Skip to main content

Capital Protection Oriented Funds

 

Capital Protection Oriented Funds



Choosing between equity and debt is a difficult task for most investors.
To avoid this problem, one must invest on the basis of one's risk-return profile, age, investment tenure and market conditions. However, if you are among those who do not want the trouble of investing in a basket of products that needs to be rebalanced at regular intervals, you can opt for hybrid or
Capital Protection-Oriented Funds (CPOFs).

Let us first understand what CPOFs and hybrid funds are...

How CPOFs work Investors are easily attracted to any investment avenue which has "capital protection" as it indicates safety.
However, this should not be confused with "capital guarantee". The best way to understand CPOFs is through an example. Let's say a CPOF is floated for a three-year period and 80% of the funds are locked in a three-year debt instrument. So, for every Rs 100 invested, Rs 80 would earn a simple interest of say 9% per annum. Accordingly that Rs 80 would become Rs 101.60 in three years. The balance Rs 20 would be invested in equity .

Now, even if the value of this Rs 20 drops by 25% and becomes Rs 15 at the end of three years, the total investment of Rs 100 would have become Rs 116.60. This translates into a simple annual return of 5.53%. So your own money is used to protect your capital. These are nothing but hybrid schemes which create a sense of security for investors who do not like to see volatility in their returns during the period of investment.


Suitability: It is suitable for investors who generally have a low risk appetite and are also comfortable with the lock-in tenure.


Taxation: These funds are taxed as debt funds, that is long-term capital gains tax applicable to these funds is 10% without indexation or 20% with indexation, whichever is less. Short-term capital gains do not arise as these funds are typically closed ended for three-five years.


Hybrids: Mixed asset allocation Hybrid funds, as the name suggests, have a mixed asset allocation pattern, typically investing in some amount of debt and equity . Lately, a few funds have also started adding gold as an asset class.

Hybrid funds can be typically put into two categories, that is `Equity-oriented' and `Debt-oriented'. Due to the inherent nature of taxation laws, most equity-oriented funds tend to have an exposure of 65-70% towards equity and the balance towards debt. As regards debt-oriented funds, the exposure to debt is in the 65-95% range and the balance is allocated to equity .

Some fund houses targeting senior citizens have floated monthly income plans (MIPs) which are nothing but hybrid funds with debt components ranging between 80% and 95%, with the objective of declaring a monthly dividend so that the investor gets a regular cash flow every month. Where gold has been added as an asset class, the allocation is typically 33% towards each asset class.


Suitability: These are suitable for investors who do not undertake an asset allocation exercise on their own, investors with low to medium risk appetite and investors looking at regular income.


Taxation: Equity-oriented funds (with more than 65% of the portfolio into equities) qualify for the same tax treatment as equity funds, that is short-term capital gains arising from redemption within one year are taxed at 15%, while there is no long-term capital gains tax.

Debt-oriented funds, those that predominantly invest in fixed income instruments, are taxed like debt mutual funds, where short-term capital gains are taxed according to the investor's tax slab while long-term capital gains are taxed at 10%, without indexation and 20% with indexation, whichever is less.

As far as the dividend option is concerned, dividend distribution tax (DDT) is charged at 28.33%, inclusive of surcharge and education cess for debt-oriented funds.


Thus an investor would have to factor this in before deciding which option to choose -growth or dividend.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now