Prajna Capital - An Investment Guide

DSP BlackRock Micro Cap Fund is a small cap fund launched in June 2007 with an objective to seek long-term capital appreciation by substantially investing in a portfolio of stocks that are not part of the top-300 companies by market capitalisation. The fund was initially launched as a close-ended fund, but was subsequently made open-ended in June 2010. The fund, which is jointly managed by Apoorva Shah, Vinit Sambre and Mehul Jani, had assets under management of Rs 437 crore as on January 2011. The fund has been ranked Crisil Fund Rank 1 (top-10 percentile of the peer set) in the Small & Midcap equity category for the last three quarters till December 2010. The fund's superior risk adjusted performance is complemented by good scores on company concentration, industry concentration and liquidity parameters. Performance The fund has outperformed its benchmark (BSE Small Cap) and peers in the last 1-, 2- and 3-year timeframes. The fund has given the highest returns in the Sma...

How often have you followed investing principles to the hilt only to fall short of expected returns? How many times have you imbibed investing logic to rue over its failure? While rules decidedly set you on the road to success, it's foolhardy to snub your own rationality. Often, our hard-earned money fails to multiply at the rate we want because of the knowledge base we have built over the years and our blinkered approach to investing.   Sometimes, adopting a different approach to the norm can be more profitable. Here are some strategies that are contrarian to the ones popularly espoused. These can work for you, but keep in mind that just as with other strategies, these too require study and due diligence. Concentrate on your portfolio: Most readers think of portfolio diversification as a wealth creation technique. Actually, it's a risk reduction tool utilised to preserve wealth. This doesn't diminish its importance. In fact, diversification is essential. However, so...

Smokers get insured! The health of a smoker is always at danger, thus people who are excessively into smoking would end up paying more premium than non-smokers. Thus, in order to trim down on the premium, one must do away with smoking. Keeping a control on High BP Suffering from high BP is simply not a fine sign and one must keep it under manageable levels. Keeping a check on high blood pressure will help you in lessening the premium cost. Good health is the key If an individual is in his or her best of health, then obviously your premium expense will be quite cheaper than the individuals who suffer from various kinds of health ailments. Concession in claim free years One must avail for their claim benefits as there are discounts on it in the claim free years. This will assist in reducing your premium at the occasion on renewal. Evaluate the quotes Comparing and evaluating the quoted price from numerous insurers is an imperative step in order to save on your health ins...

We took a look at the players in the financial markets earlier. Let us now look at the Financial Instruments these players have. They can be braodly classified into Ø       Government securities and Ø       Industrial securities   Government Securities (G-Sec): In India G- Secs are issued by the Central Government, State Governments and Semi Government Authorities such as municipalities, port trusts, state electricity boards and public sector corporations.  The Central and State Governments raise money through these securities to finance the creation of new infrastructure as well as to meet their current cash needs.  Since these are issued by the government, the risk of default is minimal. Therefore, interest rates on these securities often serve as a benchmark for the level of interest rates in the economy. Other issuers may price  their offerings by `marking up' this benchmark rate to reflect the credit risk specific to them. These securities may have maturities rangi...

The last three months of a financial year witnesses a lot of dividend declaration by mutual funds. This results in a lot of investor attention. A lot of excitement is generated among investors as the dividend is declared. But the declaration of the dividend does not actually provide any benefit, as it involves just the payout of the gains already earned. It is only the rise in the value of the fund that actually gives the investor a gain in their investments. Here is a look at some aspects of the dividend declaration process. Rate: The first aspect related to dividends that an individual investor will come across is the rate of the dividend. This is important as it determines the amount of dividend that will actually be paid by the mutual fund. The dividend rate is applicable for all investors in the dividend option of the fund and it does not impact those who have selected the growth option. While all investors look for a higher dividend rate, it is just not the rate that de...

INDIVIDUALS, both salaried and those in business, invest a portion of their income in bank deposits, mutual funds and shares. There are people who buy and sell securities on a regular basis while another category comprises those who continue to hold on to their investments for a longer period. There are a few others who do both — invest in shares and earn dividends besides buying and selling securities on a daily basis. People who deal in securities listed in a stock market can broadly be categorised as traders and investors . So, how does one find out which category he fits into?    The tax department has issued a circular to help in this process. One of the scenarios given in the circular is where a person deals in securities with an intent to earn profit; he would be termed a " trader ". A trader plays with the short-term swings in the stock market to make profits. Such a person does not tend to retain his securities for long. The circular could serve as a guide though t...

Net Yield 7.98% THIS is a type I scheme that guarantees the highest NAV over the policy tenure. This plan offers a minimum guarantee of 80% of the highest net asset value by the scheme. The striking difference of this scheme is that it offers guarantee all the time including surrender or demise. Also, the scheme allows for a longer policy tenure of 15-20 years, providing the option to investors to stay invested for long. Market shield also claims to invest a higher percentage of the premium in equity funds than in debt, unlike other schemes, offering a chance for higher upside returns.

Managing wealth is primarily about asset allocation. The basis for choice of assets and the proportion that should be held in each investor's portfolio depends on his/her objectives and constraints. It is the core proposition of financial planning . While the markets may move up or down, the investor's portfolio has a specific return requirement and risk profile. A professional wealth manager is expected to manage allocations in a way that the return is closer to achieving the investor's goal and the downside risks are well within the stated preferences of the investor. To achieve this, a wealth manager needs proficiency in asset class performance, so that he/she is able to read the macro trends and advise clients to modify their allocations accordingly. That is, the expertise a wealth manager should bring to the table. There are several investors who think that investment managers should make asset allocation decisions. They would have liked the fund manager to move into...

A re you desperately searching for the right tax-saving instrument? Pause for a moment. See if you really need one. Under Section 80C of the Income-Tax Act, the maximum you may save is Rs 1 lakh in a year. There could be an investment made in the previous year(s) that requires regular commitments each year, or an expense that qualifies for tax exemption. You might not have to undertake any fresh investments because if you invest more than the limit of Rs 1 lakh, it's not going to fetch you any additional exemption. Let's see what such existing commitments are. Employees' Provident Fund (EPF) – If you are a salaried employee, each month you contribute 12 per cent of your basic pay towards EPF. An equal amount is contributed by the employer, out of which 8.33 per cent goes towards EPF, and the rest towards the Employees' Pension Scheme. Calculate 12 months' outgo to get your total EPF contribution. Remember, only the employee's contribution qualifies for a tax ...

You can either opt for a sweep-in account or use an overdraft facility Fixed deposits ( FDs ), a risk-averse investors' investment avenue of choice, has become more attractive after the recent interest rate hikes by banks. However, the choice of an FD is not a simple one, given many variants. There are choices between regular FDs, recurring deposits, flexi deposits and sweep-in deposits. Sweep-in deposits are convenient because they are linked to your savings account. An accountholder can also take advantage if there is a temporary surplus and are unsure of the period for which the amount will stay in the account. Typically, any amount over and above double your minimum average quarterly balance, is 'swept-into' a fixed deposit in pre-specified multiples. However, this would be different for each bank. Sweep-in deposits: The savings account balance would earn you interest at 3.5 per cent per annum. The interest rate attracted by the sweep-in deposit would depend...

During this time of the year, taxpayers find themselves flooded with mails and SMSes goading them to invest in Section 80C instruments. Both insurance companies and mutual funds pitch their life/medical policies or equity linked saving schemes ( ELSS ). Investing in ELSS, however, might soon be passé. If the Direct Taxes Code is implemented next year in its present form, this year would be the penultimate year in which you will get benefits from investing in ELSS under Section 80C. A mutual fund scheme has to invest at least 65 per cent of its corpus in equities to get benefits under Section 80C. ELSS comes with a mandatory lockin of three years. But, this period is much lesser than that of other instruments such as the Public Provident Fund of 15 years (six years for partial withdrawal), National Savings Certificate (six years) and unit-linked insurance plans ( Ulips ) of five years. Over a three year period, ELSS returned 1.30 per cent as against equity diversified funds' ...

Stock splits are a relatively new phenomenon in the Indian context. It is important that investors understand the reasons that companies may split their shares and how a stock split is different from a bonus issue. In a stock split, the capital of the company remains the same whereas in a bonus issue the capital increases and the reserves decrease. However, in both actions (a stock split and a bonus) the net worth of the company remains unaffected. Let's take the HDFC 5 for 1 stock split. This means following the stock split, the company's shares will start trading at one-fifth the price of the previous day. Consequently, you will own five times the number of shares that you originally owned and the company in turn will have five times the number of shares outstanding.Consider the following example. The question that arises is if there is no difference to the wealth of the investor, then why does a company announce a stock split? Generally, stock splits are announced to mak...

THE wealth management industry, though nascent, is growing at a fast pace in the country. As per a Karvy Private Wealth Report, wealth in India held by individuals will double from the present . 73 lakh crore to . 144 lakh crore by 2012-13. HNIs are defined as individuals having an investible asset of $1 million (4.5 crore) . No wonder, the recent Citibank fraud, where investors are estimated to have lost around . 400 crore due to a fraud allegedly committed by a relationship manager, has been attracting a lot of attention. Due to the high value of the HNI portfolio, every intermediary is trying to woo this segment. Be it an independent financial planner, or a brokerage house's private client group, the wealth department of a bank or boutique investment advisory firm, all of them want a share of the pie. While the regulator will do things to tie up the loose ends, what is it that you, as an HNI investor, can do to ensure that your portfolio is in the right hands? Choose the right...

AS THE fiscal end comes closer, it is time for investing to save tax. Apart from the regular investment options under Section 80C of the income tax act, this year investors have an added advantage of investing in infrastructure bonds and enjoy an additional deduction in tax under section 80CCF of the Income Tax Act. SECTION 80C DEDUCTIONS: Investment options under Section 80C can be broadly categorised as market linked, fixed income and insurance. The fixed income category includes investment options such as the Public Provident Fund ( PPF ), Employee Provident Fund ( EPF ), tax-saving bank fixed deposits, National Savings Certificate ( NSC ) and senior citizens savings schemes. While it is the most popular tax saving category, market-linked instruments including tax-saving equity mutual funds ( ELSS ) and unit linked insurance plans ( ULIPs ) are gradually catching up. PUBLIC PROVIDENT FUND (PPF): One of the oldest investment options, PPF scores on all grounds as it is one of the v...

    While your credit card is a useful tool in several ways, it is also an easy way to fall into a debt trap . Easy because swiping a card costs nothing and paying the minimum 5% of the bill seems manageable. But if you roll over the balance on your credit card bill for more than 2-3 months in a row, it's a sign that you are in a debt trap. Here is a four-step strategy to get you out of the situation. 1. Freeze your spending: The first thing to do is stop spending on the card. Use cash instead, which will force you to think twice before you spend. If you don't like carrying cash around, use a debit card. But just don't use the credit card till you are out of the debt trap. 2. Convert bill into EMIs: Call up your bank and tell them that you are finding it difficult to repay the amount and that it should be converted into EMIs. The interest rate is lower at 14-16 % than the 36-42 % payable on rolling over the balance. Banks are usually willing to do this because they se...

Insurance regulator IRDA is in the early stages of drafting a regulation for covering nuclear accidents. The move assumes significance as India is expected to be a major player in this sector after its nuclear deal with US is operationalised. "We are in early stages (of the regulation). This thing involves large amount of risks. We will have to first constitute a pool which will be a member of the larger global pool (of nuclear accident insurance). That is yet to be figured out," Irda Chairman J Hari Narayan said. Speaking to reporters on the sidelines of the IBAI summit here, he also said that the reinsurer General Insurance Corporation (GIC)) is working on the details to provide insurance protection to such accidents. It is felt that the ambitious program expected under the Indo-US nuclear deal may not materialise to the desired extent unless there is insurance protection for nuclear accidents. According to US-India Business Council ( USIBC ) the Indo-US nuclear deal cou...

Can an Non Resident Indian (NRI) open a Public Provident Fund (PPF) account? Yes, there is no objection to Non Residents Indians opening PPF accounts out of monies held in their non-resident account in Indian banks.   What is the process of PPF account transfer from a bank to a post office? Read to know the process of PPF account transfer from a bank to a post office The State Bank of India/its subsidiary will issue an Account Payee cheque or a demand draft for an outstation transfer. The Account Payee cheque will be in favor of the transferee post office with a certified copy of the ledger and other concerned original records, such as the application for opening the account, signature cards, and nomination forms.   The cheque/draft will be drawn by designation and will indicate that it relates to PPF account number 'so-and-so. On receipt of the PPF account-on-transfer along with the cheque or draft from the bank, a PPF account will be opened at the transferee post office...

Cash flow management is the core of financial planning. It needs to addressed comprehensively, if the financial plan has to work. Liquidity : The first principle in cash flow management is maintaining liquidity to the extent of approximately three months expenses . In certain cases, where the income flows are uneven, we may even suggest up to six months' salary or expenses as a liquidity margin. It is a good idea to keep this in the form of actual cash in the bank account, sweep-in deposits (which is near-cash) or in debt mutual funds. This is maintained to ensure there is no problem even in case of disone is changing jobs, has medical conditions due to which one is on loss of pay and so on. Then, the liquidity margin will come in handy. This will be especially useful for people who have monthly instalments to clear, like a house loan, which need to be paid over and above the regular expenses. Additional provision: It is always better to have liquidity over and above that pro...

   It appears volatility is here to stay and investors have to get used to it. The less aggressive investor is shaken by the market turbulence and abandons it for the more stable debt instruments. The risk-taking investor fishes in the volatile markets hoping to reap gains. Let us explore if it is time to buy, hold or sell your stocks. Is it time to sell your stocks?     Here are some pointers:     Sell when over-valued: This strategy assumes that when a stock's price shoots beyond its true values it is time to sell it off. You can wait for a market correction to buy it back after its price plummets.     Buy low, sell high: Investors buy stocks of companies that are soaring upwards in anticipation of further gains. They seldom have the heart to part with stocks that are faring well. However, buying low, selling high is the key to successful investing.    You should book profits when they are soaring high, rather than selling laggards.     Sell to prevent further loss: ...