Sunday, May 22, 2011

Latest Interest Rates on Fixed Deposits (21st May 2011)

Banks have scrambled to revise the rates of deposits and loans post RBI rate hikes in May.  Bachhat has revised its listing of banks offering fixed deposits.  Click here to view the entire listing.  

This is a dedicated page on the blog and the link to the page titled 'Interest Rates on Fixed Deposits' shall be at the top section of the home page.

Improvements in this edition: 
In this edition, I have also added the rates of tax saving deposits which are for minimum 5 years tenure.  The banks which have revised the rates in last two weeks have been highlighted in red font.

Please make use of this listing and do provide your comments and suggestions to improve the same.

Thanks,
Vishal

Friday, May 20, 2011

A primer on Monthly Income Plans

Monthly income plans (MIPs) of mutual funds are investment plan which gives periodic income to the investors.  MIPs primarily invest in debt (75-90%) with the residual in equity.  Since most of its investments are in debt instruments, they are safer and less volatile than pure equity funds and balanced funds where the equity component is more.  However since their equity portfolio is market linked, they do carry equity market risk for the equity portion.   Hence on a risk basis, they are slightly riskier than debt funds and fixed deposits of banks.

Does monthly income plans promises monthly income?
No.  MIPs aim to provide periodic income in the form of dividend to the investors.  These dividends are distributed from the surplus generated by the plan.  Hence the periodicity of the dividend depends on the surplus generated.  The investor needs to choose from monthly, quarterly, half-yearly and annually option for dividend payments.  Alternatively the investor can opt for growth option, wherein no dividend payment will be made. The fund house does not promises monthly income but endeavors to pay it based on the option chosen.

Consistent performer
MIPs have been in existence since long and the average returns for such plans vary from 7% to 10%.  However few consistent performers have able to manage more than 10% p.a.  The top 5 MIP plans based on 5 years returns are as follows:

Plan
5 Year Returns
(in % p.a.)
Fund Size
(Rs. Crores)*
Canara Robeco MIP
11.17
363
Reliance MIP
11.10
8,394
HDFC MIP – Long Term
11.06
10,100
Birla Sun Life MIP II – Savings 5 Plan
9.84
818
L&T MIP – Regular
9.39
128
*As of March 31, 2011

Though the returns are not guaranteed, one can look for reasonable returns from MIP over a period of time.

Click here to know the latest interest rates on Bank Fixed Deposits

Tax advantage
As compared to fixed deposits, MIPs also have tax advantage due to differential tax treatments.  While interest on fixed deposit is taxable as per the tax slab one falls in, any dividend received in the hands of MIP investor is tax free.   However it is subject to dividend distribution tax of 13.52% and is charged to the fund.  Further at the time of sale, depending on the period of holding, it is treated as either short term capital gains or long term capital gains. If sold within a period of 12 months from the date of purchase, it is treated as short term and taxed as per the income tax slab.  If sold after a period on 12 months from the date of purchase, it is treated as long term and taxed at 10.30% (without indexation benefit) or 20.60% (with indexation benefit).  Thus tax treatment for MIP is favorable as compared to fixed deposits.

Suitability
MIPs are suitable for investors who are conservative and not willing to take much risk.  This is achieved by limiting the exposure to equity instruments.  It is also suitable for those who wants steady stream of income.  Thus senior / retired citizens can find MIPs useful.  Further the tax benefit makes MIPs more lucrative to investors falling under highest tax slab.         

What do you like the most in MIPs?  Do give your suggestions and feedback below in comments section.  Thanks.

Saturday, May 14, 2011

Suggested weekend readings (May 14, 2011): Sundaram Equity Plus NFO, Speak Asia, and ULIPs

Sundaram Equity Plus NFO is closing on 16th May 2011.  OneMint has a good review of the same.

Multi-level Marketing (MLM as it is famously known) seems to be back again in the form of Speak Asia.  Is it a scam?  Learn more about it through Deepak Shenoy’s post at Captial Mind, Hemant Beniwal’s post at The Financial Literates and articles (Link1 & Link2) at MoneyLife.

And contrary view on ULIPs – when it can be good.  25 minutes video chat with Manish Jain.  Posted by Deepak Shenoy at Marketvision.

Have a happy weekend!!

Sunday, May 8, 2011

Latest Interest Rates on Fixed Deposits

Besides helping individuals to manage money efficiently, one of the objectives of Bachhat is to provide individual investors with ready reference guide for various financial products.  As a first step in that direction, from today onwards Bachhat will provide fixed deposits rates of various banks for all tenure.  The link to the page titled 'Interest Rates on Fixed Deposits' shall be at the top section of the home page

Key highlights:

1.  The list provides best interest rates for all tenure available.
2.  For each tenure, the list will highlight the top 5 banks offering best interest rates.
3.  The list will be updated every fortnight.
4.  The list is downloadable and can be shared with others.



We have made best efforts to ensure that all banks (other than co-operative banks) are covered.  In case you find any bank missing, please alert us.  We shall include it in the next update.
In case you have any suggestions, to make the list more informative, feel free to share with us in the comments section below or email us at bachhatonline@gmail.com.