Prajna Capital - An Investment Guide

Planning investments is a challenge for everyone, and more so for senior citizens. Choosing the right investment product per se is a difficult task for many investors. The task is even more challenging for senior citizens as they will have a limited corpus, while their need for income from the corpus does not remain constant. While a pension plan takes care of a regular source of income, life is not easy if the investor does not have a regular source of income. As a result, senior citizens have to do the balancing act between risk and returns. Needless to say, the risk element has to be as low as possible for this class of investors. Safety over returns As pointed out earlier, safety of capital has to be the underlying principle of investments, and risk can be a component only when the investor has the comfort of liquidity. For instance, the monthly income needs have to be met through fixed return products. Some fixed return products Senior citizens’ savings schemes: T...

How these monthly income plan (MIP) plans serve the needs of those looking for capital preservation with a steady income A monthly income plan ( MIP ) is a good investment option among mutual funds. Individual investors are perpetually in search of investment avenues that yield good and regular returns. MIPs have been floated by various mutual funds. These plans are picking up fast. Investments of these plans in equities have increased. They have increased their allocations towards equity in their portfolios. Mutual funds have been focussing on the individual investor segment. A MIP is among the best products available to the individual investors. Most of these plans offer three options - Monthly income, Annual income, and Cumulative income The face value is Rs 10 per unit. Generally, the minimum investment is Rs 10,000 in case of the cumulative option, while there is no maximum limit. As is applicable to other schemes, the returns from these schemes are not guaranteed. The...

An increasingly common and rather disturbing trend in many investments is the absence of a solid 'core' portfolio. In recent times, we have met several investors (most were new to investing in mutual funds) whose investment portfolios were constituted of only thematic and sectoral funds. To further complicate matters, these investments were made in new fund offers launched at a time when markets were surging northwards. Expectedly, such portfolios are in dire straits at present. What is “The core portfolio” By the core portfolio, we are referring to a mix of investment avenues that is capable of delivering an enduring performance across market cycles. For instance, in the mutual funds segment, well-managed diversified equity funds, balanced funds and monthly income plans with proven track records could form the core portfolio. Of course, the investor's risk profile and investment objectives would play a part in determining the core. Once this core is in place, the investor...

A hassled wealth reader enquired about Monthly Income Plans ( MIP ). His concern was that he hasn't been getting any monthly payments (income/dividends) from the fund he had invested in. He has already made huge loss in the fund and withdrawing from the plan would mean a greater loss. Wealth takes this opportunity to tell you all you wanted to know about MIPs A general misunderstanding about MIP among investors is that it is believed to offer regular monthly income. From the name you may infer that MIP gives you monthly returns, but that's not the way it functions. An MIP is generally mistaken for a regular income plan; but actually, it gives you returns based on market's performance. What is MIP? MIP is a hybrid investment that invests a small portion of its portfolio, around 15 to 30 per cent, in equities, and the remaining in debt and money market instruments. This plan is ideal for those who score low or medium on their risk profile . What are the features? Returns MIPs...

Tax treatment of returns from Monthly Income Plans ( MIPs ) depends on the way you derive them. If you opt for dividend plan, then like all debt funds, MIPs are liable for Dividend Distribution Tax ( DDT ) which is 12.5 per cent for debt funds. If you choose the growth plan, all gains will be treated as short-term or long-term depending on your period of holding. Any short-term gain (less than 1-year holding) from debt funds is added to your income. Long-term gain from MIPs is taxed at 10 per cent without indexation or 20 per cent with indexation, whichever is lower. Deriving gain from an MIPs Growth option through Systematic Withdrawal Plan ( SWP ) could be more tax efficient than dividend plan. SWP is redemption of units worth predefined amount and periodicity. Besides, you will also have a greater control on your cash inflows.

After a long period of relative inactivity, the buzz is that DBS Chola Mutual Fund has aggressive plans to rev up its offerings. Going by its two recent high-level recruitments, that may well be the case. Mohit Sachdev (ex-UTI) is now the Chief Marketing Officer while Sanjay Sinha (ex-SBI MF) is the Chief Executive Officer. But that's no cause for celebration. Though it has been around for over a decade, the AMC has failed to make a mark in this highly competitive industry, despite attempts by earlier CEOs Ved Prakash Chaturvedi (now with Tata MF) and Rajnish Narula (now with Canara Robeco). Neither have the funds' performances been outstanding, nor have its fund launches generated a significant response from investors.Since inception, the AMC established itself as a debt player. Its Monthly Income Plan (MIP). launched in July 2003, is a 5-star that began to impress from 2007 onwards. It had only three equity funds till 2004, seven were launched from 2005 onwards with none in 2...

Mr & Mrs Achar, both in their early thirties, have a long list of want to-do things post-retirement. While Achar, a private banker, wants to travel a lot and write a book, Mrs Achar wants to look after their children and do some social work. The interesting part, however, is that they want to do this after 10 years, when they plan to retire! Yes, you are right, they do want to retire in their early forties and wish to pursue their passions. Wait a minute... did we hear similar voices from you too. Alright, so let's see how this can be achieved with systematic planning that includes having reasonably aggressive investment plan, regular savings and may be a slight change in lifestyle to ensure a better and safe tomorrow. Early retirement is essentially a lifestyle issue and is proportionate to one's income and consumption pattern. To retire early one needs have to do careful planning and calibrated thinking. Before making any retire plan, one should first prepare a balance sh...