| Weekly Facts |
| Close | Change | %Change | | BSE Sensex | 16,789.74
| 405.5  | 2.36% | | Re/US$ | 46.74 | 0.5 | 1.08% | | Gold Rs/10g | 16,240.00
| 420.0 | 2.65% | | Crude ($/barrel) | 78.42 | 9.6 | 13.97% | | FD Rates (1-Yr) | 4.75%-6.50% | Weekly change as on Oct 22, 2009 
Impact
Systematic Investment Plan (SIP)
investors have once again a reason to smile.
The slow and steady investing in mutual funds has proved that
every small amount invested at regular intervals has given good returns. SIP
mode of investing offers twin benefits to the investors: 1. Rupee Cost Averaging: – In the turbulence of the stock market, SIPs have worked exceptionally well. At every lower level, investors have been able to buy more units in a fund with the same amount invested. It thereby helps the investors to arrive at a better average purchase cost 2. Compounding: - Even when the markets are on an upswing, as was witnessed since March ’09, SIPs have compounded your earnings | Large Cap Funds | 1-Yr SIP Returns (%) | 2-Yr SIP Returns (%) | 3-Yr SIP Returns (%) | | DSP BR Top 100 | 44.60 | 30.48 | 36.54 | | HSBC Equity | 34.15 | 16.96 | 20.72 | | Franklin India Bluechip | 46.02 | 29.46 | 30.31 | | HDFC Equity | 65.50 | 45.27 | 45.23 | | HDFC Top 200 | 57.97 | 41.93 | 46.57 | | Average | 49.65 | 32.82 | 35.87 | (NAV data as on Oct 21, 2009) (The returns are absolute) (Source : Crisil Fund Analyser) The above table explains the absolute returns generated by SIPs in the respective time frame. For investment in some large cap funds, SIPs on an average have delivered absolute returns of 49.65%, 32.82% and 35.87% over 1-yr, 2-yr and 3-yr periods. In our opinion, investors should subscribe to the habit of investing regularly through SIPs, and by doing so, stay away from the futile exercise of timing the entry points. Impact With the reported surge in fake currency being circulated, and even news about ATMs dispensing fake notes, one must be more cautious while making any cash transactions. Personal FN provides you with a quick 4 - point check list to identify such counterfeit notes: 1. Watermark: Real notes have a prominent Gandhi watermark with a light and shade effect, and multidirectional lines. In fake notes, this watermark is distorted or fattened 2. Security thread: Real notes have a continuous silver bromide thread running vertically through the note, with inscriptions of the word ‘Bharat’ in Hindi, and RBI. Most fake notes have a silver colour painted as a thread 3. Identification mark: On the left of the watermark of real notes, a special feature in raised print is present (Rs 20 – vertical rectangle, Rs 50 – square, Rs 100 – triangle, Rs 500 – circle, Rs 1000 – diamond) 4. Variable ink: The numbers on the real Rs 500 and Rs 1000 notes appear green when the note is held flat, and blue when held at an angle Inspite of being careful, if you are unfortunate enough to end up with fake currency you must not pass it on, as you can still be penalized under the Indian Penal Code for circulating fake currency. You must hand over fake currency to a bank, which will impound the note and stamp it ‘Counterfeit bank note’. However, this is not the end of the story. The bank will file an FIR for investigation against you, which will go in your records. Also, you must remember that a fake note is never replaced, it simply gets confiscated; hence you lose your money. Thus, it is important to be careful while making even the smallest of cash transactions (both paying and receiving cash) to ensure that you never land up with a fake note. Another solution is to reduce cash transactions and use debit cards instead.
Impact Buying a home
is the dream of every individual and a once in a life-time experience. It is
also an expensive dream to fulfill. Today, with attractive home loan offers,
rising incomes, and more working couples than some years ago, the dream becomes
a “family” effort. So, if you are
thinking of buying your dream house by availing a home loan facility, then it’s
time to get smart from the tax planning perspective. A joint (husband and wife)
application for a home loan has the following advantages: 1. Entitles the couple to a bigger home loan (assuming both are
working) 2. Each applicant is entitled to tax benefits – Rs 1 lac for
principal repayment u/s. 80C and Rs 1.5 lacs for the
interest payment u/s. 24 of
the Income Tax Act. This leads to enormous tax savings The
following table illustrates the tax savings of the household: | | Single Home
Loan
(Rs) | Joint Home
Loan
(Rs) | | Salary Mr. A | 650,000 | 650,000 | | Salary Mrs. A | 650,000 | 650,000 | | Loan Amount | 5,000,000 | 5,000,000 | | Tenure (yrs) | 20 | 20 | | Rate of Interest p.a. | 9.50% | 9.50% | | Annual Principal Paid | 88,047 | 88,047 | | Annual Interest Paid | 471,232 | 471,232 | | Interest availed for tax benefit | 150,000 | 300,000 | | Principal availed for tax
benefit | 88,047 | 88,047 | | Tax Paid by Mr. A | 36,391 | 45,195 | | Tax Paid by Mrs. A | 96,000 | 42,195 | | Total Tax | 132,391 | 87,390 | | Household Savings | | 45,000 |
(Note:
Assumption made that Home Loan and the EMI paid by husband and wife is in the
ratio 50:50)
In the
light of the benefits offered, availing a home loan through a joint husband and
wife application is definitely worth it if you are buying your first house, as
it saves your hard earned money from being additionally taxed. But if the
proposed Direct Tax Code (DTC) goes through, then this benefit would no longer
be available. Further, as per the present Income Tax
Act, if you are seeking a home loan to buy your second house from the tax
planning perspective, it’s not worth it as the second house will be treated as
"deemed to be let out property" and would be taxed as per the prevailing market
value of rentals. And if the house has been actually let out, the rental income
will be brought to tax.
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| IN THIS ISSUE  Think you know someone that will enjoy this email? Why not send it to a friend? Rupee Cost Averaging:The technique of buying a fixed rupee amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. Eventually, the average cost per share of the security will become smaller and smaller. Rupee-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time. (Source: www.investopedia.com) QUOTE OF THE WEEK Quote-"Investing without research is like playing stud poker without looking at the cards" - Peter Lynch
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