The funds that works smarter than you.

1. CAPITAL LETTER
Volume 4 February 06, 2012 Issue 02
“Eventful January”
LETTER
Greetings from FundsIndia!
The year got off to a very interesting start over the past month. The equity markets had their best January
in several years with the indices returning 11+% for the four weeks of trading. As of writing this, these
gains are still holding up and the market appears trending upwards. That should calm the nerves of the
investors who are getting tired of seeing their portfolio valuations in the red.
More importantly, it will, hopefully, educate our investors that investing when the equity markets when it is down (or per-sisting
with the ongoing SIPs) is the wise thing to do. During the course of the past few months, I heard many an investors
say that something along the line of "Equity markets are down right now, so I want to invest in debt funds". Or that they
want to stop the SIPs till the market "recovers". Such thought processes are what lead to under performances of many a
portfolio. There is no tutor like the real market to teach the value of staying true to systematic investment processes.
In other news, there were reports about Fidelity mutual funds considering "strategic options", usually a code-word for con-sidering
selling their businesses. This comes as a surprise, and a sad one at that. Fidelity has established a good track record
with their solid funds and is a favorite fund house among investors. Hopefully, the company that takes over the funds will
retain continuity of fund management and prudent business practices.
In FundsIndia news, we are happy to tell you that we are working on revamping our user interface for the entire website and
we should roll it out by the end of this month. Please watch out for it, and provide forthright feedback (which I know you
will :-) ).
Happy Investing!
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

2. Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

3. Get upto Rs.1,20,000 exempted from your Income-tax when
You invest in ELSS Mutual Fund schemes and Infrastructure Bonds!
Why tax saving mutual funds?
1. Get upto Rs.1,00,000 exempted from tax under section 80cc.
2. Lowest lock-in period - just 3 years - of all tax saving investments.
3. 100% equity market exposure - best return potential of all investment classes
4. Easy and free - no demat account required, no entry load, no transaction fees to invest
So, tax saving mutual funds are easy to invest in, offer the best return potential, and has the lowest lock-in
period of all tax saving investments!
For example, if you had invested Rs. 20,000 in HDFC Tax Saver fund (one of our current recommended
funds) in the year 2008, not only would you have saved upto Rs. 6000 in taxes in the same year, your invest-ments
would have grown to Rs. 30,592 now (*as of September 22, 2011) - an annual return of 15.22%! .
What's more, the profit of Rs. 10,592 would be tax free as well!
Why infrastructure bonds?
1.Get an additional Rs.20,000 exempted from your income-tax (under section 80ccf)
2.Attractive interest rates
3.Can be acquired in physical form or by using your existing demat account
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Deposits from ‘Top rated Companies’
Company Name Rating 1 Year 2 Year 3 year
HDFC LIMITED FAAAA 9.5% 9.65% 9.75%
ICICI HOME FINANCE COMPANY LIMITED MAAA 8.25% 8.75% 8.75%
LIC HOUSING FINANACE LTD FAAA 7.0% 7.4% 7.65%
MAHINDRA AND MAHINDRA FAA 9.5% 10% 10.25%
SHRIRAM TRANSPORT FINANCE CO.LTD TAA 9.25% 9.75% 10.75%
DHFL AA+ 10.25% 10.25% 10.25%
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

4. Rebalancing Judiciously
BY DHIRENDRA KUMAR
Even though this looks like a time for fixed income, it’s actually a time for asset rebal-ancing.
Asset rebalancing must be the most useful and yet the most ignored of ideas in
the world of investing. However, it’s actually so easy to implement for mutual fund in-vestors
that it’s worthwhile to periodically revisit the concept and see whether it can be
worked into your portfolio.
Asset rebalancing is the right response to situations where the prospects of equity are
dubious but fixed income investing looks attractive. Currently, it’s relatively straightfor-ward
to earn 8-10 per cent from a variety of fixed-income options, either guaranteed or
market-linked ones. Among mutual funds, almost all debt categories are running an av-erage
of 8 to 9 per cent per annum. Taken together, the equity and fixed income situa-tions
together suggest a shift to fixed income.
However, that’s a simplistic view. It’s a form of market timing to try and anticipate when equity would do better or
worse than fixed income and then try and change one’s asset preference based on that. It’s far better to do this in an
automated way. The way to do that is to decide that a certain percentage of your investments should be in fixed in-come
and the rest in equity. For younger investors, the fixed income proportion could be as low as 10 per cent, but it
shouldn’t be zero. For those with a more conservative approach, it could be higher.
Asset rebalancing means that instead of seeing the equity Vs. debt question as a black and white binary choice, you
should be seeing it as a shade of grey. Once every year or so, you could ‘rebalance’ your portfolio. What this means
that if the actual balance has veered away from your desired one, you should shift money from one to the other to
restore that percentage.
When equity is growing faster than fixed income—which is what you would expect most of the time—you would peri-odically
sell some equity investments and invest the money in fixed income so that the balance would be restored.
When equity starts lagging, you periodically sell some of your fixed income and move it into equity. This implements
beautifully, the basic idea of booking profits and investing in the beaten down asset. Inevitably, things revert to a
mean, and that means that when equity starts lagging, you have taken out some of your profits into a safe asset.
Astute readers would have seen the fly in the ointment, or rather, two flies. One is the amount of monitoring or work
required; and two, the tax implications. Both are easily taken care of by not doing all this yourself and using a bal-anced
fund instead. Balanced funds are the most underappreciated idea in mutual fund investing. Balanced funds do
all this automatically and without building up any tax liability.
Much more importantly, when the market goes down, balanced funds fall less. Over the last five years, through the
huge upheaval of the equity markets, the average equity-oriented balanced fund has given better returns than all the
diversified fund categories. While balanced funds typically invest more than 65 per cent of their assets in equity for
tax reasons, less aggressive rebalancing options are also available. MIPs typically keep equity at less than 20 per cent
or so and are a very good option for more conservative investors.
All in all, regular rebalancing—and not complete switching—is the right response to the fluctuating fortunes of equity
and fixed income investments.
-Syndicated from Value Research Online
Article is available online at: http://www.valueresearchonline.com/story/h2_storyview.asp?str=19053
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

5. Why financial planning?
BY PV SUBRAMANYAM
Planning for a secure financial future is a must! It can be done, and is not easy, but is not rocket science either.
Maybe you’re saving to buy your first home?
Perhaps starting your own business is a dream.
The costs of a college education have spiraled and you may wonder how you will pay for your child’s education.
You will probably live longer. Additional years after retirement WILL cost more than originally planned.
Your company pension plan may not be enough to maintain your standard of living after retirement. Worse, it may
cancel the pension plan by the time you retire!
Complex financial marketplace and changing tax laws make it difficult to understand your financial picture.
Everyone needs to plan for tomorrow. At every income level, there are steps you can take to make more efficient use
of your assets and to ensure a secure financial future. It makes sense to develop well-defined goals and to map out
appropriate strategies to turn your dreams into reality. To help you get started, below are some frequently asked
questions about personal financial planning.
What is personal financial planning?
Personal financial planning is a process, not a product. It is an organized, well-planned system of developing strate-gies
for using your financial resources to achieve both short- and long-term goals. You may think of the process as
helping you to answer three straightforward questions:
Where am I?
Where do I want to go?
How do I get there?
When should I start planning?
It is important to start planning as soon as you can. Time passes quickly – it is never too soon to start planning for
tomorrow. Nor is it too late to start a plan.
Who should prepare my personal financial plan?
A well-qualified financial adviser should work with you to prepare your plan. A CA financial planner combines the
objectivity and trust long associated with the CA profession and the years of experience and expertise in personal
financial planning. However, if he does not do this for a profession (most of them do not), look for a financial plan-ner
who is a full time professional.
What should it include?
A comprehensive and complete financial plan – one that addresses your entire financial picture – should include a
review of your net worth, goals and objectives, property and other assets, liabilities, cash flow, investments, retire-ment
planning, estate planning, tax planning and insurance needs, as well as a plan for implementing your goals.
I don’t have a lot of money. Do I need a full-scale financial plan?
You may not. You can seek out different levels of financial planning advice, from counseling on a particular issue to
comprehensive planning. Speak to the advisers you are considering and discuss with them your requirements. You
should be able to find one who meets your needs.
(Cont…)
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

6. What role does goal-setting play in financial planning?
It is important to list both short- and long-term financial goals on paper. You can then rank the importance of the
goals. If you are saving toward something tangible, instead of just saving, it may be easier. These goals could include:
available cash for emergencies, education for children, care for family members, retirement, a nest egg to permit a
career change, acquiring or selling a business, estate planning, financial independence or personal objectives such as
a special vacation or second home.
How do I know how much I am worth?
One of the first things that you should do in reviewing your financial situation is to determine your net worth. Many
people are surprised to find out how much they are really worth. First, estimate the value of your assets. If you have
owned your home for a number of years, you may be sitting on a nice nest egg. Several different real estate appraisals
will help you determine its worth. Organize bank, mutual funds, insurance policies and brokerage statements and
record their value. List your liabilities such as housing loan, car loans or credit card debt. Subtract your liabilities
from your assets and you will have a good estimate of net worth.
How can I plan for tomorrow when I can barely pay for today?
Create a budget. Determine what you actually spend each month. It is easy to keep track of large expenses such as
mortgage and car payments. The variable items such as food, clothing and entertainment are often what get away
from us. Write your expenses in a diary or an excel sheet – it is far more efficient than the human memory. The hu-man
memory is selective in remembering. Excel and diary are not.
How much should I be saving?
It is hard to apply a rule of thumb toward savings, because it varies with age and income level. Ten percent of CTC is
a good start. If that amount is too high for you, do not let that deter you. You can start by putting a little money aside
each month and slowly increasing it. You should save as well as invest.
How does insurance fit in to the process?
Evaluating your insurance needs is part of personal financial planning. The insurance industry has changed a great
deal over the past few years and there is a wide array of new products. Some of them may be better options than your
current coverage.
Do I need a will? – not sure, if you are SURE that you are NOT going to die, you do not
Everyone needs a will. Whether you are single or married, you need a will. No one but you knows how you want your
estate divided after your death. It is especially important if you have children. If you do not have a will and both you
and your spouse die, the court will appoint a guardian for your children. Maybe you would have chosen someone
else.
How often should I update the plan?
It is good to review the plan when there is a significant life event such as marriage, birth, death or divorce. Any
change in financial position should be evaluated as well. Many people have an annual update that reviews how the
plan is being implemented. The review also considers changing goals and circumstances.
- Syndicated from Subramoney.com
Article available online at http://www.subramoney.com/2012/01/why-financial-planning/
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Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.