Thirteen lakh investors, Rs 8,000 crore (Rs 80 billion) . . . tomorrow will be a big day for US-64 bond holders.
These tax-free bonds were issued in 2003 to bail out Unit Trust of India's flagship scheme US-64, which got into trouble because of lack of transparency in its portfolio composition and investment strategy.
Now these investors will finally get their due. And if you are among those, who have still not decided on what should be done with this windfall, financial advisors say the money should be channelled in instruments depending upon your age and risk profile.
"Responsibilities and risk appetite change according to the age of a person. This, in turn, should decide the investments made in different asset classes," said Kartik Jhaveri, director, Transcend India.
For instance, if you have retired or are on the verge of retirement, take a safety-first approach. This implies investing in instruments that would increase the size of the retirement corpus. To meet the monthly expenses requirement, invest in debt.
"If the investor wants safe returns on his investments, he can invest in RBI bonds. These are tax-free bonds and yield about 6.5 per cent returns," said financial planner Sajag Sanghavi.
There are other taxable debt investments as well such as floater schemes of mutual funds that return around 7 per cent on an average, but only if the money is deployed for three years or more. Floater schemes invest in corporate and government bonds and treasury instruments. They offer returns that are equivalent to the prevailing interest rates.
The senior citizens' savings scheme is another option that gives 9 per cent return annually. However, the income is taxed, based on the income bracket.
Another option is to look at monthly income plans, where 10 per cent of the corpus is invested in equities for returns that are slightly above the other debt-based funds. If you are above 40 years and have already accomplished financial goals, such as buying a house or owning a car, use the money to pre-pay any loans.
And if you have not invested enough for life after retirement, a part of the money should be deployed in diversified equity mutual funds because over a period of five to 10 years, they would give returns of 15 per cent and more.
If you are averse to risk, look at deep discount bonds that give returns of 12 per cent. For instance, Bhavishya Nirman Bonds, issued by Nabard, offer 12.15 per cent returns. However, remember that the accumulated sum would only come to you at the end of the tenure.
If you want, you can splurge a bit. As Hitungshu Debnath, executive director, wealth management services, AngelBroking, put it, "If your financial planning is running sound, you should give a treat yourself with a good vacation at this stage in life."
For youngsters, who have inherited the money by being a nominee or by invested in US-64 units in the early years of their careers, the best route now is pure equity funds or blue-chip stocks. With stock markets volatile, it is the right time to create a portfolio that will give good returns in the long run.
Thirteen lakh investors, Rs 8,000 crore (Rs 80 billion) . . . tomorrow will be a big day for US-64 bond holders.
These tax-free bonds were issued in 2003 to bail out Unit Trust of India's flagship scheme US-64, which got into trouble because of lack of transparency in its portfolio composition and investment strategy.
Now these investors will finally get their due. And if you are among those, who have still not decided on what should be done with this windfall, financial advisors say the money should be channelled in instruments depending upon your age and risk profile.
"Responsibilities and risk appetite change according to the age of a person. This, in turn, should decide the investments made in different asset classes," said Kartik Jhaveri, director, Transcend India.
For instance, if you have retired or are on the verge of retirement, take a safety-first approach. This implies investing in instruments that would increase the size of the retirement corpus. To meet the monthly expenses requirement, invest in debt.
"If the investor wants safe returns on his investments, he can invest in RBI bonds. These are tax-free bonds and yield about 6.5 per cent returns," said financial planner Sajag Sanghavi.
There are other taxable debt investments as well such as floater schemes of mutual funds that return around 7 per cent on an average, but only if the money is deployed for three years or more. Floater schemes invest in corporate and government bonds and treasury instruments. They offer returns that are equivalent to the prevailing interest rates.
The senior citizens' savings scheme is another option that gives 9 per cent return annually. However, the income is taxed, based on the income bracket.
Another option is to look at monthly income plans, where 10 per cent of the corpus is invested in equities for returns that are slightly above the other debt-based funds. If you are above 40 years and have already accomplished financial goals, such as buying a house or owning a car, use the money to pre-pay any loans.
And if you have not invested enough for life after retirement, a part of the money should be deployed in diversified equity mutual funds because over a period of five to 10 years, they would give returns of 15 per cent and more.
If you are averse to risk, look at deep discount bonds that give returns of 12 per cent. For instance, Bhavishya Nirman Bonds, issued by Nabard, offer 12.15 per cent returns. However, remember that the accumulated sum would only come to you at the end of the tenure.
If you want, you can splurge a bit. As Hitungshu Debnath, executive director, wealth management services, AngelBroking, put it, "If your financial planning is running sound, you should give a treat yourself with a good vacation at this stage in life."
For youngsters, who have inherited the money by being a nominee or by invested in US-64 units in the early years of their careers, the best route now is pure equity funds or blue-chip stocks. With stock markets volatile, it is the right time to create a portfolio that will give good returns in the long run.
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Monday, December 1, 2008
Credit card addict? Switch over to cash
Puneet Lakhotia signed up for an ICICI Bank [Get Quote] credit card to book tickets online. His problem: None of the ticketing websites accepted his regular bank's net-banking facility.
But instead of only booking tickets online, the 27-year-old bank employee started splurging. Within a year, he was in a debt trap. "Due to the convenience it offered, I used the credit card to pay bills and shop online for books, movies, music CDs and even bought a cell phone," says Lakhotia. Having learnt the hard way, he has surrendered his credit card and keeps ItzCash, a pre-paid card for online transactions.
Top five expenses
Travel and related activity, including tickets and hotel bookings
Fuel refilling
Consumer durables
Apparel and garments
Jewellery
Credit card for convenience is a very common excuse. Many pay their restaurant and hotel bills because using a debit card involves punching the four-digit identification number. There are other advantages like cash-back benefits or points that attract more expenses.
According to the data compiled by ICICI Bank, the country's largest private sector bank, the top five expenses that consumers make through credit cards include travel and related activity (including tickets and hotel bookings), fuel refilling, consumer durables, apparel and garments and jewellery. Payment of utility bills is another area that is fast catching up.
"Around 8-12 per cent of business comes from the top five areas. At least, 10 per cent of card-holders pay at least one of their utility bills every month through cards," said a banker from a private sector bank.
However, just to make a few expenses, consumers always start over-spending. For those, who cannot control the urge to splurge, using an alternative-payment mechanism is a better idea.
For instance, for buying tickets online, it is better to use pre-paid cards. Three - such cards are currently available in the market - Itzcash, OxiCash and Done Cards.
These cards can be used for a host of other purchases as well. These include online shopping, insurance purchases, mobile recharge and many others.
Like credit cards, these cash cards come at a cost as well, but only for a few transactions like railway bookings and bill payments for public sector utilities. This is because government-owned companies do not give any commission to cash card companies. "The charges are either a maximum of Rs 15 or 1.5 per cent of the value of these transactions, whichever is higher," said Naveen Surya, managing director, Itzcash.
When it comes to petrol bill payments, credit card companies give bonus points and a waiver of fuel surcharge of 2.5 per cent.
Substituting them with pre-paid cards from oil companies would mean the same thing. All the three major oil companies have their own branded cards. For instance, Bharat Petroleum has a Petro Card and Hindustan Petroleum has HP-Smart 1. None of these cards attracts a surcharge and offers similar loyalty bonuses.
For apparel and consumer durables enthusiasts, most retailers on Thursday have loyalty programmes that give discounts for cash purchases. For persons, who cannot handle credit cards, it is best that they go for options that require the use of more cash. It saves them the trouble as well as a high interest payout.
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But instead of only booking tickets online, the 27-year-old bank employee started splurging. Within a year, he was in a debt trap. "Due to the convenience it offered, I used the credit card to pay bills and shop online for books, movies, music CDs and even bought a cell phone," says Lakhotia. Having learnt the hard way, he has surrendered his credit card and keeps ItzCash, a pre-paid card for online transactions.
Top five expenses
Travel and related activity, including tickets and hotel bookings
Fuel refilling
Consumer durables
Apparel and garments
Jewellery
Credit card for convenience is a very common excuse. Many pay their restaurant and hotel bills because using a debit card involves punching the four-digit identification number. There are other advantages like cash-back benefits or points that attract more expenses.
According to the data compiled by ICICI Bank, the country's largest private sector bank, the top five expenses that consumers make through credit cards include travel and related activity (including tickets and hotel bookings), fuel refilling, consumer durables, apparel and garments and jewellery. Payment of utility bills is another area that is fast catching up.
"Around 8-12 per cent of business comes from the top five areas. At least, 10 per cent of card-holders pay at least one of their utility bills every month through cards," said a banker from a private sector bank.
However, just to make a few expenses, consumers always start over-spending. For those, who cannot control the urge to splurge, using an alternative-payment mechanism is a better idea.
For instance, for buying tickets online, it is better to use pre-paid cards. Three - such cards are currently available in the market - Itzcash, OxiCash and Done Cards.
These cards can be used for a host of other purchases as well. These include online shopping, insurance purchases, mobile recharge and many others.
Like credit cards, these cash cards come at a cost as well, but only for a few transactions like railway bookings and bill payments for public sector utilities. This is because government-owned companies do not give any commission to cash card companies. "The charges are either a maximum of Rs 15 or 1.5 per cent of the value of these transactions, whichever is higher," said Naveen Surya, managing director, Itzcash.
When it comes to petrol bill payments, credit card companies give bonus points and a waiver of fuel surcharge of 2.5 per cent.
Substituting them with pre-paid cards from oil companies would mean the same thing. All the three major oil companies have their own branded cards. For instance, Bharat Petroleum has a Petro Card and Hindustan Petroleum has HP-Smart 1. None of these cards attracts a surcharge and offers similar loyalty bonuses.
For apparel and consumer durables enthusiasts, most retailers on Thursday have loyalty programmes that give discounts for cash purchases. For persons, who cannot handle credit cards, it is best that they go for options that require the use of more cash. It saves them the trouble as well as a high interest payout.
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Exports dip 12%, imports up 10% in Oct
Reeling under the impact of global slowdown, India's exports declined by 12.1 per cent in October this fiscal causing concerns of job losses in export-oriented manufacturing units.
Exports dropped to $12.82 billion in October from $14.58 billion a year ago.
However, imports grew by 10.6 per cent to $23.36 billion in October compared to $21.12 billion in the same month last year.
Concerns have been raised over large scale job losses in several export-oriented industries like textile, handicraft and gems and jewellery.
Exports dropped to $12.82 billion in October from $14.58 billion a year ago.
However, imports grew by 10.6 per cent to $23.36 billion in October compared to $21.12 billion in the same month last year.
Concerns have been raised over large scale job losses in several export-oriented industries like textile, handicraft and gems and jewellery.
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