Question: Is it easy to invest directly in Indian Debt Products for an NRI?

   
Answer: Many debt instruments on the secondary market are sold in large chunks in India (for instance - minimum of 50 million Rs investment for Corp Bonds, GOI  dated securities/ t-bills and 10 Crores min investment for commercial paper). It is possible to buy in smaller amounts when there is a primary market offering, but this occurs on an irregular basis.

              
Most Indians access such products through debt mutual funds though this doesn't make sense for a US Taxpayer due to the tax issues foreign mutual funds present. see link: http://www.investmentyogi.com/nri/us-taxes-mutual-fund-investments-in-india.aspx

Some other options that do not require such large amounts of investment are Fixed Deposits currently yielding 7-7.5% or Corporate Fixed Deposits at 8.5% to 9%. Individual shares are also good investments for NRIs.

Warm Regards,

Expert @ InvestmentYogi

Question: Can you give me information about  sharia based investments  in india like MF,insurance or any other system of investment purely based on sharia. By investing in those funds can i get TAX exemption?

Answer: There is Benchmark Shariah Fund which is an ETF, you can invest through your trading account/ demat account; there are no tax exemptions. For more details, visit: http://www.benchmarkfunds.com/static/Shariah/overview.cgi

Warm regards,

Expert @ InvestmentYogi

Question: Why NAV of Mutual funds starts at the price of Rs.10. in the NFO?

Answer: NAV at Rs. 10 makes no difference really. It is just nomenclature. Mutual fund units are a function of "percentage" gains only - that means if the stock market goes up 5%, a mutual fund with NAV of Rs. 10 will go up to Rs. 10.5 and one with NAV of Rs. 100 will go up to Rs. 105. Gains are the same for you - your investment grows 5%.

Warm Regards,

Expert @ InvestmentYogi

Question: I have bought 2500 units of JM Core 11 Fund Series mutual funds in 2008 at face value of Rs. 10 investing Rs. 25,000. Now the NAV of the fund is around Rs. 4.44. My agent keeps telling me that the fund will grow in a year or two. Should I sell them or keep them for a little longer?

Answer: The fund managers have changed, if you are fine with holding this to recover losses, you may hold; else we would recommend to exit it now and invest in large cap funds so that you recover your money faster (You can invest in tranches, some amount immediately, transfer some amount as STPs and some amount when there is some fall in the market). Depending on your existing portfolio, you may choose to invest in HDFC Top 200 or DSP BR Top 100 or Birla SunLife Frontline Equity fund.

Warm regards,

Expert @ InvestmentYogi

Q: I am 42 yrs old working in a private company and my annual income is Rs 2,40,000.My  investments so far are 1.Jeevan Anurag policy for Rs 1,75,000 for my daughter paying a annual premium of Rs 12,000 2.LIC Money Back for Rs 50,000 paying a premium of Rs 685 Quaterly 3.SUper Invest Assure ULIP from Reliance  paying a premium of Rs 1000 monthly 4. Rs 1000 monthly in PPF. I have also taken mediclaim for RS 1,,50000 each for all three of us.  My query is my wife has got a share of Rs 2,50,000 from inherited property and we want to invest in some instrument which is safe and offer decent returns.Kindly advise.

A: Thank you for writing to us. For the investments with maximum safety, you can explore the following options:

1. Bank term deposit and recurring deposit;

2. Post office small saving schemes;

3. Special bonds (RBI bonds, REC/NHAI/Infra bonds);

4. Debt Mutual Funds :

• GILT funds - investment in government backed securities by mutual funds. Although Gilt mutual funds are subject to interest rate risk in the long term, short term fund offers highest safety.

• Bond funds - They are mutual fund schemes that invest in fixed-income securities; However, one must choose a fund that holds AAA-rated bonds.Duration of the fund must be lesser than your investment horizon; The duration of the fund you choose also depends upon your risk profile; (shorter the duration, lower the volatility and vice verse).

• Monthly-Income Plans (MIPs) - They are debt-oriented hybrid funds and generally invest 80 to 100 per cent in debt instruments and the rest in equity instruments. Good for conservative investors wanting to participate in equity markets without risking their capital.

Since selecting an investment depends upon your investment horizon and future financial needs, we suggest you get a financial plan done today from InvestmentYogi which would help you to analyze where you should be investing.

Warm Regards

From Your Expert @ InvestmentYogi

Question: Please give some more info on SIP and STP

Answer: The difference between SIP and STP is in the purpose.

SIP (Systematic Investment Plan): One of the ways of investing in stock markets is through SIP. In SIP, you invest a certain amount each month (as low as Rs 100!) into the equity mutual fund of your choice. The SIP amount is debited from your account on specific dates (set by you).

STP (Systematic Transfer Plan): Just as SIP, mutual funds let you avail of STP facility. In case of SIP, the amount is debited from your bank account for a new investment, while in case of in STP, the amount is transferred from your bank account. STP allows you to transfer money from one mutual fund scheme into another. For example, the regular income from a Monthly Income Plan (MIP) of a mutual fund can be transferred into a diversified equity fund for better returns. This transfer is enabled by STP.

Also, while there is no entry load for SIP, you may have to pay switching charges for STP.

Warm regards,

Expert @ InvestmentYogi

Question: What is the criteria used by RBI to fix interest rates on various currencies for FCNR  deposits?

Answer: The Boards of Directors of banks are empowered to authorise the Asset-Liability Management Committee who fix interest rates on deposits (including FCNR) within the ceiling prescribed by RBI.

Warm regards,

Expert @ InvestmentYogi

Question: I am 45 and looking to buy term policy of 25 lakh...is it good to buy from a single insurer or split it between 2-3 companies? Do private insurers provide satisfactory claim settlement...why can a claim be rejected...?? What points are to be seen while filling the form and selecting a private insurer?

Answer: You can buy term insurance cover from a single company. IRDA has strict guidelines and hence private insurance companies also need to adhere to the same. The claim settlement ratio of a life insurance company becomes an important criteria while choosing an insurance product (apart from the cost). A claim can be rejected due to reasons like filling up of wrong information on the insurance form, non-disclosure of vital information etc. The quality of the advisor approaching you to sell insurance products is also an important factor while choosing insurance from a particular insurer. Also, issues such as is the insurer keen on providing solutions to people who need them or does it only focus on selling and no responsibility thereafter are other key factors to look into before buying insurance cover.

Warm regards,

Expert @ InvestmentYogi

Question: I bought DSP Black Rock TIGER - dividend regular plan (units 3977.472) On 1 Dec. 07. I had invested Rs. 1,25,000. Today value is Rs. 72,000.00. Shall I exit or continue with it? I can stay for next 10 years. What are future prospects of the fund?
    

Answer: You may have received dividends declared by the fund. The fund is a large cap fund focused on infrastructure and growth themes. We would recommend you to Hold on to this. Depending on your portfolio, you could even start a SIP in this.

Warm Regards

Expert @ InvestmentYogi

Q: I have been paying my existing home loan of 10 lacs last 2 and half years against renovation of home, with a EMI of12k. Am I eligible for another home loan (loan against property of worth 6 lacs), I am looking for 6-8 lacs loan.

A: There is no restriction on the number of housing loans a person can take. As long as you and your housing finance company (HFC) think you can repay, you may go ahead with the second home loan. You can avail tax benefits on more than one property. For example, in case you are renting out the second property, you can claim full interest deduction (on the second loan) under Sec 24 of IT Act. However, HFCs usually demand a higher down payment on second home loans. Also, your existing loan repayment will have a bearing on the amount of loan you can get for the second property. Remember to keep your debt under control to maintain good credit repayment history and avail further loans in future.

Warm Regards

From Your Expert @ InvestmentYogi

Q: I met an agent who tells me Jeevan Saral will give 10% gauranteed returns. Are these returns gauranteed?

A: Jeevan Saral is an endowment (with-profits) plan that offers high liquidity to the policyholder. It has been awarded the Golden Peacock award by Government of India. However, there is no guaranteed return on Jeevan Saral but loyalty bonus/addition is paid on maturity. Loyalty additions will depend on future profits of LIC. Check out the illustration provided by LIC assuming 6% p.a and 10% p.a. returns scenarios.

Warm Regards

From Your Expert @ InvestmentYogi

Q:  I am planning to invest Rs.75k in each of JSL, JP ASS, UNITECH, ANSAL HOUSING, IND-SWIFT, LYKA LAB. Is it good for 2 to 3 years period?

A: Company deposits give higher returns than bank FDs (but carry higher risk too). Check the company's liquidity position and credit rating before going in for company fixed deposit schemes. Ideally, a company with AAA rating may be considered for investment. Also, it is advisable to go in for lesser term of 1 -2 years (considering the risk associated with these kind of deposits). It is wiser to diversify your investments across asset classes to minimize your chances of losing money in any one particular investment.

Warm Regards

From Your Expert @ InvestmentYogi

Q: I am going to start a new business leaving my current job. The PF money that has been accumulated for the last 12 years of service will be given to me when I leave the job. What would be the safest way to invest this surplus money without compromising on returns (would expect at least 8.5% compounded annually for the next 10 years)?

A: We understand your concern regarding reinvestment of provident fund money. You may consider transferring the proceeds to PPF which gives 8% (compounded annually) with full tax benefits. For safest investments (and returns around 8%), you may also consider the following investments :

• National savings Certificate (NSC)
• 5-year Bank tax saver term deposits (subject to reinvestment risk) - you may have to wait for the interest rates to rise.
• Bank recurring deposits: You can deposit a fixed some each month; no TDS deductions; loans and withdrawal permitted. You can reinvest he proceeds into PPF (to earn higher yield on original investment).     

For the extra push in returns, you may diversify a part of the PF proceeds  (as per your risk profile) into equity investments and/or a combination of  the above. It is prudent to invest across asset classes to minimize the risk of loss from any one investment.

Warm Regards

From Your Expert @ InvestmentYogi

Q: I want to invest Spare Rs.4000/- every month in mutual funds out of my pension. I want to invest in those schemes in which my capital will be safe. I m not much bothered about returns but my capital should be safe. Please suggest me some schemes offered by UTI, HDFC or SBI.

A: For capital-protection mutual funds, you can look at the below debt mutual funds:

•  Monthly-Income Plans (MIPs) - They are debt-oriented hybrid funds and generally invest 80 to 100 per cent in debt instruments and the rest in equity instruments. Good for conservative investors wanting to participate in equity markets without risking their capital. You can look at UTI MIS, HDFC MIP Long Term - growth.
• Bond funds - They are mutual fund schemes that invest in fixed-income securities. Duration of the fund must be lesser than your investment horizon to get good returns. The duration of the fund you choose also depends upon your risk profile; (shorter the duration, lower the fund volatility and vice verse). You can look at HDFC HIF S/T.
• Fixed maturity plans (FMP) - Similar to bank FDs, carry higher risk than bank FDs and higher returns (subject to market risk). Minimum investment = Rs 5000; lesser tax burden compared to bank FDs. Click here for more information regarding FMPs and what points to look for while selecting the same.
• GILT mutual funds - Investment in government backed securities by mutual funds. Although Gilt mutual funds are subject to interest rate risk in the long term, short term funds offer highest safety. In this category, you can consider ICICI Pri Gilt Inv PF-G.   

All the above investments are subject to risks relating to interest rate and reinvestment (while gilt funds via government securities are guaranteed by the government, a bond fund's portfolio carries credit risk. The more your fund's assets are in higher-rated securities (AAA-rated and equivalent), the better it is. Further, debt mutual funds are less liquid (being close-ended) and the returns are comparatively lesser than equity-oriented funds. Please also note that capital-protection mutual funds will protect your capital, but cannot guarantee the returns on it.  We suggest you select an investment according to your investment horizon and risk profile.

Warm Regards

From Your Expert @ InvestmentYogi

Q: I am planning to transfer my home loan from one bank which is lending at 10% interest now to new housing loan bank. Currently I have options: 1) One housing loan bank is charging 8% fixed for first 2 years and floating from year 3 onwards. 2) Other housing loan bank which is covering fixed for 8.9% for first 3years and later floating. Pre processing fee and part payment clauses are same for both the banks. Can you please suggest which housing loan bank I should prefer?

A: The answer to your query depends upon the below parameters:

• Whether current home loan interest rate is fixed or floating
• Loan outstanding which is being transferred to the new housing loan bank
• Floating rate after 2-3 years (floating rate depends upon the economic conditions prevailing at that time);
• Your capacity to overcome the future interest rate changes.         

However, at the outset, we can say that option 2 seems preferable (assuming in both options, there is an increase of 1 % in interest when transferred to floating rate at the end of 2 years and 3 years respectively). Please understand that interest rates are cyclical in nature. Floating-rate loans make sense when the interest rates are high and are expected to fall. Otherwise, they result in higher interest outgo, or with the same EMI, the repayment period may get longer. On the other hand, fixed-rate loans can be considered if you do not want to bear future interest rate risk. So, it typically depends upon how one wants to handle the future interest rate changes. In the current scenario, since interest rates are low and are expected to rise, it makes sense to stick to a fixed interest rate for a longer term. Additionally, before you go in for refinancing of your existing home loan, you may want to consider part prepayment. Any surplus money lying in your savings account, maturing of old investments can be used to partly repay your existing loan before going in for refinancing. In this way, your new EMI will also be considerably lower.

Warm Regards

From Your Expert @ InvestmentYogi

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