- Retirement Planning and Son's education

Neha Agarwal wrote :
Dear Sir,
I Just came across your blog and read few suggestions and i really want to say thank you for all your valuable advise to the investors.
I am 32 years old and I have invested in mutual fund by starting from Rs. 500/- from one fund in 2005 and increased year by year. All the funds are having growth option. My investment horizon is +15 years.
I am having 3 year old son and I am investing for retirement and son’s education.
I am the only earning member of my family having 5 members including me.
I am having a housing loan of Rs. 12 lakhs outstanding as on today. I am repaying the principal of housing loan as an when possible.
Please analyse my portfolio and give me the feedback on the funds which I am having and suggest me if I am able to meet my goal.
I am having Life Insurance of Rs. 14, 00,000/-.
I am having following SIP.
The bold ones are the core portfolio as per my views.
Reliance Equity saving – Rs.500/- from 2008
Reliance Growth – Rs.1500/- from 2008 and Rs 500/- from 2006 to 2008
Reliance Vision – Rs.1000/- from 2008 and Rs.500/- from 2006 to 2008
Reliance Diversified Power – Rs.500/- from 2007
Sundaram Select Midcap – Rs.1000/- from 2008 and Rs 500/- from 2006 to 2008 Sundaram India Leadership – Rs.500/- from 2006
Sundaram Select Focus – Rs.1000/- from 2008
Sundaram Capex – Rs.1000/- from 2008 and Rs 500/- from 2006 to 2008
SBI Contra – Rs.500/- from 2005
DSPML tax saver – Rs.1000/- from 2008 and will discontinue as I don’t require any ELSS.
DSPML top 100 – Rs.1000/- from 2008
Kotak Tax Saver – Rs.500/- from 2007 to 2008
HDFC top 200 – Rs. 1000/- from 2008
ICICI Infrastructure Rs. 1000/- from 2007.


I had also invested in following NFO

Reliance Long Term Advantage – Rs. 5000/-
Reliance Natural Resources – Rs. 5000/-
DSPML Mid and Small Cap – Rs. 5000/-
Sundaram Select thematic Energy – Rs. 5000/-
Sundaram Equity – Rs. 5000/-
Sundaram Small Cap – Rs. 5000/-
J M Contra – Rs. 5000/-
Birla Long Term Advantage Fund – Rs. 5000/-
HDFC Midcap – Rs. 5000/-
SBI Tax saver series I – Rs. 15000/-
SBI Blue Chip – Rs. 5000/-
UTI Contra – Rs. 5000/-
UTI Infrastructure Series I – Rs. 5000/-
My question is am i too much betting on Sundaram BNP Paribas</span>?The core portfolio which i indiacted in Bold is it correct ?
I am planning to shift my equity MF investment to balance fund at the age of 45. if this is correct ?
Regards
Amit & Neha





SRIKANTH SHANKAR MATRUBAI advised :

Dear Amit and Neha,

First of all, I thank you for your kind words on my blog.
It is good to see that your faith in Mutual Funds has not diminished even after the mauling the Stock Markets has received in 2008.
Before analysing and commenting on your portfolio, I take pleasure in appreciating on your foresight for creating a Buffer for your Retirement and Son's education.

ANALYSIS AND COMMENTS:
Shockingly, you have got 27 funds in your portfolio. You seem to have become a "collector" of funds. Your portfolio needs a complete overhaul. Some funds are outright sell, even at a loss.
I will go through each fund one by one.
1. Reliance Equity Saving (Sip 500 from 2008) :
Probably you mean to say Reliance Regular Savings Fund (Equity). This fund has had a terrific 2007-08 and since then like other funds, has taken a big beating. This fund focusses on Mid-caps and Samll Caps. I advise you to STOP your SIP in this fund immediately.

2. Reliance Growth :
This fund has been a Star Performer since inception. Though it faltered in 2008, looking at its portfolio, I continue to maintain a positive view on the Fund. CONTINUE.

3. Reliance Vision :
This Fund has been living on Past Glory. STOP YOUR SIP.

4. Reliance Diversified Power :
I am never in favour of Theme/Sector Funds. STOP YOUR SIP.

5. Sundaram Select Midcap :
A Great Performer which has gone off-track of late. AVOID. STOP YOUR SIP.

6. Sundaram India Leadership :
CONTINUE.

7. Sundaram Select Focus Fund :
A Truly Quality Performer and Must Have in everyone's portfolio. CONTINUE.

8. Sundaram Capex Fund :
Could struggle going forward. Best to Avoid and STOP YOUR SIP.

9. SBI Contra :
Not a Contra Fund in True Sense. More of a Diversified Fund with a Large Cap Bias. CONTINUE YOUR SIP.

10. DSPBR TAX SAVER :
As you do not require any ELSS, it is good that you are discontinuing.

11. DSPBR TOP 100 :
Excellent Performer in Both Bull and Bear Markets. CONTINUE.

12. KOTAK TAX SAVER :
Has been an average performer. Switch to K30 fund on completion of Lock-in period.

13. HDFC TOP 200 Fund :
One of my favourites. Has been a very very consistent performer. CONTINUE YOUR SIP AND ADD MORE IF POSSIBLE.

14. ICICI INFRASTURCTURE :
One of the best Infra Funds. But does not deserve to be a part of Core Holdings, especially since you are the sole earner. STOP YOUR SIP and switch to other funds suggested below. Under the Same Fund House, you can switch to ICICI Growth fund.

NFO :

Reliance Long Term Advantage – Rs. 5000/- (After Lock-in Period is over, switch to Reliance Growth)
Reliance Natural Resources – Rs. 5000/- (Retain your holdings. The fund should start delivering as it still holds significant cash and has invested in Quality Stocks)
DSPML Mid and Small Cap – Rs. 5000/- (Even at a loss switch to DSPBR Top 100 Fund)
Sundaram Select thematic Energy – Rs. 5000/- (Take a decision when the Lock-in Period ends.. which is still 2 years away)
Sundaram Equity – Rs. 5000/- (Continue to hold as the Fund has performed better than its Benchmark and has good holdings in Large Cap Blue Chips)
Sundaram Small Cap – Rs. 5000/- (Holds nearly 93% in Small and Mid Caps which do not promise a bright future. Better to switch even at a loss to SUNDARAM SELECT FOCUS).
J M Contra – Rs. 5000/- (Has a taken a huge beating. No Other option but to wait and pray for better times. )
Birla Long Term Advantage Fund – Rs. 5000/- (Close-ended. Take a call when the Fund becomes Open ended).
HDFC Midcap – Rs. 5000/- (Close-ended. Take a call when the Fund becomes Open ended).
SBI Tax saver series I – Rs. 15000/- (Close-ended. No other option to stay invested)
SBI Blue Chip – Rs. 5000/- (Even though invests in Blue Chip, has not had a great run. But its holdings do inspire some confidence. Continue to hold and take a call after a year)
UTI Contra – Rs. 5000/- (Even at a loss switch to UTI Dividend Yield Fund)

UTI Infrastructure Series I – Rs. 5000/-(Even at a loss switch to UTI Dividend Yield Fund)

Out of your existing ongoing SIP of Rs.11500, I have suggested you to stop Rs.5000 and Rs.1000 will be stopped from DSPBR Tax Saver.

For this 6000, I suggest you to invest in the following funds
HDFC PRUDENCE FUND (1000 * 2 sips at different dates)
FIDELITY EQUITY FUND (500 * 4 sips at different dates)
BIRLA SUNLIFE EQUITY FUND (1000 * 2 sips at different dates)

so, ultimately your CORE portfolio will look like this....


RELIANCE GROWTH FUND
SUNDARAM SELECT FOCUS FUND
SUNDARAM INDIA LEADERSHIP FUND
SBI CONTRA
DSPBR TOP 100 FUND
HDFC TOP 200
HDFC PRUDENCE FUND
FIDELITY EQUITY FUND
BIRLA SUNLIFE EQUITY FUND

If you observe, I have added a Balanced Fund HDFC Prudence Fund to your Core portfolio and your portfolio now looks tilted towards Large Caps, which is how it should be.

Continue to retain your existing holdings in the Funds where I have suggested to STOP YOUR SIP. Do try to reduce/sell out when the situation improves and shift to Quality Funds as suggested.

Your Life Insurance Coverage of 14Lakhs looks inadequate to me, especially when seen in the backdrop of you being the only earning member in a Family of 5.

Try to get a Term Insurance, as this is the Cheapest Form of Insurance.

Also while investing in Reliance Growth and Birla Funds, there is Free Life Insurance available, get the details about the same from your Mutual Fund Advisor and invest through them, which will also increase your Life cover.

Rebalance your portfolio periodically, ideally, every two years. Make a gradual shift from Equity Heavy to Balanced and then to Debt Heavy, without compromising on returns/risks.

Do consult your Financial Advisor before taking action on my suggestions.
Best of luck,
Srikanth Shankar Matrubai




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SHALL I INVEST IN TATA CAPITAL NCD?

Ms.Shalini asked :
Dear Sir,

What are NON-CONVERTIBLE DEBENTURES (NCDs)?
How safe are Tata capital's recently open secured NCDs? Is Income from them is taxable?

Shalini

SRIKANTH SHANKAR MATRUBAI replied :
Dear Shalini,
How are you?. I remember answering your query in August last year. Hope you are sticking to your investment in HDFC Top 200 Fund....
Non Convertible Debentures (NCDs) are those that cannot be converted into equity shares of the issuing company, as opposed to Convertible debentures, which can be. Non-convertible debentures normally earn a higher interest rate than convertible debentures do. NCDs have a fixed maturity.

Tata Capital has come out with a NCD issue of Rs.500 Crores with an option to retain oversubscription of upto 1000 crores. It offers an attractive interest rates : 11% for the monthly option, 11.25% for the quarterly option and 12% for the annual or cumulative option.
Due to Strong Promoters and Tax Benefits (due to listing in NSE), no TDS and relatively easy liquidity, I recommend you to consider investing in this NCD.
The NCD is secured and shall rank pari passi with other credit holders. Even Banks and Company FDs do not offer this safety. The Company also proposes to create a Debenture Redemption Reserve towards maturity. The NCD offer is also rated by ICRA at LAA+ indiciating Investment Grade.
The NCD offers Monthly, Quarterly, Annual and Cumulative Options. Of all the options, the cumulative option appears most attractive, as it allows investors to reinvest the interest proceeds at high coupon rates of 12 per cent. This instrument is shielded from the interest rate and re-investment risks. For Rs 10,000 invested today, a cumulative amount of Rs 17623 pre-tax can be earned at the end of five years.
Best of luck,
Srikanth Shankar Matrubai

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SUGGEST ME GOOD TAX SAVING FUNDS

Mr.Naveen Ekbote Wrote :
Hi Srikanth,

Nice to know you work on mutual fund investments.

I have made two SIP investments of Rs.1000 each in HDFC Tax saver and Franklin templeton Tax saver from last 1 1/2 year. Unfortunately I have lost heavily due to fall in the stock market. Almost to the tune of 50%. Do you suggest to hold on for lock in period of 3 years? What is your suggestion.

I also want to take one Mutual fund SIP in my wifes name which gives tax benefit. Pls suggest.

Thanks

Naveen

SRIKANTH SHANKAR MATRUBAI replied :
Dear Naveen Ekbote,
Thank you for you nice words.

Both of your SIP investments, HDFC Tax Saver and Franklin Templeton Tax Saver are going into good funds. Though I am not so pleased with the performance of Franklin Templeton Tax Fund.
This Market Meltdown has not spared anyone and you are no exception. My sympathies are with you. You have got no other option but to stay invested till the lock-in period of 3 years. Unlike other Tax Saving Tools, Mutual Fund Equity Linked does not allow you prematural withdrawal. In a way, this is good as Equities tend to deliver better returns over longer periods of time.
Consider stopping your existing SIP in Franklin and starting a SIP in Sundaram Tax Saver which has been a very consistent performer.
To invest in your wife's name, I would have been happy if you have given your goal, term for the investment. If you wife does not have any Insurance and is under insured, start with investment in DWS Tax Saving Fund (offers Free Life Insurance 5 times your investment amount) or Birla Sunlife Tax Relief 96 (which too offers Free Life Insurance)

For details on the above schemes/offers, you visit my site http://goodfundsadvisor.blogspot.com

If Insurance is not an issue, but Returns are, then you should consider investing in Fidelity Tax Advantage Fund or Principal Personal Tax Saver or Sundaram Tax Saver Fund among others.
Best of luck,
Srikanth Shankar Matrubai,
Bangalore

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IS THE TATA MOTORS FD SECURED????

Mr.Akhil sharma had a few more doubts and wrote:

sir,
you said that the Tata Motors Fixed Deposit Scheme is "SECURED".I read the offer document and it says that..
The Company hereby declares that:

(i) The Company has complied with the provisions of the Companies (Acceptance of Deposits)

Rules 1975, as amended upto date; (ii) The compliance with these rules does not imply that the

repayment of deposits is guaranteed by the Central Government; (iii) The deposits accepted/

renewed by the Company are unsecured and shall rank pari-passu with other unsecured

liabilities; (iv) The Company is not in default in the repayment of any or part thereof and any

interest thereon in accordance with the terms and conditions of such deposits.

So will my money be secure even if the company dissolves or is taken by some other company!!
thanks and regards
Akhil Sharma

SRIKANTH SHANKAR MATRUBAI replied :
Dear Akhil Sharma,
By saying "Secured", I did not mean it literally, I meant it only in Good Faith. It is as safe as the company itself. If it files for bankruptcy, then you queue up for your deposit dues.. GoI or FDIC is not giving any guarantee for the deposits..

Though, Their $ credit rating has been downgraded to bb-. Indian rating remains as is. There is also the Tata group name behind it (I doubt if the group will let one of its companies fail).....

Given all this, what do think might be % chance of failure?
Some of the regional and co-operative banks are offering fixed deposits at somewhat similar rates of interest. But the security of money with them is always questionable, especially in the current economic circumstances. If we have to trust any company, the Tata Group is undoubtedly among the favorites. Moreover, successful vehciles like Tata Indica, Tata Safari, Tata Ace etc and anticipatory success of Tata Nano makes the funds more more secure.

The major issue of course: Is Tata Motors going to be solvent? Going by how this stupid government is thinking of bailout a Satyam, I think it's a given that even Tata Motors is going to be bailed out. In Satyam they aren't even letting the shareholders go bust - usually bailouts protect debt holders, but here they're protecting those that took the risk!

Given this mentality it's likely Tata Motors won't be allowed to go bust, but if things get ugly money could be stuck for a while. The financials don't look very good, but that's true of everything. Comes down to trust. So if you like Ratan Tata - and most importantly, if he likes you - this might just be the "alpha" you're looking for.


If you are so worried, you can consider going for FD by State Bank of Bikaner and Jaipur which too has a 3 year FD paying 10.75% compounded Quarterly. Backed by Govt of India!!!! So, by foresaking .25% extra, you are avoiding risk and ensuring safety. There is nothing wrong in it. Go ahead.
Best of luck,
Srikanth Shankar Matrubai.

To this, Mr.Akhil Sharma wrote a thank you letter :
you are the best sir!!!
thanks a lot!
you are a big support to me!!
great going sir!
god bless you n your family!

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WHAT IS TERM INSURANCE??

Mr.Akhil Sharma wrote back :
thanks a lot Mr.Advisor.
You don't know what your recommendations and the information passed on by you means to me.I really hope that somewhere in life even i could be of any help to people.
Thanks again Sir!
But what i want to know from you is "what is term insurance".......can you suggest some product to me so that i can go thru it and understand and get myself insured!

Thanks a lot sir
Regards
Akhil Sharma

SRIKANTH SHANKAR MATRUBAI replied :
Dear Akhil sharma,

Term Insurance
The cheapest and the most basic, this is a no-frills life cover that should be one of your first financial instruments. Being a pure insurance cover, it does not return your money if you survive the policy term.

If you don`t, the sum assured is paid to your dependants. So, buy only if you have financial dependants, or you expect to have dependants in the future. If you expect to have dependants till a later stage of your life, look for a plan that has a high maturity age.
For a Term Insurance of 10 lakh, for your age of 24, you will have to pay approx only 3k per annum. My suggestion, take 5 Different Term Plans from 5 Different Ins Co.s which will cost you around 15k per annum.

Keep the highest possible term
Keep the maturity age as long as possible
Talk to 4-5 insurers or visit their websites to get premium rates
Choose the plan that has the lowest premium at your parameters
Undergo medical tests, if required
Keep the nominees informed
Pay premiums every year

As of now for all age groups, the ICICI Pure Protect Classic Term plan is cheapest for Sum assured up to 24.99L Rs. & Pure Protect Elite for SA more than 25L Rs. Plz. note that with Pure protect only ADDBR & WoP Riders r available.

For exact prem. u may check the same from ICICI Pru life website or contact their local agent.

Ha, one more thing, Mr.Akhil Sharma, I am not a Insurance Agent, so I do not know much about Insurance. Do contact your friends/relatives who know a bit about Insurance.
Best of luck,
srikanth shankar Matrubai


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SHALL I INVEST IN TATA MOTORS FD?

A Regular Visitor to my blog, Mr.Akhil Sharma wrote :

Hello Sir,

How are you doing?....i again want to congratulate you for the terrific job you are doing.

Coming to the point i wanted to know about Company FDs.I just saw an advertisement of "Tata Motors Fixed Deposit Scheme".It says earn 12.83% per annum on a 3 years deposit.i have just joined my first job and my salary is around 2,10,000.

I along with my mother wanted to invest in a fixed deposit of Rs.50,000.Is this the right option.what will be the Net return after tax.i mean what will i get after 3 years if i invest Rs.50,000 now.

Or should i go for some Bank FD rather than Company FD.

You can check this link if you want.http://www.tatamotors.com/fixed-deposit-scheme.htm

I want to invest in the cumulative deposit plan!

thanks and regards
Akhil Sharma.

P.S:Thanks for your kind words on my blog Confessions of a delhite!

SRIKANTH SHANKAR MATRUBAI replied :

Hi Akhil sharma,
It is with great pleasure that I recd that the news that you have got your first job. Congrats!!!
I will answer your query later. First of all, I would like you to Insure yourself adequately. For this, you should consider taking Term Insurance as this is the Cheapest form of Insurance available. Only later on, you should think of Investments.
Regarding FDs, as you are young, you are better off investing in Diversified Mutual Funds, which I have already discussed with you earlier. Sure, if you are planning to keep aside the amount for a particular reason, with a fixed time horizon, then go ahead.
For your investment amount of 50000, you should be getting about 62940 after taxes (I have considered you to be in the highest Tax Bracket). If you are in the lower Tax Bracket, you should be getting somewhere around 66400 or so.
With the falling interest rates, the Tata Motors Fixed Deposit Scheme is quite Attractive. Though the Company is going through tough times presently, 3 years is a good enough time for the company to sail through and moreover your investment is secured. So, go ahead and invest but before that, PLEASE NOTE, THAT THE COMPANY OFFERS HALF(1/2) PERCENT EXTRA FOR SHAREHOLDERS. YOU CAN BUY A SMALL LOT OF TATA MOTORS SHARE AND AVAIL A HIGHER RATE ON THE FIXED DEPOSIT!!!!!.
Best of luck,
Srikanth shankar Matrubai
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Best Tax Saving Instruments

This letter by me was published in Financial chronicle on January 27, 2009
Tax-saving tools ¦
DHIRENDRA Kumar’s article Here’s why you should invest in tax-saving mutual funds made very interesting reading.
People tend to ignore investing in tax schemes until the last minute and then rush in to invest in whatever instruments they can without analysing the pros and cons. Equities are the best avenue to invest your hard earned money.
ELSS not only saves taxes but also give consistent returns. The icing on the cake is the very short lockin period of only three years. The biggest advantage of investing in ELSS is that mutual funds are that rare investment avenue, where not only your investment but also your returns as well as principal are all exempted from tax.

Srikanth Matrubai Bangalore

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REASONS FOR FAILURE OF LIC JEEVAN AASTHA

This article by me was published in Financial Chronicle on January 26, 2009 edition.

MISSED target ¦
APROPOS to the report that LIC failed to garner targetted funds through Jeevan Aastha.
It must be mentioned that Jeevan Aastha failed because of huge misrepresentation by agents and even by LIC itself where it hides the real picture by using weasel words. The insurer claimed 10 per cent guaranteed return on the scheme but it’s not compounded.
An investment of Rs 48,000, as shown in their own illustration, gives Rs 1 lakh after 10 years. That’s about 7.5 per cent compounded, much less than the 10 per cent claimed. The “10% guaranteed return” was a marketing gimmick, and it’s very much likely that the whole marketing infrastructure was paid obscene amounts of money and commissions to push the plan through. In a time when every asset class is losing value, people seem to clutch on to anyone who will guarantee a return, even if it’s low.
The policy is not suitable for any age class. For Young people (20-35 age), investments in market-linked instruments such as equity and debt funds can better returns for a 10 year period than the returns given by the policy. For older people also the returns from the policy is also not much attractive.

Srikanth Matrubai Bangalore

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SHORT TERM TAX DOUBTS CLARIFIED

Sir,
I am aware that short term capital gains can be booked against short term capital losses. And similar action can be taken for long term capital gains and losses. I will take the liberty of putting some issues in question form, so as to be clear.
1. Is there no difference between gains/losses from debt funds and equity for the said booking of gains/losses?
2.All Short Term If I have capital loss of 2 lakh from sale of one particular stock and capital loss of 1 lakh from sale of another stock, and capital gain of 50 thousand from redemption of debt mf, is it right to carry fwd loss of 2.5 lakh.
3. All Long Term If I have capital gain of one lakh from one stock, capital loss of fifty thousand another stock, and capital of sixty thousand from debt fund, what will be the tax treatment?
4. Is Equity Arbitrage Fund to be treated just like equity for tax treatment? My doubt arose because there is no STT being charged for equity arbitrage fund.
5. Is Gold ETF to be treated just like a debt fund, for the purpose of tax on capital gains.



REPLY :

answer for ur queries 1 by 1.

First of all Plz. note in case of Eq. MFs as well as Eq., as the LTCGs r tax free, hence u can`t claim LTCL also from Eq. funds/Eq. to sat off against ur LTCG from other capital assets (debt funds, physical gold, property etc.)

1. STCL from Debt as well as Eq. funds can be set off against STCG as well as LTCG from debt funds, physical Gold, property & STCG (only) from Eq. funds.

LTCL of debt funds can be set off against LTCG of Debt funds, Physical gold & property.

2. Yes u r right, ur total STCL is 2+1=3L Rs. out of which 50K STCG `ll be sat off. Hence the final STCL for carry over `ll be 2.5L Rs. only

3. As i already stated, for Eq. funds & Eq. LTCG r tax free hence LTCL r also not available for sat off. So in this case, u can carry over ur LTCL from Debt funds of 60K (incidently u forget to posted- is it a loss or a gain, i assumed it as a loss).

4. Yes Eq. Arb. funds r to be treated as Eq. Funds for tax treatment. Plz. clarify from ur invested Eq. Arb. fund why they r not charging STT?

4. Yes GOLD ETFs r to be treated on par with other debt funds.


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MY TARGET -- 1 CRORE IN 10 YEARS

Mr.Prakash Punekar wrote :
Hi Srikanth,

I visited your blog(goodfundadvisor.blogspot.com). I appreciate your good work.
I am new to mutual funds and want to seek advise from you.

I have started SIP since jan 06, 2009 (actually, I was about to buy satyam shares but did't) :
1. UTI Dividend Yield Fund - Growth (UT189) - 1500/month for 5 years.

I am planning to have 3000-4000 rs per month in couple of more funds for 5-10 years of horizons.
Right now I am in USA.
I would appreciate your advise on selection of funds. plan to am expect good returns in next 10-12 years through these investments.

Thanks for your time and efforts.
Prakash Punekar.

SRIKANTH SHANKAR MATRUBAI replied
Dear Prakash Punekar,
Thank you for your kind words.
It is really a matter of Great Luck that you didn't buy Satyam Shares. Just see what a Bad turnaround it had. My God, such a Big Fraud, and no one had even a Clue to it.
Anyway, coming to your investments. Right now your money is going into a Right kind of Fund for this Market, continue with your investment in UTI dividend Yield Fund.
But do keep a track on the same and reconsider if there are any significant changes in the market scene or the portfolio composition.
For your further investment plan of 3k-4k, I would suggest 5 funds, out of which you can choose as per your convenience. The fact that you investment horizon is more than 5 years makes my job easy and you too will have a fairly good chance of earning Better Than Markets Returns.

My picks are :

1. Birla sunlife Equity Fund

2. DSPBR Top 100 Fund

3. Fidelity Equity fund

4. HDFC Prudence Fund

5. Sundaram Select Focus Fund.

Out of the above Funds, Fidelity (500) and Sundaram (250) have Minimum Sip Investment of less than 1000, and therefore, in these funds you can also consider investing at different Dates to maximise returns making use of NAV Volatility.

However, your Target Return Expectation of 1 Crores in 10 years out of these investments look Overoptimistic. Assuming a Realistic Return of 18%, you need to invest Rs.32354 monthly to get your target return of 1 crores.
However, if a assume a slightly Higher Return of 20% compounded, even then you need to invest monthly Rs.29044!!!

With this investment of Rs.5500/- per month for a period of 10 years, at a Return of 20%, The End value of your investment would be only 18,93,711 on an Amount Actually Paid by you of Rs.6,60,000.

For this 5500monthly to grow into 1 crore at 20% return, you need to wait for 18.5years.
The best option is to increase your Sip input value, if not now, as and when it is possible.

Best of luck,
Srikanth Shankar Matrubai,


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"Charges in ULIPs & Mutual Funds"

My friend Ashal's answered this query recd from a guest. I found it very very interesting and thought you may like the same.


Mr.Vivek asked :
My insurance agent told me that There are many internal charges in MF which are charged by MF companies but these charges are not visible to Normal investor.

He suggested : In case of ULIP, there are 2 things :

- charges are completely transparent then MFs
- And in long Term (10-15 yrs), ULIPs are cheaper than MFs in terms of charges.

Please suggest and draw some clear picture about charges.

-vivek


Dear vivek, there is totally opposite picture what ur Insurance agent had advised u. Let me explain.
In case of MFs there r only 3 types of charges applicable -
1. Entry Load - It can be avoided if u invest directly to ur MF bypassing ur MF agent.
2. Exit Load - It can also be avoided by remaining invested for certain time period in that particular plan.
3. Fund Management Charge - It`s charged as a %age of total assets under the plan. Normally it varies from 0.25% to 2.5% depending upon type of funds (Debt to Eq.) as well as expertise of fund co. for a same set of MF plans, lower FMC Plan is always advisable for investment.

In case of ULIP following 4 types of charges r applicable.
1. Prem. allocation Charge - It may vary from as low as 1% to as high as 65-70% of ur first year prem. & reduced year after year or may remain same at a constant level say 4% or 5%.
2. Mortality Charges = It`s the basic cost of insurance & again it varies among Ins. cos.
3. Policy admin charges - Some ULIPs charge as low as 20 Rs. per month where as some charge as high as 200-300 Rs. per month. Again not constant among Ins. cos.
4. Fund Management charges - From 0.5% to 2.5% depending upon the type of Fund (debt to Equity).

From the above list u can judge urself that in case of MFs there is only 1 charge FMC, which u `ll have to pay but in case of ULIPs there r several charges & no common benchmark is there to see the impact of these charges. I do hope the message is clear to u.



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BUY GOLD NOW BEFORE IT BECOMES EXPENSIVE

Dear all,
The Global Financial Crises we are witness to today is unprecendented and many Economies, (even Developed ones) are on the brink of an looming impending Recession. In response, Central Banks, with US leading from the front, are pumping in tonnes and tonnes of money by printing more and more Dollars. But the disaster waiting to happen is, that this Oversupply of Paper Currency is not backed by any Real Assets such as Gold. Which means, that the Currency that the US Govt is pumping is only a Paper churned out from Printing Presses.
What this creates is, that Gradually the Confidence in US Dollar will reduce and its VALUE too decrease (Remember Zimbabwe?).


This is where a proxy currency such as "GOLD" holds intrinsic value, since the supply of it is limited and which is not in control of any Central Bank. Gold has a unique characteristic of "storage value", vis-à-vis paper currencies. Paper currencies tend to lose value over a period of time due to inflation (loss of purchasing power) caused by over supply as it leads to a situation where more and more currency is required to buy the same amount of goods.
Another shocker is that the Gold Reserves held by US, UK and other Developed Countries on threshold of depression has fallen considerably. While the ratio of Gold to Currency was 141.2 tonnes to 1bn$ in circulation, now it is ONLY 10.7tonnes to 1bn$ in circulation. This shows that More paper Currency is in circulation backed by Less Gold. To correct this analomy, the US needs to increase its Gold Reserves by MORE than 13 times!!!!
This will only Fasten the process of Falling Confidence and Faith in the US Dollar and hasten the image of Gold as the Saviour to protect over the Long Term.
Citigroup, in a recent report has said that gold will touch US$ 2,000 per ounce. That's 2.5 times the current price of the yellow metal at US$ 800. The firm believes the measures taken to tackle the financial crisis will not stabilise the global economy. Instead they will lead to a painful depression. As per the bank, the financial system has tripped beyond recovery, towards depression. In this scenario, there will be a flight towards gold. In fact, according some reports, China plans to add nearly 6 times its current gold reserves of 600 tonnes in a move away from foreign paper currencies.


With the financial crisis not over yet and the recession looming large, central banks would continue to inject more and more money into the financial system. Thus the debasement of the currencies will continue making Gold more and more attractive as a hedge against the dwindling purchasing power and the loss of faith and confidence in paper currencies.

Gold is seriously undervalued.

Buy gold before it gets expensive.

On where to invest, you can visit http://goodfundadvisor.blogspot.com/2008/12/dspbr-and-aig-world-gold-funds.html
http://goodfundadvisor.blogspot.com/2008/09/buy-gold-now.html
http://goodfundadvisor.blogspot.com/2008/09/is-dspml-world-gold-fund-good-buy.html
Best of luck,
Srikanth Shankar Matrubai


Also visit my other blog goodtravelplanner.blogspot.com, http://buycall.blogspot.com and http://indiahotelstariff.blogspot.com/

Will things change for the Better?

Dear all,
Greetings,
Everyone is witnessing one of the most turbulent times in the Indian and Global stock markets and particularly people like us engaged in the financial
advisory business are witnessing a tougher time to answer the questions of the customers.
In US the meltdown has happened because of the cheap credit availability in 2001-2002 when the Fed Funds Rate were reduced to 1%. The greedy
mortgage companies and investment bankers with a view that the property prices will always rise borrowed this cheap credit and funded/invested in the
high risky sub prime mortgage market. The funding was made available to anyone and everyone without scrutinizing their ability to repay and many of these
investment banks and mortgage companies were leveraged to an extent of 30-40 times of their capital.
_______________________________________________________________________________

Rate of Return Income
________________________________________________________________________________
Investments 3000 10% 300
Loan 2900 8% 232
Capital/NW 68% 68

Return on Capital 68%
________________________________________________________________________________



The above table shows what the greedy lenders were doing. They were making handsome returns on their capital. On capital of 100 they were making 68
and earning 68% return.
Now what happens if the property prices fall?

___________________________________________________________________________________

Value falls by 4% Value falls by 20%
__________________________________________________________________________________
Investments 3000 2880 2400
Loan 2900 2900 2900
Capital/NW 20 -20 -500

__________________________________________________________________________________


As we can see from above table when value of investment falls by only 4% the value of investment becomes 2880 against original investment of 3000. So on
a capital of 100 the loss of investment comes to 120. Enough to wipe off their entire capital.
The above table shows just a fall of 4% in property prices one becomes insolvent.
There has been over 500 billion dollars of such NPAs in the US. That's not the only problem but the larger problem is that the banks have become very
cautious in lending. They are hardly lending as they see all the borrowers with a jaundiced eye, seeing them becoming bankrupt. Banks are the main entities
to create credit flow and liquidity in the markets. This behavior of banks has added fuel to fire.
Also as one institution or bank provides for NPA they take a hit on their capital (For eg if the capital of Bank is 100 and NPA is 2 then the Capital becomes
98) so they have to infuse new capital against their hit to meet the capital adequacy requirements. Since it has become very difficult to raise capital in
current times, these banks are selling assets to meet those capital adequacy requirements that are adding to the problem.
What can be the impact on Indian Equity Markets?
Financial Crisis (Indian financial sector becoming insolvent)
Profit Growth Rates
Liquidity Flows
If we look at the above points one by one, i.e. Financial Crisis
India has hardly any exposure to such sub prime or bad assets.
Indian Banks are adequately capitalized. Some of the prudential norms are as follows.
The Indian Banks are supposed to maintain
25% SLR, i.e. they have to put 25% of their total funds into government securities
9% CRR, i.e. maintain 9% cash balance with RBI (Have been reduced to 6.5% to infuse liquidity)
So out of the 100 Rs they have 30-34 Rs that is extremely safe with government of India.
The Capital Adequacy Ratio of various banks are in the range of 11% -12%
i.e. the banks have landed to an extent of 8-9 times of their capital unlike in US where the borrowing were 30 -40 times of the capital.
So the Indian Banks or Financial institutions becoming bankrupt look unlikely. We have seen a South East Asian Crisis in 1997 however the same did not
impact the Indian Banking System.
There are some concerns related to the crisis in the debt schemes of mutual funds, the crisis again has occurred due to heavy redemption pressures from
the Institutional investors and not because of poor credit of papers being held by mutual fund debt schemes.
Approximately 40% of the mutual funds debt portfolio is in CDs (Certificate of Deposits) of bank that is highly liquid and government is also taking steps to
infuse liquidity in the system, a detailed analysis on the same is being worked out by our research team and shall be sent to you. We believe this is a
temporary phenomenon and all the debt schemes shall start getting inflows very soon.
Impact on Growth Rate
India has been growing at 9%+ for a last few years, there could be some impact on the same because of the global slowdown however that should be
marginal. Indian exports are only 18% of the GDP so we are not dependent on US to drive our growth. In certain sectors and business, which are dependent
on the global markets or global capital one may see some reduction in the growth rates.

But we have a very strong domestic consumption that is intact and is going to happen. The infrastructure growth is going to take place.
Within the negatives there are big positives also like reduction in global commodity prices that was a concern before a few months. The oil prices have fallen
from 150 dollars per barrel to 70 dollars per barrel that is a big positive for India to control inflation and interest rates.
In toto, one can conservatively expect India to grow at least 6%-7% and to my mind these are decent growth rates compared to the world economy.
The markets are again available at extremely cheap valuations as they are trading close to 10 times the P/E multiples.
The market valuations are like the one seen in 2003 when the EPS was 300 and markets were 3000 in 2003 i.e P/E Ratio between 9-10 (which is historically
the lowest range). From those levels i.e. 2003 if see the markets even at these levels in the worst market condition i.e after falling by 50% the SENSEX has
grown 3 -3.5 times translating into a return of 25% CAGR in the last five years (i.e 2003-2008)
Currently the markets are at similar levels where the EPS is close to 950 and markets are at 10000 i.e approximately P/E of 10.
You may imagine where can the markets go in the next five years from now..........
People understand the same but the concerns or worries are of Liquidity flows or market timing....
The markets have fallen drastically because of panic selling from FIIs. YTD selling by FII is close to 11 billion US Dollars.
The market cap of FIIs was 400 Billion dollars when the markets were 21000 and it has now reduced to close to 90 billion dollars because of
Fall in stock prices
Depreciation of Rupee
Panic selling
We may not see inflows from FIIs for some time to come and further outflows may take place which may not allow the market to move further however we
don't require to be dependent on FII flows to move our markets because we are savings economy and close to 300 billion dollars of savings takes place
every year.
Last year we got inflows to an extent of 16 billion dollars from Insurance Companies and 3.5 billion dollars from mutual funds. This financial year also mutual
funds have net invested close to Rs. 4265.5 cr or 1 Billion US Dollars into equities till 20th Oct 2008.
Even if we can as advisors convert 5% of such savings into mutual funds through SIP route we get ample amount of liquidity from the Indian Consumers for
the markets to rise, I think this is the time to act and make the Indian Consumers rich.
We have been saying the same thing again and again and are getting wrong every day. Customers are not interested in listening to what we are saying
however we will have to repeat the same thing, as it is being said by investment stalwarts and we have told at several occasions, I would like to reiterate
those words and will experience how powerful these words are.
Sir Warren Buffet
"It is the time that matters and not the market timing."
"We enjoy the process far more than the proceeds."
"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
Sir Benjamin Graham
"It is the patience that gets tested and it is the conviction that gets rewarded."
Sir John Templeton
"Buy value not price."
"Buying low is a simple concept but how difficult it is to execute."
The world has witnessed such troubled times in the past also however the world has never come to an end and the world has come out of
such times.
Everything in the world is changing; the current situation will also change.
I don't know when it will change, but it will change certainly.
It is a great opportunity to make our investors rich; this is the time to ACT.
It is the test of patience. Be cool, patient and don't shy away to face the investor if the investor gets irked, just listen silently because that will also change. It
is a matter of time and you will have to repeat the same thing again and again to boost the investors' confidence as he is being bombarded negatively
through other quadrants of the society (mainly media).
Read a few of the above quotes you like and I am sure that current meltdown shall make all of us much stronger and instill a lot more conviction into all of
us, but that will happen with time, and believe me Time Flies.
Take Heart
Srikanth Shankar Matrubai


Also visit my other blog goodtouradvisor.blogspot.com and http://indiahotelstariff.blogspot.com/

ULIPs v/s Mutual funds

Insurance is NOT an investment. ULIPs are definitely NO-NO.
because ULIPs are being mis-sold (mis-sold being a polite way of saying con job) like no financial product has ever been mis-sold in this country. In India, ULIPs are a product which have been cynically designed to maximise profits to insurance agents and insurance companies while hiding the true numbers from investors. Nominally, a ULIP is a product that combines insurance and investment characteristics. In reality, they combine an extraordinarily high cost structure (meant primarily to feed agent commissions) with a non-standardised revelation of expense so that any meaningful comparison of investment performance between different ULIPs or between ULIPs and mutual funds is impossible. In other investment products, either there are no agent commissions (as in bank FDs) or agent commissions range from 0.25 per cent to 2 or 3 per cent (as in case of Mutual Fund Advisors). In ULIPs however, commissions range from 15 per cent to (hold your breath) around 70 per cent and are typically 25 per cent. And for some bizarre reason, this is considered acceptable by everyone concerned

Basically, ULIPs are expensive and opaque mutual funds disguised as insurance. This permits insurance companies to circumvent the strict transparency, expense, and commission-related laws that govern mutual funds. It also enables them to escape the scrutiny of SEBI, which has historically been a tougher regulator than IRDA.
Insurance is a great idea and most of us need it. But we need real insurance, which is to say term insurance. Here's what you should do. Make a liberal estimate of how much money your family will need if you die suddenly. Shop around and buy the cheapest term insurance you can find. You'll be stunned at how cheap term insurance is and also at how difficult it is to buy (The quickest way to get rid of an insurance agent is to say that you're interested only in term insurance). You probably won't be able to think logically about insurance as long as you don't realise that it's an expense. It's a necessary expense, like buying a helmet or going to a doctor, but it's not an investment. You need both insurance and investment. To get the best deal in both, don't mix them up.
Best of luck,
Srikanth Shankar Matrubai







The information and views contained on this blog are personal and believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. The information on this website is updated from time to time. The blog however excludes any warranties (whether expressed or implied), as to the quality, accuracy, efficacy, completeness, performance, fitness or any of the contents of the website, including (but not limited) to any comments, feedback and advertisements contained within the Site.Use of this service is at the sole risk of the user / client. The blog may at any time be edited, altered and or remove any information in whole or in part that may be available on this blog and that it shall not be held responsible for all or any actions that may subsequently result into any loss, damage and or liability.

Portfolio Advise

From: CHANDRA SHEKHAR
To: sharesher@indiatimes.com, goodfundadvisor@yaho
o.com
Sent: Mon, 25 Aug 2008 09:14:32 +0530 (IST)
Subject: Portfolio Advise

I had invested in Some funds in Growth Option.(
Pl. See Attached file for details) Due to lack of Knowled
ge earlier I had invested in many N.F.O.s Pl. advise ho
w is My portfolio and what will i take necessary action to
better My portfolio for good returns in 5-6 years.



I also plan to invest in Sundaram Select focus & Relianc
e Diversified Power sector Fund for 1000 through S.I.P.
for 2 years.


Thanks & Regards
Chandra Shekhar


SRIKANTH SHANKAR MATRUBAI'S REPLY ::::
Dear Chandra Shekar,
Yes, indeed, you do have too many NFOs in your po
rtfolio and some of them are really duds.
My take on each of them.
Fidelity Tax Advantage ::: Hold. Has been a steady
performer. Take a call after lock in period is over.
Pru ICICI Fusion Fund 2 ::: Hold. Though has been a
n underperformer. Its stock selection has been very g
ood. Infact, it also holds upto 5% of its assets in Subhi
ksha Retail, which should give a good spike in NAV, as
and when it is listed.
Birla Long Term Advantage Fund ::: No other alternati
ve but to hold till Lock in Period is over.
HDFC mid Cap Fund ::: Not a good investment.
Could have invested in HDFC Capital builder. Hold till loc
k in is over.
SBI Infrastructure Fund ::: Hold. could turn out to be a g
ood one by the time its lock in period ends.
Tata Indo Global Infra ::: Hold. Its mandate to invest
overseas could save it from being a underperformer. H
old for another 2 years or so.
Reliance Equity Advantage Fund :: Switch to Reliance Gr
owth Fund
Sundaram Energy Opp Fund :: Not a wise investment. No
other option except to wait for its completion of lock in p
eriod
SBI Magnum Tax Gain 93. :::: OK. But as you already
have an Lumpsum. I advise you to stop further SIP as I
do not expect the fund to give as good returns as it gav
e in the past, due to its bloated corpus. You can conside
r rather Birla Sunlife Tax Relief 96 or DWS Tax Saving
Fund.
Kotak Tax Saver ::: Good investment.
HDFC Tax Saver :: Again a Very Good investment.
HDFC Top 200 Fund :: The Best fund in your portfolio.
Hold on.


As for your future investments, you can definitely go for
Sundaram Select Focus. In fact, this is a must have in ev
eryone's portfolio.
Regarding, Reliance Diversified Power Sector Fund, plea
se avoid. You already too many sector funds. Also, powe
r sector may struggle to give returns as good as in the p
ast, due to rich valuations and concerns on raw materials
prices. Instead consider investing in DSPML natural Reso
urces and New Energy Fund.

Regards,
Srikanth Shankar Matrubai.

shall I invest in ICICI Infrastructure Fund?

From: Mevi
To: kentshershare@gmail.com
Sent: Wed, 20 Aug 2008 01:01:21 +0530 (IST)
Subject: Need advise on investing in SIP

Hi Srikanth,

I came across your blogspot thru moneycontrol.com.

I am a newcomer here and want your advise regarding investments in SIP.

I am 25 and want to invest monthly around 2000rs in SIP. I was looking at ICICI Prudential Infrastructure RetailPlan (G) as a start for around 3 years.

What is your opinion on this? Do let me know if you think any other fund schemes are good.

Thanks in advance,
Mevi.



SHANKAR SHANKAR MATRUBAI'S REPLY ::::::::::
Dear Mevi,
Your decision to invest in Mutual Funds is a wise one and through SIP is even wiser.
However, your choice of ICICI Infra Fund is not such a wise one after all. True, ICICI InfraStructure Fund has been a very good performer in the past. But, going forward, Infrastructure, as a Sector will not have as good time, it had in the past, and with rising interest rates and slowing demand may even struggle to give Average Returns.
Hence, I would recommend you to Avoid ICICI Infrastructure Fund at this point of time.
You should be better off by investing in diversified equity funds which tend to have stability in their returns and also perform better than Sector Funds (like Infra) over a longer period of time.
Hence, i recommend you to invest in Diversified Equity Funds. You split your 2000 into 2 and invest 1000 each in
Reliance Growth fund
Birla Sunlife Equity fund
These funds should give you more returns than ICICI Infra Fund

Best of luck,
Srikanth

Advise please

Dear,
I am Amit. Iam 23 yrs old,apart from other debt investments and my term insurance policy,i have invested in the following MFs,kindly have a look and suggest any modifications.
thank you in advance.
1.50,000 in SBI Tax 93- April 2008
2.15,000 in Principal personal tax- may 2008
3.20,000 in UTI infrastructure -jan 2008
4.20,000 in DSP ML TIGER- jan 2008
5.2000 SIP kotak 30 july 2008
6.2000 SIP Reliance growth july 2008
7.2000 SIP HDFC top 2000 july 2008
8.2000 SIP Sundaram select focus july 2008
9.2000 SIP Birla Sunlife Frontline- july 2008 equity.
I realised my mistake to not investing in SIP,hence have tried to follow it now,please comment.
Waiting in anticipation,
Warm Regards,
Amit,Mumbai

SRIKANTH SHANKAR MATRUBAI ' S REPLY ::::::

Dear Amit,

At the outset, you have done the right thing by going for a TERM Insurance rather than an Endowment or other policy. Hats off to you there.

Your Mutual fund portfolio is a picture of good and bad. Some very good and some outright bad. My take on each of the fund
1. 50,000 in SBI Tax 93- April 2008 (continue with the same till lock-in period and then take a call).

2. 15,000 in Principal personal tax- may 2008 (Good investment. Hold on. Can even add to it)

3. 20,000 in UTI infrastructure -jan 2008 (Redeem the same. I know you will lose, but it is better to put the money to better use than lay it in a rotting asset. So, invest the proceeds of the redeemtion into DWS Investment Opportunity Fund)

4. 20,000 in DSP ML TIGER- jan 2008 (This is one of the few Sector funds that I like. Continue to hold and review every 6 months. Right now, continue to stay invested)

5. 2000 SIP kotak 30 july 2008 (One of your best decisions. Not only in terms of the fund choice but also because of SIP. Continue)


6. 2000 SIP Reliance growth july 2008 (Again, a Very Good Decision. Continue with your investment.)

7. 2000 SIP HDFC top 2000 july 2008 (Yet, again, a Very Very Good Investment. Continue)

8. 2000 SIP Sundaram select focus july 2008 (Continue)

9. 2000 SIP Birla Sunlife Frontline- july 2008 equity. (Continue)

After the rejig, your portfolio will look like this.
50,000 in SBI Tax 93- April 2008
15,000 in Principal personal tax- may 2008
20,000 in DWS Investment Opportunity - August 2008
20,000 in DSP ML TIGER- jan 2008
2000 SIP kotak 30 july 2008
2000 SIP Reliance growth july 2008
2000 SIP HDFC top 2000 july 2008
2000 SIP Sundaram select focus july 2008
2000 SIP Birla Sunlife Frontline- july 2008 equity

Of the 10000 SIP that you have, 80% of the amount (8000) goes into Large Caps. For your age, this is on the higher side. Either reduce some of the SIPs to 1000 and invest in fund given below or Increase your SIP. For these my recommendations are
DSPML Equity Fund
JM contra
Fidelity Equity Fund
SBI Commodities Fund
Mirae India Asset Opportunities fund

If you are increasing your sip from 10000, it is very good. And in that case, split your 2000 sips into 1000 each in the same funds and invest in different dates to make maximum use of volatility in NAV and hence earn better returns.

Also consider investing in
DSPML World Gold Fund
Fidelity International Opportunities fund

Best of luck,
Regards,
Srikanth

What should I do with my ULIP?

From: Bala N
To: sharesher@indiatimes.com
Sent: Mon, 18 Aug 2008 23:24:59 +0530 (IST)
Subject: what should i do with my ULIP?

Dear srikanth,

This is ramesh,aged 25,from chennai..

First of all, i like to thanks for your kind advices and suggestions..you are doing a great thing..please carry on..

I have already invested 50k per annum in SBI ULIP life insurance....but once i paid my first premium only,i got to know i was fooled by the agent..the charges are very much high(his commision???)..


now, i realize even after 3 years its unlikely, i will recover my invested amount(3 * 50k=1,50k)..

should i continue the ULIP after 3 years(by partial withdrawing & re-investing it into the same)for a long term until i get a good return or should i exit after 3 years, even if the surrender amount is lower than my invested amount(which is very much likely?)..so that i can use this amount for a good investment after 3 years?


also, please suggest some tax saving mutual funds to invest thru SIP.

waiting for ur suggestion..

Thanks,
Ramesh



SRIKANTH SHANKAR MATRUBAI ' REPLY :::::

Dear Ramesh,
It pains me to read such letters. I only hope people realise faster that ULIPs are money minting machines for Insurance Agents and a BIG LOSS for Investors. I repeat again Insurance is NOT an Investment.
But thankfully, you have realised now, so, hopefully, you will not repeat the same mistake again. And also advise your well wishers about this ULIP confusion.
I am not an Insurance Agent. But to the best of my knowledge and analysis, it is adviseable to stay invested till the lock in period of 3 years is completed. At the end of this lock in, do sell/redeem your units and invest in some Good Diversified Equity Funds.

As for Tax Saving Funds, here is my Short List. Invest in them through SIP to maximise returns.
Birla Sunlife Tax Relief 96 Fund (Invest through Century SIP now and you will get Free Life Insurance Cover)
DSPML Tax Saver Fund ( A recent fund, but has good returns and comes from a Good Fund House)
DWS Tax Savings Fund (Good performer. Free Life Insurance of 5 times your investment is an added Bonus)
Fidelity Tax Advantage Fund
HDFC Tax Saver Fund
Lotus India Tax Plan
Principal personal Tax Saver
Sundaram Tax Saver

Preferably invest through sips with different dates to take maximum advantage of NAV Volatility
Best of luck,
Srikanth

Thank you letter

Ms.Shalini wrote back

Hi Shrikanth,

Thank you very much for your advice. I'll definitely invest in HDFC fund. Your advice have strengthen my research and boosted my confidence. This is the first time I've planned to invest all by myself and for that I'm trying to learn from pros like you. I regularly visit your blog and decided to invest in HDFC Top 200 through SIP. And as per your advice(to some other person) I'll use two SIPs in the month.

For ICICI Prudential also, you are 100% correct. For first year they charge somewhere around 12% and then 2.5% and 2%. And we get 100% money only after 5th year. So we are struck not just for 3 but 5 years.

Thanks again. I'll write to you again after researching and preparing my case regarding SIPs.

Shalini

Advice for Short Term Debt Funds

From: shalini
To: kentshershare@gmail.com
Sent: Sun, 17 Aug 2008 19:08:24 +0530 (IST)
Subject: Advice for short term debt funds

Hi Mr. Shrikanth,

First of all, I would like to praise you for your noble service to investors. Its great to see that still we have some people who work for others benefit without any crease.

Now my query,

1. I want to invest 50k in some short term debt mutual fund. My time horizon is 3-6 months. While researching, I came to know of some funds like Canara Robeco Income (G), ABN Amro Flexi Debt - RP (G), HDFC High Interest - STP (G) etc. But I can not figure out which fund to choose. Canara's fund has a very low asset size and HDFC's fund is having very large assets. Though return wise Canara's non ranked fund is best in last 6 months.

If you can suggest any other avenue, I'm open to that also.

For your information, i would like to tell you, we plan to buy a car in next year and this money is for that purpose.

2. I want to start an investment of Rs. 20000 per annum in ICICI prudential life stage regular premium plan (not for insurance) for long term. Is it a good decision or I should defer it.

Thanks in advance.
Shalini.


SRIKANTH SHANKAR MATRUBAI ' S REPLY ::::

At the outset, I must thank you for your kind words.
You have done a good job by doing some research before investing, which is a sign of a mature investor.

Canara Rebocco have given very good returns for the last year or so. The rising interest rates have been obviously helping them. The main reason for this could be that they have been deploying their money more in Call Markets and Money Markets rather than investing in Fixed Debt Instruments. This could be because of their low AUM. So, when the interest rates start reversing, they will underperform the Average Benchmark returns. So, I would rather avoid investing in the fund. And, as you have rightly pointed out, their low AUM also does not inspire confidence.

I would go for HDFC High Interest STP, as they have a pretty decent track record for a long time. Their AUM is not too large. In fact, some funds have 5 times to 10 times the AUM which HDFC has right now. Do consider investing in HDFC High Interest.

About your planned investment in ICICI Prudential Life Stage Regular Premium Plan.
My advise is a firm "NO". Because this investment is an ULIP. and an ULIP is strict "NO-NO" for me. ULIPs are very costly affair, they are forcefully sold by agents because the agents get Maximum Commission from these ULIPs. Either way you are not investing for Insurance, which obviously means that you are investing for "Returns". Then why do you want to go for ULIP when the charges are very high, not only the first time you invest but also on annual premium.
Another drawback, withdrawal charges are very high and also you are struck for 3 years.

You are better off investing in Good Diversified Mutual Funds. They are cheap, transparent, easy and offer good diversification.