Corporate Fixed Deposits are deposits made by investors in Corporations and Non-Banking Finance Companies (NBFCs) for a particular time period at a fixed rate of interest. But why am I talking about corporate fixed deposits?

Corporate FD appears to be very attractive to those who are aware of the returns it promises. Lot of investors feel that it is similar to a Bank FD in terms of risk profile, but gives higher interest. In reality, it is different from the regular Bank FD in the sense that in this case companies issue these FD’s for expansion of its business and fulfilling cash requirements.

All you wanted to Know About Corporate Fixed Deposits

A company raises capital by issuing fixed deposits to the investors. The interest rate is generally higher compared to a Bank FD and is generally lies in the range of 9 – 15 %. These deposits are used by the company to fund its expansion and meet its cash requirements. A Corporate FD is just like a regular loan that we take from any financial institution. The company makes periodic payments i.e., interest payments, generally once a year, to all the investors in return for the deposit they made with them. However, sometimes, the interest payment can be done based on the investors’ choice. For example, if you want a monthly interest scheme, you just need to mention this at the outset and you will be given an option whether you want monthly, quarterly, semi-annually or annual interest payments. At the end of the deposit tenure the company repays the money deposited to all the investors.

You might be thinking that if corporate FDs are so lucrative, why are they not as popular as Bank FDs?

The reason is that these deposits are unsecured. If the company is unable to perform as expected or starts making losses, the interest payments may be skipped and in the worst case, if the company declares bankruptcy, the whole deposited money may be lost.

This is the reason why company fixed deposits offer a higher rate of interest, generally 2-3% more than Bank FD’s, to attract high risk investors who want better returns that what is offered by Banks.

Should you invest in Corporate FDs?

Going through the article you must be thinking whether investing in company FDs is a good idea or not. Considering the fact that it is unsecure and you may lose money if the company goes bankrupt then you might feel that it is not worth it. However, this is not true. Not all companies are bad, or rather mismanaged, that it will go bankrupt. Therefore, careful selection of the company is paramount in making your investment a success. There are a host of well performing companies who use this option as this is a cheaper method to raise money as opposed to borrowing from banks. If you do proper research about the company before investing, there is high probability that you will earn interest payments on time and that the company will meet its commitment to repay your deposit at the end of the deposit tenure.

How to decide which company’s FD is good?

To make sure that your invested money does not go down the drain, you need to research about the company before investing. You can keep the following points in mind while doing research on a company.

• Past History- Any company which has a strong track record of performance and profit generation for a period of at least 10 years would be a better choice than a newer company that is yet to establish itself. If the company had already issued such FD schemes in the past, then you can check if they made timely interest payouts and proper principal repayment. It will give you a good idea as to whether they will do the same with your deposits.
• Credit Rating- Checking the credit rating by credit rating agencies like CRISIL and ICRA, of the issue can give you a clear picture. A higher credit rating means that the security has credibility. These credit ratings are arrived at after studying the company extensively. Therefore, these ratings can be of great help for investors. A rating of AAA is considered to be more superior to AA rating. Generally, companies with lower credit ratings offer higher interest rates to attract investors for the additional risks they are taking.
• Term of investment- If you are planning to invest in corporate FDs, it is advisable that you go for a medium term of investment, i.e., invest for a period of 2 to 3 years. By choosing such tenure, you have the option of revisiting your decision about the security. If you feel that the company or the industry as a whole isn’t performing well, you can let your investment mature and look for better options. However, you don’t get this option if you invest for 5 or 10 years.
• Sector to which the company belongs- It is very important to make sure that the sector to which the company belongs is a well performing one. For example, the Indian aviation industry is going through turbulent times right now, especially Kingfisher Airlines. With the whole Aviation sector going through tough times, chances are that, any aviation company that is coming up with an FD issue may face difficulties in honouring their interest payment commitments. So, make sure that you study the sector of the company and figure out if the sector is expected to perform steadily over the next 2-3 years.
• Interest Rate- Another point to notice is the interest rate. If the interest rate offered by the company is very high, say 15%, then it shows that the company is desperate to raise money and is willing to offer an unusually high rate of interest to attract investors. It is advisable to stay away from such desperate companies.

To check out various Company and NBFC Fixed Deposits’ available in the market currently and the rate of interest they offer, click here. Any questions related to the various FDs can be asked by posting a comment below.

Things to Know Before Investing in Corporate FD

• Companies pay high commissions to brokers to push their company’s FD. Resist yourself from giving into the convincing appeal of such agents or brokers to go for a particular fixed deposit.
• You should regularly review company’s performance and its share prices in comparison with the overall market movements.
• Until your interest income from any such FD is less than Rs. 5000 per year, no income tax will be deducted at source (TDS) from such interest income.
• Diversify your portfolio of fixed deposits and thus reduce the risk by spreading them over number of companies in different industries. Don’t put more than 10% of your investment in any particular companies FD.
• Carefully preserve the papers like Fixed Deposit Receipt (FDR), you get from the company as proof of deposit, to avoid hardships at the time of getting your money back. You might get it after more than one month from application date.
• Companies offer various options related to the frequency of interest payout like monthly, quarterly, half-yearly or annual. There exists another option of interest accumulation and no payout. Delay the interest payout as much as possible. This will earn you interest on interest (compounding effect) and hence will generate higher interest yield on your investment.

MoneyBol Recommendation

Based on the above discussion, find below the name of some Corporate Fixed Deposits which you can consider:

Corporate FDs are decent investment options. However, you need to make sure that you have left no stones unturned in doing the back ground research before investing.

Author – Rohit Roy & Vineet Patawari

Related posts:

1. IFRS: an improvement in accounting quality as well as corporate governance
2. Should Age Determine Your Investments in Equity?
3. Beginner’s Guide for Stock Market

Solution to the Problem Refer to the article on Ten Credit Card Precautions You Must Take. Other than taking the prescribed precautions, one should keep in mind the below mentioned points.

Lack of Awareness about High Interest Cost
Credit card is the most expensive debt around. Most of the credit cards charge 3 to 3.5% per month i.e. whopping 36 to 42% per annum. Even private money lenders don’t charge that kind of interest.  The reason why most of the people get into the trap is that, they are not aware of such high cost. Though the RBI has stipulated that banks must inform clients of their annualized rate of interest, in most cases, this is mentioned in fine prints.  People see the small figure of 3% per month and rarely stop to do the calculation of the interest burden they have to carry.

Pay the Entire Amount due Every Month
First, truly understand that using your credit card doesn’t exempt you from making that payment. Live within your monthly budget. Never bring forward your shopping based on what you think you will be able to pay back. We all need to recognize the words ‘minimum payment due’ for the trap it really is. So remember, if you use a credit card pay up the entire amount due at the end of the month.

Negotiate with your Card Issuer
If you notice that your credit card bills are getting out of hand, speak to your card issuer right away. Explain that while paying the interest may not be possible, you can afford to pay the principal debt amount. Banks (issuer) may show some leniency in some cases in order to retain the customer. Some banks are even willing to outline a debt-repayment programme. They may extend the period of the payment or may agree to accept a reduced interest rate.

Break a FD or Take a Loan
Paying off the credit card debt must become your first goal. For this, even taking a personal loan is worth. Interest on such unsecured loan is as high as 20% per annum, but that’s still lower than what you are paying towards credit card debt. Noting you’ll earn by way of interest on any form of investment will equal what you are paying towards interest on that debt you have run up on your credit card. So it’s worthwhile to break any fixed deposit or withdraw investments to pay off this debt.

Go to Neutral Debt Counseling Session
One such centre, which I came across, is Abhay – an initiative of bank of India, which anyone can avail of irrespective of whom they bank with. Such centers have experts can help work out the best way to pay off debt and structure finances.

Decide on One Credit Card
After you have gone through all these channels, decide on single credit card that you would like to keep. Your choice could be based on
• the credit limit available on that card
• the interest rate
• what type card it is and the offers and reward points you get on such card
• the fact that you have standing bill payment instructions attached to that card

Once you have decided, transfer your debt from other cards to this one. That is possible to arrange when you have a card that still has balance available on it.

Switch to Debit Cards Tossing the credit card away is the safest way of not getting into the debt trap. Opt for debit card instead. That way you are only using money you have in your savings account. You should ideally have enough cash in the bank to take care of expenses for six months.

Share your biggest learning out of this article or by handling credit cards

Related posts:

1. Pros and Cons of Credit Card
2. Ten Credit Card Precautions You Must Take
3. Consolidating Debt – What are my Options?

January

• The beginning of the year is an ideal time to evaluate the monthly income and expenditure of your household. Make your savings plankeeping future needs in mind, both short-term and long-term goals.
• Review all your loans – home, car, study, etc. Evaluate the interest payments. Think whether you can make savings by refinancing or can you afford to make higher monthly payments towards that loan so as to save on interest.

February

• Get an insurance policy for yourself. This will save you tax also as the financial year ending i.e. 31st March is close. Remember you should not leave everything for the last moment.
• Your household income and expenditure already evaluated go over what you are paying towards various utilities. See if you can cut down some unnecessary expenditure. It is always wise to make a note of all your expenditures somewhere for easy analysis of how much you are spending where.
• As tax payment is around the corner, you may think of making some tax-deductible charitable donations (deduction u/s 80G) which you have been thinking to do so throughout the year but have not done till yet.
• Start making all tax-deductible expenditures prior to year end. So pay up your property tax and if you have let out some property on rent, pay the society’s charge if any for rental of premises as this charge is deductible.
  

March

• Consider the savings made so far to check whether you are moving ahead with what was planned earlier. Make necessary adjustments as necessary. Ensure that your savings amount is suitably invested so as to optimize your earnings.
• 
Keep yourself updated about the latest announcements regarding cut-backs or tax-slashes in the budget. Consult a financial planner to see how savings from these can be maximized.
• Make sure that you have made all your investments for tax planning u/s 80C. Don’t forget to buy or renew health insurance to get deduction u/s 80D.

April

• April is the month when you need to plan your tax-saving investments for the next financial year.  Insurance payments, SIPs, etc. should all be set up so that they run smoothly throughout the year.
• If you are salaried, this is the time to repay existing loans or make long term investments as most increments in salaries are announced this time of the year.

May

• Tax returns are supposed to be filed before July. It is wise to compile your returns before June end to avoid last minute hassles.
• It is wise to set up an efficient filing system and keep things organized throughout the year. This will avoid any kind of trouble in finding important papers at the right time.

June

• With other important things in place, this is a good time to prepare a financial plan keeping future in mind. Explore various options available.

July

• Every member of your family who receives an income must have a PAN card. This includes children if they have bank accounts or investments in their name. Apply for a PAN card if you do not have one yet.
• PAN card is essential for opening a demat account to trade shares, purchasing a house or car or getting a telephone connection.

August

• This is the time to check whether you are sticking to all the investment and savings plans made. It is quite likely to get complacent and forget about decisions taken three – four months back. See that your savings are in line with your plans. If not, make necessary adjustments.
• Remember that September 15 is the date for payment of advance tax. Keep your paperwork ready.

September

• With the festive season and holidays around the corner, make sure you make necessary arrangements. It is a good idea to set aside an amount for some festive shopping or a family holiday. Some sort of indulgence is a must for that ‘I am feeling good’ factor.

October

• Take out some time for asset reallocation or portfolio rebalancing. If a particular area seems good, transfer some of your funds there.

November

• Most salaried people receive their bonuses around this time. Make sure that this money goes into some kind of investment or in getting something for which you have longed for an entire year or more.
• Think about your retirement plans. Decide at what age you want to retire and make a plan towards saving enough to make that happen.

December

• The end of the calendar can be a reminder to consider making your will. Make a list of all your assets and your dependents. Meet your lawyer and get some reliable witnesses.

Related posts:

1. Financial planning: Tips to help you get financial success
2. The Importance of a Financial Education to Young Minds
3. ULIPs or Mutual Funds – Comparison

If you have been considering applying for a credit card, you may have already been shopping around for a cheap credit card. It is hard to miss out on stories in the media regarding consumers paying high interest rates and paying high annual fees on their credit cards. So by shopping around, you no doubt want to find a card with a low rate and preferably no annual fees. Before you continue shopping, though, you may want to consider if you do want a credit card after all as well as how you plan to use it if you do get one.

The Pros of a Credit Card
There are some advantages to carrying “plastic” in your wallet on a regular basis. If you find a cheap credit card, you can simply slide it into your wallet and enjoy the peace of mind that comes with knowing you have some extra cash on hand to use as needed. You may not plan to charge new purchases to the card, but it’s nice to know that if you have the need for cash due to an emergency and are unable to get cash any other way, you can use your card. Many people also use their credit card to build up a higher credit score. By making small purchases on the card regularly and then paying the balance off in full each month, you can establish or build a great credit rating.

The Cons of a Credit Card
The cons of using credit cards are well-noted by stories covered in the media on a regular basis. There are numerous stories about people who are buried under a pile of credit card debt. Many people are carrying thousands, or even tens of thousands, of dollars in credit card debt. These are balances that may be incurring interest charges of hundreds of dollars per month in some cases, and it can take years to pay off these balances. In some cases, credit cards can lower a person’s credit rating when payments are not made regularly or when high balances are carried. Plus, because it can take so long to pay these high balances off and because interest charges and annual fees eat into your future income, credit cards can affect your long term financial future, too.

As you can see, there are some reasons to keep at least one credit card in your wallet at all times. However, you do want to find a cheap credit card with a low or no annual fee and a low interest rate. You also want to use the card responsibly and pay off the balance each month to minimize the negative aspects of using credit cards.

Related posts:

1. How to get out of Credit Card Debt?
2. Ten Credit Card Precautions You Must Take
3. Consolidating Debt – What are my Options?

In such difficult times we have to ask a few difficult questions to ourselves before committing our money to any mutual fund scheme. Here I give you three questions which you must contemplate on –

1. Do I understand the risk associated with market linked instruments like mutual fund? It may be safer than direct investment in shares but it has got its own problems and risks. Because of enough diversification, stock specific risk might be reduced but the market risk still remains.
2. How to make intelligent choices between different types of funds –balanced versus diversified equity (all stocks), open-ended versus closed-ended, SIP versus lump sum?
3. What is the objective of buying the mutual fund? For tax saving you’ve tax saver funds (ELSS), if you are bullish on a particular sector, say pharma, you have sector specific funds like “Reliance Pharma Fund”, if you want regular cash flow from your investment, you can opt for dividend option of a fund.

4 mistakes mutual fund investors should avoid

1. Not reading Offer Document Carefully: Don’t miss reading about the following things in the offer document (prospectus) of any mutual fund AMC
   1. Verify that you have received an updated version of the offer document. Otherwise, your decision will be based on out dated information, specially the historical performance of the fund.
   2. Investment objective of the fund. It can be – to generate regular income or long term capital appreciation or to closely match returns of a benchmark or something else.
   3. Risk factors should be properly evaluated against your own risk appetite. Credit risk, market risk, interest-rate risk etc. are all crucial and should be analyzed based on your expectations (protection of capital or regular flow of income or something else) from the investment.
   4. We’ve all heard that past performance is not an indication of future returns.  However, we must read the historical performance of the fund critically, looking at both the long and short-term performances.
   5. Fees and expenses include various commissions named as entry load and exit load. Though entry load is restricted by SEBI but there are certain adjustments with your NAV to compensate the middle-men. These are paid in the form of upfront and trailing commissions.
2. Choosing sectoral funds without analyzing the sector: It is very important to understand the risk-return profile of a sector fund.  Investment in sector fund has to be timed very cautiously as the return will have the seasonality effect of the underlying sector. If you have entered into the right sector at the right time and if that sector performs, your investment in the fund will give you substantial return, most of the time more than market returns. For example Reliance Diversified Power Sector Fund gave handsome returns in the period 2004-06. Downside of sector funds is that individuals like us can seldom time the market properly.  If you have not seen 2-3 market cycles, then you should remain away from sector funds.
3. Investing based on short term performance of the fund: Reading too much into 1 month, 3 months and 6 months performances, without checking the consistency of returns in longer terms like 3 years and 5 years can be very risky. Relying on researches like “last month, equity funds with higher exposure in defensive sectors like health care and FMCG, fared the best” can be misleading as the trend may be very short lived.
4. Not knowing the underlying securities of your fund: Without knowing the composition of the portfolio of your fund, it is not possible to get the desired diversification. Take an instance where you invest in a few mutual funds to obtain a diversified portfolio. However, if all these funds hold same underlying shares, bonds, etc. you are not getting the required diversification. You must also know on what sectors your fund is overweight and on what sector it is underweight, which helps you map it to your risk appetite.

Related posts:

1. Things you want to know about Exchange Traded Fund (ETFs)
2. Mutual Fund Analysis-May 2010
3. ELSS Mutual Funds

What he ended up glorifying was – Highest NAV guarantee ULIP plan. The way he was pitching the product anyone could have fallen in the trap without actually understanding the product’s nitty-gritty. I thought I must write on this subject to make people aware about the actual pros and cons of this product. (Before this, read – understanding ULIP)

Understanding Highest NAV Guarantee ULIP

Let’s understand this product with the help of ICICI Prudential’s highest NAV ULIP plan – “ICICI Pru Pinnacle Super”. Following description is taken from their website -

*Highest NAV Fund B provides 110% of the “highest daily NAV” of the fund in first 7 years, guaranteed at maturity. This guarantee is applicable only at maturity and is not available on partial withdrawal, surrender and death. There will be an additional charge for the cost of investment guarantee of 0.50% per annum. This will be made by adjustment to the NAV.

Some examples of Highest NAV ULIP products

• Birla Sun Life Insurance’s Platinum Plus II
• Tata AIG’s Invest Assure APEX
• SBI Life’s SMART ULIP
• ICICI Pru Pinnacle Super
• Reliance Life Highest NAV Guarantee Plan

All these plans offer guaranteed maturity unit price.

Is Regulator Worried?

“The concern I have as a regulator is that the communication mechanism for the highest NAV products might lead to misconceptions among buyers. Therefore, it’s a risky product.” – J Hari Narayan Chairman, IRDA

Let us understand why he has made such a remark for such a hot selling insurance product. I will try to keep it as simple as possible. However, if you have any question regarding highest NAV products, leave a comment below.

Analyzing Highest NAV Products

Concepts used

Constant proportion portfolio insurance (CCPI)

Say you have a portfolio of Rs. 100 crores on which you want capital guarantee.

You must back-calculate the amount to be invested in fixed income securities to fetch Rs. 100 crores on maturity, say after 7 years. Assume the rate of interest to be 8%. The calculation will be 100 crores/(1+0.08)^7 = 58.35 crores. Thus the remaining amount 41.65 crores (=100-58.35) can be invested in risky assets.  This is an oversimplified example to explain CPPI.  Explore the concept further on Wikipedia

Dynamic Asset Allocation

It is a highly active portfolio management strategy where the fund manager looks for more profitable instruments with respect to current market direction and performance. It involves constant/frequent adjustment of investments with respect to market and instrument performances.

Highest NAV and not highest return

First of all what the insurance company promises is the highest NAV achieved during the tenure of the policy which is generally 7 years for such plans. Highest NAV will be obvious only in retrospect. Remember in this type of policies NAV doesn’t move in sync with equity markets. Any guaranteed product works for investors who do not want a risk to their principal amount, but would like a small upside of equity. Mind the word “small”. If you are looking for a Nifty or Sensex-linked return product with zero risk, that’s not realistic. Such products do not exist.

Survive the term

One has to survive the full term of the policy to be eligible for the highest NAV. Otherwise his or her survivor just gets the fund value. Other things remaining same, this product’s fund value will be lesser than simple ULIP product because of high charges attached to this policy.

Cap on Downside as well as Upside

Good thing about this product is that your initial capital is guaranteed. The fund manager of such highest NAV products is given the liberty to invest up to 100% in equity and shift the entire 100% into debt. Initially such funds start with higher equity exposure.

If the equity market moves up and so does the portfolio, such funds are likely to keep booking equity gains and moving them into debt over the tenure of the plan. This, in a way, will ensure that the equity gains are cashed in, the NAV does not go to very high levels, and the loss on account of the guarantee, if any, is minimal. Thus, it results in increase in debt proportion and decrease in equity component. This limits the probable future return from the fund as funds cannot be transferred back to equity for higher return.

If the equity market falls, insurers will move funds into debt to protect the guarantee.

Real life situation

Source : Mint Research

The above picture proves the above points. Share your experiences of ULIP plans with highest NAV guarantee.

Related posts:

1. Understanding ULIP
2. ULIPs or Mutual Funds – Comparison
3. Financial planning: Tips to help you get financial success

Why should age determine how much risk you can take?

An 89-year-old investor with Rs. 50 lakhs and a huge well to do family would be foolish to move most of her money into bonds. He already has lot of money and his grandchildren (who will eventually inherit his stocks) have decades of investing ahead of them.  On the other hand a 25-year-old who is saving for his wedding and a house down payment would be out of his minds to put all or majority of his money into stocks. If the stock market takes a deep plunge, he will have no fixed deposits or bond income to cover his downside or his backside. Another scenario – no matter how young you are, you might suddenly need to get your money out of the stocks probably at the wrong time. Without a whiff of warning one could lose ones job or become disabled or suffer with some other kind of surprise.

The unexpected can strike anyone, at any age. Everyone must keep some part of his or her portfolio in the risk-less securities or cash.

What determines asset allocation?

The question to this answer actually lies in a answering a different question –

How much risk can you take? – That in turn depends on -

When do you need the money? – To get a better feel of how much risk you can take, think about the fundamental circumstances of your life, when the might change and they are likely to affect your need for cash.

• Are you married or single? What does your spouse do for a living?
• Do you have kids? When are they going to be in school?
• Will you inherit money or will you end up financially responsible for aging, ailing parents?
• Do you face any risk of losing your job or your business?
• Do you need your investments to supplement your cash incomes? (fixed income securities like bond or fixed deposits can help you in this; equity stocks will not)
• Given your salary, spending and savings, how much money can you afford to lose on your investment?

How much should be invested in different asset classes?

If after considering the above factors, you feel you can take the higher risk inherent in holding larger percentage of portfolio as shares, you can keep 25% in bonds or cash. If not, 75% should go fixed income securities like government bonds, bank fixed deposits or debentures or corporate fixed deposits of large cap reputed companies.  Father of value investing Benjamin Graham believes, that an investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequent inverse range of between 75% and 25% in bonds. The reason for increasing the percentage in equity should be stocks becoming cheap in a bear markets or during sharp corrections. That’s in a sense is periodical realigning or rebalancing of your portfolio to come back to the original target of 75-25 or 25-75 or anything in between.

Help Yourself!

Remember, no one else can determine the asset allocation in your portfolio. You have to take that decision on your own. You can take help of the guidelines given above.

Why not 100% in Equity?

For a small minority of investors, a 100% stock portfolio may make sense. What can be the characteristics of such an investor? – I will share my opinions on that in my next post. I request you to post you thoughts as comments below.

Related posts:

1. Understanding ULIP
2. 10 Commandments of Successful Investing
3. Guide to Corporate Fixed Deposits

Given the above facts India should formulate its strategy in a manner that the next phase of growth in rural areas should be facilitated by banks.

Lending to agricultural activities and small scale industry is in the priority sector for lending of the commercial banks. This obligation can be strategically utilized to willingly create a market for banking products. This will add value to their balance sheet and will act as another channel for financial inclusion of ill-banked rural areas. To achieve the said objective banks should take the following steps-

Build staff capacity

Bank should encourage greater interaction between financial sector and rural development staff to ensure that financial sector expertise is included on any rural project that has a finance component.

Help improve the enabling environment

Bank with policy expertise and influence with governments should work to (i) enhance the transparency and efficiency of court systems and strengthen land and property registries; (ii) eliminate government interest rate subsidies for agricultural lending; (iii) remove policy biases against the agricultural sector, e.g., price controls on staple crops; and (iv) invest in communications, physical infrastructure, and services such as health and education.

Build on existing institutional infrastructure

Enhance and optimally utilize existing infrastructure rather than create new and costly delivery mechanisms that may never be viable. Financial services designed for the poor could be introduced through existing agricultural development banks that meet basic pre-conditions

Determine the appropriate role for subsidies

Instead of subsidizing interest rates to the end-clients, bank should use grants to build institutional capacity and promote innovation. Bank should also resist political pressure to include targeted or subsidized credit in agricultural projects.

Explore possibilities of technology

Where appropriate, bank with experience in technical innovations could help reduce the costs of operating in rural areas and improve services provided to rural clients by introducing new technology. Examples include ATMs linked to smart cards, and mobiles to peer group leaders. A careful cost-benefit analysis of any technology and assessment of institutions’ information systems should be conducted prior to commitment.

Fund innovations in delivery mechanisms and products

Bank should offer flexible grant funding to financial institutions seeking to adapt or introduce new financial products, or to reduce delivery transaction costs. Innovative solutions are especially needed to better fit the income and investment cycle of agricultural activities. For example, important non-credit financial services include domestic and international money transfers to help smooth seasonal income flows, and deposit services to access in times of low income or high expenditure. Bank should also explore ways to support financial institutions to build on trader and processor client knowledge and introduce more diverse and transparent financial services for farmers.

Related posts:

1. Budget 2010: Bridging the Gap Between India and Bharat
2. Financial planning: Tips to help you get financial success
3. Commercial Paper (CP) in India

Why investors are shifting to online investing?

This has become more relevant ever since SEBI has banned the entry load on mutual funds. Banning of entry load has made it very difficult for independent financial advisors (IFAs) to service individual clients. The advisors, if smart enough, can at the most earn Rs. 50 as upfront fees from an investor wishing to invest Rs. 10000. Earning this Rs. 50 will involve travelling, communication, time and knowledge. Hence many independent advisors have stopped distributing mutual funds. This is making it difficult for investors to execute transactions physically; hence many investors are shifting to online investing.

Why invest online – Advantages of investing in mutual funds online?

No Paperwork – You don’t have to fill lengthy complicated forms, submit or get it submitted along with cheque, KYC forms and then wait for physical account statements to know the status of your portfolio. In case of investing online you can do all the transactions effortlessly on a PC with internet connection and can also know the status of your account at any point of time.

Alteration at the click of a mouse – You can buy, sell and change the SIP amounts, etc. very easily through online service providers.

Many options under single platform - The biggest benefit of online mode is the ability to invest in multiple funds of different AMCs from one platform and even track their performance by having a single portfolio.

Research Support – get expert advice, research reports, financial calculators, portfolio management services as value add options.

Now the basic and original question with which I started –

How to invest in mutual funds online?

There are various ways in which this can be done. Few of them are as mentioned below –

Independent websites – There are sites which offer online investing services across AMCs. fundsindia.com and fundsupermart.co.in are two such sites.

Online Share Brokers – icicidirect.com, sharekhan.com, indiainfoline.com, etc. in addition to stock broking also offer online services for investment in mutual funds.  Onetime registration by doing the necessary paperwork is required.

Mutual Fund Websites – You can invest in mutual funds through each mutual fund’s website also. However, there are two major problems – Firstly, for the first time you have to fill up a physical application form and then you can do future transactions under the same folio number. Secondly, you have to register with each mutual fund separately.

Having said all these, many investors still hesitate to invest online and are comfortable having face-to-face interaction with the advisors. If you are one of them then ignore this article, otherwise let me know your views on this by posting a comment below.

Author – Vineet Patawari

Related posts:

1. How to Invest in Mutual Funds in India
2. ELSS Mutual Funds
3. ULIPs or Mutual Funds – Comparison

United Stock Exchange (USE) is owned by a consortium of 21 public banks, private banks and corporate houses of India.  List of partners of United Stock Exchange

United Stock Exchange launched its operations, today, 20 Sept 2010. United Stock Exchange has got final approval from SEBI to start currency futures trading.

Bombay Stock Exchange is the strategic partner of the new exchange

Currently there are 218 trading members and 30 clearing members

In the years to come, USE aims to become India’s most preferred stock exchange, providing a range of sophisticated financial instruments for diverse market participants to trade on and manage their risks efficiently.

To know more about United Stock Exchange, Visit www.useindia.com

I will be happy to help you on any queries about the new exchange. You can email at vineetpatawari@gmail.com

Posted by: Vineet Patawari

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