S&P BSE Sensex*	Re/US $	Gold Rs/10g	Crude ($/barrel)	FD Rates (1-Yr)
34,010.76 |5.00 0.01%	63.91 |0.35 0.54%	30,575.00 | 720.00 2.41%	64.33 |-1.15 -1.76%	5.00% - 6.75%

 

Dividend Distribution Tax (DDT) imposed by the government on dividend payments made by the equity oriented mutual fund schemes is the primary reason for SWP’s popularity. Investors of the dividend option of balanced funds have become habituated to monthly dividends due to a controversial practice started by some mutual fund houses to declare dividends every month.

But after government introduced the Long Term Capital Gains(LTCG) tax on equity investments for gains over Rs 1 lakh p.a., the dividend option has become unappealing to many investors.

To distribute the dividend of Rs 100 per unit,  the mutual fund house has to have a surplus of Rs 113.19; if you factor in the effective DDT of 11.65% (10% tax increased by 12% surcharge and 4% health and education cess respectively). In other words, the effective rate of tax on the distributed income is not 11.65% but 13.19%, if it followed the grossing up provisions. Here the amount of tax is also included in the distributable surplus.

Take this for example:

You hold 1,000 units. The tax you will pay is Rs 13,190 under the dividend option. But say, you have chosen the growth option. Then the gain of Rs 1,13,190 would attract only Rs 1,319 in tax. By choosing the growth option, you would save Rs 11,871.

Further, you stand to gain under the SWP facility because of  market volatility.

Those relying on the dividend income earned through equity schemes would be better off if they choose SWP and opt for the growth options.

Nonetheless, to make any meaningful gain on your mutual fund investment, it’s important to invest in schemes that have a proven long-term record, and in accordance to your risk profile and needs.

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Issuing A SBI Cheque? Read This...

Some public sector banks are in the news these days for all the wrong reasons. But that doesn’t make them spoilt government babies.

In fact, to improve the quality of governance and make Indian Public Sector Banks (PSUs) more competitive globally, the government is pondering on the mega mergers plans. As we saw last year , it merged six banks with the State Bank of  India, including its subsidiaries.

This decision is likely to improve the state of affairs of merged banks and make the largest lender of the country, the SBI even bigger.

When such mergers are made, the customers of these merged entities are inconvenienced for the initial period; however, in the long run they can hope to receive better services. After the merger, the acquired bank issues fresh cheque books and the  IFSC code, an alphanumeric code that enables seamless bank-to-bank fund transfers, changes.

If you hold a bank account with any of these banks: State Bank of Travancore (SBT), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Bikaner and Jaipur (SBBJ), State Bank of Patiala (SBP), and Bharatiya Mahila Bank (BMB); and have used these to make investments in mutual funds through Systematic Investment Plans (SIPs), then you should read this carefully.

Computer Age Management Services (CAMS)—one of the registrars of mutual funds said in its advice to distributors, “This is to intimate that due to the merger of State Bank subsidiaries with SBI, there is no effect on the investor. CAMS is updating the IFSC codes of these subsidiary banks and all the front offices will be accepting the cheques of these subsidiary banks till March 26, 2018.”

However, to make new investments and continue with the existing SIPs from April 01, 2018, investors (who have linked the bank accounts of SBI subsidiaries) will have to issue fresh cheques for the purpose of the mandate.

To avoid any inconvenience and discontinuation of SIPs, investors should issue fresh cheques before March 24, 2018.

SWP Can Help You Send Money To Your Family Members

Nobody likes to be dependent. Financial dependency is even worse!

In life, however, there are times your family members require your financial assistance to address their contingencies. In such a case, giving money in lump-sum isn’t the most helpful approach. Your loved ones might need your help for an extended period of time.

Under such circumstances, you can think of dedicating an SWP (Systematic Withdrawal Plan) to a family member in need. Mutual fund houses have started offering you unique options to transfer money to your family members.

SWP facilitates you to withdraw a fixed sum of money from a mutual fund scheme regularly (say monthly, quarterly, half-yearly and annually) and hold the potential to clock returns on the remaining investments over a period of time.

Both SIP and SWP have one thing in common: they instil a disciplined approach.  Both of them help you tide over uncertain market conditions.  

SIP allows you to accumulate more units through Rupee-cost averaging. While SWP lets you redeem lesser units to withdraw the same amount at a set frequency.  In both cases, you try to make the best use of market volatility.  

Recently, the SBI Mutual Fund launched Bandhan SWP—a unique facility that allows you to systematically withdraw money from your investments with the fund house and transfer it directly to the account of a beneficiary.

To read more on SBI Bandhan SWP, click here.

How the Union Budget 2018 showed empathy and care for senior citizens?

If you are a young taxpayer, you may have every reason to be unhappy with the Budget 2018. Instead of tall promises made to “rationalise” the direct tax code, the government has done literally nothing for the middle-income group.

But, if you are a tax-paying senior citizen, this Budget has been incredibly kind to you.

The tax liability of senior citizens to reduce substantially…

People in their golden years primarily rely on the interest from their savings and other investments as income to manage their household budget. Now that inflation is inching up again, senior citizens are facing the maximum brunt of falling interest rates. To offer them some relief, the government has increased the exemption limit of tax-free interest. Unlike the exemption of Rs 10,000 on the savings bank deposit interest allowed until now, in FY 2018-19, the senior citizens——those above 60——will be able to claim exemption of upto Rs 50,000 for the interest earned on bank and post office savings account. This will also include the interest earned on fixed and recurring deposits. Banks and the post office won’t deduct any  TDS  on such income.

The government has also proposed to extend the Pradhan Mantri Vaya Vandana Yojana up to March 2020—a scheme by which LIC offers assured returns of 8%.. It has also increased the existing investment limit of Rs 7.5 lakh per senior citizen to Rs 15 lakh.

To read more about this story and Personal FN’s views, please click here.

Canara Robeco Emerging Equities Fund: Can Its Stellar Performance Withstand The Volatility?

While large-caps are a relatively safer bet in one's investment portfolio, having some exposure to mid- and small-caps can potentially spice up your portfolio returns. Given their high return potential, they certainly come with higher risk. While identifying quality mid cap stocks is not easy, a few eminent mid-cap biased funds have been doing it with ease.

Canara Robeco Emerging Equities Fund is a mid-cap focused scheme from the stable of Canara Robeco Mutual Fund. The fund aims to identify mid cap and small cap companies that could become tomorrow's blue chip companies, by monitoring their industry of operation, sustainability and management. It also aims to participate in their potential for growth in the long-term.

Launched over a decade back in March 2005, Canara Robeco Emerging Equities Fund has delivered returns of around 19% CAGR, as against 15.6% CAGR by its benchmark Nifty Free Float Midcap 100 (as calculated on February 12, 2018).

Canara Robeco Emerging Equities Fund's performance, especially over the past five years, has been quite impressive. While it had managed to considerably improve its performance in bear phase of 2011, the fund came to limelight with the stellar performance it delivered in the bull rally of 2014. Canara Robeco Emerging Equities Fund has been successful in outperforming broader markets and most of its prominent peers across market phases. Moreover, the risk management strategies followed at Canara Robeco Mutual Fund has worked very well for the fund.

Over the last 3 years, Canara Robeco Emerging Equities Fund has become one of the prominent choices of investors looking for midcap funds. The fund's Assets Under Management (AUM) has grown over 10 times from just about Rs 283 crore in January 2015 to around Rs 3,207 crore in January 2018.

In this brief analysis, PersonalFN takes a close look at the features and performance of Canara Robeco Emerging Equities Fund.

To read more about Canara Robeco Emerging Equities Fund, click here

 

In a message to investors, the Chairman of SEBI (Securities and Exchange Board of India), Mr Ajay Tyagi, has warned against diverting fixed income savings to mutual funds. "Mutual funds investment is not a substitution for bank returns. If people are shifting from banks to mutual fund to that extent, it is not an assured return; but this is the right way to come to, if people want to come to capital markets”, he said.

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Accrued Income: Accrued income is earned in a fund or by a company for providing a service or selling a product that has yet to be received. Mutual funds or other pooled assets that accumulate income over a period of time but only pay out to shareholders once a year are by definition accruing their income. Individual companies can also accrue income without actually receiving it, which is the basis of the accrual accounting system.

Quote: "All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don't work out."‒Peter Lynch