ALL ABOUT GOLD ETF

The idea of a gold exchange-traded fund was first conceptualized by Benchmark Asset Management Company Private Ltd in India
The first gold ETF actually launched was Gold Bullion Securities, which listed 28 March 2003 on the Australian Stock Exchange. Graham Tuckwell, the founder and major shareholder of ETF Securities, was behind the launch of this fund.
Gold ETF fund will purchase a huge amount of gold, maintaining the physical metal in storage. They will then issue shares in baskets, the idea here being that the value of the shares will increase with the price of gold bullion. If the price of gold goes up by 10%, then individual shares would increase in value by the same 10%.


Buying / Selling GOLD ETFs is as simple as buying / selling any other stock on the exchange.As these are listed on the Exchange, distribution and other operational expenses are significantly lower, making it cost effective.They also have lower tracking error due to in-kind creation and redemption.


The tax structure for gold ETFs is similar to that of debt funds. If you hold gold ETFs for more than a year, you pay a long-term capital gains tax of 10 per cent without indexation or 20 per cent with indexation, whichever is lower, on the profits made. Less than a year attract short-term capital gains tax. The profits are added to annual income and taxed according to the income bracket. Gold ETFs do not attract wealth tax.

TAX SLAB FOR YEAR 2011-2012

All About Health Insurance

There are many health insurance schemes available in the market. Policies from different insurers have different features, riders and premium, and to pick the right one that suits both your needs and your budget becomes difficult.


The first thing to ensure is that the health insurance policy you buy provides adequate coverage to you and your family. Premiums vary across different insurance companies for the same Sum assured. Instead of just going for the cheapest plan, compare the features. By paying a extra, you may be able to get good benefits.

Every health insurance company has a waiting period before it starts covering pre-existing diseases. According to the Insurance Regulatory and Development Authority (IRDA), a pre-existing disease is any condition, ailment, injury or related condition for which one had signs or symptoms, were diagnosed, or received medical advice or treatment within 48 months prior to the purchase of the policy. The waiting period for covering pre-existing diseases differs from one insurer to another and ranges from two to four years. I would advice that give preference to policies that have a lower waiting period.

Many health insurance policies offer a critical illness rider along with the basic policy. It covers a limited number of diseases for which usually the cost of treatment is very high. Closely scrutinize the diseases that are covered by the rider. Also remember that the waiting period for critical illness is usually 90-120 days and you must survive for at least a month after the procedure to get the claim.” A critical illness rider mostly covers expenses arising out of cancer, kidney failure, organ transplant, multiple sclerosis and coronary artery surgery.

Most health insurance companies offer both cashless (insurer reimburses the hospital directly) as well as reimbursement facility. It is better to go for the cashless facility as then you do not have to make any payments to the hospital out of your own pocket. It also involves less paperwork and hassle than the reimbursement facility. Check the network of hospitals in your city where the cashless facility is available.

If you have had a claim-free year, companies offer a 5 per cent bonus on sum assured the following year. The cumulative bonus could go up to 50 per cent of sum assured. Make sure that your insurer offers you this bonus.

Most health insurance companies place a cap on the daily hospital room rent they will pay. Insurance companies have a cap on room rent which is usually 1 per cent of sum assured per day. This figure varies from company to company.

Usually persons aged above 45 are required to go through a medical checkup before the insurance company agrees to cover them. If your medical report is adverse, the insurance company may not offer you a cover.The age limit at which a medical test becomes compulsory varies from company to company.

Some insurance companies have designed policies to cater to the needs of senior citizens.Some insurers offer policies renewable up to the age of 75 years, provided the insured had bought the policy before the age of 55. The longer period for which a senior citizen cover lasts, the better.

IFCI Long Term Infrastructure Bonds

IFCI is offering Long Term Infrastructure Bonds – Series 1.

This issue is open till 31st August 2010.

Investments upto a maximum of Rs.20,000 in this is eligible for deduction u/s 80CCF for the Financial Year 2010-11. An Individual or HUF can avail of this benefit in addition to the limit of Rs.1 Lakh u/s 80C. 

The details are as follows:

·        The tax benefit would be limited to a maximum of Rs.20,000 although the investor can invest any amount

·        The tenure of the bonds is 10 years. However, the lock-in period is 5 years if the investor chooses the buy-back option.In case the investor does not opt for buyback, the principal amount would be refunded back after 10 years, i.e. September 15, 2020

·        The bonds will be listed on BSE. It can be sold after a minimum holding period of 5 years.

  

Options	I
	Buyback/Non-Cumulative
Minimum Amount/FV (Rs)	5,000
In Multiples of (Rs)	5,000
Buy-back Option	Yes
Interest Payment	Yearly
Coupon	7.85% p.a.
Yield on redemption	7.85%
Coupon Payment Date	Sep.15 every year
Redemption Date	Sep.15,2020
Buy-back period	Every year between Aug.16 to Aug.31,starting from the year 2015 till 2019

II	III
Buyback/Cumulative	Non-buyback/Non-Cumulative
5,000	5,000
5,000	5,000
Yes	No
NA	Yearly
7.85% comp. annually	7.95% p.a.
7.85%	7.95% p.a.
NA	Sep.15 every year
Sep.15,2020	Sep.15,2020
Every year between Aug.16 to Aug.31,starting from the year 2015 till 2019	NA

IV
Non-buyback/Cumulative
5,000
5,000
No
NA
7.95% comp. annually
7.95% p.a.
NA
Sep.15,2020
NA

SENSEX SURGED ALONG WITH GLOBAL MARKETS

Indian markets saw biggest rally yesterday. The 30-share BSE Sensex closed at 17330.55, up 561.44 points and the Nifty rose 175.55 points to settle at 5193.60, which touched 5200 in late trade. All the global markets were upwards after European Union and International Monetary Fund (IMF) agreed a massive rescue package to control Greece's debt crisis spreading to other Euro zone countries.

The European Union ministers agreed an emergency aid worth 500 billion Euros (USD 670 billion) of loans and loan guarantees to any euro zone countries needing funds, plus about 250 billion Euros from the International Monetary Fund.

Income Tax Rates/Slab for Assesment Year 2011-12 (F Y 2010-11)

Individuals/HUFs

Upto Rs 1,60,000 - Nil

Rs 1,60,000 - Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Woman Resident

Upto Rs 1,90,000 - Nil

Rs 1,90,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

Present Tax Slab

Senior Citizen (>65yrs)

Upto Rs 2,40,000 - Nil

Rs 2,40,000- Rs 5,00,000 - 10%

Rs 5,00,000 - Rs 8,00,000 - 20%

Above Rs 8,00,000 - 30%

ULIP issue agreed to settle @ HLCC : RBI

Mr. D Subbarao today revealed that market regulator SEBI and insurance regulator IRDA had mutually agreed to settle the jurisdiction issue over ULIPs at the High Level Coordination Committee (HLCC).

Mr. Subbarao, who is also the chairman of HLCC disclosed that both the regulators-IRDA and SEBI-have mutually agreed to settle the issue bilaterally among themselves.

HLCC on the other hand is a high level forum chaired by RBI Governor and works as an interface among the various financial sector regulators. The forum constitutes representatives of the finance ministry along with banking, insurance, pension and capital markets regulators. Adding further on the settlement of the issue Mr. Subbarao said, What turned up is a legal issue. Perhaps there should be an agreement... to settle at the legal forum.

SEBI had been arguing that since the money raised through ULIPs is used by these companies for making investments into equity and debt markets, hence the same should fall under the regulation framework of SEBI and not IRDA. However, in its response to SEBI, IRDA had later asked the insurance companies to continue doing business on the usual lines.

Following the issue contradictory orders from the two regulators the Finance Ministry had intervened in an effort to persuade both SEBI and IRDA.The finance ministry's intervention was then followed by an issue of a fresh order by SEBI stopping the insurance companies from issuing any new unit-linked insurance products (ULIP). The 14 insurance companies that were affected under the ban by SEBI includes the likes of SBI Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India and Reliance Life.

MARKET OUTLOOK

If we look at the Interest rate side, it should ideally go up. But it is coming down. If interest rate increases the corporate and big companies will be in trouble. So, they will not increase interest rate now. This is a very big factor.

On 29^th Jan 2010 Central bank surprised markets by raising banks' cash reserve requirements by more than expected and warned of mounting inflation, setting the stage for lifting interest rates in the coming months.

Banks worldwide will be restricted. US will come up with lot of restrictions for Banks. This can be a negative factor for the markets.

FII’s invest into India for Long term, Short term as well Medium term period. For FII’s India is small economy. We clearly don’t know for what Term they have invested in India. They can pull money from any one of the above as they have to pay back their loans and keep the money safe.

I believe that markets may see more downside in near-term. But things are unpredictable; you do not know how globally things pan out and in this to just map liquidity and say the markets will get supported because liquidity has a habit of chasing prices and vanishing when you need it most.

BHARTI AIRTEL ??

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has a diverse business portfolio and has created global brands in the telecommunication sector. Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles.

The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) –

1) Mobile Services

2) Airtel Telemedia Services

3) Enterprise Services

To talk about the Bharti price fall, it will not stop as long as it doesn’t take any decision to reply TATA DoCoMo`s 1ps/Sec Tarif. There would be occasional rallies after the results. I feel that Relcom also will travel along with Airtel to find new bottom as their new strategy is not the answer for DoCoMo. Airtel share holder can keep hope only upto the results.

Bharti would be timing of the announcement of new tariff which can match DoCoMo`s 1ps/sec plan.

There are two things to be addressed.

1) Is to retain the customer

2) Is to announce the Tariff (it can offer only 1ps/sec billing other wise customer will not take it.).

Both are complimentary one can not be without the other.

Bharti in particular can go down to Rs.310 and from there probably some buying support is likely to emerge. Start buying Bharti from current price and accumulate for every 5 to 10% dip. Bharti will do good business by adding more and more customers even with lot of competition in the sector. If one second pulse rate implemented good number of customers will be added to Bharti.

I think a stock like Bharti from these levels can easily give you a return of 25-30% in next 12-15 months.

Markets @ current levels

At this point of time i would be advising clients to be cautious. The rally may last as long as liquidity lasts but investors should be cautious. As of now there is no clear picture over what earnings growth in FY11 would be, so it was difficult to arrive at a fair value for the market based on earnings expectations.

If we look at the valuations,they are at the higher end. We are already trading at about 21-22 times. Markets have been able to meaningfully sustain above these levels at 2000 and early 2008. So,from a valuation perspective, the markets are now in a probably euphoric zone, it’s only liquidity or any of the unexpected positive news flows which could drive this market higher from here.

On FII and DII front, FIIs are buying and DIIs are not selling in this rally.There is a lot of momentum in the market. The volumes have steadily picked up these last few days and the breadth continues to be good. DIIs are not selling in this rally as they are following the insurance company's trend. Insurance company's sell when FIIs continue to buy and eventually the market comes down.

The SEBI Move to do away with Entry Load

SEBI in its eagerness to help mutual fund investors has done away with entry loads. The MF industry, which also includes 70,000-strong distribution personnel, is unhappy over the SEBI move to do away with entry load on fund schemes. The new regulations will hurt MF distributors badly, and to some extent, the industry too.

I believe that this move would ensure more transparency in the system. We have to wait and watch how this will be implemented.

If advisors have to collect two cheques from investors it may be a little tougher.

We will see many IFAs or agents moving out of this field as this will become less profitable in the short run. It will kill a large number of distributors who were making a living selling mutual fund products and contributing to the growth of this industry. The retail distributors will badly get affected by this move.

I think there would be a different model coming up with fee-based advice. The financial advisor can no longer remain a salesman. He now needs to be a professional who is qualified and knowledgeable to give advice on investments and linking it to various components of personal finance. He needs to upgrade his knowledge by undergoing certification programs such as Certified Financial Planner (CFP). Only the advisors who acquire and upgrade their knowledge and skills will be able to deliver value for fee taken from clients.

LIQUID & LIQUID PLUS FUNDS

Liquid and liquid plus funds are short-term debt funds; they are different in a few aspects.

Investment tenure is the major differentiating factor between liquid and liquid plus funds. The debt instruments held by liquid plus funds have a longer tenure than liquid funds.

Liquid and liquid plus funds can be redeemed within a day. However, if liquid plus funds are redeemed within a specified period, there can be an exit load (the minimum investment tenure and the exit load vary across fund houses). On the other hand, there is no exit load on liquid funds.

In terms of tax implications, a dividend distribution tax of 28.33% is charged on liquid funds, whereas it’s 14.16% for liquid plus funds (in case of individual investors). Liquid plus funds pay lower dividend distribution tax as compared with liquid funds, which make them more attractive.

Liquid plus funds are riskier. This is mainly due to two reasons a) liquid plus funds hold investments that have a higher maturity and b) there is no limit on the mark-to-market (MTM) component of liquid plus funds.

A fine balance between risk and return and better tax efficiency is encouraging investors to favour liquid plus funds over liquid funds, Anybody with a slightly longer call preferred liquid plus schemes rather than liquid funds,

TAX Implication on Liquid & Liquid Plus Funds:

Capital Gains Taxation
		STCG		LTCG
Individual		As per the tax slab applicable for the investor		11.33% without indexation OR 22.66% with indexation
Corporate		33.99% (30%+10%+3%)		11.33% without indexation OR 22.66% with indexation
The above figures include the tax rate + surcharge + cess SOURCE:www.valueresearchonline.com

The good aspect with LTCG is that the income tax authorities give you the option to include the benefit of indexation. Indexation is the process by which inflation is taken into account when doing the tax calculation. This is excellent because it reduces the amount of capital gains and consequently the amount you end up paying as tax.

Exchange Traded Fund’s (ETFs) And Index Fund’s

We normally invest in an Active way or a Passive way. One of the most claims of Active investor is “I know more than the market.’ Passive investors simply take exposure to market via Indexing. They believe that market is usually right. Building a good portfolio is just not enough. You need to manage it properly and take the return. So, either you do this consistently on your own or ask some expert. 

Investing in Stocks requires time and effort. Investing in Mutual funds will make you feel like you have lost control over it as you have no control over the fund or fund manager.

It is difficult for an individual to outperform the market consistently over the medium to long term. None can consistently predict the direction of the market.

Surgeon and Pilots are skilled.

                                    Managers or Stock Pickers are also skilled,

                                                    Why doesn’t it repeat?

In order to invest sensibly we have to bring down Non Systematic Risk.

“Most Investors, both institutional and individual, will find the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees & expenses) delivered by the great majority of investment professionals.” – Warren Buffet 

It is more profitable to invest directly in an Index. Index funds allow you to invest in the index. Such funds invest their portfolios only in the stocks that contain a particular index. Performance of such funds will be same as the performance of the index. You have array of Index funds available from Mutual fund sector. Mutual fund sector offers you funds that not only mirror an index but whose units can be traded on the stock exchange in much the same way as common stocks. These funds are called Exchange Traded Fund’s or ETFs.

Benchmark Asset Management Company in December 2001 launched India’s first ETF, Nifty BeES .In India currently there are Equity and Debt market ETFs. Global ETF markets have grown rapidly. The US remains the world’s largest ETF marketplace, followed by Europe.

ETFs are perfect medium to execute strategic asset allocation for long term portfolios.

STARTING INSURANCE PLANNING EARLY

Insurance should be a part of the Portfolio. Starting to plan for Insurance at the early stage is always better. Delay in Insurance planning leads to expensive premium. The premium that is age specific will vary and go high as we grow older.

There is a huge need of Insurance cover at younger age also. The individual has to cover himself as he has responsibility towards his family and society.

At the earliest first take a Term Cover and then move into ULIP’s, Pension or Endowment plans etc.

The duration of the plan i.e.) Term also matters in term of building corpus. Longer the Term, more the benefit. Power of compounding will work better in longer term. Instead of starting late its better to start early.

Treat Insurance as an expense which mandatorily or compulsorily to be taken.

Manual Switch gives the Best of Averaging the Price

Though market has fallen steeply it is dangerous to invest fully or in one shot into Equity Mutual funds. Steadily increase exposure to Equity Mutual funds by way of Switching from Debt to Equity at different price levels.

Initially investors has to invest in a Debt fund and then transfer amount to designated Equity scheme whenever they see a fall in the price. Investors should note that all valid transfer requisitions from one scheme to other would be treated as Switch out / redemption and switch in / subscription transactions at the applicable NAVs of the two schemes will be reflected in the number of units allotted. Investors have to also look into eligibility of the schemes which will allow them to Switch from Debt to Equity. Please read the offer document of the transferee scheme carefully before investing.

By doing a manual switch when there is a fall in the price will give more advantage in averaging the price than the Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) or Switch Plans. Manual Switch will allow investors to have control over the entry price in Equity schemes and as such will give the best of averaging the price.

In the current market condition it is better to rebalance the allocation systematically in favour of Equity. Investing in Debt and switching slowly to Equity will give best of times of both Debt & Equity.

 

SHOULD YOU SHIFT YOUR HOME LOAN?

India’s largest Public sector Bank State Bank of India (SBI) cut the interest rates on new home loans to 8 %. LIC Housing Finance followed suit with a rate of 8.75 %.

For people who are waiting to take the Home loan this is a great deal to grab as other banks are offering in double digits. To be believed, Public sector banks may join this rally but not Private Banks.

If you are a new borrower it is better to choose this scheme as you will save money for a year due to lower interest rates. Even after the expiry of the first year, you can continue your loan with the bank since the rates prevailing then will be close to what other banks will be offering.

If you already have a loan with another bank, you can think of switching the same as you will save the difference in interest rates. If the current rate on your loan is 13 %, by switching you will be saving a considerable amount - a difference of 5 % this year. In case of foreclosure charge, it is better of to shift because the saving by interest rate will more than make up for the penalty.

Latest Home loan rates offered by leading banks:  http://in.reuters.com/money/personalFinance/calculator?calculator=homeLoans