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A mutual fund is an entity that pools the money of many investors -- its unit-holders -- to invest in different securities. Investments may be in shares, debt
securities, money market securities or a combination of these. Those securities areprofessionally managed on behalf of the unit-holders, and each investor holds apro-rata share of the portfolio i.e. entitled to any profits when the securities are
sold, but subject to any losses in value as well.
i) Professional investment management
Mutual funds hire full-time, high-level investment professionals. Funds can afford todo so as they manage large pools of money. The managers have real-time access
to crucial market information and are able to execute trades on the largest andmost cost-effective scale.
ii) Diversification
Mutual funds invest in a broad range of securities. This limits investment risk byreducing the effect of a possible decline in the value of any one security. Mutualfund unit-holders can benefit from diversification techniques usually available onlyto investors wealthy enough to buy significant positions in a wide variety of
securities.
iii) Low Cost
A mutual fund let's you participate in a diversified portfolio for as little asRs.5,000/-, and sometimes less. And with a no-load fund, you pay little or no sales
charges to own them.
iv) Convenience and Flexibility
You own just one security rather than many, yet enjoy the benefits of a diversifiedportfolio and a wide range of services. Fund managers decide what securities totrade, collect the interest payments and see that your dividends on portfolio
securities are received and your rights exercised. It also uses the services of a highquality custodian and registrar in order to make sure that your convenienceremains at the top of our mind.
v) Personal Service
One call puts you in touch with a specialist who can provide you with informationyou can use to make your own investment choices. They will provide you personal
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assistance in buying and selling your fund units, provide fund information andanswer questions about your account status. Our Customer service centers are atyour service and our Marketing team would be eager to hear your comments on our
schemes.
vi) Liquidity
In open-ended schemes, you can get your money back promptly at net asset valuerelated prices from the mutual fund itself.
vii) Transparency
You get regular information on the value of your investment in addition to
disclosure on the specific investments made by the mutual fund scheme.
Click here>> to view SEBI Investor Education
Programmed Guide
The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fundestablished in the form of a trust by a sponsor to raise monies by the Trusteesthrough the sale of units to the public under one or more schemes for investing insecurities in accordance with these regulations.
These regulations have since been replaced by the SEBI (Mutual Funds)
Regulations, 1996. The structure indicated by the new regulations is indicated asunder.
A mutual fund comprises four separate entities, namely sponsor, mutual fund trust,AMC and custodian. The sponsor establishes the mutual fund and gets it registered
with SEBI.
The mutual fund needs to be constituted in the form of a trust and the instrumentof the trust should be in the form of a deed registered under the provisions of the
Indian Registration Act, 1908.
The sponsor is required to contribute at least 40% of the minimum net worth (Rs.10 crore) of the asset management company. The board of trustees manages theMF and the sponsor executes the trust deeds in favour of the trustees. It is the jobof the MF trustees to see that schemes floated and managed by the AMC appointedby the trustees are in accordance with the trust deed and SEBI guidelines.
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The discussion on investment objectives would not be complete without adiscussion on the risks that investing in a mutual fund entails.
At the cornerstone of investing is the basic principle that the greater the risk youtake, the greater the potential reward. Remember that the value of all financial
investments will fluctuate.
Typically, risk is defined as short-term price variability. But on a long-term basis,risk is the possibility that your accumulated real capital will be insufficient to meetyour financial goals. And if you want to reach your financial goals, you must startwith an honest appraisal of your own personal comfort zone with regard to risk.Individual tolerance for risk varies, creating a distinct "investment personality" foreach investor. Some investors can accept short-term volatility with ease, others
with near panic. So whether you consider your investment temperament to beconservative, moderate or aggressive, you need to focus on how comfortable or
uncomfortable you will be as the value of your investment moves up or down.
Recognizing the type of investor you are will go a long way towards helping youbuild a meaningful portfolio of investments that you can live with. Take the test"Tolerance Questionnaire" to determine where your preferences lie.
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Mutual funds offer incredible flexibility in managing investment risk. Diversificationand Automatic Investing (SIP) are two key techniques you can use to reduce yourinvestment risk considerably and reach your long-term financial goals.
Diversification
When you invest in one mutual fund, you instantly spread your risk over a numberof different companies. You can also diversify over several different kinds ofsecurities by investing in different mutual funds, further reducing your potentialrisk. Diversification is a basic risk management tool that you will want to usethroughout your lifetime as you rebalance your portfolio to meet your changingneeds and goals. Investors, who are willing to maintain a mix of equity shares,bonds and money market securities have a greater chance of earning significantlyhigher returns over time than those who invest in only the most conservative
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investments. Additionally, a diversified approach to investing -- combining thegrowth potential of equities with the higher income of bonds and the stability ofmoney markets -- helps moderate your risk and enhance your potential return.
Systematic Investment Plan (SIP)
The Unitholders of the Scheme can benefit by investing specific Rupee amountsperiodically, for a continuous period. Mutual fund SIP allows the investors to investa fixed amount of Rupees every month or quarter for purchasing additional units of
the Scheme at NAV based prices.
Here is an illustration using hypothetical figures indicating how the SIP can work for
investors:
Suppose an investor would like to invest Rs.1,000 under the Systematic Investment
Plan on a quarterly basis.
Amount Invested(Rs.)
Purchase Price(Rs.)
No. of UnitsPurchased
InitialInvestment
1000 10 100
1 1000 8.20 121.95
2 1000 7.40 135.14
3 1000 6.10 163.93
4 1000 5.40 185.19
5 1000 6.00 166.67
6 1000 8.20 121.95
7 1000 9.25 108.11
8 1000 10.00 100.00
9 1000 11.25 88.89
10 1000 13.40 74.63
11 1000 14.40 69.44
TOTAL 12,000 - 1,435.90
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Average unit cost Rs 12,000/1,435.9 = Rs 8.36
Average unit price 109.6/12 = Rs 9.13
Unit price at beginning of next quarter Rs 14.90
Market value of investment 1435.9 * 14.90= Rs 21,395/-
The investor liquidates his units and gets back Rs 21,395/-
Using the SIP strategy the investor can reduce his average cost per unit. The
investor gets the advantage of getting more units when the market is turned down.
All investments involve some form of risk. Even an insured bank account is subject
to the possibility that inflation will rise faster than your earnings, leaving you withless real purchasing power than when you started (Rs. 1000 gets you less than itgot your father when he was your age). Consider these common types of risk and
evaluate them against potential rewards when you select an investment.
At times the prices or yields of all the securities in a particular market rise or falldue to broad outside influences. When this happens, the stock prices of both an
outstanding, highly profitable company and a fledgling corporation may be affected.
This change in price is due to "market risk".
Sometimes referred to as "loss of purchasing power." Whenever inflation sprintsforward faster than the earnings on your investment, you run the risk that you'llactually be able to buy less, not more. Inflation risk also occurs when prices rise
faster than your returns.
In short, how stable is the company or entity to which you lend your money when
you invest? How certain are you that it will be able to pay the interest you arepromised, or repay your principal when the investment matures?
Changing interest rates affect both equities and bonds in many ways. Investors arereminded that "predicting" which way rates will go is rarely successful. A diversified
portfolio can help in offseting these changes.
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An industries' key asset is offen the personnel who run the business i.e. intellectualproperties of the key employees of the respective companies. Given the ever-changing complexion of few industries and the high obsolescence levels, availability
of qualified, trained and motivated personnel is very critical for the success ofindustries in few sectors. It is, therefore, necessary to attract key personnel andalso to retain them to meet the changing environment and challenges the sectoroffers.
Failure or inability to attract/retain such qualified key personnel may impact the
prospects of the companies in the particular sector in which the fund invests.
A number of companies generate revenues in foreign currencies and may have
investments or expenses also denominated in foreign currencies. Changes inexchange rates may, therefore, have a positive or negative impact on companies
which in turn would have an effect on the investment of the fund.
The sectoral fund schemes, investments will be predominantly in equities of selectcompanies in the particular sectors. Accordingly, the NAV of the schemes are linked
to the equity performance of such companies and may be more volatile than a morediversified portfolio of equities.
Changes in Government policy especially in regard to the tax benefits may impactthe business prospects of the companies leading to an impact on the investments
made by the fund.
The first step to investing in Mutual Fund is to define the objective of investing. Youshould clearly lay down the purpose for which you desire to invest. There areseveral schemes tailor made to meet certain personal financial goals (children's
education, marriage, retirement etc.) which can be availed of. You should definethe tenure of investment and the risk appetite you have. Thereafter, you can selecta fund type that best meets your need i.e. income schemes, liquid schemes, taxsaving schemes, equity schemes etc. Given the plethora of fund options available toyou, you can then choose the particular fund that you are comfortable with.
You can choose the fund on various criteria but primarily these can be thefollowing:
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y The track record of performance of schemes over the last few years managedby the fund
y Quality of management and administrationy Parentage of the Mutual Fundy Quality and adequacy of disclosuresy Service levelsy The price at which you can enter/exit (i.e. entry load / exit load) the scheme
and its impact on overall returny The market price of the units of the scheme (where available) to see the
discount/premium that the market assigns to the stated NAV of the scheme
y Independent rating of the schemes, if available
You could be investing in a mutual fund either at the initial stage when the mutualfund approaches the market through an offer document route or at a subsequentstage.
If you choose to invest at the initial stage, the offer document would detail the
schemes being offered and the manner of investing. The manner is usually similarto that of investing any public issue of any security (equity/debt).
If you are planning to purchase the units subsequently, then the following choicesexist:
1. A close ended scheme. If the desired units are of a close-ended scheme, thenthe investor would be able to purchase them at the stock exchange wherethe MF has listed them. This purchase would resemble the purchase of anequity share wherein the investor would pay the quoted price of the unit aswell as a brokerage for the purchase transaction. In the case of a close
ended scheme, the sale also is effected through the stock exchangemechanism and resembles the sale of equity share.The pricing for thetransaction, as was mentioned earlier, is driven by the price the units quote.This is driven by the NAV ( Net Asset Value) of the scheme. The price,however, may be either at a discount or premium to the NAV.
2. Purchasing a unit in a open-ended scheme is different as there is noexchange where these units are traded. Their price reflects the NAV of thescheme. The mutual fund in an open-ended scheme sells these units to the
investor at the NAV (plus a sale / entry load).
Selling units in an open-ended scheme is similar to the way they are purchased. Itis the mutual fund that buys back the units and at a price based on the NAV. Theactual price is the NAV less the exit load. The exit load is similar in concept to the
entry load.
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Some of the commonly used terms in the industry are explained
here.
Advisor
Your financial consultant who gives professional advice on the fund's investmentsand to supervise the management of its assets.
Amortization
A method of equated monthly payments over the life of a loan. Payments usuallyare paid monthly but can be paid annually, quarterly, or on any other schedule. Inthe early part of a loan, repayment of interest is higher than that of principal. This
relationship is reversed at the end of the loan.
Appreciation
When an investment increases in value, it appreciates. For example, a equity sharewhose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.
Arbitrage
The practice of buying and selling an interlisted stock on different exchanges inorder to profit from minute differences in price between the two markets.
Asset
Property and resources, such as cash and investments, comprise a person's assets;i.e., anything that has value and can be traded. Examples include stocks, bonds,
real estate, bank accounts, and jewellery.
Asset Allocation
When you divide your money among various types of investments, such as stocks,bonds, and short-term investments (also known as "instruments"), you areallocating your assets. The way in which your money is divided is called your asset
allocation.
Asked or Offering Price
The price at which a mutual fund's shares can be purchased. The asked or offeringprice means the current net asset value (NAV) per share plus sales charge, if any.
For a no-load fund, the asked price is the same as the NAV.
Asset Allocation Fund
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A fund that spreads its portfolio among a wide variety of investments, includingdomestic and foreign stocks and bonds, government securities, gold bullion and realestate stocks. This gives small investors far more diversification than they could getallocating money on their own. Some of these funds keep the proportions allocatedbetween different sectors relatively constant, while others alter the mix as market
conditions change.
Automatic Reinvestment
A service offered by most mutual funds whereby income, dividends and capital gaindistributions are automatically invested into the fund by buying additional shares
and thus building up holdings through the effects of compounding.
Annualised Return
This is the hypothetical rate of return, that, if the fund achieved it over a year'stime, would produce the same cumulative total return if the fund performedconsistently over the entire period. A total return is expressed in a percentage andtells you how much money you have earned or lost on an investment over time,
assuming that all dividends and capital gains are reinvested.
Balance Sheet
A financial statement showing the nature and amount of a company's assets,
liabilities and shareholders' equity.
Balanced Fund
A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60%
equity.
Barter
The exchange of goods and services for other goods and services without the use of
money.
Basis Point
A phrase used to describe differences in bond yields, with one basis point
representing one-hundredth of a percentage point. Thus if Bond X yields 8.5 percent and Bond Y 8.75 per cent, the difference is 25 basis points.
Bid or Sell Price
The price at which a mutual fund's shares are redeemed (bought back) by the fund.
The bid or redemption price means the current net asset value per share, less any
redemption fee or back-end load.
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Blue Chip
A share in a large, safe, prestigious company, of the highest class amongstockmarket investments. A blue-chip company would be called thus by being well-known, having a large paid-up capital, a good track record of dividend payments
and skilled management.
Board of Directors
A committee elected by the shareholders of a company, empowered to act on theirbehalf in the management of company affairs. Directors are normally elected each
year at the annual meeting.
Bond/Income Fund
A mutual fund whose portfolio consists primarily of corporate and government
securities. These funds generally emphasize income rather than growth.
Bond Rating
System of evaluating the probability of whether a bond issuer will default. CRISIL,ICRA, CARE and other rating agencies, analyze the financial stability of bothcorporate and state government debt issuers. Ratings range from AAA (extremelyunlikely to default) to D (likely to default). Mutual funds generally restrict theirbond purchases to issues of certain quality ratings, which are specified in theirprospectuses.
Capital
This is the amount of money you have invested. When your investing objective iscapital preservation, your priority is trying not to lose any money. When yourinvesting objective is capital growth, your priority is trying to make your initialinvestment grow in value.
Capital Appreciation Fund
A mutual fund that seeks maximum capital appreciation through the use ofinvestment techniques involving greater than ordinary risk, such as borrowing
money in order to provide leverage and high portfolio turnover.
Capital Gain
Profit from a sale of an investment constitutes a capital gain. For example, if youbought a share of stock for Rs. 5/- and later sold it for Rs. 7/-, you would have a
capital gain of Rs. 2/-.
Capital Gains Distributions
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Payments (usually annually) to mutual fund shareholders of gains realized on the
sale of portfolio securities.
Capital Growth
A rise in market value of a mutual fund's securities, reflected in its NAV per share.This is a specific long-term objective of many mutual funds.
Certificate of Deposit
Interest-bearing, short-term debt instrument mainly issued by Financial
institutions.
Closed-ended Mutual Fund
A mutual fund that offers a limited number of shares. They are traded in the
securities markets. Price is determined by supply and demand. Unlike open-endedmutual funds, closed-ended funds do not redeem their shares.
Collateral Security
This is extra security provided by a borrower to back up his/her intention to repay a
loan.
Commercial Paper
Short-term, unsecured promissory notes with maturities shorter than 3 months.
They are issued by corporations to fund short-term credit needs.
Commission
The broker's or agent's fee for buying or selling securities for a client. The fee isusually based on a percentage of the transaction's market value.
Compounding
When you deposit money in a bank, it earns interest. When that interest alsobegins to earn interest, the result is compound interest. Compounding occurs ifbond income or dividends from stocks or mutual funds are reinvested. Because of
compounding, money has the potential to grow much faster.
Consideration
The 'consideration' is the total purchase or sale amount associated with atransaction. The amount you 'pay' or 'receive'. It may also be the basis for workingout the commission, taxes and any other charges you are asked to pay.
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Conversion Priviledge
See Exchange Priviledge
Custodian
The bank or trust company that maintains a mutual fund's assets, including itsportfolio of securities or some record of them. Provides safekeeping of securities
but has no role in portfolio management.
Deficit
The shortfall between government revenues and budgetary spending in any givenyear. A surplus occurs when annual revenues exceed expenditures.
Derivative
An investment contract based on an underlying investment called an "instrument."The most common type of derivative is an option contract, which involves the rightto buy or sell the underlying instrument at an agreed price. Futures contracts are
also derivatives.
Diversification
The policy of spreading investments among a range of different securities to reduce
the risks inherent in investing.
Dividend
When companies pay part of their profits to shareholders, those profits are calleddividends. A mutual fund's dividend is money paid to shareholders from investmentincome the fund has earned. The amount of each share's dividend depends on how
well the company does.
Endorsement
Assigning or transferring a lien to another person is accomplished through the useof an endorsement. The words "PAY TO THE ORDER OF" and then the name of theperson to whom the lien is being assigned to, is written. If there is not enoughspace on the original note to write an endorsement, it is written on a separate piece
of paper that is permanently affixed to the original note. This is called an allonge.
Exchange Priviledge
The right to transfer investments from one fund into another, generally within the
same fund group, at nominal cost.
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Ex-Dividend Date
The date on which a fund's Net Asset Value (NAV) will fall by an amount equal tothe dividend and/or capital gains distribution (although market movements mayalter the fund's closing NAV somewhat). Most publications that list closing NAVs
place an "X" after a fund's name on its Ex-Dividend Date.
Expense Ratio
The ratio of total expenses to net assets of the fund. Expenses include managementfees, the cost of shareholder mailings and other administrative expenses. The ratiois listed in a fund's prospectus. Expense ratios may be a function of a fund's sizerather than of its success in controlling expenses.
Face Value
The face value is the term used to describe the value of a bond in terms of what thecompany which issued the bond will actually repay when the loan matures. It's
sometimes described as nominal or par value.
Fiscal Year
An accounting period consisting of 12 consecutive months.
Growth Fund
A mutual fund whose primary investment objective is long-term growth of capital.
It invests principally in common stocks with significant growth potential.
Income Fund
A mutual fund that primarily seeks current income rather than growth of capital. Itwill tend to invest in stocks and bonds that normally pay high dividends and
interest.
Index Fund
A mutual fund that seeks to mirror general stock-market performance by matchingits portfolio to a broad-based index (e.g. BSE Sensex).
Inflation
When the price of goods and services rises, the result is called inflation. This means
that things you buy today at one price are likely to cost more in the future.
Institutional Investor
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An institutional investor is a professional money manager whose job it is to putmoney into shares and other assets on behalf of private investors who entrust themwith money via their pension and life insurance funds.
International Fund
A fund that invests in securities traded in markets outside India.
Investment Advisor
See Advisor
Investment Objective
The financial goal (long-term growth, current income, etc.) that an investor or a
mutual fund pursues.
Issued Share Capital
This is the total number of shares a company has made publicly available multipliedby the total nominal value of the shares. A company may have 10 million shares inissue, each with a nominal value of Re. 1. So the issued share capital is Rs. 10
million.
Junk Bond
A speculative bond with higher credit risk.
Lessee
The person who makes lease payments. He has right of possession and use of a
property under the terms of a lease.
Lessor
The person who receives lease payments. He leases property.
LIBOR
LIBOR stands for London Inter Bank Offer Rate. It's the rate of interest at which
banks offer to lend money to one another in the so-called wholesale moneymarkets in the City of London. Money can be borrowed overnight or for a period ofin excess of five years. The most often quoted rate is for three month money. '3month LIBOR' tends to be used as a yardstick for lenders involved in high valuetransactions. They tend to quote rates as 'points above LIBOR'. So if 3 month
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LIBOR were (say) six per cent, a bank may choose to lend to another bank at (say)
6 and a quarter per cent. e.g. a quarter per cent above 3 month LIBOR.
Lien
A type of security instrument (i.e., a tax lien), placed against property, making itsecurity for the payment of a debt, judgment, mortgage, or taxes. If the lien is notpaid, the lien holder has the right to confiscate the property in order to recover the
money that was loaned.
Liquidity
If you can generally buy or sell an asset quickly, or convert it to cash quickly, then
that asset is considered "liquid."
Load
A sales charge or commission assessed by certain mutual funds ("load funds") to
cover their selling costs.
Load Fund
A mutual fund that levies a sales charge, which is included in the offering price ofits shares, and is sold by a broker or salesman. A front-end load is the fee chargedwhen buying into a fund; a back-end load is the fee charged when getting out of afund. See Redemption Fee.
L
ow-L
oad Fund
A mutual funds that charges small commission, usually 1.5% or less, for thepurchase of its shares.
Management Fee
The amount that an Asset Management Company (AMC) charges for managementof the fund's portfolio. In general, this fee ranges from 0.5% to 1.25% of the fund's
asset value.
Market
A public place where the buying and selling of all types of bonds, stocks and othersecurities takes place. A stock exchange is a market.
Maturity
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This is the length of time (term) before a debt instrument, such as a bond, is due to
be repaid in full.
Money Market Fund
A mutual fund that aims to pay money market interest rates. This is accomplishedby investing in safe, highly liquid securities, including certificates of deposit,commercial paper, and Government securities. Money funds make these highinterest securities available to the average investor seeking immediate income and
high investment safety.
Mortgage
A legal instrument given by a borrower to the lender entitling the lender to takeover pledged property if conditions of the loan are not met.
Net Asset Value
Also known as NAV, this is the unit price (or rupee value) of one unit of a mutualfund. NAV is calculated at the end of every business day. It is calculated by addingup the value of all the securities and cash in the mutual fund's portfolio (its assets),subtracting the fund's liabilities, and dividing that number by the number of unitsthat the fund has issued. It does not include a sales charge. The NAV increases (or
decreases) when the value of the mutual fund's holdings increase (or decrease).
Net Worth
A person's net worth is equal to the total value of all possessions, such as a house,stocks, bonds, and other securities, minus all outstanding debts, such as mortgage
and revolving credit lines.
No-Load Fund
A commission-free mutual fund that sells its units at NAV, either directly to the
public or through an affiliated distributor, without the addition of a sales charge.
Offer Document
See Prospectus
Option
A device used to speculate or hedge in securities markets. Buying a "call" optiongives an investor the right to buy 100 shares of a stock at a certain price within aspecified time; buying a "put" option allows an investor to sell a stock under the
same conditions.
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Premium
A bond premium is the amount by which a bond sells above its par (face) value. For
insurance, the premium is the amount you pay for your insurance policy.
Price/Earnings Ratio
This is the price of a stock divided by its earnings per share. This ratio gives aninvestor an idea of how much they are paying for a particular company's earningpower. A trailing P/E refers to a ratio that is based on earnings from the latest year,while a forward P/E uses an analyst's forecast of next year's earnings. For instance,a stock selling for Rs. 20 a share that earned Re. 1 last year has a trailing P/E of20. If the same stock has projected earnings of Rs. 2 next year, then it has a
forward P/E of 10.
Price Stability
Price stability protects the original amount you put into an investment. A mutual
fund's price stability is seen in changes in its net asset value over time.
Prospectus
An official document that each investment company must publish, describing themutual fund and offering its shares for sale. It contains information that has been
mandatorily required by SEBI.
Rate of Return
The total proceeds derived from the investment per rupee initially invested.Proceeds must be defined broadly to include both cash distributions and capital
gains. The rate of return is expressed as a percentage.
Record Date
The date the fund determines who its unitholders are; "unitholders of record" who
will receive the fund's income dividend and/or net capital gains distribution.
Redeemable
Preferred shares or bonds that give the issuing corporation an option to repurchase
securities at a stated price. These are also known as callable securities.
Redemption Fee
A fee charged by a limited number of funds for redeeming, or buying back, fund
units.
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Redemption Price
The price at which a mutual fund's units are redeemed (bought back) by the fund.
The redemption price is usually equal to the current NAV per unit.
Regional Fund
A mutual fund that concentrates its investments within a specific geographic area,usually the fund's local region. The objective is to take advantage of regionalgrowth potential before the national investment community does.
Registrar
See Transfer Agents
Reinvestment Date
The date on which a share's dividend and/or capital gains will be reinvested (ifrequested) in additional fund shares.
Reinvestment Privilege
A service that most mutual funds offer whereby a shareholders income dividendsand capital gains distributions are automatically reinvested in additional shares. SeeAutomatic Reinvestment.
Rupee Cost Averaging ( SIP)
The technique of investing a fixed sum at regular intervals regardless of stockmarket movements. This reduces average share costs to the investor, who acquiresmore shares in periods of lower securities prices and fewer shares in periods of highprices. In this way, investment risk is spread over time.
Sector Fund
A fund that operates several specialized industries sectors portfolios under one
umbrella. These sectors could be FMCG or Technology.
Securities
This is another word for stocks, bonds, and short-term investments.
Securitization
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A process under which non-marketable assets, such as mortgages, automobileleases and credit card receivables, are converted into marketable securities thatcan be traded among investors.
Specialty Fund (See Sector Fund)
A mutual fund specializing in the securities of a particular industry or group of
industries or special types of securities.
Spread
The difference between the rates at which money is deposited in a financialinstitution and the higher rates at which the money is lent out. Also, the difference
between the bid and ask price for a security.
Subsidy
A financial contribution by government (including any form of income or pricesupport) that also confers a benefit to the recipient (i.e., producers of goods orservices or buyers of goods). Many types of government practices constitute afinancial contribution, including traditional forms of subsidies such as grants and
loans, as well as foregone revenues such as tax credits.
Systematic Investment Plan
Many mutual funds offer investment programs whereby unitholders can invest. TheUnitholders of the scheme can benefit by investing specific Rupee amounts
periodically, for a continuous period. The SIP allows the investors to invest a fixedamount of Rupees every month or quarter for purchasing additional units of the
scheme at NAV based prices.
Systematic Withdrawal Plans
Many mutual funds offer withdrawal programs whereby unitholders receivepayments from their investments. These payments are usually drawn from thefund's dividend income and capital gain distributions, if any, and from principal onlywhen necessary.
Total Return
The performance of an investment, including yield (dividends, interest, capitalgains) as well as changes in per unit price, calculated over a designated period oftime. Assuming reinvestment of capital gains and income distributions, multiply thenumber of units owned by the net asset value per unit. Subtract the originalinvestment from the result. Then divide that figure by the original investment andmultiply by 100. (Assuming your units are now worth Rs. 8,000 and the investment
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was Rs. 5,000/-, divide Rs. 3,000/- by Rs. 5,000/- getting 0.6. Multiplied by 100-percentage increase, or total return, was 60%.) Also see Yield.
Trade Date
The actual date on which your shares were purchased or sold. The transaction priceis determined by the closing Net Asset Value on that date.
Transfer Agent (also Registrar)
The organization that mutual funds employ to prepare and maintain records relatingto unitholder accounts. Some mutual fund groups operate in-house transfer
agencies.
Trustee
One designated to hold property for another, pending the performance of anobligation. In a deed of trust state, the trustee is often the title company that
handled the property sale closing.
Underwriter
The organization that acts as the distributor of a mutual funds units to
broker/dealers and the public.
Vertical Integration
This is where a company merges or takes over other companies in the same supplychain. If a shoe manufacturer, takes over his supplier it would be vertical
integration.
Volatility
In investing, volatility refers to the ups and downs of the price of an investment.
The greater the ups and downs, the more volatile the investment.
Voluntary Plan
A flexible plan for capital accumulation, involving no specified time frame or total
sum to be invested.
Yield
Income or return received from an investment, usually expressed as a percentageof market prices, over a designated period. For a mutual fund, yield is interest ordividend before any gain or loss in the price per share. See Total Return.
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Zero Coupon Bond
Bond sold at a fraction of its face value. It appreciates gradually, but no periodicinterest payments are made. Earnings accumulate until maturity, when the bond is
redeemable at full face value.
Some of the commonly used terms in the industry are explained
here.
Advisor
Your financial consultant who gives professional advice on the fund's investments
and to supervise the management of its assets.
Amortization
A method of equated monthly payments over the life of a loan. Payments usuallyare paid monthly but can be paid annually, quarterly, or on any other schedule. Inthe early part of a loan, repayment of interest is higher than that of principal. This
relationship is reversed at the end of the loan.
Appreciation
When an investment increases in value, it appreciates. For example, a equity share
whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.
Arbitrage
The practice of buying and selling an interlisted stock on different exchanges inorder to profit from minute differences in price between the two markets.
Asset
Property and resources, such as cash and investments, comprise a person's assets;i.e., anything that has value and can be traded. Examples include stocks, bonds,
real estate, bank accounts, and jewellery.
Asset Allocation
When you divide your money among various types of investments, such as stocks,bonds, and short-term investments (also known as "instruments"), you areallocating your assets. The way in which your money is divided is called your asset
allocation.
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Asked or Offering Price
The price at which a mutual fund's shares can be purchased. The asked or offeringprice means the current net asset value (NAV) per share plus sales charge, if any.
For a no-load fund, the asked price is the same as the NAV.
Asset Allocation Fund
A fund that spreads its portfolio among a wide variety of investments, includingdomestic and foreign stocks and bonds, government securities, gold bullion and realestate stocks. This gives small investors far more diversification than they could getallocating money on their own. Some of these funds keep the proportions allocatedbetween different sectors relatively constant, while others alter the mix as market
conditions change.
Automatic Reinvestment
A service offered by most mutual funds whereby income, dividends and capital gaindistributions are automatically invested into the fund by buying additional shares
and thus building up holdings through the effects of compounding.
Annualised Return
This is the hypothetical rate of return, that, if the fund achieved it over a year'stime, would produce the same cumulative total return if the fund performedconsistently over the entire period. A total return is expressed in a percentage andtells you how much money you have earned or lost on an investment over time,
assuming that all dividends and capital gains are reinvested.
Balance Sheet
A financial statement showing the nature and amount of a company's assets,liabilities and shareholders' equity.
Balanced Fund
A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60%equity.
Barter
The exchange of goods and services for other goods and services without the use of
money.
Basis Point
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A phrase used to describe differences in bond yields, with one basis pointrepresenting one-hundredth of a percentage point. Thus if Bond X yields 8.5 percent and Bond Y 8.75 per cent, the difference is 25 basis points.
Bid or Sell Price
The price at which a mutual fund's shares are redeemed (bought back) by the fund.The bid or redemption price means the current net asset value per share, less any
redemption fee or back-end load.
Blue Chip
A share in a large, safe, prestigious company, of the highest class amongstockmarket investments. A blue-chip company would be called thus by being well-known, having a large paid-up capital, a good track record of dividend payments
and skilled management.
Board of Directors
A committee elected by the shareholders of a company, empowered to act on theirbehalf in the management of company affairs. Directors are normally elected each
year at the annual meeting.
Bond/Income Fund
A mutual fund whose portfolio consists primarily of corporate and government
securities. These funds generally emphasize income rather than growth.
Bond Rating
System of evaluating the probability of whether a bond issuer will default. CRISIL,ICRA, CARE and other rating agencies, analyze the financial stability of bothcorporate and state government debt issuers. Ratings range from AAA (extremelyunlikely to default) to D (likely to default). Mutual funds generally restrict theirbond purchases to issues of certain quality ratings, which are specified in theirprospectuses.
Capital
This is the amount of money you have invested. When your investing objective iscapital preservation, your priority is trying not to lose any money. When yourinvesting objective is capital growth, your priority is trying to make your initialinvestment grow in value.
Capital Appreciation Fund
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A mutual fund that seeks maximum capital appreciation through the use ofinvestment techniques involving greater than ordinary risk, such as borrowingmoney in order to provide leverage and high portfolio turnover.
Capital Gain
Profit from a sale of an investment constitutes a capital gain. For example, if youbought a share of stock for Rs. 5/- and later sold it for Rs. 7/-, you would have a
capital gain of Rs. 2/-.
Capital Gains Distributions
Payments (usually annually) to mutual fund shareholders of gains realized on the
sale of portfolio securities.
Capital Growth
A rise in market value of a mutual fund's securities, reflected in its NAV per share.
This is a specific long-term objective of many mutual funds.
Certificate of Deposit
Interest-bearing, short-term debt instrument mainly issued by Financialinstitutions.
Closed-ended Mutual Fund
A mutual fund that offers a limited number of shares. They are traded in thesecurities markets. Price is determined by supply and demand. Unlike open-ended
mutual funds, closed-ended funds do not redeem their shares.
Collateral Security
This is extra security provided by a borrower to back up his/her intention to repay a
loan.
Commercial Paper
Short-term, unsecured promissory notes with maturities shorter than 3 months.
They are issued by corporations to fund short-term credit needs.
Commission
The broker's or agent's fee for buying or selling securities for a client. The fee is
usually based on a percentage of the transaction's market value.
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Compounding
When you deposit money in a bank, it earns interest. When that interest alsobegins to earn interest, the result is compound interest. Compounding occurs ifbond income or dividends from stocks or mutual funds are reinvested. Because of
compounding, money has the potential to grow much faster.
Consideration
The 'consideration' is the total purchase or sale amount associated with atransaction. The amount you 'pay' or 'receive'. It may also be the basis for working
out the commission, taxes and any other charges you are asked to pay.
Conversion Priviledge
See Exchange Priviledge
Custodian
The bank or trust company that maintains a mutual fund's assets, including itsportfolio of securities or some record of them. Provides safekeeping of securitiesbut has no role in portfolio management.
Deficit
The shortfall between government revenues and budgetary spending in any givenyear. A surplus occurs when annual revenues exceed expenditures.
Derivative
An investment contract based on an underlying investment called an "instrument."The most common type of derivative is an option contract, which involves the rightto buy or sell the underlying instrument at an agreed price. Futures contracts are
also derivatives.
Diversification
The policy of spreading investments among a range of different securities to reducethe risks inherent in investing.
Dividend
When companies pay part of their profits to shareholders, those profits are calleddividends. A mutual fund's dividend is money paid to shareholders from investmentincome the fund has earned. The amount of each share's dividend depends on how
well the company does.
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Endorsement
Assigning or transferring a lien to another person is accomplished through the useof an endorsement. The words "PAY TO THE ORDER OF" and then the name of theperson to whom the lien is being assigned to, is written. If there is not enough
space on the original note to write an endorsement, it is written on a separate pieceof paper that is permanently affixed to the original note. This is called an allonge.
Exchange Priviledge
The right to transfer investments from one fund into another, generally within the
same fund group, at nominal cost.
Ex-Dividend Date
The date on which a fund's Net Asset Value (NAV) will fall by an amount equal to
the dividend and/or capital gains distribution (although market movements mayalter the fund's closing NAV somewhat). Most publications that list closing NAVs
place an "X" after a fund's name on its Ex-Dividend Date.
Expense Ratio
The ratio of total expenses to net assets of the fund. Expenses include managementfees, the cost of shareholder mailings and other administrative expenses. The ratiois listed in a fund's prospectus. Expense ratios may be a function of a fund's sizerather than of its success in controlling expenses.
Face Value
The face value is the term used to describe the value of a bond in terms of what thecompany which issued the bond will actually repay when the loan matures. It's
sometimes described as nominal or par value.
Fiscal Year
An accounting period consisting of 12 consecutive months.
Growth Fund
A mutual fund whose primary investment objective is long-term growth of capital.
It invests principally in common stocks with significant growth potential.
Income Fund
A mutual fund that primarily seeks current income rather than growth of capital. Itwill tend to invest in stocks and bonds that normally pay high dividends andinterest.
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Index Fund
A mutual fund that seeks to mirror general stock-market performance by matching
its portfolio to a broad-based index (e.g. BSE Sensex).
Inflation
When the price of goods and services rises, the result is called inflation. This means
that things you buy today at one price are likely to cost more in the future.
Institutional Investor
An institutional investor is a professional money manager whose job it is to putmoney into shares and other assets on behalf of private investors who entrust them
with money via their pension and life insurance funds.
International Fund
A fund that invests in securities traded in markets outside India.
Investment Advisor
See Advisor
Investment Objective
The financial goal (long-term growth, current income, etc.) that an investor or a
mutual fund pursues.
Issued Share Capital
This is the total number of shares a company has made publicly available multipliedby the total nominal value of the shares. A company may have 10 million shares inissue, each with a nominal value of Re. 1. So the issued share capital is Rs. 10
million.
Junk Bond
A speculative bond with higher credit risk.
Lessee
The person who makes lease payments. He has right of possession and use of a
property under the terms of a lease.
Lessor
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The person who receives lease payments. He leases property.
LIBOR
LIBOR stands for London Inter Bank Offer Rate. It's the rate of interest at which
banks offer to lend money to one another in the so-called wholesale moneymarkets in the City of London. Money can be borrowed overnight or for a period ofin excess of five years. The most often quoted rate is for three month money. '3month LIBOR' tends to be used as a yardstick for lenders involved in high valuetransactions. They tend to quote rates as 'points above LIBOR'. So if 3 monthLIBOR were (say) six per cent, a bank may choose to lend to another bank at (say)
6 and a quarter per cent. e.g. a quarter per cent above 3 month LIBOR.
Lien
A type of security instrument (i.e., a tax lien), placed against property, making itsecurity for the payment of a debt, judgment, mortgage, or taxes. If the lien is notpaid, the lien holder has the right to confiscate the property in order to recover themoney that was loaned.
Liquidity
If you can generally buy or sell an asset quickly, or convert it to cash quickly, then
that asset is considered "liquid."
Load
A sales charge or commission assessed by certain mutual funds ("load funds") to
cover their selling costs.
Load Fund
A mutual fund that levies a sales charge, which is included in the offering price ofits shares, and is sold by a broker or salesman. A front-end load is the fee chargedwhen buying into a fund; a back-end load is the fee charged when getting out of afund. See Redemption Fee.
Low-Load Fund
A mutual funds that charges small commission, usually 1.5% or less, for the
purchase of its shares.
Management Fee
The amount that an Asset Management Company (AMC) charges for managementof the fund's portfolio. In general, this fee ranges from 0.5% to 1.25% of the fund'sasset value.
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Market
A public place where the buying and selling of all types of bonds, stocks and othersecurities takes place. A stock exchange is a market.
Maturity
This is the length of time (term) before a debt instrument, such as a bond, is due to
be repaid in full.
Money Market Fund
A mutual fund that aims to pay money market interest rates. This is accomplishedby investing in safe, highly liquid securities, including certificates of deposit,commercial paper, and Government securities. Money funds make these highinterest securities available to the average investor seeking immediate income and
high investment safety.
Mortgage
A legal instrument given by a borrower to the lender entitling the lender to takeover pledged property if conditions of the loan are not met.
Net Asset Value
Also known as NAV, this is the unit price (or rupee value) of one unit of a mutualfund. NAV is calculated at the end of every business day. It is calculated by addingup the value of all the securities and cash in the mutual fund's portfolio (its assets),subtracting the fund's liabilities, and dividing that number by the number of unitsthat the fund has issued. It does not include a sales charge. The NAV increases (or
decreases) when the value of the mutual fund's holdings increase (or decrease).
Net Worth
A person's net worth is equal to the total value of all possessions, such as a house,stocks, bonds, and other securities, minus all outstanding debts, such as mortgage
and revolving credit lines.
No-Load Fund
A commission-free mutual fund that sells its units at NAV, either directly to thepublic or through an affiliated distributor, without the addition of a sales charge.
Offer Document
See Prospectus
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Option
A device used to speculate or hedge in securities markets. Buying a "call" optiongives an investor the right to buy 100 shares of a stock at a certain price within aspecified time; buying a "put" option allows an investor to sell a stock under the
same conditions.
Premium
A bond premium is the amount by which a bond sells above its par (face) value. For
insurance, the premium is the amount you pay for your insurance policy.
Price/Earnings Ratio
This is the price of a stock divided by its earnings per share. This ratio gives aninvestor an idea of how much they are paying for a particular company's earning
power. A trailing P/E refers to a ratio that is based on earnings from the latest year,while a forward P/E uses an analyst's forecast of next year's earnings. For instance,a stock selling for Rs. 20 a share that earned Re. 1 last year has a trailing P/E of20. If the same stock has projected earnings of Rs. 2 next year, then it has aforward P/E of 10.
Price Stability
Price stability protects the original amount you put into an investment. A mutualfund's price stability is seen in changes in its net asset value over time.
Prospectus
An official document that each investment company must publish, describing themutual fund and offering its shares for sale. It contains information that has been
mandatorily required by SEBI.
Rate of Return
The total proceeds derived from the investment per rupee initially invested.Proceeds must be defined broadly to include both cash distributions and capitalgains. The rate of return is expressed as a percentage.
Record Date
The date the fund determines who its unitholders are; "unitholders of record" who
will receive the fund's income dividend and/or net capital gains distribution.
Redeemable
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Preferred shares or bonds that give the issuing corporation an option to repurchase
securities at a stated price. These are also known as callable securities.
Redemption Fee
A fee charged by a limited number of funds for redeeming, or buying back, fundunits.
Redemption Price
The price at which a mutual fund's units are redeemed (bought back) by the fund.
The redemption price is usually equal to the current NAV per unit.
Regional Fund
A mutual fund that concentrates its investments within a specific geographic area,
usually the fund's local region. The objective is to take advantage of regionalgrowth potential before the national investment community does.
Registrar
See Transfer Agents
Reinvestment Date
The date on which a share's dividend and/or capital gains will be reinvested (if
requested) in additional fund shares.
Reinvestment Privilege
A service that most mutual funds offer whereby a shareholders income dividendsand capital gains distributions are automatically reinvested in additional shares. SeeAutomatic Reinvestment.
Rupee Cost Averaging ( SIP)
The technique of investing a fixed sum at regular intervals regardless of stockmarket movements. This reduces average share costs to the investor, who acquiresmore shares in periods of lower securities prices and fewer shares in periods of high
prices. In this way, investment risk is spread over time.
Sector Fund
A fund that operates several specialized industries sectors portfolios under one
umbrella. These sectors could be FMCG or Technology.
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Securities
This is another word for stocks, bonds, and short-term investments.
Securitization
A process under which non-marketable assets, such as mortgages, automobileleases and credit card receivables, are converted into marketable securities that
can be traded among investors.
Specialty Fund (See Sector Fund)
A mutual fund specializing in the securities of a particular industry or group of
industries or special types of securities.
Spread
The difference between the rates at which money is deposited in a financialinstitution and the higher rates at which the money is lent out. Also, the differencebetween the bid and ask price for a security.
Subsidy
A financial contribution by government (including any form of income or price
support) that also confers a benefit to the recipient (i.e., producers of goods orservices or buyers of goods). Many types of government practices constitute afinancial contribution, including traditional forms of subsidies such as grants andloans, as well as foregone revenues such as tax credits.
Systematic Investment Plan
Many mutual funds offer investment programs whereby unitholders can invest. TheUnitholders of the scheme can benefit by investing specific Rupee amountsperiodically, for a continuous period. The SIP allows the investors to invest a fixedamount of Rupees every month or quarter for purchasing additional units of thescheme at NAV based prices.
Systematic Withdrawal Plans
Many mutual funds offer withdrawal programs whereby unitholders receive
payments from their investments. These payments are usually drawn from thefund's dividend income and capital gain distributions, if any, and from principal onlywhen necessary.
Total Return
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The performance of an investment, including yield (dividends, interest, capitalgains) as well as changes in per unit price, calculated over a designated period oftime. Assuming reinvestment of capital gains and income distributions, multiply thenumber of units owned by the net asset value per unit. Subtract the originalinvestment from the result. Then divide that figure by the original investment andmultiply by 100. (Assuming your units are now worth Rs. 8,000 and the investmentwas Rs. 5,000/-, divide Rs. 3,000/- by Rs. 5,000/- getting 0.6. Multiplied by 100-percentage increase, or total return, was 60%.) Also see Yield.
Trade Date
The actual date on which your shares were purchased or sold. The transaction price
is determined by the closing Net Asset Value on that date.
Transfer Agent (also Registrar)
The organization that mutual funds employ to prepare and maintain records relatingto unit holder accounts. Some mutual fund groups operate in-house transferagencies.
Trustee
One designated to hold property for another, pending the performance of anobligation. In a deed of trust state, the trustee is often the title company that
handled the property sale closing.
Underwriter
The organization that acts as the distributor of a mutual funds units to
broker/dealers and the public.
Vertical Integration
This is where a company merges or takes over other companies in the same supply
chain. If a shoe manufacturer, takes over his supplier it would be verticalintegration.
Volatility
In investing, volatility refers to the ups and downs of the price of an investment.
The greater the ups and downs, the more volatile the investment.
Voluntary Plan
A flexible plan for capital accumulation, involving no specified time frame or total
sum to be invested.
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Yield
Income or return received from an investment, usually expressed as a percentageof market prices, over a designated period. For a mutual fund, yield is interest ordividend before any gain or loss in the price per share. See Total Return.
Zero Coupon Bond
Bond sold at a fraction of its face value. It appreciates gradually, but no periodicinterest payments are made. Earnings accumulate until maturity, when the bond is
redeemable at full face value.
Income and expenses are two sides of the same coin. And one liability that you
cannot afford to turn a blind eye to is income tax. While you cannot evade payingtaxes, the best you can do is to minimise their effect on your wallet.
What are the Tax Slabs ?The basic exemption limit for personal income tax is:Rs 150,000.Rs 180,000 for resident women below the age of 65 years;
Rs 225,000 for resident individuals of the age of 65 years and above;
Income tax rates for the tax year 2008-09 applicable for individuals, HinduUndivided Families, Association of Persons and Body of Individuals, can be
tabulated as follows:
Total IncomeTax
Rates
Up to Rs 150,000 (for individualsother than women and senior citizens)
NilRs 180,000 (for women below 65years of age).
Rs 225,000 (for resident individuals of65 years or above)
150,001 300,000 10%
300,001 500,000 20%500,001 upwards* 30%
* Surcharge of 10 per cent of the total taxliability is applicable where total incomeexceeds Rs 1,000,000
Note:
Education cess is applicable at a rate of 3 per cent on income tax (inclusive
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of surcharge, if any)
Marginal relief may be provided under specific conditions
What is Section 80 C ?No matter what tax bracket you fall under, Section 80 C of the Income Tax Act acts
as a saviour, outlining deductions that can be made from your taxable income.
y Section 80 C allows certain investments and expenditures to be exemptedfrom tax.
y You need to invest in the instruments specified under this Section and deductthat amount from your gross income. You are liable to pay tax only on theincome derived after this deduction.
y Investments up to a maximum of Rs 1,00,000 only are set for deduction for
any tax bracket.
What are Tax saving options available ?
Tax-saving options under Section80C
Provident Fund (PF) contribution
Public Provident Fund (PPF) up to Rs 70,000 ina year
Premium for Life insurance policy or Unit-linkedInsurance Plan
Tax saving Fixed deposits with Banks
Equity Linked Saving Schemes (ELSS)of mutualfunds
Infrastructure bondsNational Savings Certificate (NSC)
Senior Citizens Saving Scheme
Post Office Five Year Term Deposit Account
Payment towards principal amount of homeloan
Pension Plans
Note: An additional deduction of Rs 15,000under Section 80D has been allowed to anindividual who pays medical insurancepremium for his/her parent(s).
Other deductions:In 2008, Senior Citizens Saving Scheme 2004 and the Post Office Five Year TermDeposit Account have also been brought under the purview of this Section anadditional deduction of Rs 15,000 allowed under Section 80 D to individuals paying
medical insurance premium for his/her parent(s).
What are Equity Linked Saving Schemes?
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Equity linked savings schemes (ELSS) are mutual funds that help you gain the twinadvantage of earning equity-linked returns with the additional benefit of saving tax.ELSS have a lock-in period of 3 years, which encourages long term investing amonginvestors and gives ample time for the fund manager to manage a portfolio of
stocks that can outperform over a period of time.
Why is the Equity Linked Savings Scheme a winner ?Over a longer horizon, it has been witnessed that equities outperform most other
asset classes in terms of returns.
Advantages of ELSS
Investments in equity delivers higher returns over a longer period,surpassing returns from other tax saving instruments
A lock-in of 3 years ensures you stay invested for a longer period, thusallowing your money to grow over a period of time.
ELSS will endeavor to provide higher returns with tax-efficiency One has the option of investing small amounts of Rs 500 each month in ELSS
through Systematic Investment Plans (SIPs)
Comparison of risk and returns vis-a-vis other tax savinginstruments
InstrumentsLock-inPeriod(years)
RiskLevel
Returns( percentper
annum)CAGR
Minimuminvestment
(Rs)
Maximuminvestment
(Rs)
Taxstatus
onreturns
PublicProvident
Fund (PPF)15 Low 8 500 70,000
Taxfree
NationalSavings
Certificate(NSC)
6 Low 8 100 1,00,000 Taxable
Bank Fixeddeposits
5 Low 11 10,000 1,00,000 Taxable
EquityLinked
SavingsSchemes(ELSS)
3 HighM
arketlinked 500 1,00,000 Taxfree
Unit LinkedInsurance
Policy(ULIP)
3 HighMarketlinked
10,000 (asannual
premium)1,00,000
Taxfree
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Disclaimer:Past performance may or may not be sustained in future. Allrates of return except ICICIPru Tax Plan are from RBI, Handbook ofStatistics on Indian Economy, 1999, 00 and 04, SBI andwww.indiapost.gov.in. Some of these instruments are not liquid, so thevalue is only indicative computed using the return as on 19/8/1999 on acompounded annual growth rate basis. ICICI Prudential Tax Plan returnsare CAGR and are based on NAV on 19/8/99, which was Rs.10 and NAV onNov 28, 2008 (29-Nov-08 & 30-Nov-08 were non business days), whichwas Rs. 50.81 No loads are considered in the computation. Pastperformance may or may not be sustained in the future. PPF interest rateswere modified to 11% on 15 Jan 2000, 9.50% on 1 March 2001, 9% on 1March 2002 and 8% on 1 March 2003.