Invest in Existing Schemes

I want to invest one lakh in Sbi Tax Advantage Nfo and Magnum Tax Gain for tax benefits and good returns. Please advice.
-Dipak, Almora
SBI Tax Advantage is a 10 year closed ended new fund offering. It is advisable to invest in an on going tax saving scheme like Magnum Tax Gain which has a good performance history. Some other tax saving funds that you can opt for are Birla Sun Life Tax Relief, Sundaram Tax Saver or HDFC Tax Saver.

Is it worth investing in Principal Large Cap now?
-Ravi Kanetkar
Principal Large cap is an unrated equity diversified funds. The fund has been an average performer. You should look to invest in some well rated equity diversified fund with a long proven track record.

Is it advisable to invest Rs 500 each in Reliance Vision & Reliance Diversified Power sector fund as SIP? Please advice.
-Raj
This is a good combination but you should note that Reliance Vision is a diversified equity fund whereas Reliance Diversified Power is a sectoral fund (hence riskier). Choose a sectoral fund only if you have a high risk appetite.

I want to invest around Rs 40,000 in a good fund for a period of 1-2 years. Tax rebate is required.
-Rohit
If you wish to avail of the tax benefit, invest in tax saving mutual funds. Take note that these funds would have a lock in period of three years. Some good tax saving funds are Magnum Tax Gain, Birla Sun Life Tax Relief, Sundaram Tax Saver and HDFC Tax Saver.

I am investing in ICICI Prudential Life Insurance (ULIP), in maximiser (Growth) fund. My policy is almost 3 years old. Should I continue this policy for few years (i.e. 2-3 years)?
-Ajay Jagtap
ULIPs have high associated costs and are complex products. After three years you can exit from this policy and invest in some well rated equity diversified mutual funds in a phased manner via SIP.

I want to invest Rs 1 lakh in mutual funds. Please tell me top 3 funds.
-Neeraj
You can choose any three from Reliance Vision, HDFC Equity, Birla Frontline Equity or Sundaram Select Focus. These funds are well rated and have been consistent in their performance over years.

I want to invest Rs 10,000 per month for 10-15 years .My age is 43 yrs. Kindly suggest.
-Gautam Choudhury
Opt for two funds for SIP of Rs 5000 each. Well rated funds like DSP ML Top 100, Reliance Vision, HDFC Equity, or Sundaram Select Focus can be good picks.

What is a Sip?
-Abhey
SIP (systematic investment plan) is a hassle free way of investing a fixed amount in a mutual fund scheme of your choice every month/quarter. This helps you automatically average the cost of your purchase over the long term. It is the most advisable way of investing in equity mutual funds.

Please recommend funds to invest. My age is 63.
You should create a balanced portfolio with 60 per cent equity and 40 per cent debt (assuming a medium risk level). Invest in equity diversified funds like Reliance Vision, HDFC Equity or Sundaram Select Focus via SIP. For debt, choose well rated funds like ICICI Pru Long Term or Kotak Flexi Debt.


(by value research)

Profit Booking

I have two questions. If I sell my equity fund units before the completion of a year, is short term capital gains (STCG) tax deducted at source before the proceeds are credited to my bank account? If a mutual fund gives a return of 60 per cent within a year, is it wise to book profits?
-Dr. Saxena

The rate of STCG tax as per current tax norms is 10 per cent. Whether you redeem your mutual fund units or sell your shares within a year of buying, you need to pay this tax on the gain. You need to specify the short term gain in the income tax return that you file and pay the tax accordingly. The broker or the mutual fund company does not deduct this tax at source. Whether it is a good idea to book profits occasionally and pay STCG tax is a personal call as that depends on your financial status, goals and risk appetite. You need to assess the time horizon you have and for how long you would like your money to stay invested. Historically it has been proved that equity investments reap best results when one invests for the long term. Yet again, how each individual

(by value research)

Reliance NRI Fund

Can you tell me about the performance of Reliance NRI Fund? How is the 'beta' factor of the fund, considering the current overheated equity market? I understand that only NRIs are eligible to apply for this fund. Does this fetch any unique benefit to the NRI applicant?
-Amlanjyoti Basu

Reliance NRI Fund is a 5-star rated, diversified equity offering with assets under management of around Rs 190 crore (as on December 31, 2007). The fund has done exceptionally well till now and has delivered an annual return of 55.35 per cent in the past three years (as on January 10, 2008).

Only NRIs are eligible to purchase units of this fund and resident Indians are prohibited from doing so. But there is no special benefit for NRIs. Most other mutual fund schemes are open for purchase by NRIs on a repatriable and non-repatriable basis.

Beta is a measure of the fund's sensitivity to market movements. It is calculated based on the trailing three-year monthly returns of the fund and the benchmark and hence can change over time. Though the beta of the fund is 0.78 for its benchmark, it may not be useful gauge to evaluate a fund. Beta is very relevant for a stock but not so for a fund. A fund's portfolio keeps changing in complexion and character making beta less relevant.

(by valueresearch)

50% Dividend under DSPML T.I.G.E.R. Fund

DSPML Mutual Fund has announced a dividend of 50% (i.e. Rs 5.00 per unit on the face value of Rs 10) under the dividend option of DSPML T.I.G.E.R. Fund. The record date for the same has been fixed as February 22, 2008.

This would be the fourth dividend being declared by the fund so far. Earlier, in March 2007 the fund paid 45% dividend.

(by valueresearch)

Tax Efficiency

Come January and there will be a significant number of individuals who will be scurrying around to do their last minute tax planning. Those who are not smart enough to start their tax planning from April itself will have only two options left. Either allow huge chunks of their salary to get deducted or invest hurriedly in one of the tax-saving options to escape the tax net at the last minute

With the way the market has been booming, fixed-return options available under Section 80C of the Income Tax Act have lost their sheen. On the other hand, Equity Linked Savings Schemes (ELSS), with an average return of 52.03 per cent per annum over the last five years, have been garnering a lot attention.

Did you know that you can save taxes on the Rs 1 lakh limit (the limit under Section 80C) yet invest much less than that? Sounds impossible, doesn't it?

According to the rules laid down by the regulatory body Securities and Exchange Board of India (SEBI), the date of dividend declaration for mutual funds can be made public five days before the record date. But why would one invest in an equity mutual fund (dividend payout option), just before it declares dividend? After all it appears that when an investor does so, all he does effectively is liquidate his investment.

But the equation is bit different in the case of an ELSS. These are diversified equity mutual funds which offer the tax benefit under Section 80C. Let's illustrate. Suppose an ELSS fund announces that it would declare a dividend of Rs X per unit after five days. Now if you are aware of this news, you can simply pump in Rs 1 lakh in the fund before the record date and opt for the dividend payout option. Of course, we made that statement on the assumption that the fund is worth investing in. Now, when the dividend is declared, you would get back a portion of the amount you invested as dividend (at the rate of Rs X per unit). This way you end up saving taxes on the fully invested amount of Rs 1 lakh but effectively pay much less.

An actual example should make things clearer. Franklin India Taxshield, a three-star rated ELSS, declared a dividend of Rs 8 per unit on November 14, 2007 (record date). Let's say someone invested Rs 1 lakh in this scheme soon after the announcement. Let's further assume that the amount was invested on November 13, 2007. The table illustrates how he would have saved taxes on Rs 1 lakh but would have by effectively invested just Rs 82,730. That's translates into a savings of Rs 17,269. Quite a difference! And for those of you who actually borrow money to meet your Section 80C rquirements, this will work out even better.

In case you were unaware, the dividend received is tax free.

So if you have not yet completed your Section 80C requirements, keep a watch for dividend declaration of ELSS funds in the coming months. To figure that out, you can refer to the Fund Action section on this website.

Dividend Record Date		14-Nov-07
Dividend Rate		Rs 8/unit
NAV (as on Nov 13, 07)		46.3
Amount Invested		Rs 1 lakh
Units		2158.7
Amount of Dividend Received		Rs 17,269.3
Net Investment		Rs 82,730.7

(by valueresearch)