Dear friend, plz. understand, apart from Index funds not any other funds invest in the scrips of a particular index (sensex or nifty) in the same weightage as the individual scrip has in the underlying index.

This is the reason of deviation in rise & fall of Indices (sensex & nifty) in comparison to MFs.

Thanks

Ashal ...

Dear friend, It w`d be better had u posted the name of funds/ Ulips also. Anyway, suggestion of investing thru STP is OK. regarding ur investment of current 2L Rs. plz. split the amount in the ratio of 65:35. Invest 65% amount for ur Kids` education funding & rest 35% for retirement funding.

After starting ur investment, plz. invest more in future also to make a worth of ur investments. Regarding ur ULIPs it `ll be better to protect urself thru Term Plans, primarily to cover ur all financial liabilities. U `ll get a high cover for fraction of the sum u `ll spend in ur ULIP prem.

From ur 70K Rs. invested in Eq. MF `ll grow to 23+L Rs. @ 15% avg. growth rate over the remaining 25 years of ur retirement, If u don`t invest any new amount for the retirement funding.

Thanks

Ashal...

Dear friend, I`m afraid, but as per the info provided by u, u r in trouble.

1. If u keep the money with ur old employer, the money `ll earn interest, but my dear friend as u have not completed 5 years of service, whenever u withdraw the amount in future, it `ll be taxable in that FY.
2. U can`t transfer ur money from PF to PPF

3. It make sense to liquidate ur money now & invest in a mix of Debt & Eq. MFs for long term. Ut loss on account of taxation `ll be compensated by the kick in returns from EQ. over the period.

Thanks

Ashal ...

Dear Krishnamurthy, Ur observations clear echoes the views time & again expressed here @ MMB by Me & fellow boarders.
1. Avoid NFOs.
2. Invest only in a fund with a long history of at least 5+ years.
3. Invest 50-60% of ur MF portfolio in Large cap funds.
3. Mid cap & Small cap funds should not be more than 10-15%.
4. Review the performance of funds every 6-12 months & take corrective actions if necessary.
5. Invest only for long term.
6. Don`t bother about short term volatility.
7. Avoid lump sum investing.
8. Be disciplined in investing.

For ur observations - Please note that Midcap & small cap index r down more than what Nifty & Sensex r & that is showing in the performance of funds related to Midcap & small cap.

Thanks

Ashal...

Dear Radhika_nandlal, My take on Interest Rate -

Almost every indian Investor/saver have deposits in Banks. Over the last 18-24 months, the banks r offering higher rates on deposits (test case u r thinking to join this @ 11% FD).

Add 2.25-2.5% administrative cost & profit margin for banks on these deposit rates. The effective lending rate works out to around 12-13% but wait there is another twist in the tale named as CRR (Cash reserve ratio). For every 100 Rs. accepted by bank as deposit, it `ll have to keep 7.5 Rs. (after recent reduction of 1.5%) mandatorilly with RBI & it `ll be non income earning.

So from the 100 Rs. deposited by u, the bank `ll be able to lend only 92.5 Rs. & before the CRR cur the same figure was 91 Rs. only. So the effective lending rate comes around 14-15%. Now add at least 1-2% NPAs (non performing assets), the same lending rate `ll move on to on more higher level around 15.5-16%.

Now change ur shoes from depositor to borrower, R u ready to borrow at such higher rates to purchase -
1. That Plasma Panel
2. That High speed Mobike for ur son
3. That Grand new sedan costing 10+L
4. That sweet little (lavish) home costing anywhere from 20L to some crores depending upon in which place of india u r.
5. That drean swiss vacation
.......
......

The list goes on & on, but one thing is certain u `ll certainly cutback some of the above mentioned purchases or delay the same.

Now imagine u r not a domestic borrower but a corporate borrower. To increase ur capacities or starting a new factory or any other business requirement, after taking loans at such higher rates, how `ll u earn profits when the sale of ur products (CAR, Bike, Consumer goods, Homes....) is going down.

Sooner or later, the interest rate `ll go down, how much
I DON`T KNOW, by when, again I DON`T KNOW.

I know only one thing, for a healthy growth, low interest rates r essential.

Thanks

Ashal...

Dear Radhika_nandlal, U r time & again talking about Jeewan dhara Plan, but in my view ur Hubby had started New Jeewan Dhara or New Jeewan Dhara - 1.

The reason is, the plan named as Jeewan dhara was discontinued by LIC way back in 2001. This plan was just like an FD/KVP offering from LIC. Under this plan, the single prem. invested `ll be returned after 10Years as 3 times. Say u had invested 1L Rs. in 2000, u `ll get 3L Rs. in 2010.

As u r telling that u r paying prem. yearly, it means the older jeewan dhara plan is not with U. Infact the new Jeewan dhara Plan is a deffered annuity plan. Returns under this plan r very pathetic. Only around 2.5 to 3.5% during accumulation phase. Every year LIC announces bonuses for these policies & these bonuses r simple reversionary bonuses.

Even after completion of defferment period (read prem. paying term), the pension received from these plans is very - very poor.

Make an informed decision.

Thanks

Ashal ...

Dear Radhika_nandlal, here is the No. crunching u wanted. The bank FDs u r talking about current one u r holding & new one u want to switch, normally offers quarterly compounding.

Case - 1 Continue the current FD of 9.5%
Base amount = 35L
Maturity amount (pre Tax) = 4638686
I assume u r in 30.9% Tax slab, Post Tax maturity amount = 4286832

Case - 2 break the current FD & invest the maturity proceeds in a 1 year 11% FD.
As the older FD is completing 2 years & as per ur info the applicable interest rate is 8.5%,
Base amount = 3500000
Maturity amount for 2 years @ 8.5% (Pre Tax) = 4141185
Post Tax maturity amount = 3943059 This `ll be the base amount for new FD of 11%
Maturity amount @ 11% (Pre Tax) = 4395017
Post Tax maturity amount = 4255362

U can see urself that, Post Tax mat. amount is more in ur Older FD, so the bottom line is continue the same. ...

dear friends, i am back again. this time, with a suggestion. a suggestion from a newbie? well please do read it, i have discussed it with ashalji and i have been able to somewhat convince him. we thought it will be better to get the views of all of you other friends. the suggestion goes like this: if you have invested when the sensex was 15,000 plus levels, then redeem all those investments at current value and reinvest the amount in the equity again over the next year either through sip/ debt fund- stp route etc etc. why do i say this? well, i think the markets would not only remain depressed at least for the next one year, but would also fall by at least another 20 per cent over the next one year. ( i know, the general rule is one should not time the market. but, i think, presently, one can be certain that the markets will remain depressed at least for the next one year and fall by a further 20 per cent at least over the next one year.) how will my suggestion help? lets take an example. lets say some one had invested 2 lakhs when the market was 15 k plus, its present value would be about 1.5 lakhs. by redeeming that amount and re-investing in the market through sip/ stp route, one would be able to avoid any further loss in the portfolio and at the same time, be able to buy units at an average sensex level of 9,500 considering that the market today about 10,500 and assuming a fall of 20 per cent more over the next year. in other words, one can cut losses and also gain by about 10 per cent. the gain would be more if the fall is more. many of you have far more experience than me in the market place. i only hope you would not brush aside my suggestion as that of a newbie, and give it some consideration. thanks cheers sunder (why do i say investments made at 15 k plus levels? that is because, i think even if the market goes up some time in future, it would certainly reach 15 k level at almost one go, and could struggle to go up further up after that. as you would have all noticed, there had been a strong resistance at 14 k level, and my assumption is that by the time the market starts moving up, it should be able to reach 13 k level without many pauses and then go on upto 15 k level, before facing some resistance) ...

dear friends, i am back again. this time, with a suggestion. a suggestion from a newbie? well please do read it, i have discussed it with ashalji and i have been able to somewhat convince him. we thought it will be better to get the views of all of you other friends. the suggestion goes like this: if you have invested when the sensex was 15,000 plus levels, then redeem all those investments at current value and reinvest the amount in the equity again over the next year either through sip/ debt fund- stp route etc etc. why do i say this? well, i think the markets would not only remain depressed at least for the next one year, but would also fall by at least another 20 per cent over the next one year. ( i know, the general rule is one should not time the market. but, i think, presently, one can be certain that the markets will remain depressed at least for the next one year and fall by a further 20 per cent at least over the next one year.) how will my suggestion help? lets take an example. lets say some one had invested 2 lakhs when the market was 15 k plus, its present value would be about 1.5 lakhs. by redeeming that amount and re-investing in the market through sip/ stp route, one would be able to avoid any further loss in the portfolio and at the same time, be able to buy units at an average sensex level of 9,500 considering that the market today about 10,500 and assuming a fall of 20 per cent more over the next year. in other words, one can cut losses and also gain by about 10 per cent. the gain would be more if the fall is more. many of you have far more experience than me in the market place. i only hope you would not brush aside my suggestion as that of a newbie, and give it some consideration. thanks cheers sunder (why do i say investments made at 15 k plus levels? that is because, i think even if the market goes up some time in future, it would certainly reach 15 k level at almost one go, and could struggle to go up further up after that. as you would have all noticed, there had been a strong resistance at 14 k level, and my assumption is that by the time the market starts moving up, it should be able to reach 13 k level without many pauses and then go on upto 15 k level, before facing some resistance) ...

Dear Ranjan & Ashalanshu, Thanks for giving me the right advice. I actually wanted to go for Pure-Term cover, diversified Equity MFs and some debt instruments. one my friend provked to invest in ULPP, he overpowered my plan, thats why i had put that question, to re-confirm my plans. Once again thanks very much. ...

Dear Ashal, Good informative post, keep it up.....

Ashal, Yes sooner or later bank interest will go down. The best thing to book long term FDs coz interest may go down just as swiftly as it went up....

Ashal, I realized i am no good in finance. If i remember one thing i forget the next and my parents know nothign but FDs... so its no use.. most brahmins are like that... I have so many policies, ICICI MILLINOARE BONDS, etc etc.. the houses i sold off coz i knew if i sell this i get this and its a multiple but in these insurance policies and millionare bonds i have to calculate inflation to see the worth and i dont know how to consider inflation when arriving at networth. BTW ystday finance minister said IIP numbers may not be correct.. i was aghast.. i though IIP numbers are released by the govt? Wonder who releases the IIP numbers.. so they have no hand in the release of such data? What a disconnect between growth and IIP numbers. When u plan do u take inflation also into account. Going forward do u see interest rates hardening or softening?...

Ashal, Thanks, yes its new jeevan dhara. I think i will remove the money here and invest it in some good stock....