Sunday, April 10, 2011

Top 5 ELSS Funds in India

ELSS is Equity Linked Savings Scheme and is tax-saving mutual fund that invests in equity and equity-related products. These schemes directly involve in investing in stock markets and carry a inherent amount of risk and can give handsome returns as well.

Top 5 ELSS funds

The above is the screenshot from the for analysing all type of mutual funds. I took up a look on the currently available ELSS funds in the market and did some analysis to get this list. This is based on their past performance and this can be well be a probable indication of their future but not their future.

To quote the top 5 ELSS funds for this FY 2011-2012,

1. Fidelity Tax Advantage
2. Canara Robeco Equity Tax Saver
3. Tauras Tax Shield
4. HDFC Tax Saver
5. Sahara Tax Gain

In the case of ELSS, you get up to 30% returns (because of saving tax) before hand and even if you get 2-3% less after 3 years, it would have beaten any well managed fund by leaps and bounds. So, its always better to put your remaining amount after your PF into ELSS if you want better returns.

Be aware that ELSS doesn't give any assured returns. If anyone says that you will get 16% assured returns every year, they are fooling you around, and its better you walk two steps ahead them, so them you don't hear them. There won't be any assured returns if you see any market, stock, unit-linked kind of words in front of you. Have fun.

Disclose the investments for this FY

And its April and yet another start of the new financial year. If you are a salaried employee of a company, you all would have come across this every year and this is nothing very new. Even if you are not salaried, it is better to have your investments planned before hand for this Financial year before hand and plan accordingly.

Why is disclosing the investments important in the month of April?
Its nothing to do with the month of April. But its better to disclose in the month of April itself to get the full advantage. For the salaried class of people, who worry about the tax, this marks an important event. This is because TDS (Tax deduction at Source) is based on the investments disclosed and better to disclose the right figure to get the proper cash flow right from the beginning.

How I can make this disclosure to my benefit?
Understand each and every section that has to be disclosed and the advantages and dis-advantages in detail.

Section 80C:
Identify how much is already covered by your PF. Your contribution towards your PF, comes under this section.

12% of your basic. - Already accounted in.
Max. that you can account in is Rs. 1,00,000.
If you want good returns, invest in ELSS and for secure returns, I would recommend PPF. Don't ever invest solely for the purpose of saving tax.

Infrastructure Bonds(Section 80CCF)
Max. of Rs.20,000/- applicable for FY2011-2012.

Medical Re-imbursement - Rs.15,000/-
Section 80D - Medical Insurance Premium -
Rs. 35,000/- (only if, one of your parent is above 60years.) or
Rs.30,000/-(should cover your parents as well)

Leave Travel Allowance
Within India, two times in the block of 2011-2014.

And perks and loans according to the company's terms and conditions.
Pick the best that suits you and feel free to leave the other things behind.
Most of the companies don't support 80G bills (Donations to charity). The best that can be done here is to increase the disclosure in some of the other investments to match the 80G investment, so that the cash flow for each month will remain constant.

Monday, April 4, 2011

Should I continue my SIP now?

This is a universal question that can be answered with a simple answer: YES and a detailed answer below.

SIP is Systematic Investment Planning and it is designed for people who want to be involved in market during all the time, thereby minimizing the risk involved in the volatility of the market. There are many mutual funds currently providing with SIP for the investors and almost all the funds have either the online agents or the agents directly collecting the cheques from your doorstep for investing in your favored fund. Check out Are agents your friends? before deciding and investing on their suggestions. There are no entry load for most of the mutual funds now but still all the agents would still get the Trial commissions which would differ from each fund house to fund house. So, its better to be aware rather to cry later.

Coming back to the SIP fundas, You invest a constant sum of amount irrespective of the market condition. It works best for the equity mutual fund and I am going to take an example of the equity diversified mutual fund.

Say, If you put Rs.10000/- every month on to a mutual fund and this mutual fund's NAV differs according to the market conditions, you get the number of units according to the current NAV.
NAV No. of Units
April 2011 55.66 179.66
May 2011 61.21 163.21
June 2011 58.27 171.61
July 2011 65.66 152.3

From the four months data itself, it can be clearly seen than, As the NAV increases, the no. of units you buy decreases and when the market is down (NAV decreases) and you buy a lot more for the same money and the no. of units increases. So, you already know, when the market goes down, you want to buy more and when it goes up, you want to buy less and you are doing exactly that with SIP.

This works best when you are invested for extremely long time and you might say, I can invest the whole Rs. 20000/- during the month of June 2011 after April 2011 instead of May 2011. Its extremely hard to time the market and what would you do if the market turns its head and ran towards 63 NAV. And if you are a long term investor, its best to remain invested in the market and continue your SIP for a long time to come.

And never forget to get out of your equity exposure at the right time (just before the requirement for your goal, say 13 years from now, if you are planning for your retirement at 55 and your current age is 40) and move all your funds to safety to the debt level so that you are in never a position to sell all your holdings at a loss.

Why are Indians primarily savers?

Indians are primarily more on the saving side because of the environment surrounding it. They see everyone around them are saving and are doing the same! There is a big difference between Saving and investing and it will be a hard fought truth.

Setting a goal and standing by it is pretty hard. The commitment is easy to come by if you are working and set by your peers and your managers (some of them don't get it even under the supervision of strong managers.. :-) ) and its also the inherent nature of the entrepreneur and he has it in his veins. But, to see through a goal that is set as a part of retirement or getting a house is very hard to come by and its hard to come even for an entrepreneur.

Let us see a simple example. You need a house. First house. Absolute need. Alteration for rent. Everything. Fine. It should be understood that how much you are currently having in hand and how much you need as a loan and it should be a neatly laid out plan. How many of them who have bought the first/second house recently has plan and bought the house recently after this plan. This really hurts the whole economy. Because, without absolute need and plan, some people are ready to buy the real estate at whatever prices the agent is quoting and are happy at the price they bought just because they were saving this long and they are going to INVEST in a property for the long term! This again beats my thinking. You are investing in a highly illiquid asset class, which has a good scope of growth but not excellent but given the nature of the leveraged investment made in the real estate, the returns will be below par to that of the savings account at least till that of 20 years. And, if it was your absolute need, just forget about what we are talking about here and think you have bought something for your child or nice thing for something in your wardrobe for your absolute need and don't even think of getting any return out of this instrument.

So, you ask is SAVING bad?
No.. Not at all.. Saving is the first step towards Investing. As I was describing here, you need to spend less than what you earn and get your saving right on track before you think on your investment track.

After you start saving, make sure to invest in towards your financial goals that are well set and are tracked. If you can't track it properly, its time you hire a financial planner and there are many available in market to do that.

Sunday, April 3, 2011

Dhoni and the golden urn

It seems Dhoni has a special feeling towards the golden urn. Suddenly, all is well when it ends well.
Dhoni had a dream run in World T20 to secure that he has world renowned leadership and the nerve within him to secure the gold. And then, much fame came to him as a captain of CSK (Chennai Super Kings) in IPL 3 and it moved leaps and bounds within India and won the cup for CSK against Sachin. People even accepted it with a smile.

Then, even in Champions League gold followed him. Now, he was in with much renowned batting line-up as the favorites for the world cup 2011 and everyone chipped in bits and parts at some part of the game to MAKE IT HAPPEN. In the league games, there were some hiccups and they proved themselves champions after they beat all the much famed teams in Quarters to Finals.

Some of the decisions were breath-taking and has to be taken at that level. Dhoni knows what he is doing when he took three seamers against Pakistan and Sri Lanka in Semi Finals and Finals of such a big tournament, which can really back fire, given that your strength is spin. Dhoni would say the opposition strength also lies in playing spin and I wouldn't feed them with getting my spinner. Dhoni proved how he is right against Sri Lanka, by playing out Muralidharan and Randiv without giving a wicket to them. But it was a different case against Pakistan, Afridi was given many a chance with Sachin, but their fielders were never up to mark to catch it and Dhoni felt bad for not reading the pitch correctly. Having this kind of side and getting that kind of fielding performance would be because of the coach and certainly captain would have a role to play.

And, last but not the least, he came and performed in the finals of the world cup tournament, when it really mattered and was there till the very end. Not to forget the poor start by the famed opening pair and things were really going good for sri lanka. Coming in at the right time and playing a captain's innings you got to have IT in you and Dhoni has IT. Its official now. Dhoni is now the successful captain of Team India and its not the luck factor alone that has favoured him. He was not like Kamran dropping catches like anything and giving some facial expressions.

Sri Lanka were having few odds favouring them. Side playing first won 9 out of 11 games in a world cup final and its really hard to chase down a total. The highest total that was chased down in a world cup final match previously was never this high. Also, Sri Lanka and India have faced 6 times before in World cup matches and only 2 times India have been able to beat them. Dhoni was always playing completely different for the past one year and completely out of form. Even during this tournament before the final, his highest score in the tournament was only 30 or so. May be, it was because he didn't get a chance to play in some of the matches and in some, he was not good enough. Also, he has created a new kind of shots other than helicopter shot like dancing down the track and defending shot - A peculiar shot played really well by dhoni. Only the spectator will be kept gazing whether he will be IN the very next ball.

But will all the above odds favoring Sri Lanka and with those two quick wickets of those great gems, it would have been a cake walk for Sri Lanka except for this man in the middle. DHONI getting his form back right in the slot. He has the urge for the golden urn for the team, specially for Sachin. Sachin, what a man he has been this long for the country and he really deserves this cup for sure. Dhoni and his boys were a pleasure to watch all along.

Cheers India. Congratulations Team India and Dhoni. Continue your journey.

Tendulkar and India

Not very long back, It was Tendulkar who took India on his shoulders right through for more than 20 years. There was some days when Opposition team will get control over team India completely once Sachin Tendulkar gets out. But its never the case anymore. It doesn't mean we don't need the master anymore in our team. We do need him for his strokes and occasional mastery words. But our batting order has reached more resilient with him and looks good even without him as well. Its good for the future of the Indian cricket.

Is it the time for Sachin to retire?
Its never the time to retire for the master unless he himself calls it for. Its not for the media or Greg Chappell to predict but leave it to the great man. Let him play until he enjoys playing and he will call it a day when he think its right!

Tendulkar has been part of 33 winnning matches in his 48 centuries. Even though, one would say, 13 on 48 centuries were on the losing cause, it was for establishing pride for the country against some good teams and conditions, that are never easy for batting. Never to forget those nervous 90's that has sailed India home about few years back.

For those stats savvy people, there was a post I recently came across from a blog that I follow and I couldn't do more justice than the one given below,

Let me know your comments.

The cup that counts...

As predicted in my last post, India came out good and performed well in all its final three stages of the World Cup tournament. It was great to watch all of them chipping in at the right time and contributing for the success of the team.

Even though the stats was against you when you were playing against Australia and Sri Lanka, it was really very important to be calm and composed and hit the right chords at the right time. Everyone came good and the best team exhibiting good command over all the other teams won the WORLD CUP that really counts...

Happy for TEAM INDIA and proud to be an Indian.