Kotak MF offers SIP with a cheap life cover
Bundling your insurance and investment needs into one is an expensive proposition. For example, unit-linked insurance policies charge a first-year commission as high as 30 per cent.
But, now you have a mutual fund (MF) that will meet both these needs at a much lower cost.
Kotak MF has launched Kotak Star Kid (KSK), which merges investment and insurance needs at a lower cost. All you need to do is start a fresh systematic investment plan (SIP) in either the Kotak 30 scheme or the Kotak Tax Saver fund over a tenure of either 5, 10, 15 or 20 years. You can then appoint your child as the nominee.
KSK offers you a life cover—provided by Kotak Life Insurance—at an entry load of 3.25 per cent, 1 percentage point more than what SIPs typically charge (2.25 per cent).
Your choice is not unlimited though; the mutual fund has laid out the options for you depending on your age (see Your Options). Since KSK is aimed at fulfilling the needs of your child and also insuring them, it is open for ages 23 to 45 years.
How much cover?
At any time after the 13th month, your cover is the sum total of the remaining SIP instalments. For instance, if a unitholder opts for a 5-year SIP at a monthly sum of
Rs 5,000, and dies in the 13th month, the amount that the nominee gets will work out to be Rs 2.40 lakh (60 months less 12 months x Rs 5,000). Until the 12th month, the cover is 10 times the monthly SIP value. Under both cases, the nominee will also receive the prevailing value of all the instalments already made. No medical tests are required up to a maximum cover of Rs 10 lakh; between Rs 10 lakh and a maximum cover limit of Rs 1 crore, tests are mandatory. KSK does not cover existing SIPs; you’ll need to start a fresh one if you wish to opt for this facility.
KSK is akin to the Super SIP facility that DSP ML MF had launched in 2005, but is different in bits. Despite being a good initiative, the product found few takers as many investors refused to commit money for the long-term. Sandesh Kirkire, chief executive officer, Kotak MF, however, is confident that KSK will work because he says the product is simpler to understand than Super SIP. “Also, KSK is an on-going facility and is open throughout. Unlike SSIP, we do not intend to keep it open for a limited time period,” says Kirkire.
Should you opt for it?
At present, KSK is available only in Kotak 30 and Kotak Tax Saver. It’s not yet available in Kotak Opportunities fund (KOF)—the MF’s most successful fund in the past three years. Kirkire assures that KOF and a host of other Kotak schemes will soon get included in KSK. By turning the tables on insurance companies on the back of sweetening systematic investing with a cheap insurance cover, here’s one effort that ought to give a boost to the MF industry caught on the wrong side on account of aggressive mis-selling of Ulips on the back of higher commission. Opt for KSK in Kotak 30 or wait till the MF includes KOF in the plan.
(by outlook money)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Sunday, January 27, 2008
Maiden Dividend under Lotus India Tax Plan
Lotus India Mutual Fund has announced a maiden dividend of 15% (i.e. Rs 1.50 per unit on the face value of Rs. 10) under the dividend option of Lotus India Tax Plan. The record date for the same has been fixed as January 28, 2008.
(by valueresearch)
Fund Selection
I invest Rs 7,500 every month in five funds - HDFC Top 200, Reliance NRI Equity, Sundaram BNP Paribas Select Mid Cap, Magnum Global and Reliance Growth. How is my fund selection? Should I replace any? Which is a better option for SIP - growth or dividend reinvestment?
-Dr. Karthik
Your fund selection has been wise and a look at your portfolio returns reaffirms this. But you must remember to assess your funds vis-à-vis your risk profile. As of now your fund selection is such that the portfolio has a mid-cap tilt to it. Given your long investment horizon this should not be a problem per se. As to your second query there is no difference in returns between the growth and dividend reinvestment option. The difference between the two options arises only in funds that do not invest in equity instruments or those that invest less than 35 per cent of their assets in equity. Such funds attract a dividend distribution tax payable at the time of distribution of dividends. But since you are invested in equity oriented mutual funds there is no applicable dividend distribution tax either. So as long as you are investing in equity oriented funds you needn't worry about which option to select. And your choice can depend on whether you want a payout or increase the number of units.
(by value research)
-Dr. Karthik
Your fund selection has been wise and a look at your portfolio returns reaffirms this. But you must remember to assess your funds vis-à-vis your risk profile. As of now your fund selection is such that the portfolio has a mid-cap tilt to it. Given your long investment horizon this should not be a problem per se. As to your second query there is no difference in returns between the growth and dividend reinvestment option. The difference between the two options arises only in funds that do not invest in equity instruments or those that invest less than 35 per cent of their assets in equity. Such funds attract a dividend distribution tax payable at the time of distribution of dividends. But since you are invested in equity oriented mutual funds there is no applicable dividend distribution tax either. So as long as you are investing in equity oriented funds you needn't worry about which option to select. And your choice can depend on whether you want a payout or increase the number of units.
(by value research)
Thursday, January 24, 2008
Profit Booking
I invested in Franklin India Bluechip Fund(dividend option) at different levels. Now that the NAV has risen, I plan to book some profits and rebalance my portfolio. But I can't figure out which of the units will be redeemed. Will it be earlier investments or the later ones? How will I figure out the value of my investments after partial redemption?
-Deepti Mukherjee
Your query reveals that booking profits is not an easy exercise at times. From the investment details you have supplied, you own a total of 3,763 units of Franklin India Bluechip Fund. We gather that you wish to redeem profits of Rs 1,23,135 from the current valuation of Rs 1,63,635.
As a first step, you can redeem units by filling in a redemption request for the sum of Rs 1,23,135 and the fund would deduct the necessary number of units. But as an informed investor it is always good to be in command of one's investments. So here goes.
Investments and redemptions in mutual funds follow a principle called first-in first-out (FIFO). This means that the investments made first will be the first to be redeemed and so on. In order to book profits of Rs 1,23,135, you will have to redeem a certain number of units. At an NAV of Rs 43.48 per unit, you will have to redeem 2,832 units. On the basis of the FIFO principle, the first batch of units to be redeemed will be those purchased first and then the next batch and so forth and so on. Hence units purchased on February 8 (412.201), September 12 (90.09), September 19 (465.983) and October 1 (717.017) will be the first to go. The only purchase that will be partially diluted is the 1,150 units purchased on October 4, 2002. Of this you will end up retaining only 3.82 units.
As for the status of your remaining investments, the balance units will be maintained with the fund house until you wish to redeem them. And these units will be the most recently purchased ones totaling 931.46 units i.e. 3.82 units from October 4 and 927.644 from the purchase made on October 18.
(by valueresearch)
-Deepti Mukherjee
Your query reveals that booking profits is not an easy exercise at times. From the investment details you have supplied, you own a total of 3,763 units of Franklin India Bluechip Fund. We gather that you wish to redeem profits of Rs 1,23,135 from the current valuation of Rs 1,63,635.
As a first step, you can redeem units by filling in a redemption request for the sum of Rs 1,23,135 and the fund would deduct the necessary number of units. But as an informed investor it is always good to be in command of one's investments. So here goes.
Investments and redemptions in mutual funds follow a principle called first-in first-out (FIFO). This means that the investments made first will be the first to be redeemed and so on. In order to book profits of Rs 1,23,135, you will have to redeem a certain number of units. At an NAV of Rs 43.48 per unit, you will have to redeem 2,832 units. On the basis of the FIFO principle, the first batch of units to be redeemed will be those purchased first and then the next batch and so forth and so on. Hence units purchased on February 8 (412.201), September 12 (90.09), September 19 (465.983) and October 1 (717.017) will be the first to go. The only purchase that will be partially diluted is the 1,150 units purchased on October 4, 2002. Of this you will end up retaining only 3.82 units.
As for the status of your remaining investments, the balance units will be maintained with the fund house until you wish to redeem them. And these units will be the most recently purchased ones totaling 931.46 units i.e. 3.82 units from October 4 and 927.644 from the purchase made on October 18.
(by valueresearch)
Invest In Debt Too
I am 37 and my investments are in mutual funds and stocks. I have two saving goals in mind: My child's education (17 years from now) and my retirement (23 years from now). I also invest Rs 27,000 every month in mutual funds through a systematic investment plan.I need some guidance in pruning my portfolio to help me achieve a growth of approximately 14 per cent annually.
KG Manohar
On the quality front, you score high. Though we do spot some mismanagement where quantity is concerned. But upfront, be reassured that you are pretty much on track. Your expectation of 14 per cent per annum seems reasonable too. Going by that return, your current monthly SIPs of Rs 27,000 would cross Rs 1 crore in another 13 years (assuming you invest regularly all through this period in well performing funds).
Taking Stock
Mutual funds account for 73 per cent of your overall investments while the balance 27 per cent has been invested directly in stocks. Keep in mind that when you maintain a combined portfolio of stocks and equity funds, your funds may have investments in the very stocks/sectors which you have directly bought into. If you do not pay heed to this, your portfolio could get dangerously skewed towards a sector or a particular stock without you being aware of it. Currently, your stock portfolio consists of 16 stocks with a 7 per cent exposure to Reliance Industries (RIL). But when we when we clubbed your stock and fund investments, your overall exposure to the stock goes up to 16.15 per cent.
The same is the case with your sector allocations. Your stock portfolio had a 12 per cent exposure to the energy sector. But when we looked at the overall impact and clubbed it with your mutual fund exposure of 10 per cent to that sector, the energy exposure shot up to 22 per cent. Quite a difference, isn't it?
You must make an effort to track your investments. You can employ the Value Research Online Portfolio Manager tool on this website to arrive at the exact allocation. You will also be able to monitor the market-cap exposure with this tool. Right now, the large-cap component of your portfolio stands at 60 per cent, mid-cap at 31 per cent and small-cap at 9 per cent.
We have always stressed that one should have a ceiling on the exposure to a particular sector, stock or a fund. So you can exit or reduce holdings of certain stocks in case you feel that the exposure to a particular sector or stock is exceeding your pre-determined limit.
Shed Some Weight
Owning 21 funds is not the issue. What matters is the type of funds they are. And you do have some good picks. Nine are 5-star rated and four have a 4-star rating.
But what came across as absurd was that in five schemes you have invested in both, the dividend and growth options. This doubles the fund count unnecessarily. And, since you have time on your side and a regular income too, why did you consider a dividend plan at all?
In case you had some misgivings on this front, let's clear the air. Though a dividend reinvestment and the growth option are identical (as the money continues to remain invested in such schemes), the dividend payout option differs. Once a dividend is declared, the net asset value (NAV) of the fund falls in the same proportion. This way you end up liquidating your own investments. So, the dividend that you get from funds is nothing but your own money coming back to you!
The mistake investors tend to make is to equate a fund's dividend with that of a stock. In the case of stocks, a dividend does not affect the price of the scrip as it is given out of the company's surplus reserves. So, the dividend that you get is over and above the value of your shares. So to make your fund portfolio lighter, we suggest you convert your dividend payout option into the dividend reinvestment option. We also suggest that you exit from UTI Services Sector and UTI Software. They are high-risk sectoral funds which do not have a good rating. You are better off without them. That will leave you with 14 equity schemes (considering growth and dividend reinvestment as the same).
Get Bold
What is lacking in your portfolio is conviction. Out of the 21 fund schemes, 11 of them account for less than 3 per cent each. Likewise, you have six stocks with less than 1 per cent allocation. Such small holdings, even if they appreciate rapidly, would add no value to the overall portfolio.For mutual funds, the best strategy is to invest in a few that have a good track record. Pick two to three funds that can act as your core holdings. You can even throw in a mid-cap fund to add to the aggression. The same principle holds true when investing in stocks. Small allocations add no great value to your portfolio. Continue to invest in stocks only if you have the expertise of managing your stock investments.
Get Balanced
Your portfolio has a negligible debt component of 1 per cent, something that needs to be immediately corrected. Even if you have a long-term plan, you must have some exposure to debt. Do consider some debt fund like Kotak Flexi Debt and ICICI Prudential Long Term. Please ensure that you maintain the debt component as the equity portion would constantly increase on a monthly basis. Here's where the online tool would help tremendously.
Get Going
Decide how much of an exposure you would like to have to debt and maintain your portfolio allocation. As you approach the timeline for your goals, gradually shift the money from equity to debt.
Stick to your SIP approach of investing in mutual funds and avoid adding any more funds to your portfolio. Your need not change your current SIPs which are all in good funds. Just don't clutter your portfolio with too many stocks and funds.
All the best!
(by valueresearch)
KG Manohar
On the quality front, you score high. Though we do spot some mismanagement where quantity is concerned. But upfront, be reassured that you are pretty much on track. Your expectation of 14 per cent per annum seems reasonable too. Going by that return, your current monthly SIPs of Rs 27,000 would cross Rs 1 crore in another 13 years (assuming you invest regularly all through this period in well performing funds).
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taking Stock
Mutual funds account for 73 per cent of your overall investments while the balance 27 per cent has been invested directly in stocks. Keep in mind that when you maintain a combined portfolio of stocks and equity funds, your funds may have investments in the very stocks/sectors which you have directly bought into. If you do not pay heed to this, your portfolio could get dangerously skewed towards a sector or a particular stock without you being aware of it. Currently, your stock portfolio consists of 16 stocks with a 7 per cent exposure to Reliance Industries (RIL). But when we when we clubbed your stock and fund investments, your overall exposure to the stock goes up to 16.15 per cent.
The same is the case with your sector allocations. Your stock portfolio had a 12 per cent exposure to the energy sector. But when we looked at the overall impact and clubbed it with your mutual fund exposure of 10 per cent to that sector, the energy exposure shot up to 22 per cent. Quite a difference, isn't it?
You must make an effort to track your investments. You can employ the Value Research Online Portfolio Manager tool on this website to arrive at the exact allocation. You will also be able to monitor the market-cap exposure with this tool. Right now, the large-cap component of your portfolio stands at 60 per cent, mid-cap at 31 per cent and small-cap at 9 per cent.
We have always stressed that one should have a ceiling on the exposure to a particular sector, stock or a fund. So you can exit or reduce holdings of certain stocks in case you feel that the exposure to a particular sector or stock is exceeding your pre-determined limit.
Shed Some Weight
Owning 21 funds is not the issue. What matters is the type of funds they are. And you do have some good picks. Nine are 5-star rated and four have a 4-star rating.
But what came across as absurd was that in five schemes you have invested in both, the dividend and growth options. This doubles the fund count unnecessarily. And, since you have time on your side and a regular income too, why did you consider a dividend plan at all?
In case you had some misgivings on this front, let's clear the air. Though a dividend reinvestment and the growth option are identical (as the money continues to remain invested in such schemes), the dividend payout option differs. Once a dividend is declared, the net asset value (NAV) of the fund falls in the same proportion. This way you end up liquidating your own investments. So, the dividend that you get from funds is nothing but your own money coming back to you!
The mistake investors tend to make is to equate a fund's dividend with that of a stock. In the case of stocks, a dividend does not affect the price of the scrip as it is given out of the company's surplus reserves. So, the dividend that you get is over and above the value of your shares. So to make your fund portfolio lighter, we suggest you convert your dividend payout option into the dividend reinvestment option. We also suggest that you exit from UTI Services Sector and UTI Software. They are high-risk sectoral funds which do not have a good rating. You are better off without them. That will leave you with 14 equity schemes (considering growth and dividend reinvestment as the same).
Get Bold
What is lacking in your portfolio is conviction. Out of the 21 fund schemes, 11 of them account for less than 3 per cent each. Likewise, you have six stocks with less than 1 per cent allocation. Such small holdings, even if they appreciate rapidly, would add no value to the overall portfolio.For mutual funds, the best strategy is to invest in a few that have a good track record. Pick two to three funds that can act as your core holdings. You can even throw in a mid-cap fund to add to the aggression. The same principle holds true when investing in stocks. Small allocations add no great value to your portfolio. Continue to invest in stocks only if you have the expertise of managing your stock investments.
Get Balanced
Your portfolio has a negligible debt component of 1 per cent, something that needs to be immediately corrected. Even if you have a long-term plan, you must have some exposure to debt. Do consider some debt fund like Kotak Flexi Debt and ICICI Prudential Long Term. Please ensure that you maintain the debt component as the equity portion would constantly increase on a monthly basis. Here's where the online tool would help tremendously.
Get Going
Decide how much of an exposure you would like to have to debt and maintain your portfolio allocation. As you approach the timeline for your goals, gradually shift the money from equity to debt.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stick to your SIP approach of investing in mutual funds and avoid adding any more funds to your portfolio. Your need not change your current SIPs which are all in good funds. Just don't clutter your portfolio with too many stocks and funds.
All the best!
(by valueresearch)
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