Kavitha Menon's Blog

Kavitha Menon |  Disability, partial or complete, due to accident or illness, makes it impossible for a person to continue earning as he or she did before the unfortunate accident or illness. In financial planning lingo, both death and disability mean loss of income. This loss of income needs to be covered using insurance. While most do have life cover, we cannot be completely assured of our families' financial safety without a complete disability cover. How much disability cover do we need? A cover equivalent to life cover is needed. The product should give a lumpsum amount, equivalent to sum assured, should one be unable to work productively in case of a physical or mental disability. Surprisingly there seems to be a huge lacuna in the product offerings from insurance companies in this space. Not only is there a lacuna there is also a lot of confusion on what such a product would offer. Disability insurance is not the same as accident cover. An accident cover protects again...

Schemes that invest a part or whole of their corpus ,either directly or through overseas investments funds ,in securities of companies listed abroad are called international funds. There are many variants within International Funds. At the most basic level there are schemes with over 65% in Indian equities. These are classified as equity schemes and taxed accordingly, while those with less than 65% in Indian equities are classified as non-equity and hence taxed on the same lines as debt schemes. Further more schemes in this space can be either direct equity schemes or FOF (Fund of Funds). FOFs are typically more expensive structures than regular funds as the investor pays fees/expenses to both the FOF manager as well as to the schemes that form part of the portfolio. Many schemes are also sector specific. They may invest in only commodity or bullion funds that invest in overseas markets. Thus a AIG World Gold or DSP World Gold fund invests your money in schemes floated by their parents...

A Depository Receipt is a type of negotiable (transferable) financial security that is traded on a local stock exchange but represents a security, usually in the form of equity, that is issued by a foreign publicly listed company.( Source: www.investopedia.com ). An I DR (Indian Depository Receipt) is issued by a foreign company raising funds from the Indian market. IDRs are rupee-denominated and created by a domestic depository against the underlying equity shares of a foreign company. Sounds complicated? Let’s explain with a live example from our markets. Very recently Standard Chartered Bank which is a foreign company listed in the UK issued its first IDR in India. Effectively it purchased its own shares listed in UK ,deposited the same with a custodian -The Bank of New York Mellon ,on behalf of a Indian depository which is Standard Chartered Bank, Mumbai and against every 1/10 Standard Chartered share issued 1 IDR to Indian investors . Thus the Indian investor does not direc...

Its getting pretty hot out here ! . You would agree that our stock markets have caught the fancy of the entire globe . Every fund worth its name wants to increase allocations to our country. The results are showing, with equity valuations going into expensive territory. For value investors, these are difficult times. What does one do with funds allocated towards equities in such times ?. While parking money in debt investments is never a bad idea , another option is to look for value in equities other than in India . We are speaking about international equity investments. Post the 2008 correction, the current rally hasn’t been uniform across international markets . India has infact been one of the best performers in the ongoing rally while markets like China are still far away from the peak levels of 2007. Both developed and emerging markets would have a range of stocks that could be available at much better valuations than their Indian counterparts. For example - just like...

The biggest advantage of investing in FMPs is the tax benefit. One can pay long term capital gains at 10 % or choose to pay 20 % after claiming indexation benefit. This year thanks to high inflation, the Cost index used to calculate capital gains will be at least 7% to 8 % higher. If that is the case then by taking the option of 20 % tax with indexation benefit, you may end up having almost all your capital gains tax free. FD interest on the other hand is taxable at the marginal rate of tax applicable to you. For working of tax benefit refer to articile on the following link https://www.ppfas.com/pdf-docs/research/week-reports/2008/wr090808.pdf The only real disadvantage with respect to this instrument is liquidity. You can break a bank fixed deposit if there is need for funds. The bank may pay you a lower rate of interest or charge you a nominal penalty, but you still get your money back in a day or two. FMPs on the other hand have zero liquidity. As per Sebi's order last year FMP...

We wish we had seen it coming. The rally after the fall. If we did we could have made a ton of money with the markets having more than doubled since its lows of 2008. At the time of the huge correction the investing community was divided into three: 1 .The Cynics - These guys had resources to invest and take advantage of cheap valuations. They however believed that the market could see further downside and there was no recovery in a long long time. They probably had lost money already with existing investments and were unwilling to commit more. 2.The broke bunnies - These were investors who lost a great deal of their wealth in the stock correction, had no cash in hand or other assets that they could liquidate to buy stocks at the huge discounts they were available at. 3. The gold hunters - They were people with the cash and recognized deep value in the markets. They jumped in to take advantage of falling prices. The great Indian stock sale was too good to be true and our hunters lapped...

Our Prospective client was a confident man. He was confident and optimistic. He had walked in to our office to inquire about our Portfolio Management Scheme and wanted to know the returns given by us in the last three months. He said that he would compare the same with the returns given by his existing PMS Manager and then decide whether to stay put, or switch to our scheme. After comparing, he happily informed me that his current scheme has performed far better in the last three months and he would not switch right now.The client was not a prospect after all .Out of curiosity I wanted to know for how long had he been invested in the scheme and what were his returns. You may think that he was joking, but our man was dead pan serious. He had invested over three years back and in the ensuing three years his fund manager had given him only his capital back! He was sitting on a 50 % loss till three months ago and it was only due to 'restructuring' of the portfolio that his fund ma...