Prajna Capital - An Investment Guide

Most of us tend to visit the doctor only when we are sick, instead of going for regular health check-ups. If we apply the same principle to our financial planning, it can lead to some nasty surprises. Only when there is a sudden change in market conditions and the performance starts slowing down that we look at our portfolio. Creating an investment plan and asset allocation is like planting a garden. While planting the seeds is the first step, to keep the garden green, it requires maintenance. When investing, rebalancing — or re-allocation of investments amongst the different asset classes in the portfolio — is key to maintenance. Asset allocation changes as you stay invested for a long time, due to the different returns made on different assets. You need to restore the portfolio to its original allocation to keep your portfolio in line with your investment objectives. How often should you do it and when? We don’t take rebalancing seriously when the portfolio is performing well....

Here are some useful information on mutual funds. Do mutual fund investors get the benefit of bonus shares, dividends, rights issue etc? When the portfolio is switched by fund manager more often, how is the cost (Brokerage+ Securities Transaction Tax and Short Term Capital Gains Tax etc) passed on to the investor. Are these expenses met through entry load and exit load? Ofcourse. All benefits in the form of dividend, bonus share, right issues, interest and gains on all investments accrue to the fund and reflected in the NAV. Mutual funds have a unique tax status. From the income tax point of view, it is exempt from paying tax on gains accrued due to normal process of business, such as short-term capital gains tax and long-term capital gains tax. The other expenses incurred by the fund can be classified into two broad heads - transactional expenses and operational expenses. All these expenses are charged to the fund and ultimately passed on to the investors. The transactional expense...