Why MF SIP?

Invest Mutual Fund SIPs Online

An SIP is a financial planning tool offered by mutual funds that allows you to invest small amounts at regular intervals over a long period. It also allows one to use the power of compounding to generate big returns in a portfolio.

In the equity market, the general approach to investing is to time the market whereby one tries to buy a stock or an index at a certain level and book profit when it has run up significantly.

That approach often leads to "common mistakes in asset allocation by common investors, who tend to buy high (caused by exuberance of a bull market) and sell low (due to the hopelessness caused by a bear market)

An SIP can address this wrong approach to asset allocation by majority investors in a fool-proof way. Common investors should never try to time the market. All they simply need to keep doing is maintain the regular SIP payments in order to completely negate the impact of wrong timing that can hit return on investment

SIP or no SIP, equity investment will always be considered a game of deep-pocketed people. For the ordinary middle-class Indian, the stock market will perhaps be the last place to make their retirement planning fool-proof.

Of the many benefits of SIP investing, one is that you can start an SIP by investing as low as Rs 500 a month, which allows even a small investor to build long-term wealth. An SIP can allow investors to invest in a regular and disciplined fashion

Investors should first chalk out their long-term financial plans to identify how much mutual fund investment one needs to make every month and what should be the debt-equity mix

The next step is to decide on the right fund house and fund manager. They are the guys who will be looking after your money every single day till you redeem and, therefore, they are like the coach on who you want to entrust your life’s savings.

A lot of time and energy is spent in this process. Once the basic plan is inked, it is really a simple matter of unemotional execution by investing the routine SIP instalments on the scheduled dates

SIPs are not just about pouring all the money into the equity market. The mark of a great portfolio is distribution of risk and diversification across asset classes.

One important element in mutual fund investing is the split in asset allocation between equity and debt. This needs to be reviewed every few years to see if the risk profile of the investor has changed and, hence, allocation split needs to be changed

SIP investing is not about putting in some money and forgetting it, the way Warren Buffett will have you do it. It is more like being a gardener, who looks after his plants almost every day just to ensure weeds are not cropping up.

Investors will do well to monitor their investments over a medium to long-term and take a course correction if needed

Investors need to manage their investments at an overall portfolio level instead of approaching them in a piecemeal fashion. SIPs are constituent of such a portfolio and as such require attention from time to time. An investor must, therefore, monitor the performance of an SIP with reference to its benchmark and ascertain the long-term wealth creation potential that it carries

Best 6 ELSS Mutual Funds

Tax Planning Strategies article in Advisorkhoj - Tax Planning: Review of Top 6 Mutual Fund ELSS Schemes

As this fiscal year draws to a close, tax planning is now an important concern for a lot of people. Section 80C of Income Tax Act allows tax payers to claim deductions from their taxable income by investing in certain instruments. Equity Linked Saving Schemes (ELSS) is one of the most popular investments allowed under Section 80C, since the investors can avail three benefits – capital appreciation, tax free dividends and tax savings. An ELSS is a diversified equity scheme with a lock in period of three years from the date of the investment. If you investment in an ELSS through a systematic investment plan (SIP), each investment will be locked in for 3 years from their respective investment dates. There are both growth and dividend options for ELSS. For tax purposes, returns from ELSS are tax free. Compared to other tax savinginstruments under Section 80C like PPF and NSC, ELSS has a much lower lock-in period and has the potential of offering superior returns over the long term. However ELSS is subject to market risks, like other mutual funds.

In this article, we will review the top performing ELSS. As with all mutual fund investments, recent performance may not always be sustained in the future. One needs to look at a number of parameters to compare and rank schemes, relative to their peer group. CRISIL ranks ELSS based on several parameters like average 3 year annualized returns, volatility, portfolio concentration risk (both industry and company) and portfolio liquidity risk. On each of these parameters, each scheme is accorded a cluster rank (from 1 to 5) relative to its peer group. To derive a composite cluster rank, CRISL has assigned different weightages to each parameter, with average 3 year annualized return given the highest weightage at 50%, volatility 30%, industry concentration risk 10%, company concentration risk 5% and liquidity risk 5%. Here is the list of top 6 ELSS on the basis of annualized 3 year returns:-

  1. Axis Long Term Equity Fund (CRISIL Rank 1):

    This scheme has provided the highest 3 year annualized return at 12.2%2. It has consistently outperformed all its peers in terms of annual returns over the 3 years period. Volatility of returns is low relative to its peers, as per CRISIL ranking. Its portfolio is sufficiently diversified, with a large cap bias, with HDFC bank, TCS, L&T, Kotak Mahindra and ITC accounting for nearly 31% of its portfolio. However, the overall portfolio is sufficiently diversified with the top 10 stocks accounting to just over 51% of the portfolio. The fund is well diversified across sectors with the top 3, Banking / Finance, IT and Pharma accounting to just over 50% of the portfolio.

  2. BNP Paribas Tax Advantage Plan (CRISIL Rank 1):

    The scheme’s 3 year annualized return stand at 9.4%2, while 1 year and 2 year annualized returns stand at 1.98% and 13.9% respectively outperforming ELSS as a category over each of these periods. Volatility of returns is quite low relative to its peers, as per CRISIL ranking. In terms of portfolio composition, the fund has a large cap bias with HDFC Bank, Bharti Airtel, Infosys, ITC and TCS accounting for nearly 25%, the fund is well diversified with top 10 stock accounting for only 43% of its overall portfolio. In terms of industry concentration, Banking / Finance, IT and Telecom account for 45% of portfolio.

  3. DSP BlackRock Tax Saver Fund (CRISIL Rank 2):

    The 3 year annualized return of this fund is 7.4%2. While the volatility of returns is higher relative to its peer set as per CRISIL ranking, it has provided high annualized returns relative most peers, over 1 and 2 periods, at 6.3% and 16.3% respectively. The fund portfolio has balanced large cap and mid cap mix. The top 5 companies, Infosys, Biocon, Tech Mahindra, L&T and HCL account for 23% of the portfolio value. In terms of sectoral allocation Banking / Finance, Consumer Cyclicals and IT account for about 54% of portfolio.

Invesco India Tax Plan (CRISIL Rank 2): The annualized 3 year return is 7.2%2. The fund has also performed consistently over 1 and 2 year periods, with annualized returns of 3.8% and 12.5% respectively. Volatility of returns is quite low relative to its peers, as per CRISIL ranking. The fund manager has balanced mix of large cap and mid cap scrips in the portfolio. Top 5 companies TCS, Britannia, HDFC Bank, Wipro and HDFC accounting for 29% of the portfolio. However, the portfolio is diversified with the top 10 holding accounting for about 45%. In terms of industry concentration IT, Pharma and Banking / Finance account for 37% of the portfolio. ICICI Prudential Tax Plan (CRISIL Rank 2): The annualized 3 year return is 6.9%2. The fund has provided annualized returns of 4.6% and 14.3% over 1 and 2 year period respectively. The volatility of returns is average relative to its peer group, as per CRISIL ranking. The portfolio is fairly well diversified across large cap companies, with the top 5 holdings NDMC, ICICI Bank, Infosys, HDFC Bank and Reliance accounting for nearly 25% of the portfolio value, while top 10 holdings account for about 40% of the portfolio. In terms of industry exposure the fund is well diversified with Banking / Finance, Oil & Gas and Pharma accounting for nearly 46% of the portfolio. Tata India Tax Saving Fund (CRISIL Rank 2): The annualized 3 year return is 5.9%2. The 1 and 2 year annualized returns stand at 2.8% and 17.2%. Volatility of returns is higher relative to its peer group, as per CRISIL ranking. The portfolio is fairly well diversified, across large cap and mid cap scrips. The fund is fairly well balanced in terms of mix between large cap and mid cap scrips, with the top 5 holdings, ICICI Bank, ITC, Infosys, Reliance and Escorts, accounting for 21% of the portfolio. The top 10 holdings account for about 37%. In terms of industry exposure, Banking / Finance, Automotive and IT account for 47% of the portfolio.Key Fund Statistics
3With respect to Benchmark Index, BSE – 200

Tax Saving with ELSS Funds

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Partial PPF withdrawals are allowed after 6th Financial Year. ^ELSS Category Average from MorningStar.
Source: Indiapost, SBI Bank

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 10 Tax Saver Mutual Funds for 2017 – 2018

Best 10 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. ICICI Prudential Long Term Equity Fund

5. Birla Sun Life Tax Relief 96

6. Franklin India TaxShield

7. Reliance Tax Saver (ELSS) Fund

8. BNP Paribas Long Term Equity Fund

9. Axis Tax Saver Fund

10. Birla Sun Life Tax Plan

Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms

For further information contact SaveTaxGetRich on 94 8300 8300

SIP or VIP

Mutual Fund VIPs



While VIPs give superior returns, they are not easy to administer.

The advantages of dollar cost averaging, or systematic investment plan (SIP) as it is known in India, are there for all to see.

In addition to streamlining your regular investments, SIPs also help to reduce the average cost of holding a bit.This is because you are investing a fixed amount every month and as a result, you get more number of units when the market is down and less number of units when the market is up.

Value averaging investment plan (VIP) is another concept that helps you augment this averaging benefit.

VIP averages at the minute level and in volatile markets, it generates around 1.5% to 2% additional CAGR over a five-year time period. So, how does it work? VIP does better averaging by putting more money to work when the market is down and reduces investment when the market is up.

We can better understand how the two plans work by assuming a monthly investment of `10,000 in a VIP and an SIP. To keep it simple, we assume that the rate of return expected is 1% per month (CAGR of 12.68%). In the first month, the investor puts `10,000 in the VIP and SIP. Since the assumed rate of growth is 1% per month, the invested value should grow to `10,100 by the time the second instalment is due. However, this rarely happens and depending on the market situations, the actual value will be either higher or lower than the expected value. Now assume that instead of going up by 1% as expected, the NAV has tanked by 5%, so the current value becomes `9,500. While the SIP investor will continue with the `10,000 investment, the VIP investor will compensate for the deficit of `600 (`10,100 ­ `9,500) and make an investment of `10,600 (see chart).

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At a growth rate of 1% per month, the first two instalments should have grown to `20,301 by the time of third instalment.Now assume that the market has jumped 4% during the second month and the invested value has reached `20,904. Since the current value is higher than the targeted value, investment for the month will be reduced by `603 (ie `20,904 ­ `20,301) and the VIP for the month will be `9,397. In VIP, this process is followed month after month till you reach the goal date.

In addition to generating better returns, the probability of reaching your goal is also more likely with VIP because here the review is more frequent. In case of SIPs, the portfolio review is carried out at 6 months or one year intervals. However, it happens automatically every month for VIPs.

Suitability:

While everyone can invest through SIPs due to its simplicity, VIPs are not for all investors. It is better for small investors who are starting out to continue with SIPs. Compared to SIPs, VIPs are also more difficult to administer. While all mutual funds allow automated SIPs, very few offer automated VIPs. This means you have to do it manually or rely on your investment adviser or distributor or online mutual fund transaction portals like FundsIndia.

Suitability also depends on the level of investor knowledge. VIP suits investors who are more vigilant and also have some basic understanding of economic cycles. Else the monthly volatility can put off investors from investing altogether.

VIP is more suitable for investors with deep pockets, because of the erratic monthly investment amounts. Though the variation will be small in initial months, it can become really large in later stages. For instance, a sudden demand for a high amount (say `30,000) may be difficult for an investor who can afford only `10,000 per month to cough up. Fixing a monthly investment band (eg `5,000 to `15,000) is a partial solution, but still you need access to a lot of money. Even if you fix a reasonable band of `5,000 to `15,000, this `15,000 may be required continuously for a few months, so you need to have that much surplus in hand.

VIP works only for disciplined investors and can be disastrous for spend thrifts. This is because there will be periods that may suggest zero in vestment and if the investor is not disciplined, this additional surplus may end up as consumption. Some of this problem can be tackled by using a combination of equity and debt funds. In this case, you can keep the total monthly investment amount constant and manage the VIP into equity schemes by increasing or reducing your debt fund combination.Even if the VIP demands higher investment in some months, you can manage it by switching from debt funds.

However, here the investors needs to take care of the additional taxation issues that could arise.

Just like SIP, VIP also works better in volatile markets and will not work in one sided bull or bear markets. Your equity exposure may be much less in raging bull periods like it was between 2002 -2007 or you may invest much more in constant bear markets like 1994 to 1998. And compared to SIPs, you need to give a longer time periods for VIPs. VIP is meant for the very long term and to get results, you need to give at least 10 years

Mutual Funds Investing for US based NRI

Mutual Funds for US based NRI

The fund houses that are still accepting applications from US/Canada based NRIs are: L&T, UTI, PPFAS, Sundaram, Canara Robeco

Most of the Indian mutual fund houses have stopped accepting funds from US/Canada based NRIs. This is because the Foreign Account Tax Compliance Act (FATCA) makes it compulsory for all financial institutions in the world to report to the US Government comprehensive details of all transactions involving US persons which includes NRI.

The fund houses that are still accepting applications from US/Canada based NRIs are: L&T, UTI, PPFAS,Sundaram,Canara Robeco . Other mutual fund houses are also slowly joining in.

Do not Just Save Tax, Invest and Get Rich

Save Tax Online and Get Rich

INVESTMENT IS THE PROCESS OF PUTTING YOUR MONEY TO WORK HARDER SO THAT YOU CAN BEAT INFLATION AND CREATE WEALTH

Investing is the process of putting your money into assets where there is a high chance of getting a return that will offset the impact of inflation on your final corpus, and at times will also cover the impact of taxes. Often, in relation to personal finance, people confuse savings as investment. The reality here is if one keeps money in a savings bank, that will pay 4-6% yearly rate of interest, which will not offset the impact of inflation. On the other hand, over the long run, In India stocks have given more than 12% annual return, which more than offsets the impact of inflation.

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Top ELSS Funds for 2017

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 4 Tax Saver Mutual Funds for 2017 – 2018

Best 4 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. BNP Paribas Long Term Equity Fund

Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms

For further information contact SaveTaxGet Rich on 94 8300 8300

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Invest in Mutual Funds of a single or multiple Fund House?

Invest Best Mutual Funds Online

From a diversification perspective, it is better to spread your investments across funds of more than one fund house.

Several funds of a fund house will tend to have the same fund management and research teams and if their bets go wrong, it may potentially impact the performance of all their funds.

Besides, there could be other factors such as the exit of a key fund manager which may impact several funds of that fund house. Therefore, it is always better to diversify your portfolio across fund houses too.

Nowadays, you have plenty of good funds to choose from across different fund houses in almost every fund category.

Franklin India Taxshield Fund

Franklin India Taxshield scheme seeks medium to long term growth of capital, with income tax rebate. The scheme invests in equities and there is an exposure to PSU Bonds and debentures and Money Market instruments.

Funds in the ELSS category usually like to shuffle their market-cap weights quite a lot depending on market conditions. But this fund is determinedly large-cap-oriented in a category crowded with multi-cap funds. Consistency of returns and an ability to contain downside have helped it retain four- to five-star ratings for much of the last eight years. The fund’s year-to-year returns don’t always beat its more aggressive peers, but its performance adds up to very handsome returns over the long term.

Franklin India Taxshield Fund allocates a minimum 60 per cent of its portfolio to large caps, it has pegged up this exposure even higher, to 80 per cent in the last one year. Mid and small caps now make up less than 20 per cent of the portfolio, shielding the fund from any meltdown in this segment of the market. The fund also avoids momentum stocks and sticks to bottom-up fundamentals-based investing. Though this fund is from a growth-style fund house, it tends to be quite valuation-conscious. It doesn’t take cash calls and remains fully invested through cycles.

Outpacing the benchmark in 12 of the last 15 years, this fund has proved more adept at containing losses in bear markets. It tends to be rather sober in bull years and trailed peers in 2006-07, 2009 and 2012. The last two years, however, have seen the fund widen its outperformance vis-a-vis the benchmark and the category. The fund’s current large-cap tilt suggests that it would be quite well placed to handle any market correction.

Go for it if you like a less bumpy ride in choppy markets.

Capital Gain Tax on Mutual Fund Redemptions for NRIs

Considering your status as an NRI, applicable tax on capital gains would have been deducted at the time of your redemption

For NRIs, mutual fund redemption proceeds are subject to tax deducted at source (TDS). If you withdraw from your MF within a year, you have to pay a TDS at the rate of 30% if it’s a debt fund or a gold fund and 15% if it is an equity-oriented scheme.

But long-term capital gains on equity mutual funds are not taxed if held for over a year. Short-term gains are taxed at 15 percent plus cess. In case of debt mutual funds, both short-term and long-term capital gains are taxed.

Short-term capital gains (redeemed within 3 years) are added to the income and taxed as per the individual’s income tax slab.

Long-term capital gains (redeemed after 3 years) are taxed as 10 percent without indexation and 20 percent with indexation (plus cess).

Considering your status as an NRI, the applicable tax on capital gains would have been deducted at the time of your redemption.

In case if the tax liability on your investment is less than the amount of tax deducted at source then you should file for an income tax refund.