospital network, inclusions and benefits before buying a plan.

Critical illness plan:

This provides a lump-sum benefit in case of certain pre-decided ailments and pays the costs associated with longterm care and loss of income due to prolonged recovery period. It is available both as a standalone policy or as an add-on with life and health insurance.Typically a standalone plan will offer a higher cover and more flexibility. You can avoid buying it at this stage, but consider it in your 30s given the higher incidence of such diseases at lower ages.

Accident disability plans:

This is a plan you should buy when you start working because of the sheer unpredictability of life. It covers you against mishaps that can result in complete or temporary loss of income due to partial or total disability. Buy a cover for `20-25 lakh or one in accordance with your income and nature of job.

Home contents plan:

Though you are unlikely to have a house at this stage, buy a policy for the contents if you are in another city, not with your parents. The premium for a `5 lakh cover can be `3,000 and will cover jewellery, home appliances, furniture, etc, against theft, fire and natural disasters.