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Franklin Templeton Investments (India) has launched Franklin Templeton Capital Safety Fund (FTCSF), the first of the many 'Capital Guaranteed' schemes slated to hit the markets soon.

The scheme endeavors to protect the capital by investing in high quality fixed income securities as the primary objective and generate capital appreciation by investing in equity and equity related instruments as a secondary objective. Franklin Templeton launches Capital Safety Fund)

Offer opens: October 31, 2006 Offer closes: November 30, 2006 Entry load: Nil Exit load: Nil Minimum investment: Rs 10,000 Type of fund: Close-ended Tenure: 3-years and 5-years Benchmark: Crisil MIP Blended Index Fund Managers: Santosh Kamath (debt) and Satish Ramanathan (equity)

Franklin Templeton Capital Safety Fund offers a 3-year and a 5-year plan. Being a close-ended fund, the fund will not repurchase units of the scheme before the end of the maturity period. (Check out - New Fund Offers open now)

Experts believe that though such schemes offer the investor the opportunity to have his cake and eat it too, investors should note that this doesn't come without having to make some compromise.

1) Limited Equity Upside

In Franklin Templeton Capital Safety Fund, capital guarantee would mean a minimum of 70% of the funds invested in fixed income securities for the 3 year plan and a minimum of 80% of the funds invested in fixed income for the five year plan. Therefore, equity upside, if any, would be limited to the 20% and the 30% portion invested in equity respectively.

However, Sukumar Rajah, CIO - Equity, Franklin Templeton clarifies that, "FTCSF allocates a major proportion of its portfolio to high quality debt investments in order to protect capital and the remainder is in equities so that investors can benefit from the upside potential of Indian equities over the long term." "Investors comfortable with the near term volatility and looking for potentially higher returns should look to invest in well-managed diversified equity funds with an established track record over market cycles", he added.

2) Capital Protection is NOT Guaranteed

The fund house, per se, does not guarantee that the capital will be protected. Instead what the capital guarantee means is that CRISIL has assigned a rating to the scheme that signifies a high degree of certainty regarding timely repayment of the face value of the investment.

Regulations do not permit mutual funds to offer any "guarantee" pertaining to returns or safety of capital on their products. However, he assures that the portfolio structure of FTCSF is designed in such a way that investors are likely to get Rs.100 back for every Rs.100 invested.

He clarifies, "The chances of an erosion of capital are low given the structure of portfolio. The ability of this fund's portfolio structure to deliver capital protection is also affirmed by CRISIL through an AAA (SO) rating, which indicates a high degree of certainty regarding the timely repayment of principal". Debt investments will be in AAA or equivalent securities that match the maturity profile of the fund, minimizing both credit & interest rate risk. The chances of a capital erosion from the debt portfolio are minimal given the near-zero default ratio for AAA rated securities by CRISIL.

"The portfolio allocation is determined in such a way so as to provide enough cushion to mitigate credit, reinvestment, float and liquidity risks along with transactions costs. In addition, the portfolio will be monitored by the rating agency on a monthly basis to determine the probability of the portfolio value falling below the original principal value and this would necessitate any changes to the portfolio. As part of the investment process, we will be closely monitoring the credit quality of our investments and would proactively shift investments into good quality papers, if we sense a change in the issuers' fundamentals", he added.

3) Liquidity – A Concern?

Current Sebi regulations do not allow a fund house launching a capital protection scheme to provide for an exit window to the investors. Though the fund is planning to get the fund listed on the NSE in an attempt to offer some exit option, it'll not be the same as having the facility of redeeming units directly with the fund house.

This fund is not meant as an alternative to equity investments, it is positioned as an attractive alternative for conservative investors used to parking their long term money in traditional fixed income avenues, where there is a chance of getting low inflation-adjusted returns."

Conclusion:

All said, experts believe that FTCSF would prove to be a good investment for the risk averse investor who doesn't mind compromising on his returns for the additional implied safety.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online

Invest In Tax Saving Mutual Funds Online

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Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

 

With lifestyle disorders on the rise, young pros would do well to review their health insurance needs and consider buying cover for major illnesses

Most individuals, especially the upwardly mobile young executives, know the importance of a health insurance. However, even they tend to overlook the importance of a critical illness cover. The younger ones often reason that they have enough time to buy one. However, they should reconsider their decision. According to a recent study conducted by private non-life insurer ICICI Lombard, the maximum increment in critical illness incidence rates was experienced in the age bracket of 26-35 years.

Our study has found that the vulnerability to illnesses such as cancer among the younger age group is increasing. In this age group, the incidence rate has doubled in the last three years. The study also noted that spike in critical illness incidence rates was more significant in IT and manufacturing sectors. Other insurers also have a similar story to tell. Not only are lifestyle disorders becoming more rampant, but they are also affecting younger population. While claims for lifestyle diseases like cancer, heart attack and diabetes from people below 40 years of age stood at 23% in 2011-12, it has shot up to 38% in FY2012-13.

And, lifestyle issues seem to be the main culprit. Due to a spurt in lifestyle diseases where people are exposed to various risk factors like diabetes, hypertension and cholesterol disorders, we have noticed an increase in the number of claims for cardiac diseases and cancer, which are covered under major critical illnesses. No, the numbers are nothing alarming. It just point towards a growing trend. Compared to, say, ten years ago, the incidence of critical illnesses among the younger age group has certainly gone up. However, while the percentage of younger people who are now afflicted by critical illnesses has grown significantly, the absolute numbers remain quite low. A smart money manager won't take refuge in percentage figures, but try to act so that s/he has a plan to meet any contingency. That means relying solely on your employer's group policy is not an option anymore, especially as the average cover they offer is between . 2 lakh and . 3 lakh.

An independent health policy of a similar amount, too, may not be adequate to cover treatment costs running into lakhs. That means you have two options: buy a critical illness plan or enhance your existing health cover.

Critical illness policies offer a fixed sum once the illness is diagnosed. They can be bought as riders along with your life insurance cover or as a standalone cover. They can be a valuable addition to your basic health cover if you contract any serious illness. Your health cover will take care of hospital bills, and pay-outs from critical illness cover can be used to fund your travel, food and post-treatment recuperation expenses.

The health cover for hospitalisation and surgical expenses may not be sufficient to meet the high expenses of a critical illness. A bypass surgery or the several chemotherapy sessions can be very costly. It's not just the hospitalisation bills, income for the family is impacted even if the primary wage earner has to take a break from work to recuperate for a couple of weeks or a month. Investing in health insurance can prove extremely useful in case of hospitalisation linked to surgery, as all the hospital expenses including tests are taken care of by the insurer. However, they become futile in case the insured contracts a critical illness such as cancer which demands much larger expenses over long term. It could also come to your aid should you have to travel abroad for treatment.

A critical illness policy is a benefit policy where the sum insured is paid once any of the illnesses is diagnosed irrespective of where the treatment is taken, at home or abroad. In contrast, a regular indemnity-based health plan only pays for hospitalisation expenses incurred within the country. However, many experts don't think critical illness cover is a must. Instead of buying a critical illness policy, a better option would be to enhance the sum insured of your existing health insurance policy. If you have a cover of . 4 lakh - . 5 lakh, you should consider increasing it to . 10 lakh. Ordinarily, a family floater cover of . 10 lakh should be adequate for a family of six – a couple, their two children and parents. However, if you are convinced that a critical illness policy will fortify your protection, you need to evaluate several factors before buying one. For one, you have to make a choice between buying critical illness riders sold as add-ons with most term policies and standalone critical illness covers offered by life as well as non-life insurers. Standalone covers are better than riders, as they are more comprehensive. At present, rider benefit covers on offer are standardised, covering 8-10 illnesses at best. Scope of coverage is much wider in case of independent policies, covering up to 20 illnesses, depending on the insurer. Also, rider benefits are more expensive, as they are packaged as an add-on

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online

Invest In Tax Saving Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms

Buy Gold Mutual Funds

Call 0 94 8300 8300 (India)

 

 

Mutual funds have caught on with retail investors due to investor education initiatives by various stakeholders. Equity oriented mutual funds seem to be more popular than their debt counterparts. According to folio numbers disclosed by the Association of Mutual Funds in India (AMFI), retail investors constituted 3.28 crore of total equity folios but just about 53.66 lakh of the total debt folios.

Since equity funds are a long-term product, most mutual fund investments are mapped to long-term goals. However, certain mutual fund products can help meet short to medium-term goals too. For example, liquid funds provide almost similar benefits as a savings bank account and higher post-tax returns while hybrid products like monthly income plans (MIPs) help achieve goals such as children's tuition expenses, buying a vehicle or planning an international trip.

Traditionally, investors prefer fixed deposits (FDs) for such goals but debt-oriented mutual funds provide a better option with advantages such as variety, convenience, liquidity, returns and tax benefits. The table here lists such mutual funds, segregated on the basis of risk-return tradeoff, indicative investment horizon and suitability.

Indexation benefits

A unique feature of investing in debt-oriented mutual funds is the indexation benefit if one stays invested for over a year — only gains made over and above the inflation rate are taxed. For example, investment for over a year is taxed at 20.6%, including cess with indexation, or 10.3% ex-indexation under long-term capital gains tax.

Bank FDs and postal deposits do not offer this benefit, where the entire interest earned is taxed according to the applicable marginal tax slabs of 10%, 20% and 30%.

Summing up, mutual funds offer products across time horizons and asset classes based on one's risk appetite. First-time investors may approach professional financial planners for mapping mutual funds with respective goals or refer to rankings from independent research providers available.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. ICICI Prudential Tax Plan Invest Online
2. HDFC TaxSaver Invest Online
3. DSP BlackRock Tax Saver Fund Invest Online
4. Reliance Tax Saver (ELSS) Fund Invest Online
5. Birla Sun Life Tax Relief '96 Invest Online
6. IDFC Tax Advantage (ELSS) Fund Invest Online
7. SBI Magnum Tax Gain Scheme 1993 Invest Online
8. Sundaram Tax Saver Invest Online
9. Edelweiss ELSS Invest Online