Thursday, September 1, 2011

Prajna Capital

Prajna Capital


Mutual Fund Review: LIC Nomura MF Floater MIP - Plan A

Posted: 01 Sep 2011 06:16 AM PDT

OBJECTIVE: To generate regular income by investing mainly in floating rate instruments / fixed rate instruments swapped for floating rate return so as to minimise the interest rate risk and at the same time aiming at generating capital appreciation in a long term by investing in equity / equity related instruments.

Exit Load:
• For application upto 25 lakh : 0.50% if exit within 6 months from the date of investment
•  For application size > 25 lakh : 0.25% if exit within 3 months from the date of investment.

Plan:
Invest maximum 20% of the corpus in equity or equity related instrument.

Option:
Each Plan offers Investment under four options namely 1) Monthly Dividend 2) Quarterly Dividend 3) Yearly Dividend 4) Growth. Monthly, quarterly, and yearly dividend option will have dividend payout and reinvestment facilities.

Special Facilities:
Systematic Withdrawal Plan (SWP), Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Automatic Withdrawal of Capital Appreciation plan (AWOCA). SWP, STP, and AWOCA plans will be available under growth option only.

Transparency:
Disclosure of NAV on a daily basis at the end of each business day. Periodical disclosure of portfolio as well as publication of yearly and half-yearly accounts.

Repatrition Facility:
NRIs, FIIs and PIOs may invest in the scheme on full repatriation basis. (Investment will be governed by rules laid down by RBI/SEBI in this regard).

Issue Price:
Sales will be at NAV related prices on an ongoing basis, on all business days except during book-closure, if any.
 

The tax-saver mutual fund ELSS

Posted: 01 Sep 2011 05:11 AM PDT

If you are a hard-working, hard-earning individual, chances are that come March, you are going to have to invest some time in tax planning for the next financial year. The question that is probably foremost in your mind is how to save as much as possible on the amount of tax you will have to shell out.

As you know, irrespective of the income, the maximum deductions that can be made from your taxable income are up to Rs 1 lakh. While the Public Provident Fund and National Savings Certificates are the traditional way to go, you might want to consider investing in ELSS, or Equity Linked Saving Schemes.

FIRST, WHAT ARE EQUITY LINKED SAVING SCHEMES?

These are mutual funds that invest in the stock market and give the tax benefit under Section 80C of the Income Tax Act. How this works is that the fund manager will invest in shares of various companies across various industries. So, in fact, it is a normal equity diversified fund. But there is the added tax benefit which a normal diversified equity fund will not have. This sets it apart. And currently, if you invest in such funds, you get a rebate. This is the immediate plus of the ELSS mutual fund.

WHAT MAKES EQUITY LINKED SAVING SCHEMES A BETTER OPTION THAN OTHER SAVING INSTRUMENTS?

The answer is really very simple. When you invest in ELSS mutual funds, you not only save the amount permissible by the government, you also stand to gain from it, because of the high rate of return.

There are, of course, many reasons why you should go the ELSS way.

  • ELSS has proved in the past that given the right market conditions it can be the  the best performing in the mutual fund category, showing returns of nearly 60%. In fact, a number of funds have appreciated by more than 80% in their three-year period. However, when market conditions get hit due to the economic downturn and recession effects, the performance will also reflect this! Remember equities are long term investments that yield better in the long run ( a span of 10-12 yrs)
  • These funds have a lock-in period of three years, which prevents you from unnecessary withdrawals and spending and helps earn a return over time. However, remember to stay invested for longer periods of time to the tune of 10-12 years to reap the best of returns.
  • Also, the lock in gives fund managers the freedom to take sector and stock bets, which they are not able to do in the regular equity schemes.
  • The dividends you earn will be tax free.
  • When you sell the units of these funds, you can avail of the long-term capital gain for which there is no tax. If you sell after one year, you pay no tax.

POINTS TO CONSIDER BEFORE YOU INVEST

  • Unlike the Public Provident Fund or the National Savings Certificate, the returns here are not guaranteed. While there is a chance at earning handsome returns, the likelihood of incurring losses is also high.
  • Also, unlike PPF and NSC where investing at one go does not have any impact on the investment, lump-sum investing in an equity fund could be dangerous.
  • It is always wise to have some amount of equity in your portfolio. If you are not too sure about directly getting into the stock market, a mutual fund is your best bet.

Remember that the younger you are, the greater the amounts you can think of investing in these schemes. As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. But it is always wise to have some amount of equity in your portfolio. And if you are not too sure about directly getting into the stock market, a mutual fund is your best bet. Decide how much you want to invest in an ELSS and start investing a fixed amount right away every month, and watch your nest egg grow.

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

 

 

 

 

What if you Missed filing income tax returns July 31, 2011?

Posted: 31 Aug 2011 11:32 PM PDT

 

 

THE July 31, 2011, deadline for filing income tax (IT) returns has come and gone. Those who have filed their I-T return for the financial year (FY) 2010-11 (that is assessment year (AY) 2011-12) in time, can heave a sigh of relief. For others, who could not file their tax return by deadline, all is not lost. Similarly, those who may have made an inadvertent mistake while finalising their tax return and filed the same, there is recourse available to them as well.


Missed filing the tax return -file a belated tax return: As per Section 139(4) of the Income-Tax Act, 1961, an individual who fails to file a tax return by deadline, may file a belated tax return before the end of one year from the end of the relevant assessment year in which the return was to be filed.


This means that a person can file a belated return within two years from the end of the financial year under consideration. In relation to assessment year 2011-12, which is financial year 2010-11, you can file a belated return on or before March 31, 2013. However, if the tax return is filed after the end of the relevant assessment year in which the said return was to be filed, which is after March 31, 2012, applicable for financial year 2010-11, the I-T authorities may levy a penalty of Rs 5,000.

Although, the provisions for filing a belated tax return provides a much needed respite for those who missed filing the tax return by deadline, there are certain disadvantages: Carry forward of losses not allowed: In case, you have a loss from any of the heads of income (except for "income from house property"), and you do not file your tax return in time, then you would not be able to carry forward your losses. Thus, you would lose the benefit of carry forward and set off of these losses against the income of the next year.

No revision allowed: A belated tax return filed with the tax authorities cannot be revised.
Therefore, one should be very careful while filing a belated tax return.

Interest liability payable under Section 234A of the Act: If the complete tax liability is not paid by the taxpayer by July 31 of the year under consideration, and the tax return is filed after the due date, then the taxpayer is required to pay an interest of 1 per cent per month on the outstanding tax liability.


Committed a mistake while filing the tax return file a revised tax return: As per Section 139(5) of the Act, if an individual who has filed an income tax return on or before the due date, realises that he has made an omission or wrong statement therein, he may file a revised return before the end of one year from the end of the relevant assessment year in which the return was to be filed, which is within two years from the end of the relevant financial year under consideration. Accordingly, in relation to assessment year 2011-12, a revised return can be filed on or before March 31, 2013. It may be noted that a revised return replaces the original return and can be revised again.

A notice can be sent by the I-T authorities for fail ure to file an I-T return or for providing wrong details in the tax return. In such a case, you are required to file your belated/revised tax return, as the case may be, relating to assessment year 2011-12 by March 31, 2013, or the completion of your assessment, which ever is earlier.

In view of the above tax provisions, it is advisable that the individuals take advantage of the same and file a belated/revised tax re turn, as the case maybe, at the earliest.
 

Gold Outlook: One factor you must watch

Gold is up again today on several factors: 1) end of month buying, 2) speculation that the European Central Bank is unlikely to raise rates, meaning rates will stay low in the US and Europe for some time, and 3) Chicago Fed`s Evans endorsing low rates for some time to come.

Where will gold go from here? No one can give you a sureproof answer to this question, but here`s two different ways to think about it.

1) Watch the women of India. They are the largest purchasers of gold in the world, and they are no fools. The issue is not whether gold will go up or down, but whether it is currently cheap or expensive compared to other investments.

The price of onions. I spent some time a short while ago with AngloGold Ashanti CEO Mark Cutifani at his office in Johannesburg, South Africa, who has spent a lot of time talking to Indian gold consumers.

He notes that they view gold strictly as an investment, and compare it to the cost of other commodities and investments. Like onions. Like fuel. And like real estate.

(How do commodity futures work? )

"So they`re triangulating a basket of commodities against the price of gold so with inflation going up, for thousands of years, they`ve worked out what gold is in relation to the things that matter in their life and they see gold as volume against the price. And that`s how they get to the price of gold. At the moment, they`re saying, gold looks pretty good. On a relative basis, it`s holding its value."

Notice how carefully Cutifani chooses his words: at the moment, gold looks pretty good. On a relative basis. That means that if inflation stops, and gold keeps going up...it will be less attractive as an investment to Indian investors. Or if real estate suddenly drops in price, while gold keeps going up, real estate might be a better investment.

So look for signs of "buyer fatigue" in places like Asia and the Middle East.

And remember, gold has competition from its eternal nemesis, silver. This is happening in the United States, where demand for gold jewelery again declined in 2010 as consumers shifted to more affordable silver jewelery.

2) Look at gold as a play on paper currency. Aside from demand issues, John LaForge and Chay Norbom at the respected Ned Davis Research firm have made what I think is a correct observation: the peak price of gold will reveal itself in the currency markets.

"Gold`s bull run reflects a lack of trust and credibility in governments and central banks worlwide to stop printing paper money at will. We believe this because gold continues to rise versus every currency we track--developed country and commodity country currencies alike. Until governments start enacting more sound money policies, gold should continue to rise. Gold`s ultimate demise will come when confidence in paper currencies returns, which forecast is not today."

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Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

 

 

 

 

Income Mutual Funds & Interest Rates

Posted: 31 Aug 2011 10:36 PM PDT



The RBI increased the policy rates by 50 basis points recently. That will push up interest rates. When rates are peaking, experts advise investors to invest in income funds.


An income fund is an open-ended mutual fund scheme that invests in fixed-income instruments of varying maturities to generate regular income from the coupon payouts from the instruments. The fund invests in certificates of deposit, commercial paper, government bonds, debentures and securitised debt to build a diversified portfolio offering good risk-adjusted returns.


The fund manager may choose to invest in call money market, treasury bills and collateralised borrowing and lending obligation (CBLO), to maintain liquidity requirements. Fund managers consider credit rating of fixed income instruments before investing in them. The returns payable by funds are influenced due to changes in interest rates. The returns generated by an income fund include both the coupon payments and capital gains. Higher the coupon – the rate at which interest is paid by the borrower — higher the income for the investor. Also, the higher the coupon, the lower the credit rating of the bond, other things remaining the same. The fund manager of an income fund does his best to strike a balance between the credit rating and yield of the portfolio. Capital gains are a function of interest rate changes. If the interest rates were to move up, the fixed income instruments, especially those with longer maturities, see a fall in price. This, in turn, results in a capital loss and a lower net asset value (NAV) of the fund. On the other hand, if the interest rates move down, the fixed income instruments see prices appreciate. This brings capital gains to the fund and the NAV appreciates. Income funds make a better choice for fixed-income instruments when the interest rates are peaking.


One can invest in an income fund with as low as . 5,000 to start with. One can also opt for a systematic investment plan. The ideal time frame for investments in an income fund is one to two-three years. Though income funds do not charge an entry load, there is an exit load in place.


Investors looking for regular income should look at the dividend option. The growth option works for investors looking to save for the future.
 

Franklin FMCG and Franklin Pharma will be Merged into Franklin India Prima Plus

Posted: 31 Aug 2011 09:24 PM PDT

Franklin Templeton Mutual Fund has announced the merger of Franklin FMCG Fund(FFF) and Franklin Pharma Fund (FPF) into Franklin India Prima Plus (FIPP), with effect from September 9, 2011.


Investors in both these funds have been given an option to exit at the prevailing Net asset Value without any exit load. The period of this no load exit offer is valid from August 8, 2011 to August 9, 2011.


All systematic transactions including Systematic Transfer Plan (SIP), Systematic Transfer Period (STP), Dividend Transfer Period (DTP) or Systematic Withdrawal Plan (SWP) will continue under Prima Plus for its balance tenure subsequent to the merger.


If investors do not wish to continue the systematic transactions under Prima Plus, they are required to intimate the fund house in writing their unwillingness to continue the said facilities post merger latest by September 9, 2011.
 

 

Mutual Fund Review: Reliance Banking Fund

Posted: 31 Aug 2011 08:59 AM PDT

 

Reliance Banking Fund is still the top performer (under the sector specific fund category) among the various mutual fund schemes launched by reliance mutual fund.

 

Type of Scheme: Open Ended Banking Sector Scheme

 

Investment Objective:

 

The main objective of the scheme is to generate income by primarily investing in equities / equity related fixed income securities of the banks.

The fund will invest in banking equities only when the stocks are expected to perform well. If the stocks are not expected to perform well, the scheme will invest in debt and money market instruments.

 

Asset Allocation:

 

Equity / Equity related instruments – 0 to 100%

Debt and Money Market Instruments – 0 to 100%

 

Types of Plans Available:

·                           Retail

·                           Institutional

·                            

Both the plans have the following Options:

Dividend Option – Dividend Payout or Dividend Reinvestment

Growth Option – Growth Option or Bonus Option

Minimum Investment Amount – Rs 5000 and in multiples of Re 1 thereafter

Minimum Additional purchase Amount – Rs 1000 and in multiples of Re 1 thereafter

Entry Load: NA

Exit Load: 1 % if the scheme is redeemed within 1 year from the date of investment. There is no exit load if the scheme is redeemed after 1 year.

Systematic Investment Plan: Yes

Systematic Withdrawal Plan: Yes

Systematic Transfer Plan: Yes

Online Investment: Yes
 

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