Fixed maturity plans (FMP) make sense for risk-averse investors who have a set timeframe. So, if there is an FMP on offer that matches your investment timeframe and you don't want to assume any risk, go for it. FMPs are structured in such a manner that they assume very low risk. They are low on costs and generate fairly predictable returns. However, the best time for FMPs might be coming to an end because of the falling interest rates, so you might as well consider income funds.

Gold Savings Funds

An interesting way of buying Gold is developing in India nowadays. It is thorugh Gold savings funds. They resemble Gold fund of funds, but there are some drastic differences between them. Gold savings fund usually invest the money in Gold ETFs of the parent company and small percentage in fixed deposits and other money market instruments. where as Gold fund of funds invest in physical gold and equity and other instruments. Major merit of this type of investments is the non requirement of Demat account for the investors. In other words, unlike Gold ETF, you don't need a demat account for buying the units of Gold savings fund.

If an investor want to buy the units of the fund, just go to the branches of asset management company and buy and sell the units. Another merit is the presence of SIP or EMI options in the scheme. You can remit SIP as low as Rs.100. For those sections of the population which are still outside the Demat network can buy Gold through this route. Main demerit of Gold Savings fund is the high expense ratio. It is more expensive than Gold ETF. At present three mutual funds are offering this type of funds. SBI, Kotak and Reliance mutual fund. These funds mirror the performance of the parent Gold ETF. Expense ratio is high when compared to Gold ETF. For those who have demat account, gold ETF is a better option. For those who don't have Demat account, Gold Savings fund can be a better a option.

Over a longer time frame, the fund has been ranked CRISIL Fund Rank 1 in the 'Consistent Performers - Equity' category for the quarter ended December 2011, wherein the fund entered this category for the first time. The 'Consistent Performers' category ranks those funds which have been part of the CRISIL Mutual Fund ranking for a five-year time frame. The rank is a composite of historical performance of the fund in the CRISIL Mutual Fund Ranking and risk-adjusted return of the fund over a five year period. The fund's average assets under management (AUM) were ~3,962 crore for the quarter ended December 2011.

Investment style The fund dynamically manages its equity exposures in response to equity market valuations. It has increased the equity exposure when the markets were undervalued and decreased it when the markets were overvalued. As compared to peers, the fund has aggressively managed its equity exposure. Since inception, the fund has been able to outperform its benchmark(S&P CNX Nifty) 71 per cent of times in a downtrend (benchmark giving negative returns quarter-onquarter) and 68 per cent of the times in an uptrend (benchmark giving positive returns quarter on-quarter). This indicates that the fund's strategy has helped in outperforming the benchmark on majority occasions across market phases.

Performance The fund has outperformed both the benchmark and the category across multiple time frames, viz., one, two, three, five and seven years. For the past one year, the fund gave positive annualised return of three per cent as against two per cent by the category and negative return of one per cent by the benchmark. Over the longer time frame of seven years, the fund gave an annualised return of 21 per cent vis-à-vis 14 per cent and 16 per cent by the benchmark and category, respectively. A monthly systematic investment plan (SIP) investment of ~1,000 for seven years would have grown to ~1,42,139 as on March 14, 2012 (principal invested of ~84,000) resulting in annualised returns of 15 per cent. A similar investment in the benchmark would have grown to ~1,16,958, yielding nine per cent annualised gains.

Risk The fund has managed to generate higher returns than the benchmark and category while maintaining low volatility over the past five years. The average monthly volatility for the fund over this period was 23 per cent vis-à-vis 27 per cent and 28 per cent for the category and benchmark, respectively. Since inception, the fund has a beta of 0.8 indicating relatively lower risk.

Portfolio analysis The fund has a well diversified portfolio with average 59 stock holdings over the past three years. At the sector level, the fund is more concentrated than its peers. The top 5 sectors of the fund formed 63 per cent of the fund as against 56 per cent for the category over the past three years. Within equities, the fund has taken a majority exposure to large cap stocks. Over the past three years, the fund has taken an average 77 per cent of its equity exposure to CRISIL defined large cap stocks. Further, almost 52 per cent of these stocks were part of the S&P CNX Nifty.

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Product Details

Met Life's Monthly Income Plan is a scheme that guarantees payment of a monthly income to the policyholder for a period of 15 years after the end of the premium paying term. In the event of the death of the policyholder, the regular monthly income shall accrue to the nominee. Investors can choose a policy term of 20 or 25 years. The corresponding premium paying term for the same is 5 and 10 years, respectively.

Additional Features

The scheme pays an additional 25% of the sum assured to the nominee in the event of the death of the policyholder during the policy term. The additional sum assured is paid along with the payment of regular monthly incomes until the maturity of the policy.

Policy At A Glance

Assuming the age of a healthy male policyholder to be 55 years and the policy term to be 20 years, the premium payable during the limited premium paying term of 5 years and the benefits that will accrue to the policyholder at various quanta of monthly income are illustrated herewith…

Met Life Monthly Income Plan is structured in a manner so as to provide the amount of the sum assured to the policyholder in installments, as a regular monthly income, during the policy term itself, rather than return the same as a lumpsum on maturity. The policy thus makes sense for those nearing their retirement age, as it will ensure a regular stream of income then.

However, as far as the returns are concerned, for the policy taken at 55 years of age, the absolute gains from this plan over a period of 20 years are less than 9%. While the returns are relatively higher at lower age groups, say, 18% if the policy is taken at 30 years of age, the same fail to match even the returns that one can gain by investing in bank term deposits during this tenure.

Invest in this plan only for the sake of the convenience of regular income. Those seeking higher returns may give this one a skip.

When this year's budget laid down new rules for life insurance, it was presumed that mis-selling would lose its sting. Far from it, mis-selling has now become more dangerous for your finances. Till 31 March, if someone was missold an unsuitable life insurance policy, the most he would have lost was the liquidity and the opportunity to invest in a more lucrative avenue. But at least he got the tax benefits—tax deduction of the premium under Sec 80C and tax-free income on maturity under Sec 10(10D).

Now, if a buyer is not careful, he may end up buying a policy that won't offer any tax benefits. Even the money received by his nominee in case of death will be taxable if the policy does not cover the buyer for 10 times the annual premium. Individual agents as well as aggregator sites are happily selling insurance policies that are not eligible for tax benefits. Till last week, a prominent insurance portal was hawking Jeevan Vriddhi, a single premium plan from LIC that covers the buyer for five times the premium. Posing as a buyer, ET Wealth called up the portal and was given the assurance that the policy will offer the tax benefits under Section 80C and Section 10(10D).

Insurance agents also have their hands in the till. They are bombarding buyers with attractive benefit illustrations without educating them on the post-budget tax implications. An agent of a private insurance company approached us with an endowment insurance policy that offered a cover of seven times the premium. It is by itself a good plan because it offers the option of a whole life cover as well as term cover and accidental death riders But the five-year option that he was trying to sell is not eligible for any tax benefits and he was oblivious of the fact. When this was pointed out to a senior official, he mumbled that the company will soon be conducting training sessions on the changes in the rules.

The budget has very clearly stated that policies issued after 1 April must meet the 10 times criteria to claim the tax benefits. "The Sec 80C tax de duction is not as important for insurance buyers as the Sec 10(10D) tax exemption," says V. Srinivasan, chief financial officer, Bharti AXA Life Insurance. For a buyer who is not aware of the 10 times norm, there may be a rude shock waiting when the policy matures or when his nominee gets the insured amount after his death.

To ensure that companies don't design products to circumvent the rules, the budget has clarified that the cover shall not include bonuses and other payments made by the company. Only the basic cover will be taken into account The budget has also mentioned that the cover should remain at least 10 times throughout the tenure of the policy. This means that plans in which the cover comes down from the second year onwards will also not make the cut.

If you are planning to invest in a life insurance policy make sure it complies with the new eligibility norms for tax benefits. The base cover offered by the policy should be at least 10 times the annual premium. For instance, if the premium is 12,000 a year, then the cover should be at least 1.2 lakh.

Two weeks back, Finance Minister Pranab Mukherjee had asked the Insurance Regulatory and Development Authority to take strict action against companies that are mis-selling insurance. The truth is, companies don't mis sell—their agents and advisers do. The problem is that companies don't actively dis courage the mis-selling and er rant agents usually get away with a mild rap on the knuckles. Insurers will have to take stricter action against mis-selling. If they do not take cor rective measures now, in a few years Irda will be inundated with mis-selling complaints from taxpayers who have been denied tax deduction and ex emption on their investments in life insurance.

What to check before you buy


• The cover should be at least 10 times the annual premium of the policy.

• The life cover should not fall below the 10 times level even in subsequent years.

• The sum assured should only be the basic cover and should not include bonuses and other payments.

GOLD DEPOSIT SCHEME FROM STATE BANK OF INDIA

Any Indians who have 500 gms of Gold in their hands can make money from the Gold in India. An investor can invest maximum of any quantity of Gold under this scheme. Not many in India, are aware of this scheme run by SBI. It is nice way to get money from the idle Gold in your custody, which will otherwise be kept in the locker. But the scheme has some controls and checks. It is like Fixed deposit in Gold. One of the advantage of Gold Deposit scheme from SBI is its tax concessions and safety in the transactions.

You can avail Gold Deposit scheme from SBI for a period of 3, 4, 5 years. Gold in the form of Gold coins, Gold Bars, Gold jewelery etc.. all in scrap form is accepted by the SBI under the scheme of Gold Deposit Scheme. When the Investor transfers the Gold in Scrap form to the Bank, they will give a provisional

certificate and after that, the Bank will send the Gold to Bullion branch at Mumbai and then to India Govt. Mint where your Gold will be melted, assayed and minted and the certificate for fineness and quantity will be sent to the customer within 90 days of the receipt of Gold at the branch. This is the Gold Deposit Certificate from the SBI

You can avail 75 % of the total value of Gold as loan under this scheme. When you want to your investment back after the said years of investing in Gold Deposit Scheme, the bank will give you the investment back either as Gold or as in Rupee terms.

Interest rate applicable under this scheme is as follows:

Another important advantage of Gold Deposit Scheme is its exemptions from Wealth tax, Income tax, Capital Gains tax for the investors. An investor under this scheme has no need to bother about theft of Gold. The charges like insurance charges, locker charges which are otherwise present with Physical gold is not at all present in case of Gold Deposit Scheme run by SBI. The are the advantages of enrolling into Gold Deposit Scheme run by SBI.