Prajna Capital - An Investment Guide

      Interest Rate Risk: When interest rates rise, bond prices fall. So if the fund manager has his portfolio stacked with lower interest rate paper, the prices of his holdings will fall resulting in a lower NAV. On the other hand, if interest rates fall then the price of his holdings rise and so does his NAV.   The longer a bond's maturity, the greater the interest rates risk. A bond fund with a longer average maturity will see its net asset value ( NAV ) react more dramatically to changes in interest rates as the prices of the underlying bonds in the portfolio increase or decline.   Credit Risk: Bonds carry the risk of default, meaning that the issuer is unable to make further interest or principal payments. They are rated by individual credit rating agencies to help describe the credit worthiness of the issuer. Higher the credit rating, lower the risk and lower the returns. Lower the credit rating, higher the risk and higher the return.   Liquidity Risk: If the c...

Effective management of money is just as important as earning it. Following a good investment plan is critical for avoiding cash flow problems in the future. However, with a number of criteria such as investment horizon, liquidity   needs, risk profile etc. being taken into consideration, investment can turn out to be a complex process. Add to that the need for constant monitoring and rebalancing and the task becomes extremely perplexing and time consuming. Hence the need for a professional investment manager. With thousands of investment experts vying for your money, the task of choosing your manager can be just as complex as managing money itself. Using the following criteria to filter out your options can make your job a lot easier. 1) Experience -A firm which has created wealth for its clients in various economic cycles, market situations and investment scenarios is likely to be able to adapt easily and provide the correct solution accordingly. 2) Basket of products - Inves...

Swipe-now-pay-later attitude could land credit card holders in a soup if they don't understand the charges levied by card issuers    Credit crad gives you the ease to shop anywhere and everywhere with minimal hassle. It helps you buy big and lets you pay later, with a one-month grace period. But not understanding the terms and conditions in a credit card — like the interest and other charges levied by card companies — could leave you gasping under a mountain of debt. Often, a cardholder is struck by the realisation only when the monthly credit card statement reflects the hefty charges. For every card holder, it is imperative to study the ' Most Important Terms and Conditions' ( MITC ) listed on the card issuers' websites carefully. Here are some key clauses you need to be aware of, in order to avoid rude shocks later. Cash Withdrawal While your credit card can be used to withdraw cash from the automated teller machines, or ATMs, if required, it is best to save this ...

THE interest rate on the employees' provident fund (EPF) has been raised to 9.5 per cent for the present financial year. This is good news for all those who have money invested into EPF, as the new rate represents a rise from the returns witnessed in the past few years. There is also some indirect impact that this rate hike will have on the individual and their efforts while making other investments. This is one aspect that assumes added importance as several people might miss out on the details here. Restriction and impact: The higher rate of return of 9.5 per cent is applicable for the existing investors of the EPF. This system comprises a compulsory contribution that is made each month by the employer and the employee to the provident fund based upon a specified percentage of the salary earned. The interest is earned on the entire amount present in the fund that includes the present year's contributions plus the accumulated amount comprising past contributions and the i...

    WHEN Tata Motors was trying to turn around Jaguar & Land Rover, the Indian company's stock was trading very near to its book value 18 months ago. Months down the line, the strategy seemed to have paid off for the company as well as for investors, who understood the situation then. Special situations like these often throw up interesting opportunities, which can be capitalised by mutual fund investors. Known for the special situations theme, Birla Special Situations Fund, Fidelity India Special Situations Fund and HSBC Unique Opportunities Fund offer passive investors an option to bet on such special situations. Be it M&A or foraying into a new business area or demerger or share buyback, special situation funds screen situations like these to make the most of the opportunities. Mahesh Patil, head of equity (domestic) at Birla Sun Life Mutual Fund, talked of a special situation opportunity in Crompton Greaves. Crompton had strong cash flow and decided to invest a ...

  After a top quartile performance for three years, the fund found itself in the bottom quartile in 2009. But investors should not be in a hurry to write it off. Fund manager Aniket Inamdar maintains a compact portfolio and limits his mid- and small-cap exposure to around 25 per cent of the portfolio. With the number of stocks ranging from 20 to 31, one can expect concentrated stock bets. The top 10 holdings of the fund account for around 57 per cent of the portfolio. Though allocation to a single stock has exceeded nine per cent on many occasions, it is only in the large-cap bets. The fund appears to follow a mixed strategy. While a few of the large-caps have been held since inception, a fifth of its portfolio comprises stocks held for five months or less. Inamdar says he doesn't churn the portfolio a lot; it is the range-bound market that has resulted in a higher than normal turnover ratio. Despite the blip in performance last year, the fund has established a decent trac...

  M utual funds (MFs) are possibly one of the simplest market-linked investment products when it comes to meeting financial goals, whether it's your short-term needs or the long-term financial plans. However, to make the best of what they have to offer, you should understand some basic terms related to MFs. We take a look at five such important terms: Unit Holding a unit in a mutual fund scheme is akin to owning one share of a company. A holder of such units in any of the MF schemes is called a unit-holder. When you invest a certain amount in an MF scheme, you are allotted a certain number of units, the value of which determines the worth of your investment. Net AssetT Value (NAV)   NAV is a dynamic ratio. The market value of a scheme's portfolio changes day- to-day, just as prices of shares move up or down Just as a share or bond is bought and sold at a specific price, each mutual fund unit is bought and sold at its NAV. A scheme's NAV is its net assets (market ...

    UTI Master Value Fund is an equity fund and had average assets under management of ` 564.44 crore in August 2010. The fund was rated Credit Rating Information Services of India (Crisil) Mutual Fund Rank 1, under the small &midcap categories, for the last three quarters up to June 2010. The fund also features in the top 10 percentile of the Consistent Crisil Mutual Fund Ranking for June 2010. Performance The fund, managed by Anoop Bhaskar, has steadily improved performance in the last three years. A month-on-month comparison of its performance visà-vis the benchmark index reveals outperformance close to 60 per cent of the times. An improvement in performance saw the fund moving to the top 10 percentile of Crisil's Mutual Fund Rankings. The ability of the fund to capitalise on the recent rally in the equity markets is evident from its net asset value (NAV) growth, which has beaten the Bombay Stock Exchange (BSE) 200 by a wide margin. In the last 12 months, the fund...

  Bank customers can get themselves heard and their grievances settled if they know the banking service codes mandated by RBI    BANKING surely has come a long way. You don't have to visit the musty branches and brave serpentine queues anymore. The ATM can take care of most of your needs. If at all you need to visit a branch, smiling faces with pleasant manners would welcome you warmly.    However, the facade drops the moment you have a serious issue — like an erroneous transaction or wrong entry — with the bank. No technology, no courtesy can save you from the Kafkaesque nightmare. Suddenly, the bureaucratic maze would make sure that you run from one counter to the other or follow up the matter with countless phone calls to find a solution.    That need not be the case. A little bit of awareness about the service level of banks mandated by the Reserve Bank of India can help you take the bank to task. If there is a violation of the code of commitment (available on the websi...

The yield from these bonds is more thanks to the tax benefit. How these bonds work for an investor    In the Budget for 2010, the Finance Minister had mentioned floating of infrastructure bonds. The objective was to promote infrastructure investments in the country. Infrastructure requires huge investments. The gestation period is long and returns take a long time to come.    The Finance Minister had offered tax benefits to individuals on investments up to Rs 20,000 in infrastructure bonds under Section 80CCF. This is over and above the current limit of Rs 1 lakh under Section 80C. The Central Board of Direct Taxes ( CBDT ) has now notified New Infrastructure Bonds. An individual or a Hindu Undivided Family (HUF) can invest in these new infrastructure bonds up to Rs 20,000 in a financial year. Non-banking financial companies ( NBFCs ) classified as infrastructure companies by the Reserve Bank of India ( RBI ) will be allowed to issue these bonds, called long-term infrastructure bo...

Value-Averaging Investment Plan (VIP) Can Give Better Returns Compared To Sip Over A Market Cycle For most disciplined investors systematic investment plan ( SIP ) now forms the best way to put their money in equities. An investor keeps putting in a fixed sum at regular intervals, and in turn, he benefits from cost averaging without worrying about stock market fluctuations. Investors prefer SIP as no one can time the market. Therefore, it also saves them from speculating the market rise and fall in the future. However, wouldn't it be nice if we could invest more when the market is low and less when markets have risen? Value averaging investment plan, or VIP, is the answer. This method of investing goes a step further from SIP. The difference:   In the backdrop of being more active than an SIP, VIP endeavours to provide better returns. SIPs average out your cost by buying a fixed amount at regular intervals. VIP invests more money in the chosen funds, the market slumps or th...

    Investing for tax benefits under the new Direct Taxes Code ( DTC ) will be different in several ways from what taxpayers are familiar with right now. This will require some reconfiguration in the nature of investments for the investor and they need to be ready to tackle the changes that will come about once the new DTC is implemented from financial year 2012-13.One area of interest for most taxpayers is the manner in which they can extract the maximum tax benefit. Here is a look at the situation and also how it changes from the existing position. Basic deduction: At present, there is a deduction of Rs 1 lakh that is available for an individual when they make investments under specified areas such as provident fund, public provident fund, national savings certificates, equity linked savings scheme and insurance premium, among others. This benefit is available under Section 80C of the Income Tax Act. This has been replaced by a new Section 68 under the DTC where there is a deduct...

    There is a definite and growing buzz around IDFC Premier Equity, given its stellar show since 2007. The subprime crisis may have dealt a blow, but the revival has been much faster than the brief slide   IDFC Premier Equity is well recognised in the mutual fund industry as a mid-cap fund. The underlying philosophy of this fund is to invest in small- and mediumsized companies which have a good longterm potential, and hold on to these stocks until they evidently emerge as large-caps of the equity market. This has given IDFC Premier Equity an edge over many of its midand small-cap peers. No wonder then, that this mid-cap fund has successfully grown from less than 200-crore assets under management (AUM) in early 2007 to more than 1,700 crore AUM today. While the valuation of its equity portfolio definitely has an important role in boosting its AUM, IDFC Premier Equity does appear to have stirred up investor interest, given its powerpacked performance since 2007. PERFORMANCE: Launc...

        The government on Wednesday said that it has increased the interest rate offered in the employees' provident fund by 1 percentage point to 9.5 per cent for the financial year 2010-11. The move will benefit nearly 4.71 crore employees in public and private sectors. Announcing the hike, Union labour minister Mallikarjun Kharge, said, "We have decided to give 9.5 per cent rate of interest to subscribers during the current financial year on their contributions. For over four crore subscribers this is a big gift from EPFO Trustees." With this hike in interest rate, EPFO deposits become more attractive than bank fixed deposits, which at present are offering interest in the range of 7-7.5 per cent. The decision would put an additional burden of Rs 1,600 crore on the EPFO, the minister said, adding that it would be met from the surplus of over Rs 1,731 crore in the interest suspense account.

  INDIANS typically consider house property as an important source of investment for long-term returns. However, with the Direct Taxes Code (DTC), 2010, proposing significant changes in the way house property income would be subject to tax, it becomes imperative for investors to take note of the changes and plan their investment decisions accordingly. RENTAL INCOME The income from letting out a house property will be computed under the head — income from house property. The income from house property will be computed as gross rent less the deductions specified under DTC. Gross rent is the amount of rent received or receivable for the financial year. One can claim deductions for the amount of tax paid to the local authority, a sum equal to 20% of the gross rent in respect of repair and maintenance of such property, and the amount of any interest paid on loan taken for the purposes of acquisition, construction, repair or renovation of such property; or the interest paid on the loan ta...

  Here are some strategies for investors in these conditions    The domestic stock markets have been through a good rally over the last couple of months. The markets are trading close to their 30-month highs, propelled by good foreign institutional investor ( FII ) inflows. The markets are trading at cru cial levels. There are no strong triggers at the domestic level and the global sentiments are on the weaker side.    Investors should look at reducing their exposure to equity and equity-based instruments, and stay in debt or cash to invest at lower levels when the markets correct.     Here are some strategies for investors in the current market conditions: Book profits regularly     One basic strategy to maximise yield is to book profits at regular intervals. Analysts suggest investors should maintain profit and loss targets on investments and keep track of the triggers constantly. However, many investors don't have the time to follow the market developments constantly an...

     Till recently, investors always had a fancy for a particular asset and never explored options offered by other products. A real estate investor, for instance, never looked beyond property for his longterm needs as he was sure of its performance. Similarly, risk-averse investors banked on fixed deposits for both their short and long-term needs. The objective in most cases was accumulation as returns were secondary.    In recent years, the trend has undergone tremendous change thanks to the emergence of new options. More importantly, the current investor has the ability to take risk as he is not completely dependent on his savings for short and medium-term needs. The high disposable incomes and a steady rise in the ability to earn more have done the trick. As a result, investors too have begun to look at a combination of products to maximise returns. Smart investors aren't depending on one product to make their money grow any more.    Interestingly, this has also resulted ...

Under householder's policy, the sum insured of the jewellery covered is based on its market value at the time of taking the policy Last week, Tata AIG General Insurance launched ajewellery and valuables insurance cover for high net worth individuals — a first of its kind. While both public and private general insurance companies have jewellery insurance covers, they are a part of the householder's policy. The annual premium for a cover of ` 1 crore will be one per cent of the sum assured. It could vary depending on the risk evaluation of the jewellery. This product will offer an all-risk cover — loss reimbursement, repair and restoration, preservation and storage assistance. When you take a householder's policy and get your jewellery covered under it, the sum insured of the jewellery is based on its market value at the time of taking the policy. An accurate valuation report given by the government-approved valuers is, therefore, very important. As part of household...

  INVESTORS, who are looking for an opportunity to own pubic sector undertakings (PSUs) due to their long-term growth prospects and strong balance sheets, can look at investing in Baroda Pioneer PSU Equity Mutual Fund.    Baroda Pioneer PSU Equity Fund is similar to SBI PSU Equity Fund and Religare PSU Equity Fund. The fund aims to provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of PSUs. The scheme will invest 65% to 100% of assets in equity and equity-related securities covered under the universe of PSUs including derivatives with medium-tohigh risk profile. It will further allocate up to 0% to 35% of assets in debt and money market instruments with a low to-medium risk profile. The scheme's will be benchmarked against BSE's PSU Index. The fund manager will invest in shares of PSUs across sectors and market capitalisations, with not more than 10% in any single company. The total portfo...