Prajna Capital - An Investment Guide

    Would you want to drive your car freely, but carefully, without the fear of having to pay high damage claims if an unfortunate accident occurs involving pedestrians or other outside individuals? Would you want to be away from your home without any fear of a theft at your home causing immense losses? If your answer to these questions is yes, then you should be going for general insurance policies of different types. General insurance protects individuals and companies from financial losses that may arrive in the event of undesirable risks materialising. Health insurance, also a part of general insurance, is aimed at protecting individuals from unforeseen healthcare costs ruining their finances.   The biggest protection offered by non-medical general insurers to individuals is the protection from losses due to Occurrences such as fire, storm, burglary, earthquake and explosion, whether accidental or natural. In case of companies, there are insurance plans that can protect them f...

    THE Public Provident Fund ( PPF ) is a long-term investment option that is available for investors to build a corpus over several years. This has been a popular investment route over the years and now, with the second draft of the Direct Tax Code ensuring that this will retain its tax exemption status in the future, there will be an increased interest. At a time when rising interest rates across the economy has raised several questions for investors about the routes that they can follow, the PPF is one instrument that can feature prominently among the choices. Investors must be clear about the various details before they make their specific investment plans. Here are a few points that need attention:   Investment & tax benefits   There are two aspects to an investment in the PPF. The first is the ability of the investor to actually invest some amount in the instrument, while the second point is the tax benefit that is associated with the instrument. The PPF is a 15year o...

  Last year, the fund delivered 70.2 per cent, while the category average was 61 per cent. The bias towards mid-cap stocks clearly worked in its favour. Till 2002, the fund tilted more towards large caps but when the rally started in 2003, it changed tack and gave in to the smaller fare. Having said that, the fund has been flexible in moving across capitalisation in line with market conditions. The flexibility also extends to its changing composition. Its equity allocation has averaged around 69 per cent over the past year. The funds mandate permits the equity allocation to fluctuate between 50 and 75 per cent of its assets, and it has always stayed within that limit. When Nishit Dholakia and Satyabrata Mohanty took over in June 2009, changes were apparent in the fund. A lot of shuffling took place in sector bets, while the number of stocks rose significantly to touch 60. The fund is fairly diversified and single-sector allocation has rarely crossed 16 per cent since 2006. On th...

    Mirae Asset India Opportunities Fund has been putting up some good numbers, but nailing down its style is not easy. Give it some more time   At first blush, this would appear to be an aggressive offering. After all, that is what the perception of an opportunities fund is: one that takes bold sector and stock bets and swiftly moves between sectors wherever money is to be made. It is not unusual to find a very concentrated portfolio in such a fund. However, upfront let's be clear: that is not what the Mirae Asset India Opportunities Fund is all about.   The fund manager has complete flexibility to invest in stocks across sectors and market caps. He can move out of sectors which do not appear to have much upside and focus on those with greater chances of an upswing. But he keeps himself well grounded, in what one may refer to as a conservative strategy. "Our fund is not aggressive. Let me clearly state that this is a flexi-cap fund with a large-cap bias," is how...

    Three Ps of Buffettology. The three Ps are: Predictability, Price and People.   Predictability . Buffett's liking for some sectors and his famous refusal to get into some sectors like technology boils down to predictability. His investment choices are entirely based on products whose basic demand will remain predictable for decades to come. Not just that, the factors that will determine success or failure will also remain the same as they are today. At the core of Buffett's portfolio, there are companies that dominate businesses like soft drinks, shaving blades, candy, cheese, furniture, jewellery and (recently) railway freight services.   Price. This is the heart of value investing. Investments must be made at a low or at least fair price. This rules out any hot growth stocks, at least at any point of their history when they are widely recognised as growth stocks.   People. If you read what Buffett writes or says about his investments, he always lays great emp...

HDFC Prudence Fund, launched on February 1, 1994, is one of the oldest funds in the equity-oriented hybrid funds category (also called as balanced funds). As of July, the fund's average assets under management (AUM) were ` 4,558 crore. It has been ranked 'Crisil Mutual Fund Rank 1' for the past three quarters and has held the top rank on 22 occasions over the 10-year history of Crisil Mutual Fund Ranking. The high consistency in rankings is an indication of a blend of superior performance and disciplined portfolio management. Investment style It seeks to benefit from both asset classes, ie, it aims to provide capital appreciation of equities and stability of debt market instruments. During the last three years, the fund maintained an average 75 per cent exposure to equities. It's aggressively managed, showing a clear tilt towards equities over the last three years wherein the fund remained invested largely in equities, despite 2008's down cycle. Performance ...

    INVESTORS in unit-linked insurance plans, which are known as Ulips, will have some relief in the coming days, as new guidelines become effective for policies entering the market. There are a lot of changes that will come into play and they will ensure that there is an added element to protect investor's interest. One such guideline refers to discontinued policies. Till now, investors often ended up paying a lot of charges on discontinuation of a policy before the completion of the policy term. This will now be restricted. Here are some details with respect to discontinuation of unit-linked plans. Applicability:   The first thing that has to be considered is the time period when the new guidelines related to discontinuation of Ulips will be applicable. These guidelines say all policies cleared by the insurance regulator after this date will need to follow the stated directions. Investors should first ensure whether the policy they are buying is covered by the new guid...

Asks MFs To Publish Ads With Specific Nos Apart From Scheme & Benchmark Returns    THE Securities and Exchange Board of India (Sebi) is planning a standard set of disclosures for mutual fund fact sheets, advertisements and scheme information documents (SID), a person familiar with the matter told ET. This will not only give a clearer picture about the performance of the schemes, but will also help investors compare similar schemes of different fund houses.    The regulator is aiming at more of quantitative disclosures, and not just qualitative disclosures as is the case at present.    For instance, take returns. The thinking within Sebi is that returns alone do not define performance. A scheme may generate high returns by taking more risks, but this may not be palatable to the conservative investors in that scheme. Once the risks taken by fund managers are quantified, investors can compare the performance of various schemes before deciding on the one that suits their tempera...

A small exposure will ensure that there is adequate hedge when the equity market is not doing too well If you have not taken notice of aslew of feeder funds in the market, it is time you did. They've clocked impressive returns during the current uptrend and provided diversification. Feeder funds became popular lately, with many international funds making a debut here. Concept: Feeder funds invest via another fund called the master fund. Often, an onshore feeder fund will invest in an offshore master fund. This is done so that the foreign master fund can gain a tax advantage for domestic investors. Feeder funds are a bit complex since they bring exchange rates into play. But, the investor remains unaware of such intricacies. These funds are launched to replenish or expand the asset base of a principal fund. Existing feeder funds: Currently, there are 22 schemes floating, across domestic mutual funds. The popular ones being, AIG World Gold Fund, DSPBR World Gold Fund, ING La...

Some avenues for those who cannot afford to risk their corpus    Everyone tries to set aside some savings for future needs. These savings are built based on some factors of life. People invest savings in various investment instruments in order to protect their value from inflationary pressures. There are various types of investment instruments available in the market that can be segmented based on returns offered, lock-in period, risk etc.      An investor should select and invest in instruments based on his risk appetite and look at building a portfolio that covers various needs that may arise in the future.     These are some options that come with a low risk level: Bank deposit     The basic features of a bank deposit are safety of the principal amount, easy liquidation of the deposit and accumulation of regular interest. The interest rates on bank fixed deposits are on the rise after the Reserve Bank of India's (RBI's) decision to tighten the monetary policy.    Th...

THE possibility of one undergoing some kind of expensive health treatment during the lifetime is much more than a sudden demise. Given the cost of treatment at private healthcare facilities, it's almost beyond reach for the Indian middle and lower income class to meet such expenses. Despite that, the penetration of health insurance in our country is extremely low. Only about 2% of the India's population is covered under medical insurance.    This is partly because of a lack of understanding of various products and the need for these products. There is a wide range of health products available in the market, each with its own advantages and drawbacks. Understanding them is important to make the right choice. INDIVIDUAL HEALTH PLAN The simplest form of health insurance is the individual mediclaim policies. It covers hospitalisation expenses for an individual for up to the sum assured limit. The insurance premium is dependent on the sum assured value. Unlike in the past, most...

Many credit card users fail to take the benefit of features provided for convenience and security. Even before the Reserve Bank of India mandated a compulsory password for online transactions, HDFC Bank and Kotak Mahindra Bank offered virtual cards. Many users are not comfortable using their card online due to security reasons. That's why we introduced this facility, Let's look at other such features that credit card companies are offering: Pay by transaction : The latest entrant in the credit card space, Dhanlaxmi Bank, offers cardholders a 45-day free credit period, irrespective of the billing date. While applying for the card, the applicant needs to just specify if he wants to pay like this or according to the billing cycle. In the former, the bank starts charging interest rates only from the 46th day onwards. The bank also gives an online financial planning tool that analyses the expenditure, segment-wise. The customer can track if more money is being spent in lif...

    THE introduction of unit-linked insurance plans (ULIPs) has been, one of the most significant innovations in the field of life insurance over the past several decades. With the help of one product category it has addressed and overcome several concerns that customers had about life insurance –be it liquidity, flexibility or transparency. Prior to the introduction of ULIPs, different goals of an individual were addressed with separate products. However, ULIPs are one stop solution for an individual's financial goals that are designed to enable consumers plan and fulfill all their long term financial goals, be it child education or marriage, wealth creation or even creating a retirement kitty. ULIPs are structured such that the protection (insurance) element and the savings element can be distinguished and hence managed according to one's specific needs, offering unprecedented flexibility and transparency. Why invest in ULIPs Traditionally, the policyholder had no contro...

MONEY makes the world go round. Managing money is not on the top of everyone's mind — some do not think about it, others think that working hard to get the money is tiring enough — but even so, it remains just there: in the mind. Just because we use money as a unit of exchange for goods and services and start dealing with the physical currency early, some of us seem to think that we know all that we need to about money. It's Time To Shake Off The Cobweb With fast-changing regulations and intricately-woven global markets, there is a need to be continuously on top of the news — and be able to understand the implication of these on your personal finances to ensure that your money works as hard as you do. However, more often than not, we need a mistake to awaken us to the fact that money management is not as sim ple as it looks. Ask the CFO of your organisation today, and he will honestly tell you that he can handle the company's finances with consummate ease, but his person...

     Savings and investments are the basic steps in an individual's financial planning process. There are various options available in the market, and it is very important to plan and select the right investment instruments in order to get the best returns. It is advisable to start saving and investing as early as possible. It is also very important to allocate some of your time to planning and tracking your existing and planned investments. You cannot have all you plan for in your investment portfolio on day one - you need to build the portfolio slowly over time, and focus on diversification of instruments too.    The first step is to identify your objectives. The objectives can be simply classified as short-term needs such as tax saving, insurance, buying some asset etc, and long-term needs such as a property, marriage, children's education, retirement etc. The next step is to identify your risk appetite, which is basically your capacity to bear loss on investments. Risk ...

   Some banks and housing finance companies insist on a personal guarantor. The guarantor is required to meet norms specified by the bank. It is difficult to re-possess the property of a borrower in case of default. In order to safeguard its interests and to ensure the repayment of the loan is made in time, banks insist on a guarantor.    Although the liability is secondary, it is always there. One should act as a guarantor only if he is satisfied with the credibility of the borrower.    Usually, only individuals can act as guarantors. The guarantor basically provides a sort of security on behalf of borrower to the bank, that in case the borrower fails to repay the loan amount or other dues to the bank the guarantor will make good that shortfall. The guarantor has to enter into a deed of guarantee, where he agrees to make the payment in the event of applicant failing to pay the dues by the due date.    A guarantor should satisfy all the norms relating to age and income applicabl...

    Credit card information is privy and prone to theft. Therefore it is your responsibility to keep it safe from miscreants who may illegally use it and make you pay the price for the same because after all, you are the owner of the card. It is therefore important that precautions are taken so that you do not have to pay financially for the misdeeds of others. Take note of the following- Avoid giving out credit card information: Credit card thieves are known to pose as credit card issuers to trick you into giving your credit card number. Therefore give your credit card details only on the calls initiated by you to the customer service number. Also do not submit your credit card number through email. As a general rule, most banks and credit card companies will never request your account numbers via e-mail. No matter how official, credible an e-mail or website appears to be; if it is asking for sensitive information you can safely assume that it is not genuine. In fact, most banks ...

    Experts say dividend on a mutual fund scheme is mostly a gimmick used to attract investors MF experts say there has been rationalisation in dividend declared after Sebi's order HIGH dividend payouts from the mutual fund company is not the real indicator of a fund's performance and one should not invest in mutual funds based on dividend payouts, say mutual funds experts. Unlike stocks where dividend reflects performance of the company, dividend paid on a mutual fund scheme does not reflect a fund's performance. One should look at historic performance of the fund. Unlike corporate dividends, where the firm distributes surplus, high mutual fund dividend does not really mean that the fund is performing well. Fund experts say there's no difference between an investor redeeming a part of mutual fund and a fund company paying a part of your returns in the form of dividend. Till now, more than 135   equity schemes have paid dividends this year. The dividend paid i...

What is KYC? Client identification process is known as 'Know Your Customer or Client' aka- KYC . Sebi has made it mandatory for all mutual funds to know their clients. This would be in the form of verification of address and identity, providing financial status, occupation and such other demographic information to CDSL Ventures Limited (CVL), a wholly owned subsidiary of Central Depository Services India Limited. Investments equal to and more than Rs 50,000 in a mutual fund portfolio necessarily have to be accompanied by a KYC acknowledgement letter. How to get KYC compliant? CVL is the designated body to carry out the KYC compliance procedure for mutual fund investors. You have to approach CVL through any of the point of service ( POS ). The KYC application form is available on the CVL website in the downloads section. One can take a printout of the applicable form. The same is also available on mutual fund websites.    Investors need to attach self-attested photocopy of th...