Monthly Archives: March 2014

Save Tax in a Better Way with ELSS Funds


Ever since the inception of tax system in India, financial gurus have been coming up with several kinds of investment vehicles, which cool down the taxation heat. Traditionally, people have been inclined towards using the safest of these instruments for saving tax. However, none of them offered attractive returns, and investors were always unhappy about it.

Image

But now, times have changed, ever since mutual funds were born in the Indian economic market. Speaking of mutual funds, you can look at them as investment vehicles, which offer moderate amount of returns. The returns are not too low like those from debt instruments and are neither too risky, lije those from equity instruments. In short, the returns are balanced, but high enough to come under the taxation cover.

So, fund managers came up with unique schemes, which would offer protection from taxation as well as benefits of good returns. They achieved it by producing ELSS fund. The demand for this special type of mutual funds has strongly increased in the market. Even the NRIs are seen to be interested in them. ELSS or Equity Linked Savings Schemes are specially created to offer tax benefit to investors while taking care of their returns appetite.

The Section 80C of the Income Tax Act classifies ELSS as tax saver mutual fund. Any investment up to 1 lakh in it qualifies for special tax exemption. All you have to do is invest some amount in them, and it will get locked in the scheme for 3 years. The underlying instruments used for investment are equities only. Unlike the fixed deposits or bond deposits, these schemes do not carry any administrative charges. Lastly, the equity factor promises high returns.

So, why stick to traditional instruments like bonds and National Saving Schemes, when attractive instruments like ELSS are available at your disposal?

Recurring Deposits or Systematic Investment Plans


When investing money, one of the main concerns on anyone’s mind is whether their money will be able to grow at the same rate as that of inflation. There are many different types of investments that are available in the market which are known for generating different amounts of returns. The same is applicable while opening a bank account, as there are different amounts of interest that are offered by different banks.

When comparing the two, one needs to put the risk appetite of the investor in mind. While it is far more advisable for younger investors to have a mix of both; where they have a higher proportion of SIP’s (as they can afford to take the risk); elder people (investors) who are far more conservative investors should opt for recurring deposits with fixed returns rather than SIPs. However, this choice has to be made by the investor.

There are basically two types of long-term investments where the investor can choose how much he/she wants to invest.  These are Recurring Deposits offered by banks and Systematic Investment Plans offered by mutual fund companies.

A Recurring Deposit requires an investor to set a fixed sum of money every month and also earn a fixed rate of interest which is at the same rate of a fixed deposit. However, unlike fixed deposits as the depositor does not have to shell out a large amount at one time for the investment. These deposits are advised for people having low risk appetite. Investors can make use of the recurring deposit interest calculator online to help them calculate the maturity value (i.e. principal amount + interest earned) of the deposits that are made under recurring deposits.

On the other hand, SIP’s are linked to risky securities such as gold, equity or other fund portfolios. They are known to generate returns; based on the performance of the underlying security. They work differently from RD’s because of the way that every monthly instalment/deposit has the investor allocating a certain number of units that are based on the net asset value of the fund at that particular time. However, these returns on SIPs are not guaranteed and there may be times when the investor gets less returns.

3 In-depth Ways of Calculating Mutual Fund Performance


Mutual fund Calculation

Savings form an important part of everyone’s life and you may not be an exception to this belief. There are several saving schemes in the market, which allow you to invest and multiply your savings. But, in the end, only the ones linked with equity markets offer substantial returns.

Direct investment in equities can be risky, so you can prefer buying the mutual funds. These funds are linked with capital market instruments, and the funds gathered through them are managed by experts, who have in-depth knowledge of stock market movements. Still, you will always have a doubt whether your investments are growing or not.

To solve all your doubts to assess mutual fund performance, take a look at these 3 in-depth, number crunching methods that help in assessing the growth in a better way.

Mutual Fund Performance

1.   Absolute Returns

This method is also called as point-to-point method of evaluating the growth of mutual funds. It is commonly used to calculate returns and is one of the easiest methods of all. According to mutual fund definition, NAV is the net asset value of the scheme for a particular day. In this method, NAVs on two dates are used to assess returns.

The formula is: Absolute Returns = (NAVend – NAVstart / NAVstart) x 100

2.   Total Return

This method includes the dividends received over underlying stocks for a particular MF scheme. It is better than the Absolute Return method, and is calculated by summing up dividends for a particular period to the absolute change in NAV.

The Formula is: Total Return = (Dt / NAVstart) x 100 + Absolute Return

3.    CAGR (Compound Annual Growth Rate)

This method is very intensive and is applicable for holding periods of more than one year. It eradicates the fluctuations and inconsistencies experienced during short term holding periods and offer a solid picture to the investors.

These are the three number intensive techniques, which help in assessing mutual fund performance in a better way.

Purchase AEGON Religare’s Guaranteed Return Plans Online


When you say the word guarantee, especially in the field of a sales pitch it is a very powerful word that insurers use. What does this exactly mean for regular investors and people who purchase insurance product though? While insurance products are designed in such as manner so as to provide financial protection to a person in case there is any sort of mishap or financial loss in event of death, guaranteed plans refer to those plans which also ensure the advantage of returns of premiums on maturity. Therefore people, investors can get the twin advantage of not only protection but also returns on premium at the time of maturity.

savings_plans

Known as Guaranteed Returns Plans, these plans are far more beneficial than simple insurance products which solely insure financial protection. There is no scope of maximising the money that has been invested in the insurance plan. Many people prefer these plans so that they may be able to reap the twin benefits associated.

Moreover, these policies are easily available online where people can read about the plan, compare it with other plans and also purchase it online via electronic means; thereby saving them a great amount of time and effort. In fact, many people prefer to buy Guaranteed Returns Plans online rather than having to deal with the purchase procedure in the traditional manner, where they have to visit the company.

Some of the features of the Guaranteed Returns Plans include guaranteed returns of regular premiums on maturity and payment of the lump sum to the nominee in case of death; which can be utilised to replace the loss of income on death of the life that has been insured.

There are many benefits that are associated with availing these plans. Some of them include:

1) There is a limited premium payment term.

2) There are tax benefits that are available as per the prevailing tax laws.

3) The policy ensured that there is 150% guaranteed payout on the premium amount.

4) In case there is death of the life that has been assured within the policy term, all of the future premiums will be waived off and the guaranteed annual payouts will be payable to the nominee.

5) There are guaranteed annual payouts at maturity.

So, once a person has decided that they want to purchase this policy, the next step would be on how they would go about doing so. Some of the steps that are involved in the same include:

1) The investor has to first decide the amount of premium that he/she wishes to pay.

2) Once Step 1 has been done, the life advisor will assist in the process of application.

3) Once all the above formalities have been completed, a person then has to write out a cheque in favour of AEGON Religare Life Insurance Co. Ltd.

However, there are many eligibility factors that a person must meet in order to avail this policy. Some of the factors include the entry age (minimum and maximum), maturity age, policy term, premium payment term (PPT), premium payment frequency (annual or monthly), sum that has been assured, annualised premium.

It is very important to read the disclaimer of the policy as well so as to understand what is not included within the policy.