Prajna Capital

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• Schemes from HDFC Mutual Fund
• IIFL Nifty ETF
• NFO Review: ICICI Pru Regular Gold Savings Fund
• Laddering Investment Technique
• Investing: Direct Stocks or Mutual Funds?
• DSP Blackrock World Agriculture Fund
• Life Insurance - Rider Benefits

Schemes from HDFC Mutual Fund Posted: 03 Oct 2011 05:01 AM PDT HDFC Cash Management Fund - Savings Plan Objective To generate optimal returns while maintaining safety and high liquidity. Option/Plan Growth Option, Daily dividend option (reinvestment facility only) and Weekly dividend option (with payout and Reinvestment facility).(Effective from Jun 1st, 2007 - Dividend Payout facility is being introduced under the Weekly Dividend Option). Minimum Application Amount Growth Option - For New/ existing investors - Rs.10000 and any amount thereafter. Daily Dividend and Weekly Dividend Option - For New/ existing investors - Rs. 100000 and any amount thereafter. Debt/Income Funds HDFC MF Monthly Income Plan - Short Term Plan Objective To regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme's assets in equity and equity related instruments Option/Plan Growth Option,Quarterly Dividend Option,Monthly Dividend Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. Exit Load (as a % of the Applicable NAV) In respect of each purchase / switch-in of Units upto and including Rs. 10 lakhs in value, an Exit Load of 0.50% is payable if Units are redeemed / switched-out within 6 months from the date of allotment. In respect of each purchase / switch-in of Units greater than Rs. 10 lakhs in value, an Exit Load of 0.25% is payable if Units are redeemed / switched-out within 3 months from the date of allotment. Minimum Application Amount For new investors : (Growth & Quarterly Dividend Option) – Rs.5000 and any amount thereafter under each option. (Monthly Dividend Option) . Rs. 25000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter. HDFC Multiple Yield Fund   Objective To regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme's assets in equity and equity related instruments. Option/Plan Growth Option, Quarterly Dividend Option, Monthly Dividend Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. Exit Load(as a % of the Applicable NAV) In respect of each purchase / switch-in of Units upto and including Rs. 10 lakhs in value, an Exit Load of 0.50% is payable if Units are redeemed / switched-out within 6 months from the date of allotment. In respect of each purchase / switch-in of Units greater than Rs. 10 lakhs in value, an Exit Load of 0.25% is payable if Units are redeemed / switched-out within 3 months from the date of allotment. Minimum Application Amount For new investors : (Growth & Quarterly Dividend Option) – Rs.5000 and any amount thereafter under each option. (Monthly Dividend Option) . Rs. 25000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter.   -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

IIFL Nifty ETF Posted: 03 Oct 2011 04:24 AM PDT The investment objective of the scheme is to provide returns that closely correspond to the total return of the S&P CNX Nifty Index, subject to tracking error. The scheme will invest in stocks comprising S&P CNX Index up to 100% in the same ratio as the index. However, it may also invest up to 5% in debt and money market instruments.   Fund Manager Mr. Manish Bandi is the fund manager of the scheme. Mr. Bandi is a science graduate and a CA with 11 years of experience in the financial services industry. He has been a part of the investment committee and fund management team and held senior managerial positions in the field of equity advisory, portfolio management services, equity broking, business and process reviews and audits in his previous roles.   Fund House IIFL Mutual Fund will be the 43rd entrant to the fund industry. It got SEBI's approval in March 2011. But they have waited for more than six months to come out with their first fund. Initially the fund house plans to focus on ETFs and then add other actively managed funds.   Performance of Similar Funds: IIFL Nifty ETF proposes to charge the lowest expense ratio among all the Nifty ETFs.   Basic Details NFO Opens: September 28, 2011 NFO Closes: October 12, 2011 NFO Price: Rs.10/- Per Unit plus premium Listing: National Stock Exchange Option: Growth Minimum Application Amount: Rs. 5000 and in multiples of Re. 1 thereafter per application Exit Load: NIL Benchmark: S&P CNX Nifty Index Fund Manager: Mr. Manish Bandi     -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

NFO Review: ICICI Pru Regular Gold Savings Fund Posted: 03 Oct 2011 02:54 AM PDT     ICICI Prudential Mutual Fund has launched an open-end Gold Fund, which will invest in ICICI Prudential Gold ETF. This will be the fifth fund of this kind.   Investment Strategy The primary objective of the fund is to generate returns linked to the underlying scheme. The scheme will invest up to 100 per cent in the units of ICICI Prudential Gold ETF. However, it may also invest up to 5 per cent in debt & money market instruments.   Fund Manager Mr. Chaitanya Pande will be the fund manager. He has over 15 years of fund management experience. He has graduated from St. Stephens College, New Delhi and has done PGDM from IMI, New Delhi. He also manages ICICI Prudential Gold ETF, S.M.A.R.T. Fund, Banking & PSU Debt Fund, Regular Savings Fund, all the FMPs and all the Interval Funds.   Fund House ICICI Prudential Mutual Fund has been around for more than 16 years. Its assets under management as on June 30, 2011 are Rs 79,857 crores and it is the third largest fund house.   Comparison between a Gold ETF and Gold Fund of Fund If an investor chooses to invest Rs. 50,000 each in Gold ETF through demat mode as well as in a regular Gold Savings Fund through physical application mode. He has to incur following charges in each case. Charges ICICI Pru Gold ETF ICICI Pru Regular Gold Savings Fund Account Opening Charges Nil Nil Annual Maintenance Charges of Demat A/C Rs 0 - Rs 1200 Nil Delivery Brokerage Charges^ Rs 25 - Rs 175 Nil Transaction Charges Rs 25 Nil Annual Scheme Recurring Expenses^^ Rs 750 Rs. 750 Total Rs. 800- Rs. 2150 Rs. 750 ^Delivery brokerage charges is in the range of 0.05% to 0.35%. ^^capped at 1.50% under both options   Our View If you want to invest in gold, you may invest 5 to 10 per cent of your overall portfolio in such a regular gold savings fund. However, one should keep in mind when to get out of such a fund whenever the prices start to decline.. Hence, ensuring a stop loss in such an investment becomes very important.   Basic Details NFO Opens: September 20, 2011 NFO Closes: October 4, 2011 NFO Price: Rs.10 Options: Growth and Dividend Minimum Application Amount: Rs.5000/- and in multiples of Re.1 thereafter Exit Load: 2% if redeemed/switched-out on or before 1 year from the date of allotment and NIL after 1 year. Benchmark: Domestic Price of Gold Fund Manager: Mr. Chaitanya Pande     -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

Laddering Investment Technique Posted: 03 Oct 2011 01:23 AM PDT Laddering helps you benefit from changing rates and make the most out of fixed income instruments    Fixed income investors are having a tough time predicting the movement of interest rates. The Reserve Bank of India has raised rates nine times in the last 14 months. Banks and companies, offering fixed deposits, too, have raised rates several times. Consider this: you earned 6-7% on a one-year bank deposit a year ago, while, today, you could get about 9% to 10% on the same deposit. However, the trouble is that nobody can predict what will happen to deposit rates in the next one to two years. To tackle such a tricky scenario, financial planners recommend a technique called laddering, which helps investors maximise returns from their fixed income portfolio, including fixed deposit, company deposit, debt mutual fund schemes and so on. WHAT IS LADDERING Laddering is an investment technique in which investors purchase multiple financial products with different maturity dates. Laddering helps avoid the risk of reinvesting a big portion of assets if the financial environment is unfavourable. For example, say you have fixed deposits maturing in 2012 and 2015. Now, even if the interest rate drops in 2012 when one deposit comes up for renewal, half of the income is locked at higher rates until 2015. It is impossible for retail investors to predict the interest rates. That is why laddering helps optimise returns. HOW LADDERING WORKS When you invest in fixed income products such as fixed deposits, one of the risk you carry is that of reinvestment. Put simply, you are not sure whether you will be able to reinvest the amount at the same rate or a higher rate when the deposit comes up for renewal. This is a risk investors have to live with in every fixed income product — be it fixed deposits or bonds. Typically, many fixed-deposit investors try to time the market. They wait for interest rates to peak before locking their deposits. They wish bulk of their money is locked in at the highest interest rates. But they lose out on returns, since, in the interim period, they may see money lying idle in their savings bank account, earning lower returns. Even if they succeed in this technique, when their deposit matures, they have to accept the prevailing rates at that point of time, whatever they are. If you break your fixed deposit, then you end up paying a penalty and you again land in a tricky situation. Clearly it could be a catch 22 situation! This is where laddering helps investors. You can use it with products like bank deposits, company deposits, post office schemes, bonds and fixed maturity plans of mutual funds. So you can create a ladder with a single product such as a fixed deposit (FD) or with multiple products. It is a technique of creating a staggered income ladder, one rung at a time. Suppose you want to invest . 3 lakh of your emergency funds for an indefinite time period. You are not sure which way the interest rates are headed in the coming years. If the interest rates go up, you investment will be locked in your current FD and you cannot benefit from the higher rates. On the other hand, if the rates were to go down you would be more than content to have the money locked in at higher FD rates. So the simplest ladder is investing . 1 lakh each in a one-year, two-year and a three-year FDs. While this is the simplest ladder, you can also combine different products based on your risk profile to get a higher return. So, a good idea could be to invest in a one-year fixed maturity plan (FMP), where you are expected to get about 9% per annum. You can also go for a two-year company fixed deposit of a reputed company like Mahindra Finance (9.5% per annum) and a three-year bank fixed deposit, which could give you about 9.5-10% per annum. The example has been used to create a three-rung ladder, but you can also build a four, five or 10-rung ladder, depending on your risk profile and needs. BENEFITS OF 'LADDERING Typically, a ladder is setup to have one product mature at the end of every year, which is reinvested back depending upon the period. The maturing product gives you an opportunity to invest again, depending upon the then existing interest rate scenario. Laddering is very useful for retired people who depend on interest income to meet their day to day expenses. Laddering can free up capital as and when required. This gives you access to funds in an emergency. A person may purchase a shorter-term deposit to meet any need for capital to fund his children's education and purchase longer-term fixed deposit for retirement spending. If you ladder your fixed income instruments, there will always be some amount of money that will mature every year or after the intervals you have planned, every six or even three months, for instance. Laddering gives you optimal return with safety of capital and liquidity. By using this process over long periods, you should be able to average out your interest rates and get a good return from your fixed income portfolio. You can create a ladder as per your needs. Today, a ladder can range from three years to 15 years depending on your needs and wishes, since you have retail bonds from SBI, which have a tenure of as high as 15 years. So if your child is say three years old and you need money regularly for his education, you could create a 15-year ladder. To optimise your returns it would make sense to use a mixture of instruments. Depending upon your risk-return profile, you can choose from among several products. Today, you have bank fixed deposits, company fixed deposits, retail bonds from firms like SBI, Tata Capital, Shriram Transport Finance and L&T Finance, and even postal products like NSC and Kisan Vikas Patra. You can mix and match various products to create the best ladder. The disadvantage of laddering in a falling interest rate scenario is that it may not give you an interest payout as high as you would have got by investing the entire sum at the higher rate. But the upside is that if interest rates fall, the overall return on your corpus will still be higher than the prevailing rate of return as there will be tranches invested at higher rates. So, over the longer term, the flow will be more even and predictable. The constant maturing, however, does present reinvestment risk to investors in a falling interest rate environment.   -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

Investing: Direct Stocks or Mutual Funds? Posted: 03 Oct 2011 12:01 AM PDT At a time when both Indian and global equity markets are being plagued by bad news, retail investors aren't sure of the strategy they need to adopt. Should they bet on the equity markets now or take the safe route of mutual funds? This is a loaded question. This does not have a simple yes or no answer and depends on a persons risk taking ability, return expectations combined with the ability and inclination to manage a share portfolio, as opposed to simply investing in mutual fund schemes. However, if the same question is posed in the context of the current downward slide in the markets, the answer could be far more definite. Consider this… can a person used to swimming in a pool switch to swimming in an ocean or river at will? The answer seems self-evident as swimming in a pool is far easier as it is a controlled environment. Swimming in a river or ocean is far more difficult as one has to contend with the surging waters, currents and whirlpools. There are of course other lurking dangers like alligators, sharks and so on, which can cause harm. So, even those who swim regularly in pools aren't always willing to jump into a river or ocean. Apart from the perils involved, swimming in the open, also calls for higher level of skills. It even involves different, special skills, not required in a pool. MUTUAL FUNDS That is precisely the difference between investing in mutual funds and equity. Mutual fund investments are far safer as there is a fund manager who takes care of the investments and whose only mandate is to monitor and manage the investments that his fund makes. Not much knowledge is required from the investors side, except for the due diligence on selecting an appropriate fund to invest, in-line with their requirements. Most investors, are not even aware of who the fund manger is, but a look at the kind of returns the fund manages over the years, and you can judge his work. Good managers will use extensive information from their research to pick the best stocks. Over time, the investor just needs to check if the fund manager is sticking to the mandate and is delivering a return superior to the corresponding index and the category, enough to justify the charges. But not all investors want to depend on the fund manager's discretion. Such an investor may want to invest in the broad economy instead. He could invest in index funds. This is even simpler, as the investor does not have to spend too much time studying what to invest in. All he needs to know is which index, he should like to invest in and what the charges are for managing it. Savvy investors may also want to go through websites that rate mutual funds on various parameters. EQUITY Equity, however, is a different ball game. Here, the investor needs to analyse and choose the equity shares to invest in. This is easier said than done. Choosing a good equity share requires broad understanding of the economy, sectors and the company itself. One has to go through the financials of the company like balance sheet, profit and loss account as well as all other parameters that indicate the health of the enterprise. As individual investors, most people do not have the capability nor the inclination to do this. Unless, they have a good broker or advisor, they may end up taking or simply choose blue chips. you could end up a sucker, if you have been taking tips from the wrong person. Again the latter may also not be the best investment decision since there are many good buys even among the smaller stocks. By avoiding them totally, you may miss the opportunity to buy potential multi-baggers. You might as well have, invested in an index funds if you want to go for blue chips only. STRATEGY Given these facts, investors want to know what changes they need to introduce in their strategy. The proximate cause is that an investor hears that some stocks prices have come to 50 per cent levels of what it was prevailing at, a year ago. Investors will also find blue chips among these. Most market experts have been asking investors to buy at such points, given that these stocks may not be available at such attractive valuations in a upward moving market. That gets investors salivating. But if there are major drops, there would be reasons for it. Assuming that it has dropped due to market conditions would be wrong. GTL Infra and KS Oils are cases in the point. For KS Oils the 52 week High/low is 63.1 and 7.7 and that for GTL Infra is 48/ 10.5. The drops here may make one salivate and invest in them; but these companies prices have come down because the equity shares pledged have been sold to recover the money. That hints at a cash flow problem for these companies and hence caution is advised. What this illustrates is that, just a price drop is not sufficient reason for picking up a stock. Unfortunately, in a falling market, investors who follow the herd mentality, may end up picking up stocks that should be best left untouched. Investments are done with a purpose. Admittedly, there is more than one route to get to ones goal. Mutual funds allow investments through either lump sum payments or systematic investment plans. One could follow similar investment patterns for equity investing too. Either ways, staying invested for longer periods is the only way to make money from equities as well as mutual funds. However, changing from equity to mutual funds or vice versa, may not be warranted just to take advantage of a falling market. Those investing in mutual funds should continue to stay invested there for the fund manager would be able to take advantage of the situation, much better than any individual investor. Those who have been investing in equities, however will have enough knowledge to pick and choose the right investments. For them, equity markets at this point provides great opportunities. Equity investors can consider mutual funds, to bring down their risk .In summary, one need not change the investment strategy due to market conditions. Rather, it is better to think it out before opting for a strategy. And once done, stick to ones strategy - be it equity or mutual fund investing.   -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

DSP Blackrock World Agriculture Fund Posted: 02 Oct 2011 11:06 PM PDT DSP BlackRock's new fund offer (NFO), the World Agriculture Fund, is a fund of funds (FoF) scheme. The scheme will invest in the BlackRock Global Fund-World Agriculture Fund (BGF-WAF), that invests in equities of agricultural companies globally. The BGF-WAF is benchmarked against Luxembourg's DAX Global Agribusiness Index. The scheme has performed in line with the benchmark in the past year (as on August 31) with returns of 20.5 per cent, whereas its benchmark has gone up 21 per cent. In the past six months, the fund's returns have fallen 7.5 per cent and its benchmark was down 6.6 per cent. SNaganath, president and chief investment officer of DSP BlackRock, said, "Agriculture is a sector represented globally, which has sound fundamentals over the long term, given the rising imbalance between food demand and supply. We believe agriculture is an investment opportunity, with the potential for growth in the long-term." There are two more international feeder funds in India that invest in shares of agri-commodities companies abroad. Deutsche Asset Management, the mutual fund arm of Deutsche Bank, had a fund —DWS Global Agribusiness Offshore —launched in April 2010. This returned 2.49 per cent in the past year. Birla Sun Life Asset Management Companys Global Agri Fund has returned a negative 9.34 per cent. In comparison with equities, it has done better in recent times. The Sensex in the past year dipped 19 per cent. The charges for international feeder funds are no different from what domestic fund investors would pay. The overall asset management charges are capped at 2.25 per cent. The fund invests in agricultural science companies, fertilisers, agricultural equipment, agribusiness, food processors, land & farming, forestry and allied sectors. For investors wanting to take advantage of the agri-commodities story, this fund is a good opportunity. The international trend of investing in scrips such as Monsanto, Potash Corp, Deere, ArcherDaniels-Midland, Wilmar International etc. is an added attraction. The move seems timely, as analysts feel prospects for the agriculture sector look bright. The agri-commodities space looks promising, as prices are likely to rise. The disadvantage of investing in a global feeder fund is that it is treated as a debt fund and you have to pay capital gains tax. The shortterm capital gains tax (less than 12 months) is 30 per cent. The longterm capital gains tax (more than 12 months) is lower, at 10 per cent without indexation or 20 per cent post it. A fund such as this is meant for those with a large portfolio and a capacity to bear risks and the volatility associated. The exposure to thematic funds should be 5-10 per cent. And, to invest in these requires a more active management by the investor. Besides the usual risk of investing in equities, there is a foreign exchange risk as well on investing in an international feeder fund.   -----------------------------------------------------------------   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 IDFC Mutual Funds Online   Invest in UTI Mutual Funds Online    Invest in SBI Mutual Funds Online   Invest in L&T Mutual Funds Online   Invest in Edelweiss Mutual Funds Online

Life Insurance - Rider Benefits Posted: 02 Oct 2011 08:45 PM PDT As an insurance-seeker, insurance agents or financial advisors may have often advised you to enhance your basic cover with rider benefits. It may not be wise to blindly follow their recommendations to buy a policy merely, but you can do your own research and identify riders that can add real value to your basic protection plan. Essentially, riders are add on covers insurers provide to enhance the scope of a life policy. Riders cover risks that are beyond the scope of the main life policy, resulting in a more comprehensive protection. The riders may cover critical illness (or dreaded diseases), personal accident (or accidental death and dismemberment), and waiver of premium benefit (applicable to child Ulips). These add-ons step in during situations where the main life insurance policy may not come into play. For example, if the insured meets with an accident resulting in absence from work, he/she could be faced with the prospect of loss of income during the period of recovery. The life cover will not be able to offer any succour in this situation. This is where a personal accident rider, covering temporary disability, would come into play. The insurance company will compensate the insured monetarily during the period, depending on the policy terms and conditions. Likewise, if the policyholder is diagnosed with a critical illness, the life cover will be of no help as it does not cover funding of the treatment cost. On the other hand, if it is topped up with a critical illness benefit rider, the insurer will hand out a lump sum upon diagnosis of such an illness, unlike a health insurance policy. Thus, it can take care of the post-recovery costs as well. Cancer, kidney failure, and bypass surgery are some of critical illnesses covered under the rider. To identify the rider best suited for you, take into account factors such as age, regular mode of commuting to work and history of illnesses in your family. Also, consider the costs involved. Insurers levy an additional premium as per their underwriting norms when you decide to add such rider benefits to your basic policy. In terms of tax breaks, rider add-ons make you eligible for deductions in line with life and health covers. For instance, if you opt for an accidental death rider, you can claim deductions under section 80 C on premiums paid; for critical illness, the relevant section will be 80 D.

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