FIDELITY INDIA CHILDREN'S PLAN

FIDELITY INDIA CHILDREN'S PLAN

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FIDELITY INDIA CHILDREN'S PLAN - A REVIEW

It’s Different!

While most Child funds in the mutual funds are hybrid in nature with very little to differentiate each other, Fidelity has tried to create its own space by adding unique options hereto unavailable in child plan by Mutual funds.

The Fidelity India Children's Plan has provided investors with a good variety of unique investment options.

OPTIONS....

The Fidelity India Children’s Plan will have three sub Funds which you can choose…

1. Education Fund : Asset allocation under the Education Fund will comprise of 70 per cent equity and 30 per cent debt to provide funds over the long-term for children''s education.
2. Marriage Fund : The Marriage Fund will have asset allocation of 70 per cent equity, 20 per cent gold ETFs and 10 per cent in debt.
3. Saving Fund : The Savings Fund will have only Debt exposure and the asset allocation will be up to 100 per cent in debt and money market instruments to provide stability. 

You can watch the Video of how the Fund works …………

Here..  

http://www.indyarocks.com/videos/Fidelity--Cake-exhibition-053avi-2029858

Fidelity India Children’s Plan (FICP) is a hybrid fund which combines equity, fixed income instruments and gold ETFs. The fund offer three distinct funds under it viz. Education Fund, Marriage Fund and Savings Fund, where one can invest in, and each of them are intended to achieve their stated objective. Investors can opt for any of the funds for their investments, depending upon their financial goal – being children education, marriage or mere savings.

The FICP “Education Fund” exposes its investors to two asset classes – equity and debt, while the FICP “Marriage Fund” exposes its investors to three major asset classes – equity, debt and gold. The FICP “Savings Fund” on the other hand invests only in debt and money market instruments.

These Hybrid options give investors exposure to low co-related assets. So, when you feel that Gold is not looking attractive as investments, Equity will take care of your returns.

 In contrast to most hybrid mutual funds in the market, Fidelity India Children's Plan will have dedicated fund managers for both the equity and debt portions of the portfolios. The Equity Portion will be managed by Nitin Bajaj who also has a good track record in managing Fidelity Special Situations Fund.

RECOMMENDATION :

Fidelity has understood the physic of Indian investors well and has included "Gold" also in its Marriage Fund. Gold has been long considered a natural hedge against inflation and Indian Marriages do have more than 20% of their expenses directed towards Gold.

The Fidelity India Children's Plan can be considered with a long term view. The Fund has all the potential to ensure good returns. Its Gold Exposure should ride out volatility and beat inflation over the long term.  The auto balancing would ensure that downside is protected.

Savings Fund which invests predominantly in debt and money market instruments suitable for conservative investors and those nearing their financial goals and

Instead of looking at Child ULIPs, you should seriously consider investing in this Fund, as the costs are not only cheaper, but also the withdrawal are easy and returns should be far superior.

So, the vote is INVEST.

NOTE :

There will be no charge for switching between different options of the same fund or between funds within the plan and for transfers under STP.

Srikanth Matrubai

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IFCI INFRA BONDS.... SHOULD YOU INVEST??

Infrastructure Bonds are back as they allow you to claim extra 20000 as Deductible from your Income. But, are they worth it??

Hi,
As you are aware, the Finance Minister in the recent budget has announced a special Income Tax rebate, wherein investment made upto Rs.20,000/- in Bonds issued by Infrastructure Companies will be eligible for Income Tax benefit u/s 80-CCF.


Following this, IDFC, L&T had earlier come out with Infrastructure Bonds and now IFCI too has come with a public issue of such Tax Saving Bonds.

On an investment of Rs.20k, an individual in the Top Tax Bracket of 30% can make a saving of Rs.6000 and also earn an interest of 85 to 8.25%. However, for the Highest Bracket Tax Payer, the effective yield works out to 14.25%…..
These Bonds typically have a minimum tenure of 10 years and will be locked for 5 years. Since, the Bonds are expected to be listed on the Stock Markets, liquidity concerns are negated to some extent.


Those Tax payers who have exhausted their Exemption for Investments of Rs.1 lakhs in Sec 80c, 80ccc, 80ccd can look at these Infra Bonds.


HOW MUCH TO INVEST?


Even though there is no upper limit for investing in these bonds, since a maximum of Rs.20000 is deductible from your Taxable income, do NOT invest more than Rs.20000 in these Bonds.

Features of the present IFCI Bond open for subscription :

Face Value Rs. 5,000/- per bond
Issue Price At par (Rs. 5,000/- per bond)
Minimum Subscription 1 Bond and in multiples of 1 Bond thereafter,
Tenure 10 years, with or without buyback option after five years
Options for Subscription The Bonds are offered under the following 4 options-
• Option I – Non-cumulative and Buyback after 5 years
• Option II – Cumulative and Buyback after 5 years
• Option III – Non-cumulative and no Buyback
• Option IV – Cumulative and no Buyback
Redemption / Maturity At par at the end of 10 years from the deemed date of allotment. For Cumulative Option, at par with cumulated interest thereon.
Coupon rate • Option I & II – 8% p.a.
• Option III & IV – 8.25% p.a.
Option II and Option IV will have cumulative payment at the end of the Buyback period or 10 years, as per the option opted by the Investor.
Rating : BWR AA- by BRICKWORK RATINGS INDIA PVT LIMITED implying these Bonds carry high credit quality
Listing Proposed to be listed on BSE

Interest from IFCI BONDS are not subjected to TDS , but it is TAXABLE at the hands of investors.


The IFCI bonds are issued with section 80CCF benefits which means that they will get you a tax benefit of reducing your taxable income over and above the Rs. 100,000 under Section 80C with a cap of Rs.20,000.

These IFCI 80CCF bonds will not attract TDS, however the interest itself is taxable at your hands. So, the bonds don’t attract TDS, but it doesn’t mean they are tax free.

LET ME ALSO CLARIFY....
If you have already bought another infrastructure bond, and exhausted the limit of Rs. 20,000 then you won’t get any further tax benefit by buying this bond. There are also several banks that offer 8% interest for terms less than 5 years, so you won’t get much value out of locking your money in this instrument for 5 years.

ONE MORE IMPORTANT NOTE.....
LIC is also expected to come out with its Infra Bonds...
This bonds from LIC is expected to not only give MORE interest but also OFFER FREE TERM INSURANCE.
So, you can wait for some more time...

Regards,

Srikanth Matrubai
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Little Drops of Water Make a Mightly Ocean

 

Dear Srikanth sir,

I am in awe of your writings and would appreciate if you can guide a poor man like me. My earnings don’t leave with enough savings. Still, with great sacrifice on my part, I can invest 700rs per month. Is this too little? Should I consider investing in safe options like Bank FD; insurance, etc…Guide me to have some decent lump sum in around 20-25 years time. Please.

Thanks,

Nisarg

 

SRIKANTH MATRUBAI guides:

Dear Nisarg,

   First of all, I appreciate your effort to save the money as "Money Saved is Money Earned"

Saving is nothing but “spending less than earned income”.

Rs.700 is not a small amount at all.   Better late than never, better small than no investment at all.

Do you know that if you had invested just Rs.100 in Reliance Growth Fund for the last 181 months, your investment of Rs.18100 would now have gone to, hold your breath, Rs.3,26,888!!!!!

Yes, you read it right…your investment of a paltry of Rs.100 would have grown to more than 3 Lakhs of rupees….!!!!!!

So, if Rs.100 can achieve this much, your Rs.700 too could earn a lot and can easily make you a Crorepati..

Ignore people who tell you to invest in Recurring deposits or buy Gold or even consider Insurance.

Insurance is NOT AN INVESTMENT.

People do not advise you about Mutual Funds because they get ZERO Commission on Mutual Funds where as in Insurance they get about 40% (the recent IRDA has brought this down to about 10%, but still quite a deal) and in Post  Office and other investment avenues, they get at the least 2%.

Gold at best gives a return on par with Inflation (even though the last few years have been an exception).  With Recurring Deposit, you actually 'LOSE' your Capital when you consider Inflation and Taxes.

The Best option is 'MUTUAL FUNDS".

Reliance, SBI and Sundaram Mutual Funds have SIP for as low as Rs.100.

Sip investments allow you to start small and accumulate huge.

If possible, add another Rs.50 to your savings.

My advise for you is to split this Rs.700 into say about 4-5 Schemes and invest as advised below  every month.

My preferred Funds would be

1.Reliance Growth Fund – Rs.100

2.Reliance Regular Savings Fund- Equity – Rs.100

3.SBI Magnum Contra Fund – Rs.100

4. Sundaram Mid Cap Fund – Rs.250

5. SBI Magnum Balanced Fund – Rs.100

6. Reliance Equity Opportunities Fund – Rs.100

These Funds are a Good mixture of Large Cap, Diversified and Balanced Funds with a bias towards Conservative investment.

Visit my blog http://goodfundsadvisor.blogspot.com for more ideas on investing.

Best of luck,

Srikanth matrubai.

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RELIANCE SMALL CAP FUND - SIP WOULD DO WONDERS

AGGRESSIVE FUND FOR HIGH RISK HIGH RETURN INVESTOR

Reliance Mutual Fund have launched an aggressive fund focussing purely on Small Caps aptly named "Reliance Small Cap Fund".

The Fund will be managed by Mr.Sunil Singhania who has had a great success with Reliance Growth Fund.

Small Caps are largely under-researched and the key is to identify companies which can become Large Caps.

Reliance Small Cap Fund will be investing in companies which have a market cap between Rs.170cr to Rs.2200cr.

The Fund will aim to invest in Entry Level Companies which however have a good quality Business Model and has the ability to scale up itself to become Large Cap.

The notable thing is that unlike with their NFOs, this time Reliance have had a low key exposure of this Reliance Small Cap Fund in terms of ads, hoardings. Mr.Shailesh Raj Bhan, Fund Manager of Reliance equity Opportunities Fund said, the low profile was intentional and they were looking at a size of around 500 crore for this fund.

Mr.Shailesh Raj Bhan also indicated they would be looking at a portfolio of around 50-60 companies.

INVESTMENT APPROACH :

The Fund would be doing following up a purely "Bottom Up" Approach and would be less likely to look at Macro View foccussing more on micro view.

COMMENTS & RECOMMENDATION :

Small Caps are very volatile., they tend to rise more than the rest of market in a bull market and likewise fall steeper than the rest in the Bear Market.

Timing your entry and exit from these small caps is imperative and essential to make maximum profit.

DSPBR Micro Cap Fund has done exceedingly well but most probably its close ended nature helped the fund hide the fact of the volatility it had to face.  

Sister Reliance Regular Savings Fund-Equity has about 18% exposure to Small Caps and has done exceedingly well even in Bear Market of 2008.

The most notable thing about Small Caps is this, The BSE Small Cap fund has outperformed the Sensex and BSE Mid Cap by a wide margin of more than a huge huge 20% over a 6 year period. That sums up the issue. Yes, Small caps are volatile but they have the potential to become the next multi-baggers if you spot the right one. Who better than the Reliance Star Fund Manager, Mr.Sunil Singhania to do this for you??

Although, Small Caps tend to be very volatile, they can give your portfolio a much needed 'alpha' adding to the overall returns. The volatility associated with small caps tend to get evened out over a period of time. SIP Investment would be the BEST method to maximize your returns from this Fund. 

DEFINITELY RECOMMENDED FOR THOSE WHO CAN DIGEST HIGH VOLATILITY.

RECOMMEND INVESTMENT THROUGH SIPS AND/OR INVESTING A SMALL SUM AT REGULAR INTERVALS.

Caveat : Have a minimum of 3 years time frame and Do not have more than 10% exposure to this Fund, even if you are an Aggressive Investor.

Note: Exit load is quite at 2% for redemption before one year., which however, is actually, is beneficial and motivates to stay invested for longer period. 

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BEST FUND FOR RETIREMENT

Rajshekar asked :

Sir I have Index Funds and want to stay invested with them till retirement. What is your view on Franklin Dynamic FOF and UTI Retirement Benefit Fund? Is my decision right. If not, which is best retirement solution mutual fund?

SRIKANTH MATRUBAI says :

Dear Rajshekar,

    At the outset, you have chosen the right asset class (mutual funds) for your retirement planning , and the not the mistake which most people do, by taking up Insurance as their Retirement Kitty.

     Though Index Funds should have been the ideal solution for your retirement, the fact that in India, Diversified Equity Funds have more often than not, beaten the Index Funds handsomely makes them the obvious choice for you. Especially, the fact that you would stay invested for at least 15 years makes the case stronger.

    But it is always a good idea to have a combination of assets to fund your Retirement rather than betting on just one particular kind of scheme to mitigate risks.

     Diversification should be given the highest priority. Your Portfolio should have an ideal mix of Equity, Debt and other asset components. This will of course, be dynamic, and keep changing depending on your age, risk profile and time horizon of your retirement.

   

     When in doubt, follow the golden rule, 100 minus your age should be your equity exposure. That is, if you are 30, then 100-30, i.e, 70 % should be equity exposure and this should gradually reduce as you age.

     It is always advisable, to dispose off your equity funds/real estate(if invested for retirement) about 2-3 years before your actual retirement and switch this amount into Debt. This will not only ensure that you lock in the capital gains you would have made, but also protect your capital from volatility.

Just because you can stay invested for 20 years, does not mean "Invest and Forget". Keep reviewing your investments every 6 months or so to see any noticeable change in any fund's mandate/performance/attribute.

Slowly, as the years progress, switch out from Diversified Equity Fund to Large Cap Funds and then further to Balanced Funds to give better stability to your Portfolio.

While Franklin Dynamic FOF is good, no doubt, the minus point about this fund is that the Fund invests only in In-House Funds. You can know about this fund here_{……….http://goodfundsadvisor.blogspot.com/2010/05/ft-dynamic-fof-auto-timing-markets.html}

The Fund automatically times the market by booking profits when the markets are overvalued and entering the markets when they are cheap. While this strategy helps in locking your profits, it prevents you from reaping compound returns. This Fund is more suited to conservative investors and definitely not you since you already two ‘safety first’ funds.

You can consider UTI Retirement Benefit Fund at a later stage. This Fund is a Balanced Fund with a debt bias. The equity portion is passively managed and is being invested in large-cap stocks. Investors can only expect moderate returns from this segment. The Fund fails to ride the bull markets fully and hence you would lose the compound return equities are expected to provide. Read more about the fund here……http://goodfundadvisor.blogspot.com/2008/12/uti-retirement-benefit-pension-urbp.html

For now, you invest in Good Diversified Equity Funds and take the call to switch to safer large caps and balanced funds (HDFC Prudence, DSPBR Balanced Fund, etc) as  you are near retirement.

Ultimately it all boils down to ideal asset allocation and clear planning. You need to revisit your planning regularly and make adequate changes, if necessary.

You are advised to read ……..^{http://goodfundsadvisor.blogspot.com/2010/02/retire-super-rich.html}

This article will help you on how you should go about planning your retirement.

Best of luck,

Srikanth Matrubai

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DSP BLACKROCK MICRO CAP FUND

CHOTA PATAKA BADA DHAMAKA





 

My recommendation and pick for this month is the DSP BlackRock Micro Cap Fund.

The Fund has been a clear out performer since its launch. In spite of the markets going into a tailspin immediately after the Fund's launch, the Fund has managed a impressive 15% absolute return. The Fund which was a close ended has become a open ended now and has been ranked NO.1 by money control in the Equity Diversified Category and has been rated 5 Star.

Now, as you can make out by its name itself, this Fund invests in Very Small Companies (by market capitalization). Even here DSP zeroes on a lot more 'micro'. And DSP has announced in clear terms that it will put a ceiling of 500 crores on this Fund, so that it can be managed easily. A Smaller size will enable the Fund house to be quick footed and will have little problem in entering/exiting a stock.  A Bigger Fund size will require the fund to look beyond micro companies.

Micro caps are under-researched and if picked at the right price can be multi baggers. DSP Blackrock has a good pedigree and has proved its mettle before and has a high focus on investment processes and relatively lower dependence on any STAR manager.

DSP BlackRock Micro Cap Fund.  has targeted to invest in Small Companies which are market leaders in that field which will not only reduce risks but bring in assured returns.

Typically Small Cap Fund will be highly volatile and hence works wonders when you invest through SIP.

The Fund is heavyweight on Industrial Capital Goods which account for about 14%. As you can expect, the Fund boasts of stocks which you rarely find in other funds. Some unusual stocks which the Fund holds are...Whirlpool, Jubilant, Zuari Inds, TRF, TTK Prestige, etc.

However, the Fund has restricted its investment to fewer than 40 stocks.

The Fund is managed by Apoorva Shah who has done wonders with DSPBR Top 100 Fund.

Micro cap stocks comprise a large pool of varied, uncorrelated stocks which are relatively unknown and under-researched. Building a portfolio of such companies requires proven expertise in equity fund management and stock-picking. DSP Merrill Lynch Fund Managers Ltd. have however done well in the 3 years since the Fund has been launched.

A major problem with these small caps is their liquidity especially when the markets are going downhill. Hence, it is essential that you have a long term vision when investing in this Fund and keep booking profit whenever you feel the time is right.

Those who wish to take advantage of the private-equity style of investing in which one enters companies with potential and exits after they have grown into winners, can look at this fund.

The Fund will be a good addition to aggressive investors who are willing to ride out volatility associated with small caps.

The Fund should do wonders for a SIP investor.

INVEST

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