Systematic Transfer Plan - STP

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The basic premise of systematic investment plans (SIP) is that you shouldn't invest in one go, you should spread your investments to take advantage of different market levels. An STP is a systematic transfer plan that is useful when you have a big amount to invest, but don't want to invest it into an equity mutual fund in lump sum, because you might catch a peak. In such a scenario, you can invest that entire amount in a debt fund or a liquid fund, which are not affected by the ups and downs of the equity markets. And from that debt fund, you mandate that a particular amount is periodically transferred to an equity fund. That is how an STP works.

 

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Sundaram India leadership fund merged with Sundaram growth fund

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Sundaram Mutual Fund has approved the merger of Sundaram India leadership fund with Sundaram growth fund. The merger will be effective from July 11

 

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Bharti AXA Life Young India Plan

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FEATURES: Bharti Axa Life Young India Plan is a regular premium and traditional participating plan. This plan is specially designed for the young and offers life cover risk till the insured reaches retirement age of 60.

The policy matures at 60 years of age.

ENTRY AGE: You need to be at least 18 years old to buy this policy and not more than 40 years. The minimum annual premium is Rs 8,000.

COVERAGE: You have an option to increase the sum assured or life cover at two important milestones, to be decided by you, such as marriage or childbirth. However, you will have to shell out additional premium for the additional coverage. Additional sum assured cover will terminate when policyholder attains 50 years of age.

For example, for a 25-year-old male, for a base sum assured of Rs 2,00,000 premium will be Rs 11,678. In case he opts to increase life cover at the first milestone after his wedding at the age of 31 by Rs 8,00,000, he will be charged an additional annual premium of Rs 1,688. If he chooses to raise his life cover by Rs 40,00,000 at the second milestone of childbirth, the additional annual premium will be Rs 9,440.

MONEYBACK: Money can be claimed after completion of three policy terms. The amount will depend at the time the claim is made. The minimum amount will be 10 per cent and the maximum is 29.5 per cent of the base sum assured.

SURRENDER BENEFITS: Surrender benefits are available only after completion of three years. The insurer is obligated to pay only 30 per cent of the premium paid (excluding first-year premium). It could also pay a special surrender value. Bonus accumulated will be paid.

DISCOUNT: You get a marginal discount of 5 per cent on premium if you choose a base sum assured of Rs 5,00,000 lakh or more.

MATURITY BENEFIT: The policy matures when you turn 60 years. At maturity, you will receive 200 per cent of the base sum assured plus accrued bonuses, if any.

LOAN: A loan can be availed against this policy, provided the first three years' premiums have been paid in full and the policy has acquired surrender value.

Anyone who has financial responsibility must buy a term plan with significant life cover so that in case of an unfortunate event in the future, the interest of the family can be safeguarded. There are no maturity benefits in a term plan. This plan has limitations because the additional life cover terminates at 50 years, which is hardly a time when all responsibilities are met.

Considering the premium paid, the returns on the premium paid may not be very satisfying.

 

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Mutual Fund Statistical Ratios - Useful to study Mutual Funds

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What is Standard Deviation?
Standard Deviation is the measure of the deviation in the returns of the portfolio. In Simple Words it tells us how much the return on the fund is deviating from the expected normal return

What is Beta?
Beta is a measure of the volatility of the portfolio to that of the index. In simple words it shows the movement of the portfolio in comparison. The Higher the Beta, higher the volatility of the scheme to the index. If it's greater than1, then the portfolio is highly volatile to the movements in the index. If the beta is lesser than 1 , then scheme is less volatile to the index and beta which is close to 1 implies that the scheme is closely following the index.

What is R-Square?
The R-squared value shows how reliable the beta number is. It varies between zero and one. An R-squared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sense should have an R-squared value of one when compared to the Sensex. For equity-diversified funds, an R-squared value greater than 0.8 is generally accepted to mean that the underlying beta value is reliable and can be used for the fund. Beta and R-squared should thus be used together when examining a fund's risk profile.

What is Portfolio P/B Ratio?
It is the price to book value ratio of the portfolio. It measures whether the scheme is undervalued or overvalued

What is Jenson's Alpha?
It measures whether the Scheme is generating excess returns over the normal returns. For example, if there are two mutual funds that both have a 12% return, a rational investor will want the fund that is less risky. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has 'beat the market' w with his or her stock picking skills. The Higher the value the better the performance.

What is Turnover Ratio?
The turnover ratio represents the percentage of a fund's holdings that change every year. To put it simply, a turnover rate of 100 per cent implies that the fund manager has replaced his entire portfolio during the period given. Technically, the turnover ratio is the lower of the total sales or total purchases over the period divided by the average of the net assets. Higher the turnover ratio, greater is the volume of trading carried out by the fund.

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

LIC Jeevan Vaibhav

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Product Details
LIC Jeevan Vaibhav is a single premium, close-ended endowment plan with a fixed policy term of 10 years. The scheme offers to pay the sum assured, with loyalty additions if any, on maturity to the policy holder or as death benefit to the nominee, whichever is earlier. The minimum amount of sum assured that a policyholder can opt for is 2 lakh. The scheme as such, provides for rebate on higher amounts of sum assured of 4 lakh and above. This scheme is available only for a limited period

Additional Features
Jeevan Vaibhav is a single premium plan where premium payable is almost half the amount of the sum assured. When analysed over a 10-year period, the returns generated by the scheme during the entire work out to 7.7-8.0% per annum., after accounting for high sum assured rebates.

Policy At A Glance
Assuming the age of a healthy male policyholder as 30 years, the annual premiums payable for various amounts of sum assured are illustrated herewith…

Jeevan Vaibhav is a smart adaptation of the Jeevan Vriddhi policy launched by LIC a few months ago. Jeevan Vriddhi offered returns ranging from 4.7% to 7.09% compounded annual growth rate (CAGR) and death cover equal to five times the amount of single premium. For Jeevan Vaibhav, LIC has limited the death cover to about twice the amount of single premium and has increased the annual returns to 7.7% to 8.0% CAGR instead.

Jeevan Vaibhav is thus an interesting investment plan, an alternative to term deposits offered by banks. With interest rates having begun to soften gradually, investors can use this latest offering by LIC to park their money for 10 years for an assured tax-free return of about 8% p.a.

The comparison reveals that returns of LIC's Jeevan Vaibhav gain over those of bank term deposits earning interest @ 8.75% for 10 yrs; after accounting for tax impact @ 20.6% and above and the cost of premium paid to buy a term plan.

However, purchasing this scheme solely for life cover does not really make sense. Those with a preference for insurance over investment may give this plan a miss and purchase a pure term plan instead

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

Capital Protection Funds - A closed ended debt mutual fund

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Capital protection funds are back. ICICI Prudential Mutual Fund and Tata Mutual Fund have recently launched these schemes. These funds are coming at the right time when volatility is the order of the day on Dalal Street, and many investors are desperate to preserve their capital. Look at these numbers: S&P CNX Nifty returned 2.9% in the past five years, making investors revisit their assumptions of long-term investing. A weak rupee and the credit crisis in Europe have made it even more difficult to guess the future course of the market. This is where the capital protection schemes enter the scene. Capital protection oriented funds make good investment option in volatile markets. The fixed income portfolio ensures that investors get their money back at maturity and the equity allocation brings the return kicker.

How They Work?

A capital protection oriented fund (CPOF) is a closed-ended debt mutual fund that aims to invest a significant amount of money in top-rated fixed income instruments and rest in equities. The tenure of the scheme can be one, three or five years. This investment along with the interest would ensure that the investor gets his capital back on maturity. The modest equity component is expected to be the icing on the cake.

Assume there is a three-year CPOF. The fund manager gets 8% interest per year on three-year AAA-rated papers. Around 80% of the money deployed in such AAA-rated papers ensures that investors get their money at the end of the third year, as interest on these investments accumulate. According to CRISIL default study 2011, from 1988 to 2011, no AAA-rated instrument defaulted over one-, two- or three-year period. This makes a strong case that the money comes back to investors at the end of the third year. Rest 20% of money is invested in equities. If over three years this investment appreciates 20%, the portfolio value becomes 124 (fixed income portfolio worth 100 plus equity portfolio of 24) over three years, a CAGR of 7.43%. If equity investment doubles over the three-year period, investors take home 40% point-to-point return, or a CAGR of 11.87%.

As the tenure of the scheme increases, allocation to equities also goes up as less money is required to ensure the capital at the end of the tenure, compared to a scheme with a shorter tenure.

Should You Invest?

Markets have been range bound with downward bias for the past couple of years. Most of the negatives are already in the price. The attractive valuations of Indian equities make good investment case with a three-year view. If you are keen on investing in stocks, but really worried about the downside risk, you can consider investing in a capital protection oriented fund. These funds make sense for risk-averse investors looking for options to invest in equities, provided they are willing to remain invested throughout the term of the scheme.

Downside

But capital protection oriented funds have some disadvantages as well. Being a closed-ended scheme, it is listed on the stock exchange and there is little chance that you will get to exit at fair value because of the poor liquidity of most such products listed on the exchanges. The second big disadvantage is that these funds are taxed like debt mutual funds. Long term capital gains are taxed at 10.3% without indexation or 20.6% with indexation, whichever is lower. Also, according to mutual fund experts, the performance of these schemes has been a mixed bag. There are 45 capital protection oriented funds across 11 fund houses listed on the stock exchanges.


If you do it yourself, you need not sacrifice liquidity all together and can bring down the tax impact, too. You can pick up a combination of three-year fixed maturity plan from a reputed fund house and an equity fund with good track record. Decide your extent of investment in the FMP by looking at the prevailing yields for that tenure and invest the rest in equities. For example, in case of the three-year tenure, if the yield for the three-year paper is around 8%, you should put 80% of your corpus in FMP. For 7% and 9% the share of FMP should be 82% and 77% in your money. Rest of the money goes into an equity fund. Here the tax impact will be lower than CPOF, but money invested in the FMP won't be liquid. If you are in the lowest tax bracket, you can also consider investing in a combination of a bank fixed deposit and an equity fund. But if you don't have time to zero in on the right schemes and find mathematics difficult, opt for a CPOF. 

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Invest Mutual Funds Online

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Download Mutual Fund Application Forms from all AMCs

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Best Performing Mutual Funds

1. Largecap Funds                           Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds              Invest Online
1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
3. Mid and SmallCap Funds          Invest Online
1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
4. Small and MicroCap Funds        Invest Online
1. DSP BlackRock MicroCap Fund
5. Sector Funds                                 Invest Online
1. Reliance Banking Fund
2. Reliance Banking Fund
6. Gold Mutual Funds                     Invest Online
1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund

 

When to choose traditional insurance policies and when ULIPs

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CHOOSING the right life insurance product is not easy. It requires careful thought and consideration, and, a thorough evaluation of your present financial circumstances and your requirements in the future.

Life insurance products are broadly categorised into traditional and unit linked (most commonly equity-linked) products. The difference between traditional and equity-linked products depends on whether the investment risk is borne by the insurer or by the customer. In simple terms, a traditional product is where the premiums are invested by the insurer (as per the regulatory investment guidelines) and the customer gets certain guaranteed and non-guaranteed benefits for paying and non-guaranteed benefit premiums. In unit-linked products, the customer chooses (from a list of available funds), the investment option, and, his/her premiums are allocated after deducting charges. The value of these invested funds could then go up or down depending on the performance of the underlying investment (typically equity shares), and this risk is borne the customer and not the insurance company.

So, how does one decide which product is more suitable? Before buying, it is important that you review your financial plan.

One should note that the core objective of buying insurance is protection of the family in unfortunate circumstances. Whichever type of product you choose, first ensure that the level of protection is in line with your requirements, that is, your income, number of dependents and age. In both traditional and unit-linked products, you can tailor the protection level by choosing the appropriate sum assured and add-on protection riders. Once your family protection is assured, we can set out some general guidelines.

Are you comfortable with investment risk?

The past experience of investment returns suggests that equity investments have the potential to deliver superior returns over a longer period of time. In the interim, however, your investment value will go up or down. Higher the investment risk, higher the potential reward. Hence, if you are looking for longer-term gains, and have the risk appetite of being comfortable with your investment values moving on a daily basis, go for equity-linked products. Traditional products, typically, invest a limited (regulated) percentage in equity and, hence, the potential returns are lower.

Do you need your investment to provide a minimum guaranteed return? Traditional products will, typically, guarantee the payment of the `sum assured' on maturity or in the unfortunate event of death of the insured. For equity-linked products, if you have the choice of equity investments, then, there is no guarantee of return or protection of the invested capital. Are you likely to change or control your asset allocation during the investment period? In unit-linked products, you can see the value of your investment on a daily basis through the net asset value (NAV), published by insurers on their website. If you don't want to actively manage your asset allocation and are comfortable with the insurer's guaranteed returns over the policy term, then go for traditional plans.

Do you understand the implications of early exit or discontinuing premiums? You may be unable to pay your premiums for the planned premium paying term. All life insurance products are suitable for long-term financial goals and, hence, there are costs associate hence, there are costs associated with premature surrender, and often, with discontinuing premium payments. In unit-linked products, there is a five-year lock in, during which, you will not be able to access your funds and stopping premium payments Traditional products normally provide some flexibility on withdrawals through loans against the policy, which are available from the insurer

 

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Best Performing Mutual Funds

1. Largecap Funds        Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds     Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds    Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds             Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds              Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Gold Mutual Funds             Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund