Month: March 2018

40 Times Returns in 20 Years: Investing in Birla Sun Life Fund is a True Wealth Creator

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Investing in a good mutual fund scheme allows individuals to live a life they have always longed for. It gives them the freedom to finance their dreams, needs and desires. Though there are a good many mutual fund schemes available for investors, finding the one that suits one’s requirement is a tough task altogether.

If you are planning to invest in a mutual fund scheme that promises long-term capital growth at a relatively moderate risk, Birla Sun Life advantage fund tops the list here. Launched on 24th February 1995, it is an open-ended equity scheme that let investors earn long-term capital gains through a diversified research based investment approach. Investors willing to invest in a Birla Sun Life Advantage fund can invest in this fund with a minimum of Rs 5,000. The Face Value of the fund is Rs 10/unit.

The Entry Load and the Exit Load

The entry load in the Birla Sun Life Advantage Fund is Nil. Investors planning to invest in Birla Sun Life advantage fund can invest both in Dividend (profits are given to investors from time to time) and growth (profits are put back into the scheme that results in higher NAV).

The table below illustrates the daily NAV and price:-

Scheme Net Access Value (NAV)    Sale Price Repurchase Price Date
Aditya Birla Sun Life Advantage Fund -Reg Dividend 107.32 107.32 106.25 24th Nov 17
Aditya Birla Sun Life Advantage Fund -Reg Growth 438.86 438.86 434.47 24th Nov 17

Birla Sun Life Mutual Fund is a joint venture between Aditya Birla Group and Sun Life Financial. Apart from Birla Sun Life Advantage Fund, below is the list of other open-ended fund schemes offered by Birla Sun Life Mutual Fund:-

  1. Birla Bond Index Fund
  2. Birla Income Plus
  3. Birla Sun Life International Equity Fund
  4. Birla Sun Life Cash Manager
  5. Birla Sun Life Short Term Fund
  6. Birla Infrastructure Fund
  7. Birla Sun Life Savings Fund
  8. Birla Sun Life India Reforms Fund
  9. Birla Sun Life Equity Fund
  10. Birla MNC Fund
  11. Birla Sun Life Freedom Fund
  12. Birla Sun Life Savings Fund
  13. Birla Sun Life Government Securities Fund
  14. Birla Sun Life Buy India Fund
  15. Birla Sun Life Income Fund
  16. Birla Sun Life Tax Relief 96
  17. Birla Sun Life New Millennium Fund

Gone are the days when investing was just restricted to pension schemes, bank fixed deposits, etc. However now, mutual funds are raising high on the minds of people looking to invest their hard-earned money for a secured livelihood. The reason why a good many people nowadays are keen to invest in mutual fund is that it gives them the flexibility to start buying units or shares with a relatively small amount. Some funds also allow the investor to buy more units regularly by paying smaller installments as well. Professional management is the other factor that persuades investors to invest in Mutual fund schemes. These are managed by experts who have the education, skills, and resources with which they invest your money in the right fund that promises long-term capital gains.

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Bharat 22 ETF: Diversification Can Give Better Returns

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Bharat 22 is the second Indian government backed Exchange Traded Fund (ETF) designed to partially liquidate government stake in 22 leading public sector and SUUTI companies. The introduction of this ETF in thus part of the government’s plan to reach the proposed Rs 72,500 Cr. disinvestment target for the financial year 2017 – 2018. The first government based CPSE ETF was launched in March 2014 with an AUM of Rs. 5,000Cr and is managed by Reliance Mutual Fund AMC.

When compared to the previous CPSE ETF, the ICICI Prudential Mutual Fund AMC managed Bharat 22 ETF is more diversified as it has investments in 22 listed companies. While the CPSE ETF had exposure in only PSU companies, the Bharat 22 will have exposure in both PSU companies and public sector banks such as SBI and Bank of Baroda which feature substantial Government ownership. Furthermore, Bharat 22 ETF will also invest in a few other companies where the Government holds a stake through the Specified Undertaking of the Unit Trust of India (SUUTI) mechanism. SUUTI companies in the Bharat 22 ETF portfolio include Larsen&Toubro, Axis Bank and ITC.

In addition, the Bharat 22 ETF will be invested across multiple sectors including Industrial (e.g. L&T), utilities (e.g. Power Grid etc), banking (e.g. SBI, Axis Bank etc), FMCG (e.g. ITC), energy (e.g. Indian Oil, BPCL etc), and materials (e.g. National Aluminium). The Bharat 22 ETF, being mainly a large-cap oriented fund, is expected to have only 10% portfolio exposure to mid and small-cap stocks.

The Advantages of Bharat 22 ETF diversification

Individual stocks are subject to high risks from competitors, sector dynamics and market conditions. Thus the risk associated with the individual stock investment cannot be diversified through individual stock investments. However, the market risk of equity investments can be controlled to a significant extent by investing in a larger portfolio of companies (to combat company-specific risk) and investing in assorted sectors (to combat sector-specific risk). Different sectors tend to lie at different stages of the business cycle. Some sectors such as mining and energy are highly susceptible to business cycles which can last for years, while other sectors such as FMCG feature only seasonal variations in demand. The portfolio of Bharat ETF 22 features a high degree of diversification across multiple sectors which are expected to balance the individual volatility of different sectors.  So all in all, it can be stated that diversification can deliver better results as it enables the ETF perform equally well in a wide range of market conditions. For sufficient diversification, a fund should invest in various types of stocks diversified across sectors as well as market capitalization. Hence the Bharat 22 ETF is one of the best exchange traded funds for investors seeking indirect exposure to public sector stock while maintaining a high level of liquidity.

Conclusion

Bharat 22 ETF is a diversified exchange-traded fund which will track Bharat 22 index that is meant to provide good returns to investors planning to invest for the long term and simultaneously enable the government to reach disinvestment goals. The components of the Bharat 22 index work on various reforms and initiatives set by the current government in power like the Goods and Services Tax (GST), Infrastructure Reforms, Direct Benefit Transfer of subsidy, Financial Inclusion, Digital and Cashless Economy, etc. which improves the earnings of the constituent companies which ultimately benefits the investors. Like the CPSE ETF, the Government also offered lucrative discounts of 3% on the face value of the Bharat 22 ETF units during the NFO period.

Things to Note Before Transferring your Home Loan

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Most individuals tend to opt for refinancing or a home loan transfer to avail lower interest rates available in the market. Usually, any borrower who is about two or more years into the loan tenure does not get the opportunity of getting the benefit of falling interest rates in the market. The Reserve Bank of India is also asking the lenders to pass on the benefit of lower interest rates to the existing borrowers.

If any individual thinks that he is stuck with a bank or financial institution, which charges high interest rates on a home loan then he can opt to transfer his home loan to a bank or financial institution that charges a lower rate of interest. Before opting for transfer of home loan, such individuals can also discuss with their current bank or financial institution on re-negotiating the interest rates based on the good repayment track record, etc. If the bank denies re-negotiation, then they could shift to a bank that offers a home loan at a lower interest rate.

Process for Home Loan Transfer

  1. Close the Deal with the Existing Bank: When you want to make a home loan transfer, then it becomes essential to get approval from the existing bank or financial institution. You need to submit a letter to existing bank to request a home loan transfer. Bank will send you a consent letter or a No Objection Certificate (NOC) along with a statement mentioning the outstanding amount.
  2. Provide the letter to the New Lender: Give the NOC to the new bank or financial institution to approve your loan amount to the old lender for an account closure.
  3. Transfer Documents: Post the completion of the transaction, your property documents will be handed over to the new lender. The leftover post-dated cheques are cancelled. Also, stay cautious at this step to ensure that you do not leave any document from being transferred.

Things to Consider Before Home Loan Transfer

Following are the top 5 things that you need to consider before you opt for a home loan transfer to make sure you get the best deal.

  • Check the market for affordable interest rates: Before you opt to transfer your home loan to another lender, it becomes essential for you to check the interest rates offered by various lenders in the market. You should also check the type of interest system the lender is based on and whether they are floating or fixed.
  • Study the lender’s profile: There are various banks and financial institutions that are competing in the market and are ready to lend you money. Each of these banks and financial institutions has made a certain reputation in the field. You should be aware of your chosen lender’s service. So, go through reviews and testimonials on several platforms as choosing a trustworthy lender is a must.
  • Check for charges and costs: A home loan balance transfer can come with numerous costs such as processing fee, application fee, legal fee and even prepayment charges concerning your new and existing lender. Carefully understand all the costs you have to pay and ask your lenders all questions you have in mind about the costs. Make sure you negotiate for low fees and penalties.
  • Read the Terms and Conditions Carefully: Low interest rates may seem attractive, but it is important to be aware of all the terms and conditions of your new lender. Go through the documents containing the terms and condition provided by the bank and check if it contains any hidden charges or any important condition you are unaware of.
  • Ensure that you switch early in the tenure: Balance transfer in the second half of the tenure is worthless as most of your interest led EMI payments have already been made. If you plan to transfer home loan then ensure that you do in the earlier half of the tenure. This will benefit you as you will be paying lower home loan interest rate when you make a home loan transfer.

What Things should I Remember Before Applying for Home Loan in India?

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Buying a home depends on the funds you have and the amount of home loan you can avail. Taking a home loan is not as easy as it is said. Though it appears that banks are eager to lend, but getting a loan sanctioned can be a tedious task. Home loans are the major hurdle, which an individual looking for an affordable home deal need to cross. Getting approval for a home loan involves a lot of paperwork and documentation, which can be time consuming and exhaust someone looking for a home and also applying for a home loan.

But before you decide on borrowing and choosing a home loan in India, here are 5 things that you should keep in mind before applying for a home loan in India.

  1. Know the Maximum Loan Eligibility: The loan amount that will be sanctioned depends on the income and previous track record or credit history when it comes to repaying the loans and credit card dues. After assessing the income generally, home loan lenders provide 80 percent of the value of the property. While assessing the income, the lender usually considers only the income heads, which can be used to repay the loan. For instance, the medical allowances and travel allowances are deducted from the monthly net salary as you are expected to spend the amount received for the respective activities they are provided for.
  2. Check CIBIL Score: The home loan eligibility depends on the credit worthiness of the individual. Credit Information Bureau India Limited assist in providing a credit score on a scale of 300 to 900, which is based on your previous credit card usage, existing loans, loan repayments etc. The CIBIL score also depends on the number of times you have applied for a loan or a credit card. The more an individual applies for the loan, CIBIL considers it being credit hungry and the chance of getting a loan is minimized. CIBIL credit rating and net salary, which includes variable heads and existing loans, are the vital components in deciding the repayment capacity of the applicant.
  3. Type of interest rate: Before taking a home loan, you should have clarity about different types of interest rates. The type of interest rate you choose also leaves an impact on the monthly EMIs to be paid. One should be aware of the difference between a fixed rate home loan and floating rate home loan. In fixed rate home loan, the EMIs don’t vary over the loan tenure. So, a fixed rate home loan is beneficial when the interest rates are expected to rise in the near future. In floating rate home loan, the interest rate is determined based on the prevailing base rates plus a floating rate. The EMIs are based on the base rates. And a floating rate home loan is beneficial when the interest rates are expected to fall in the near future.
  4. Loan Tenure: You should decide your loan tenure wisely as the loan tenure can impact your EMI payments and interest paid. To calculate EMI of the home loan, one has to consider home loan amount, interest rate and tenure. The amount of the monthly EMI is inversely proportional to the home loan tenure and the interest amount is directly proportional to the loan tenure. In case of longer loan tenure, the monthly EMI amount is lower and the total interest paid is higher. In case of short loan tenure, the monthly EMI amount will be high but total interest paid amount will be less.
  5. Read the Documents: Do not sign the marked spots blindly without even reading anything mentioned in it. You should check the documents carefully and read all the terms and conditions to know about different charges applicable and other charges like processing fee, late payment fee etc.