Now that RBI has signalled a pause in rate hikes, should I invest in gilt funds?
?Gaurav Gupta
After 13 rate hikes in the past 19 months, we expect a period of pause followed, hopefully, by a gradual reduction in interest rates. As a result, government bond yields are likely to start dropping. This would result in good gains for gilt funds as prices of government securities will rise. Going by past trends, it seems to be the right time to park your money in gilt funds. Of the various options available, you can invest in Birla Sun Life GSF Long Term Fund and ICICI Prudential Gilt Investment Fund.
I want to go for a monthly SIP of R2,000 for my son for five years. What are the tax benefits and returns that I can expect?
?Padmaja Sethi
For investments in equity MFs, long-term capital gains?i.e. if you hold on to your investments for more than one year?are tax-free. You can expect around 15-18% annualised returns on your equity MFs over the next five years. Income and gilt funds are also good options at this stage as bond prices are close to their historic lows. Here, the returns may be only around 10-12%, but the volatility is also usually less.
Does it make sense to invest in fixed maturity plans now for a year? Are FMPs better than bank fixed deposits?
?Arvind Deo
Keeping in view the prevailing high interest rates, it?s wise to lock in your funds in FMPs. Both the FMPs and FDs are debt instruments having a stipulated lock-in period. It is the tax efficiency part that sets FMPs apart. The returns on FD are treated as other income and taxed as per the investor?s tax slab. This is irrespective of the term they are held for. FMPs, on the other hand score better, with dividend distribution tax applicable at 13.5%. In the long term, they have the benefit of indexation, which gives the option of paying taxes at either 20% with indexation or 10% without indexation.
While investing in banking stocks, should I now look at banks which have lower Casa after the savings bank interest rate deregulations?
?P S Padmanabhan
Savings bank interest rate deregulation is a good opportunity for banks with low Casa to augment their deposits. This, in turn, should help them expand their base and increase margins. Hence, I agree that it is a good idea to look at banks with lower Casa. However, also consider other parameters like return on assets, capital adequacy, NPAs, branch network and growth prospects beforte choosing a bank.
Do I have to give my KYC documents to MF houses every year?
?Santosh Kumar Singh
Know Your Client is a term used for the client identification process. Sebi has prescribed certain requirements relating to KYC norms for financial institutions and intermediaries, including MFs, to ?know? their clients. This is a one-time process.
The writer is CEO, Investshoppe.com
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