Monday, September 18, 2017

Interest rates are falling ...

Interest rates are coming down. What should one do?

This has been a common question in various forums these days. As we all know, in the calendar year 2017, the interest rates have come down by a good number. Bank deposits offer lower rates as compared to last year. Even there are discussions regarding reduction in the interest paid on the savings bank account...

Click on the link below to read the article:

Interest rates are coming down. What should one do?

Monday, September 11, 2017

Equity investments simplified

Click on the link here to read the transcript of my chat on www.moneycontrol.com today



So you haven't received the dividend from your mutual fund?

What happens to the mutual fund dividend that you have not received? Is it possible to get it back even aft6er years have passed? What care should you take to ensure you do not miss out on receiving these payments? Read my article in  Gujarati edition of today's Mid-day to get the answers to these questions.

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The English translation of the article is as under:


What if you did not get your mutual fund dividend?
“I invested in a mutual fund scheme that declared dividend some years ago. I did not get the dividend cheque. May be it was lost in transit. Will I lose that amount? Can I ever get it back?”
Well, as per the process, unclaimed dividends are deposited in an account with Investor Education and Protection Fund (IEPF). However, such transfer of funds happens only after such dividends remain unclaimed for seven years. The logic behind this was simple. If someone has not claimed the dividend for such a long period, there is a very high probability that the claim would never come.
One is not sure, but the logic used here could be in alignment with another law that states that any person missing for more than seven years is declared dead. This was required especially with respect to the distribution of that person’s wealth among the legal heirs.
The dividend rule also could have used the same time period for the purpose of depositing the unclaimed amounts in the IEPF.
However, there is an angle that is often missed out – human behavior. Some of the dividends may not be claimed for long periods purely due to lethargy. What if after a long gap someone realizes that one had not claimed the dividend?
In order to take care of such cases, the Government of India has changed a rule related to the unclaimed dividends. Even after this seven year period is over, one can claim the dividend back from the IEPF. In other terms, with one change in the regulation, the Government has taken a huge step in favour of the investor.
Having said that, it is also the investor’s responsibility to keep track of one’s own hard-earned money. Whether there is a facility to recover the money or not, being unaware of dividends for as long as seven years is not financial prudence.
So what should one do? First of all, one must review the investments on a regular basis – at least once a year. Second, please opt for electronic transfer of all the dividends into your bank accounts. In this way, you would be able to get rid of remembering whether you have received a cheque, deposited it in the bank, whether the cheque validity is over, etc. opting for electronic transfer of funds also removes various other risks related to paper movements, e.g. torn cheques, mutilated cheques, loss of cheque in transit, etc.
So, be careful with your money and take a few small but very important steps.


Tuesday, August 29, 2017

How to Estimate Equity Mutual Fund Returns?

Equity markets are at all time high levels. On one hand, many are flocking to investing in equity, while some others are developing cold feet. “Is this the right time to invest?” – This is the common question facing investment advisors and mutual fund distributors, alike.

In the last article, we looked at how to estimate returns from your debt funds. In this one, we will do the same exercise for equity funds. Understanding how much to expect should be able to help us evaluate various investment options.

Click here to read further ...


Monday, August 28, 2017

Equity investments simplified - your queries regarding mutual funds

Here is the transcript of my chat on www.moneycontrol.com today.

http://www.moneycontrol.com/news/mgmtinterviews/chats/detail_new.php?chatid=2935


Measures from mutual funds for safety of investors' money

There are certain measures taken by mutual funds to insure safety of investors' money. Some may appear causing inconvenience, but at the core is the objective of protection from possible fraud. Read on ...

Measures for safety of mutual fund investors

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The English translation of the article is as under:


Another safety feature in mutual funds
Ramesh had shifted to another location due to change of job. Incidentally, the new job also meant that the salary account changed to another bank. In the hurry of shifting to another location, and that too of one’s choice, Rameshthis person wanted to finish all the tasks at the earliest. One of the tasks was to close to bank accounts. He closed his bank account before shifting to the new location.
On reaching the new location, he needed some funds for buying a house to stay as well as for renovation. He opened his mutual fund account statement and checked the balance. He had more than enough money for the requirement. However, in the mutual fund folio, the old bank account was linked and it carried the old address. Ramesh filled in the details in the redemption slip for withdrawal of required amount of money. In the same form, he also filled in the details for change of bank account and change of address.
Three days later, he checked his bank account to see if the money was credited. He was disappointed that it had yet not happened. He called up the call centre of the fund house only to be informed that it would take longer time. Ramesh was angry and asked for the reason for the delay.
The reason was simple, yet Ramesh could not understand. The fund house kept the redemption on hold since there were three simultaneous transactions, viz., redemption from the fund, change of bank details and change of address.
While someone may consider this as an inconvenience, this was done for the safety of the investor’s funds. Let us understand this statement.
When someone wants to fraudulently take out money from someone else’s mutual fund account, the only way to do so is to change the bank account and address. As a normal procedure, the mutual funds send the funds directly to the investor’s bank account or the payment instrument (DD or a pay order) carries the bank account number of the investors as a safety mechanism. Hence, even if someone copies the signature and files for redemption, one cannot take the money out. The intimation of the redemption would also go to the investor’s registered address. That is why a fraudster must change both these along with the redemption request.
How do the fund houses know whether this is a genuine request or a fraud?
That is why they do not process the requests immediately and often they use other means of verification to ensure the money goes only to the investor’s account. That prevents a fraud from happening against the investor.
It is not an inconvenience, but a safety feature.

Monday, August 14, 2017

Liquid mutual funds offer the facility to get instant access to your money

Many do not know this facility offered by certain mutual funds - instant access to your money. Though, it is is for a limited amount currently, it still remains to be a great facility. Click here to read further.
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The English translation of the article is as under:


Many people keep large sums of money in current and savings accounts. They do it for a simple reason: what if the money is needed urgently?
Well, how urgent could be the need? And how much money may be required in such an emergency? It is in just a handful of exceptional cases that one has bothered to consider these two questions.
Most others operate out of fear. The fear is fully expressed in the earlier question about the urgent need. They support this argument further by stating that the emergency comes unannounced. It gives no time for any preparation. The argument is correct that there is no prior notice before an emergency. However, consider any situation – the emergency may come unannounced, but is there some time before money may be required? Even in case of hospitalization, how much money is required upfront? Will the hospital deny admission?
This is where one may consider some unconventional options to put the money to a better use. These options are the innovations in the financial markets that can be used to your advantage.
One such innovation is the liquid mutual funds that can be used for parking money for very short periods of time. One may also consider parking money for as short a period as three to four days. There is no limit on the maximum period for which such funds can be used. The beauty of these products is that there is no maturity period and the investor also need not specify for what period the investment is being made.
These funds have the potential to deliver more than what one gets from savings bank accounts or bank deposits of less than a year’s maturity.
Through a recent development, the regulator has allowed instant redemption facility from these liquid funds upto a maximum of Rs. 50,000 per account or 50% of the balance in the folio, whichever is lower. On redemption, the bank account would be credited within half an hour. This is a fantastic facility in case of emergency.
So go ahead and utilize this facility from the liquid funds.

- Amit Trivedi
The writer is the author of a book "Riding The Roller Coaster - Lessons from financial market cycles we repeatedly forget"