c
  is the commitment of money or capital to purchase financial instruments or other

assets in order to gain profitable returns in the form of interest, income {dividend}, or
[1]
appreciation of the value of the instrument. It is related to saving or deferring consumption.
Investment is involved in many areas of the economy, such as business
management andfinance no matter for households, firms, or governments. An investment
involves the choice by an individual or an organization such as a pension fund, after some
analysis or thought, to place or lend money in a vehicle, instrument or asset, such
as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the
foreign asset denominated in foreign currency, that has certain level of risk and provide s the
[2]
possibility of generating returns over a period of time.

Investment comes with the risk of the loss of the principal sum. The investment that has not
been thoroughly analyzed can be highly risky with respect to the investment owner because
the possibility of losing money is not within the owner's control. The difference
between speculation and investment can be subtle. It depends on the investment owner's
mind whether the purpose is for lending the resource to someone else for economic purpose
or no
A 
  is a professionally managed type of collective investment scheme that pools money
from many investors and invests typically in investment securities (stocks, bonds, short-term money
market instruments, other mutual funds, other securities, and/or commodities such as precious
[1]
metals). The mutual fund will have a fund manager that trades (buys and sells) the fund's
investments in accordance with the fund's investment objective. In the U.S., a fund registered with the
Securities and Exchange Commission (SEC) under both SEC and Internal Revenue Service (IRS)
rules must distribute nearly all of its net income and net realized gains from the sale of securities (if
any) to its investors at least annually. Most funds are overseen by a board of directors or trustees (if
the U.S. fund is organized as a trust as they commonly are) which is charged with ensuring the fund is
managed appropriately by its investment adviser and other service organizations and vendors, all in
the best interests of the fund's investors.

Mutual funds may invest in many kinds of securities (subject to its investment objective as set forth in
the fund's prospectus, which is the legal document under SEC laws which offers the funds for sale
and contains a wealth of information about the fund). The most common securities purchased are
"cash" or money market instruments, stocks, bonds, other mutual fund shares and more exotic
instruments such as derivatives like forwards, futures, options and swaps. Some funds' investment
objectives (and or its name) define the type of investments in which the fund invests. For example, the
fund's objective might state "...the fund will seek capital appreciation by investing primarily in listed
equity securities (stocks) of U.S. companies with any market capitalization range." This would be
"stock" fund or a "domestic/US stock" fund since it stated U.S. companies. A fund may invest primarily
in theshares of a particular industry or market sector, such as technology, utilities or financial
services. These are known as specialty or sector funds. Bond funds can vary according to risk (e.g.,
high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g., government
agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock
and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign
securities (global funds), or primarily foreign securities (international funds). Since fund names in the
past may not have provided a prospective investor a good indication of the type of fund it was, the
SEC issued a rule under the '40 Act which aims to better align fund names with the primary types of
investments in which the fund invests, commonly called the "name rule". Thus, under this rule, a fund
must invest under normal circumstances in at least 80% of the securities referenced in its name. for
example, the "ABC New Jersey Tax Free Bond Fund" would generally have to invest, under normal
circumstances, at least 80% of its assets in tax-exempt bonds issued by the state of New Jersey and
its political subdivisions. Some fund names are not associated with specific securities so the name
rule has less relevance in those situations. For example, the "ABC Freedom Fund" is such that its
name does not imply a specific investment style or objective. Lastly, an index fund strives to match
the performance of a particular market index, such as the S&P 500 Index. In such a fund, the fund
would invest in securities and likely specific derivates such as S&P 500 stock index futures in order to
most closely match the performance of that index.

Most mutual funds' investment portfolios are continually monitored by one or more employees within
the sponsoring investment adviser or management company, typically called aportfolio manager and
their assistants, who invest the funds assets in accordance with its investment objective and trade
securities in relation to any net inflows or outflows of investor capital (if applicable), as well as the
ongoing performance of investments appropriate for the fund. A mutual fund is advised by the
investment adviser under an advisory contract which generally is subject to renewal annually.

Mutual funds are subject to a special set of regulatory, accounting, and tax rules. In the U.S., unlike
most other types of business entities, they are not taxed on their income as long as they distribute
90% of it to their shareholders and the funds meet certain diversification requirements in the Internal
Revenue Code. Also, the type of income they earn is often unchanged as it passes through to the
shareholders. Mutual fund distributions of tax-free municipal bond income are tax-free to the
shareholder. Taxable distributions can be either ordinary incomeor capital gains, depending on how
the fund earned those distributions. Net losses are not distributed or passed through to fund investors.
?

K  Î        
               

    
 
      
     
       

                 
  
 

    

 Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme.
The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial
contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the
corpus. The NAV of the Scheme may be affected, interalia, by changes in the market conditions, interest rates, trad ing
volumes, settlement periods and transfer procedures. The Mutual Fund is not assuring that it will make periodical
dividend distributions, though it has every intention of doing so. All dividend distributions are subject to the availability of
distributable surplus in the Scheme. For details of scheme features and for scheme specific risk factors, please refer to
the Scheme Information Document.      
    c
     c
 
!  
 

 

 
 

      
A mutual fund is not an alternative investment option to stocks and bonds, rather it pools the money of several
investors and invests this in stocks, bonds, money market instruments and other types of securities.

Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a
proportional share of the fund¶s gains, losses, income and expenses.
" 
    
  

The fund¶s objective is laid out in the fund's prospectus, which is the legal document that contains information
about the fund, its history, its officers and its performance.

Some popular objectives of a mutual fund are -

  #
 $ 

   

Equity (Growth) Only in stocks
Debt (Income) Only in fixed-income securities
Money Market (including Gilt) In short-term money market instruments (including government securities)
Balanced Partly in stocks and partly in fixed-income securities,
in order to maintain a 'balance' in returns and risk

        %  &%'

The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund
schemes with similar or varied investment objectives.

The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated
objective.
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   ( 
! 
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund¶s objectives are
clearly spelt out in the prospectus.

In addition, every mutual fund has a board of directors that is supposed to represent the shareholders' interests,
rather than the AMC¶s.
In Step 2 we discuss The Basics of Mutual Funds.
Mutual funds are investment vehicles, and you can use them to invest in asset classes such as equities or fixed
income. moneycontrol recommends that you use the mutual fund investment route rather than invest yourself,
unless you have the required temperament, aptitude and technical knowledge (take our Investment IQ Quiz to
evaluate how you score on each of these parameters).

In this article we discuss why and how you should choose mutual funds. If you would like to familiarise yourself
with the basic concepts and workings of a mutual fund,Understanding Mutual Funds would be a good place to
start.

We are not all investment professionals

We go to a doctor when we need medical advice or a lawyer for legal guidance. Similarly, mutual funds are
investment vehicles managed by professional fund managers. And unless you rate highly on theInvestment IQ
Quiz, we recommend you use this option for investing. Mutual funds are like professional money managers,
however a key factor in their favour is that they are more regulated and hence offer investors the ability to
analyse and evaluate their track record.
Investing is becoming more complex
There was a time when things were quite simple - the market went up with the arrival of the first monsoon
showers and every year around Diwali. Since India started integrating with the world (with the start of the
liberalisation process), complex factors such as an increase in short-term US interest rates, the collapse of the
Brazilian currency or default on its debt by the Russian government, have started having an impact on the Indian
stock market.

Although it is possible for an individual investor to understand Indian companies (and investing) in such an
environment, the process can become fairly time consuming. Mutual funds (whose fund managers are paid to
understand these issues and whose asset management company invests in research) provide an option of
investing without getting lost in the complexities.
Mutual funds provide risk diversification
Diversification of a portfolio is amongst the primary tenets of portfolio structuring (seeThe Need to Diversify). And
a necessary one to reduce the level of risk assumed by the portfolio holder. Most of us are not necessarily well
qualified to apply the theories of portfolio structuring to our holdings and hence would be better off leaving that to
a professional. Mutual funds represent one such option.
In Step 2 we discuss Selecting a Mutual Fund.


       
Fund managers are responsible for implementing a consistent investment strategy that reflects
the goals of the fund. Fund managers monitor market and economic trends and analyze
securities in order to make informed investment decisions.
!

 
Diversification is one of the best ways to reduce risk (to understand why, read The need to
Diversify). Mutual funds offer investors an opportunity to diversify across assets depending on
their investment needs.
)
  
Investors can sell their mutual fund units on any business day and receive the current market
value on their investments within a short time period (normally three- to five-days).


  
The minimum initial investment for a mutual fund is fairly low for most funds (as low as Rs500 for
some schemes).
%
  
Most private sector funds provide you the convenience of periodic purchase plans, automatic ?? ?

withdrawal plans and the automatic reinvestment of interest and dividends.

Mutual funds also provide you with detailed reports and statements that make record-keeping
simple. You can easily monitor the performance of your mutual funds sim ply by reviewing the
business pages of most newspapers or by using our Mutual Fundssection in Investor¶s Mall.
*     
 
You can pick from conservative, blue-chip stock funds, sectoral funds, funds that aim to provide
income with modest growth or those that take big risks in the search for returns. You can even
buy balanced funds, or those that combine stocks and bonds in the samefund.
+*  
  c
    
1) 100% Income Tax exemption on all Mutual Fund dividends

2) Equity Funds - Short term capital gains is taxed at 15%. Long term capital gains is not
applicable.
Debt Funds - Short term capital gains is taxed as per the slab rates applicable to you. Long term
capital gains tax to be lower of -
10% on the capital gains without factoring indexation benefit and
20% on the capital gains after factoring indexation benefit.
 ´) Open-end funds with equity exposure of more than 65% (Revised from 50% to 65% in Budget
2006) are exempt from the payment of dividend tax for a period of ´ years from 1999-2000.

, Equity Funds are those where the investible funds are invested in equity shares in
domestic companies to the extent of more than 65% of the total proceeds of such funds.

?
 

$  

 -

If we break the phrase 'mutual funds' and analyze the words, we realize that it refers to funds that
are raised and invested mutually, i.e. on behalf of everyone participating in the scheme. If you
and your friend both pool your money and invest it jointly, you have created your own mutual
fund.

When the concept of companies initially formed, people who knew each other and were willing to
take the risk of the venture used to put in the share capital of the company. Slowly,
entrepreneurs realized that many are interested in investing financially in the company but do not
want to take the day-to-day hassle of managing the company. Thus began the concept of
passive investing in companiesÎ with shareholders and executives separated.

Similarly, in the case of mutual funds, people are not interested in the day-to-day management of
the funds but are interested in the final outcome of the investment. Hence, they pool their money
together, hire an investment manager who manages funds for them and expect to earn a return
on them.

Interestingly, while the process started from the point of view of the investor and the fund was the
outcome, in today's time, it is hard to see the reality this way. With rampant (mis?)marketing of
the mutual funds, it seems as if the funds came in first and they want the investor money to
increase their assets under management.

ù  
     -

The asset management companies (AMCs) that manage the mutual funds define avenues where
they think profitable opportunities exist. For example, currently many AMCs believe that small
and medium cap stocks will yield significant return over the medium to long term. Hence, they
launch a 'fund' (called a new fund offerÎ NFO) which seeks to bring all those investors together
who believe similarly.

The AMC releases a prospectus wherein it details the objective of the fund, the credentials of the
company and the fund manager and the avenues where the money will be invested. Based on
this information, the investor needs to decide whether this fund meets his objective or not. If the
investor (or his advisor) believes that the new fund fits his required risk-return profile, the investor
invests in the fund.

You might wonder that you have never seen a prospectus but only an application form for
investing. Well, som etimes you give the authority to your financial advisor to choose what is best
for you (and sometimes, when you lose control, s/he just chooses on your behalf!)
$  
 
-

Mutual funds, unlike companies do not take the risk of a business directly. For example, Reliance
[ Get Quote ] faces the risk of change in refining margins and Hindalco [ Get Quote ] faces the risk
of fall in aluminum prices. Companies take the risk head-on and craft strategies to maximize their
competitive position and profits.

Mutual funds, however, take one step back and invest in the companies which take on business
risks. Funds which invest in the shares (or equity) of the company are called 'equity mutual
funds.' Funds like PruICICI Power or Reliance Growth are examples of such funds.

Similarly, funds can invest in government securities (bonds issued by central or state
governments, PSUs or other government entities) or corporate debt (issued by companies and
banks). These funds are called 'debt funds.' Funds like Reliance Income Fund invest primarily in
medium and long-tenor debt. Again, there are funds that invest in very short term loans (typically
overnight to up to three months)Î these funds are called money market mutual funds. Examples
include HDFC [ Get Quote ] Cash Management - savings plan.

While the above three are the basic avenues for the funds to invest, many funds combine the
three types in various proportions and produce 'hybrid or balanced funds.' HDFC Prudence and
SBI [ Get Quote ] Magnum Balanced are examples.

Based on where the funds invest, they expect returns and have corresponding risks. Equity funds
are the most risky followed by debt funds; cash funds are considered almost risk less. Based on
the standard theory of finance, the riskiest funds are expected to deliver the highest returns over
the long run.

In the next article, we will look at the various styles and themes on which mutual funds raise
money.

K  

   
 ,

The biggest risk of investing in a mutual fund is one of underperformance. When an investor
decides to invest in a particular asset class, he typically expects to get the return that the
benchmark of the asset provides.

For example, if someone is investing in large-cap equity stocks, he would expect to make at least
as much return (with similar risk) as a benchmark index, say Sensex or Nifty.

Mutual funds try to maximise the returns on the funds invested through them -- but all of the
funds cannot succeed an outperforming each other or the benchmark. Hence, some of them
under-perform the benchmark.

Similarly, the cost of investing in a mutual fund (discussed below), eats in the returns. In high
return years (like the last few years, where returns have been in the high ´0% in equity, 2% costs
may not make a material impactÎ however, at more moderate or negative returns, costs can be a
big inch).

The other risk with mutual funds is 'style drift.' If you invest in a large cap fund and it begins to
invest in mid cap stocks, or if you invest in a long term debt fund but it starts to invest a greater
proportion in cash instruments, you might not the type of risk-return reward that you have been
expecting.

Change of the fund manager can also introduce an element of risk n

i to your portfolio. There is a
wide debate as to whether investing is a science or an artÎ most authorities concede that it is a
blend of the two. If so, the artist may contribute to the success of the returns.

Hence, if you invest based on the ability of a fund manager who decides to move on, it presents
you with a risk. Change of a fund manager can also cause style drift.

% 

   
 ,

Typically there are three types of charges in a mutual fundÎ entry load, asset management
charges and exit loads. As the names suggest, these charges are applicable when you invest,
while you are with the fund and when you exit the fund, respectively. You also get hit by the 'buy-
sell spread.'

h


An entry load is the charge that the fund charges you for marketing and distributing the fund to
you. This money is typically paid to your mutual fund broker. This can range from as low as
0.25% (or lower) in case of debt funds to as high as 2.25% in case of old equity funds. Typically,
new equity funds require a lot more marketing and distribution effort and in order to compensate
your broker for selling you a fund based only on promises, the entry load is higher (up to 5%).

Now you may say that when you invested in the last new fund offering (NFO), you did not see an
entry load. The Rs 1000 that you invested showed as 100 units of Rs 10 each -- how then was
the entry load charged (or the broker compensated)?

Well, the fund company creates a Contingent Deferred Sales Charge (CDSC) which is the total
expenditure that the company has incurred in launching the NFO. It amortizes this amount daily
over the course of ´ to 5 years (the lock-in period) which reduces the NAV slightly every day (but
with such a miniscule amount that it is hardly noticeable!)


   


While the fund house manages your money, it needs to incur costs in research, brokerage,
salaries of hiring the best talent for you, office rentals and overheads, etc. In order to recoup
such costs, the fund house charges you a certain percentage of your assets as asset
management expenses.
In equity funds, this typically ranges between 1.5% to 2% of the assets per year while in debt
funds, it is typically lower than 0.5%.

If you are investing for the long run, you will realize that a low cost fund (in its category) is the
best choice for you. Incidentally, the lowest cost equity funds are 'index funds' which manage
your assets passively by investing based on an index.

While academic research and mutual fund industry veterans (for example, John Bogle) show that
these funds perform better and at lower cost over the long run, these funds seem not to have
caught the fancy of investors in India [ Images ].

h


Exit loads are loads that the mutual fund charges you when you leave the fund. Exit loads are
charged by some funds on a reducing basis on timeÎ hence the load decreases as time passes.
This promotes a long term investment from the investor. Also, the fund may charge you an exit
load to recover some of the charges of from you.



When you buy a fund, you will typically be invited to buy at a premium to the prevailing Net Asset
Value (NAV) of the fund. Similarly, while selling some funds might require you to sell at prices
below the NAV. Hence, you get hit on both the sides. This spread is limited by SEBI to 6%, but
typically the range is much lower, indicating a mature market.

When you buy a mutual fund, be carefulÎ while these are great avenues of investment, you need
to know the costs and the risks. Now that we have mastered them, we will look at the taxation
aspects of the funds.

=
 ?

The Mutual Funds originated in UK and thereafter they crossed the border to reach other
destinations. The concept of MF was Indianized only in the later part of the twentieth
century in the year 1964 with its roots embedded into Unit Trust of India (UTI). Now
after 50 years, booming stock markets & innovative marketing strategies of mutual fund
companies in India are influencing the retail investors to invest their surplus funds with
different schemes of mutual fund companies with or without complete unders tanding of
Mutual Funds (MF).?

It's a hard fact that investments in mutual fund is always risky. Investors should always
be conscious of the fact that Mutual Funds invest their funds in capital market
instruments such as shares, debentures, bonds etc and th at all the capital market
instruments have risk. Risks can be Investor Psychology Risks, Prediction Risks, Choice
Risks, and Cost Risks etc.

Even there is no one mutual fund that will be suitable to all kinds of investors. Hence,
mutual fund investors need to identify a suitable fund for them. It will be the first step
towards making successful investments in mutual funds to make Mutual Funds their
"CUP OF TEA".

Identifying a suitable fund can be done in a two -step manner as follows:

š Selecting a fund with investment objectives and preferences, return objectives, time
horizon and risk tolerances that meet the requirements of the investor.

š Selecting a fund that has a detailed asset allocation strategy by fund type category to
reflect the investment objectives of the fund.

Mutual funds can be win-win option available to the investors who are not willing to take
any exposure directly to the security markets as well as it helps the investors to build
their wealth over a period of time. But the thing which m ust be remembered by the
investors is 

=
== 


==
=





The Indian Equity Market has grown significantly during the last one year; Mutual Funds
are not left far behind. Both the avenues have created wealth for the investors. But for
the creation of wealth through this avenue a proper understanding of the Mutual Funds
is must.?

  ?

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. ?

Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.?

When we talk about all these, one hard fact is about risks that are faced by the Mutual
Fund investors. Whenever we see any Mutual Fund offer, there are few statements
inevitably found along with that, which is commonly known as "Disclaimer Clause of the
Mutual Fund".?

! "#$% 

"Mutual fund investments are subject to market risks. Please read the offer document
carefully before investing. There is no assurance or guarantee that all the objectives of
the fund will be achieved. Past performance of the Sponsors/ Mutual fund/ Schemes/
Asset Management Company is not necessarily indicative of future results. The name of
the fund/ scheme does not, in any manner, indicate either the quality of the fund, its
future prospects or returns".

It may be interpreted that under there is greater amount of risk involved in the subject
matter; even if the disclaimer statement(s) are not too lengthier. In fact, these
disclaimers, directly or indirectly, give a clear message that investors should be
informed, take adequate care and beware of the inherent risks before investing in the
mutual fund. Now the issue is what those Risks are?

1. Investor Psychology Risk:

The investor psychology is such that most of the investors, be it Mutual Fund Investors
or Direct Capital Market Investors, behave like reactionaries. E.g. they enter the market
when the share prices starts rising and they get panicky & exit as soon as share prices
starts falling. Therefore, whether it is shares of company or mutual fund unit investors,
investors resort to selling their investments when market starts looking down. Because
of this, there will be more than normal demand on Mutual Fund manager to redeem the
units. To honor the redemption demands of the exiting unit holders during the worst
market times, Mutual Funds are forced to sell more stocks at the prevailing low prices.
As a result of this, along with the redeeming unit holders, all the other unit holders who
have invested in the fund suffer. This means, irrespective of one being a long -term buy
and hold investor or not, he suffers because of investing in Mutual Fund.

2. Choice Risks:

All the experts recommend different schemes/ funds. Naturally, all of them cannot be
and will not be right. Investors are also advised to stay invested for long -term to reap
good returns. These experts also suggest different funds at different times. Of course, to
be in the well-being fund, one needs to move from fund to fund intermitt ently. In an
tempt to stay invested for a long-term and to be in the well-doing fund, the investor,
whether educated and informed, will have to be satisfied with disappointment.

3. Cost Risks:

Mutual Funds charge huge fees that they can get away with and that too in the most
confusing manner possible. The fund managers never intend to make their costs clear to
their clients. It would not be painful for the investors to pay for the expenses and costs
of the funds when they derive satisfactory returns. But, the irony is that investors have
to pay for the sales charges, annual fees and many other expenses irrespective of how
the fund has performed.

4. Prediction Risks:

Nobody can predict the capital market perfectly and can always find good investments.
Similarly, the fund manager's predictions of future actions and outcomes are, of
necessity, subject to error.

5. Jargon Risks:

The newsletters and other documents that are distributed to the investors do report so
much and that too in such a language filled with technical jargons that it will not be very
easy for an investor to understand and follow the report.
Ë. Competition Risks:

Return is ultimate measure of job performance for any investment, be it in a mutual

fund or otherwise. Performance is the matter of comparison and the evaluation is
intended to measure how the fund has performed vis-à-vis its past performance, peers
and market. At present, Mutual Funds are required to report their performance including
returns on a quarterly basis. Therefore, to prove that the fund is performing well,
managers focus on quarterly returns. Buying & Selling of stocks at the end of quarter will
be done to report better quarterly returns and to make funds holdings look better based
on recent market action. In this process, where the competition is not really productive,
fund managers incur expenses & losses that are naturally passed on to the uni t holders.

7. Risk of Redemption Restrictions:

Whether informed in writing or not, normally the liquidity of schemes investments may
be restricted by the trading volumes settlement period and transfer procedures.

8. Management Change Risks:

It is not uncommon for a Mutual Fund to have changes in its management. The change
in the funds management may effect the achievement of the objectives of the fund. The
fund company may, for various reasons, replace a fund manager or may be the fund
manager himself may resign from his job for any reason. This change will be significant
since the fund manager controls the fund investments.

9. Judgement Risks:

Investors may not know more than the fund manager about the investment strategy and
whatever judgement the investor makes will not be fool proof.

10. Forward Pricing Risks:

The prices of a Mutual Fund do not change during the day. Order placed up to a cut off
time of 3:00 p.m. get that day's Net Asset Value (NAV) and orders placed after 3:00
p.m. receive the next day's NAV. This is called the rule of forward pricing. This system
assures a level playing field for investors. No investor is supposed to have the benefit of
post 3:00 p.m. information prior to making an investment decision.

11. Breakpoint Risks:

Mutual Fund charge loads such as front end & back end. Few Mutual Fund charge front
end sales load will charge lower sales loads for larger investments. The investment level
required to obtain a reduced sales load are known as breakpoints. These breakpoints
lure investors to invest huge funds to avail the discounts on volumes and end up losing
focus on his planned diversification for his Mutual Fund investments.

12. Risks of Blind Diversification:

It may happen that a fund is heavily committed to a particular area of the economy at
any given time. This is called blind diversification risk and any investor would like to
invest in Mutual Fund that concentrate in asset classes that he himself has not invested
at his own.

13. Risks of changes in the Regulatory Nor ms:

Mutual Funds are constantly regulated by SEBI and investors are subject to risk of the
changes in the norms for the Mutual Funds.
Besides the above risks, Mutual Funds will also have the common risks that any
investment has. In fact, risk is present in every decision made with regard to the
investments in capital markets. Following is the list of some common risks involved while
investing in the capital markets and particularly in the mutual funds:

š #&' : This risk arises from the possibili ty that political events such as war,
national elections etc. and financial problems such as rising inflation or natural disasters
such as an earthquake, a poor harvest etc. will weaken a country's economy and cause
investments in that country to decline.

š ': This is a risk that arises from the possibility that a bond issuer will fail to
repay interest and principal in a timely manner. This risk is also called as default risk.

š !&': This risk arises from the possibility that returns could be reduced for
Indians investing in foreign securities because of a rise in the value of the Indian rupee
against dollar, euro or yen etc. This is also known as Exchange Rate Risk.

š &' : This risk arises from the possibility that a group of stocks in a single
industry will decline in price due to developments in that industry.

š ' : This risk arises from the possibility that an actively managed mutual
fund's investment adviser will fail to execute the fund's investment strategy effectively,
resulting in the failure of the sated objectives.

š '': This risk arises from the possibility that stock fund or bond fund prices
overall will decline over short or even extended periods.

š !( ' : This risk arises from the possibility that an investment will go down
in value, or lose money from the original or invested amount.

)#*(#+ &)

š Read the Mutual Fund Prospectus completely.

š Investors must be particular about the objectives.
š How much they should rely upon the name of the scheme or objectives.
š What initiate the investors to purchase the mutual fund units?
š Understanding the investment strategy of the fund investments.
š Whether the investment strategy will lead to the achievement of the objectives of the
scheme.
š Whether old investors receive any investment advice from the mutual funds besides
the newsletter.
š Whether investors manage their mutual fund investments or do they just invest and
stay passive.
š Whether investors compare the performance the performance of the scheme with
other schemes or other funds.
š Whether investors face any problem with regard to the NAV pricing.
š Whether breakpoints lure investors.
š Whether investors realize any blind diversification.
š What do investors expect from Sebi as a regulator?

=%&#,$#% )#

There is no one mutual fund that will be suitable to all kinds of investors. Hence, mutual
fund investors need to identify a suitable fund for t hem. This would be the first step
towards making successful investments in mutual funds. Identifying a suitable fund can
be done in a two-step manner as follow:

a. Selecting a fund with investment objectives and preferences, return objectives, time
horizon and risk tolerances that meet the requirements of the investor.

b. Selecting a fund that has a detailed asset allocation strategy by fund type category to
reflect the investment objectives of the fund.

To select a suitable fund, investors should read the fund's prospectus completely before
making investment. By reading investment objectives, the fund's financial goals and the
type of securities chosen can be known. An investor can make out whether or not a fund
is advisable for him by determining if the goals are congruent with his own investment
goals. Investor should also ensure that the fund is comparing itself with an appropriate
benchmark. Another important aspect investors have to carefully examine is the fees
and expenses charged by the fund.

Finally, investors should always be conscious of the fact that mutual funds invest their
funds in capital market instruments such as shares, debentures, bonds and money
market instruments, and that all the capital market instruments have risk. Therefore an
investor is supposed to have full knowledge and understanding that mutual fund
investments are subject to market risk and should manage the risks carefully for a safe
and happy investment.
??

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$e have always talked about investing regularly in equity funds for the long term. And, when we
say long term, we don't mean six or 12 months. We don't even mean two to three years.

We believe you will reap the benefits of investing regularly over a period of five years; 10 is even
better.

To verify whether long term investing works, we ran through the performance figures of equity funds
for the last 10 years and found that you would have earned very good returns in over half the funds if
you had stayed with them that long.

What's more, if you had invested in a Systematic Investment Plan, you would have made even more
money.

÷ ù 
  

 

+  

We studied ´4 mutual funds that have existed since July 1995 to June 2005.

The average point to point annual returns of these funds stand at 1´.41%, compared to the Sensex
return of 8.05% and Public Provident Fund return of 10.77%.

If you were a regular investor, investing the same amount every month in an SIP, the situation would
be completely different.
Let's say you put in fixed amounts every month in the mutual funds. And you put in the same amount
in PPF and the stock market.

You would have made an average of 20.´7% in the former, compared to the Sensex return of 12.´´%
and PPF return of 10.29%.

* !  . 
?

A fixed deposit is best suited for those investors who want to invest a lump sum of money at a low risk
and are comfortable committing it for a fixed period of time, and earn a rate of interest on th same.?

 
   
 
     ,

÷ Flexible Deposit Terms Î The tenure of fixed deposits can vary from as low as 7, 15, ´0 or 45
days to ´, 6 months, 1 year, 1.5 years to 5 years. The minimum deposit amount also varies
with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks.
The amounts can be in multiple of Rs. 100.
÷ Great DealsÎ The banks are free to offer varying rates of interest for products of different
maturities. If you are flexible in terms of deposit tenures, you might find differential interest
rates in odd tenures like ´90 days or 200 days.
÷ Safe InvestmentsÎ Bank deposits are generally safe investments because they are insured
under the Deposit Insurance & Credit Guarantee Scheme of India.
÷ Flexible Interest Payment Terms Î A Bank Fixed Deposit gives you the option of taking the
interest income, as a lump-sum amount on its maturity as well as every quarter (quarterly
interest payment) or every month (monthly interest payment)
÷ Electronic ClearingÎ The Interest payable on Fixed Deposit can also be transferred directly to
Savings Bank or Current Account of the customer.
÷ CompoundingÎ Compounding of fixed deposit interest rate is available for all deposits more
than ´ months.

?
+*    ?

The interest income earned on a deposit is taxable at the same tax slab as the customer is in. It will
be added to his income in the year under the head ³Other Income´.

   %
Normally, there are no charges for a plain vanilla fixed deposit account. Charges are usually levied on
premature withdrawal of the deposit or taking additional features like a debit card against it.

)  !  /

   
Can you find anyone who has become wealthy by leaving his or her money in the bank or an FD? If
you want to create wealth, you must move away from this mentality of thinking that a savings account
or an FD is the best home for your money.

Much has been made of the so-called comparison between mutual funds and ULIPs in the past few
months. Our opinion is that the public debate on these two investment options misses the bigger
point. The reality is that the bulk of the household savings for Indian families is tied up in bank
accounts earning ´.5% interest and in FDs, both of which are highly inefficient investment options for
wealth creation. Add to this the announcement this week that inflation has now touched double digit
levels, and its an even scarier thought that most of us still prefer to leave our money in a bank, rather
than in instruments that are higher yielding, be they equity mutual funds or ULIPs.

So the real debate should be whether families in their effort to create wealth are making a mistake in
leaving their money in the bank vs. choosing to invest through instruments like mutual funds and
ULIPs that offer a reasonable prospect of better long-term returns.

  
 )c  0    

Call it a turf war or clash of regulators, frankly in the long run it's not a big deal from the end
customer's perspective. Whether its SEBI or IRDA, consumers should feel comfortable and secure
that there is a regulator who is mandated to look after their interests.

Every investment instrument has pros and cons. We challenge you to find one that is perfect. So,
there will always be promoters or detractors of both mutual funds and ULIPs.

Objectively speaking, however, there is a better chance of you being able to meet your long-term
financial goals through equity mutual funds and/or a ULIP than the default option for most Indians,
which is to leave money in the bank.

Almost every one of us will have one of the following goals that require a substantial amount of money
in the futureÎ funding our graduate education, marriage, house purchase, taking care of children's
financial needs, funding their education and marriage, being adequately funded towards our own
retirement.

Experience from all over the world has shown that our salaries are not enough to fund these goals.
We need to invest into the capital markets, subject to our risk taking capacity, to take advantage of
the compounding of capital, i.e., money that creates more money. No lesser authority than Albert
Einstein remarked, "compounding is the 8th wonder of the world because it allows for the systematic
accumulation of wealth".
The advantage of equity mutual funds and ULIPs is that they are instruments that offer you a better
rate of compounding for your capital than cash lying in the bank, and thereby provide a better chance
of creating wealth in the long run.


     ! 0  

   
Let's make ourselves clear. Savings accounts and FDs have a purpose and we cannot over
generalize and make a blanket statement that they are bad instruments. However, when it comes to
wealth creation they are not good instruments for you to invest through. We will show you why.

First of all, a savings account earns you a mere ´.5% interest rate, a level that is fixed arbitrarily.
Similarly, a fixed deposit contractually fixes the rate of return at the start date of your deposit, and you
cannot earn more than what you signed up for, even if interest rates in the markets were to rise.
Compare this to a return that the equity market can earn you. History and experience of equity
markets from around the world suggests that in the long-term equity markets are likely to "compound
your capital" at approximately 12% per annum. Compared to this, a ´.5% savings account return just
does not match up.

Secondly, savings accounts and FDs are highly tax inefficient. Any interest you earn through these
will be taxable in your hands as income, and you will be liable to pay tax on this income. Compare this
to equity mutual funds and ULIPs where at least for the time being until the new direct tax code is
implemented you pay zero taxes on your gains if you hold these instruments for the long-term. And, if
you invest into an equity linked savings scheme (ELSS mutual fund) you might find this an even more
tax efficient investment than a regular mutual fund.

Finally, and perhaps most crucially, by leaving your money in a bank or an FD, you are losing the
purchasing power of that money. Because you are earning a fixed return through these instruments,
these instruments cannot offset the corrosive effect of inflation or rising prices within the economy. If
one's bank account returns only ´.5% pre-tax, but the level of prices is rising at 10%, one doesn't
have to be a mathematical genius to figure out that in the long run one's standard of living will suffer.
You will hardly be able to create any wealth, because whatever returns you earn does not even help
you keep pace with the rising prices in the economy, let alone give you a surplus that can earn you
further returns.

If you are already wealthy then FDs might be a good wealth preservation instrument, but please don't
use them to create wealth for yourself.

$ * !    + ( c
 


 

þ   
 

÷ Debt Funds deliver better post tax returns in comparison with Fixed Deposits especially for
the investors in higher income tax bracket.
 ÷ Debt Funds provide more liquidity to investors with no lock in period for the amount invested.

] 

 
 

TAXATIONÎ Debt funds deliver tax efficient returns when compared with fixed deposits

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÷  + %  . +*,Taxable as per

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? 
???? ÷ )  + %  . +*, Less of 10%
without indexation or 20% with indexation

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÷ Tax free in the hands of investor

  ?
? ÷ Dividend distribution tax of 14.16% is paid by the
 ?
Asset Management Company

??

šTaxation rates indicated above are inclusive of surcharge (10%) and education cess (´%)

÷ Taxation in case of debt funds is more investor friendly when compared with fixed deposits
especially for the investors in higher tax bracket
÷ In the short term investment horizon, investor gets the benefit of lower dividend distribution
tax in debt funds
÷ In the long term investment horizon, investor gets the benefit of indexation in debt funds

]
   
   
 


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?

?? ??
 ÷ The amount invested gets locked in for the tenure ÷ The amount invested is highly
of the fixed deposit (14 days, ´ months, 1 year, 5 liquid and can be redeemed in
years etc.) T+1 days

??

÷ Debt Funds are highly liquid as the amount invested can be redeemed in T+1 days unlike
fixed deposits where money gets locked in for a fixed period of time.

*
   þ
  
  

+* !   , If an investor earns interest of more than Rs 10,000, TDS is deducted on
this interest income and investor is required to collect this TDS certificate from the bank. No such TDS
is deducted in case of debt Funds

hþ 



  
  

Though the pre tax returns are in the same range of 8-9%, but variation can be seen in post tax
returns. Let us discuss two scenariosÎ

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÷ Debt Funds deliver better post tax returns when compared with fixed deposits
÷ In the short term and long term investment horizon, investor earns better post tax returns by
investing in debt funds.

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%$-(#. 
A fixed deposit is an investment account comprising a single deposit, for a fixed term at a
guaranteed fixed rate of interest. It can be used for both short and long term investment
purposes. A fixed deposit account allows you to deposit your money for a set period of time,
thereby earning you a higher rate of interest in return. Fixed deposits also give you a higher
rate of interest than a savings bank account.

%&-(#
Fixed deposit is one of the oldest & most common methods of Investing. FDs look great
because you get a decent risk-adjusted return and your principal is protected. Fixed deposits
help you to secure your hard earned money for a long duration. Fixed deposit is a financial
instrument for you to deposit your money for a fixed duration ranging from 15 days to 5
years.

However you need to remember that FDs are safe only as long as they are parked in large
bank. Now a day, the banks & financial market is becoming very competitive.

You need to check up on the different types of FDs scheme available before making any fixed
deposit investments. Banks offer various types of fixed deposits in India to their customers.
Some banks offer a fixed deposit schemes which offer more savings & over draft facility.

A regular fixed deposit can earn you an interest up to 8.75% and senior citizens who opt for
such a fixed deposit scheme are eligible for an additional 0.5 % increase.

%%$#$-(# 
With fixed deposits or FDs as they are popularly known, a person can invest an amount for a
fixed duration. The banks provide interest rates depending on this loan amount and the
tenure of deposit.
1) The option to withdraw the deposit at any time before maturity without any difficulty
2) Fixed deposit is secure form of investment that means your money would be 100% safe.
3)You can avail loans up to 85% of the principal
4)Variable deposit periods ranging from 6 months to 120 months
5)You get interest once in 6 months
A minimum opening deposit of R1000.00 is required. Deposit can be made in multiples of
Rs.100/-
You can choose how frequently you want to receive your interest payments:

÷ Maturity
÷ Yearly
÷ Half-yearly
÷ ouarterly
÷ Monthly

The banks may not always tell you the full story. Therefore it is important for us to delve
deep into any Fixed deposit Rate of interest and make the right choice.?

$/
01

$&/
FDs have conventionally been the premier choice for investors with a low risk appetite;
assured returns is the key factor which attracts investors towards deposits. Stick to FDs of
the highest credit rating i.e. those with a ³AAA´ rating even if their rates seem modest vis-à-
vis those offered by company deposits. The fixed deposits of reputed banks and financial
institutions regulated by RBI (Reserve Bank of India) the banking regulator in India is very
secure and considered as one of the safest investment methods.?

r
1 !#"/
Fixed deposits earn fixed interest rates for their entire tenure, which is usually compounded
quarterly. So, those who want an income on a regular basis can invest into fixed deposits and
use the interest rate as their income. This makes a fixed deposit very popular way of
investing money for retirees
´1
)=-/
With the directives of the income tax department stating that investment in fixed deposits up
to a maximum of Rs.100, 000 for 5 years are eligible for tax deductions under section 80 C of
income tax act; fixed deposits have again become popular. Fixed deposits save tax and give
high returns on invested money

21 3&/
Find out how your FD fares on the pre-mature encashment front i.e. how easily can your
investment be liquidated. Also enquire about the penalty clauses, e.g. do you suffer a loss of
interest and/or principal amount. #"(%#,)#$-(#'#%
("(!'%+ 4%+&&#""5%"(!#$ 3&
,%!%&(! &#!,%$-(#

!#/
What all Precautions one should take while making such investments?

01#"(&-(#/
Company fixed deposits are not considered as safe as fixed deposits from leading banks and
financial institutions regulated by the RBI. So, if a company runs into losses or goes bankrupt
the money invested into its fixed deposit can be lost. To lure investors, such companies offer
a fixed deposit interest rate which is much higher than those offered by banks. Before
investing in any company fixed deposit it is advised to check the credentials of the company

r1" #$-(#/
Banks will impose a penalty if you break your fixed deposit before the maturity period. Make
sure you get the facts right about this thing. How the bank calculates this penalty and what¶ll
charge will it levy when you break a fixed deposit should be noted carefully.

4
 ?

To compare between mutual funds and fixed deposits you need to first need the #+6!)#$
). Though they both are under investment types but the '
!# associated with both of them differentiate them.

  : These are manged and operated by large fund houses and in which you just give
your share of investment and the fund manager collectively invests your fund under various
portfolio's in order to maximize the returns.
Under new

7  there is no entry and exit load.

-(# : These are also one of the investment instrument which guarentees assured
returns as you would be having a lockin period in this i.e. you cannot withdraw your money prior
that stipulated period and you get fixed and pre decided amount when your lockin period is
expired.
Current rate of return is 6-8% on principal depending upon the institution you are opening

Now to dicuss which one is better depends upon the risk that person can take beacuse :

1) Mutual fund follow the policy of high risk and high returns whereas fixed deposit follows low risk
and low return.
2) Fixed deposit can give upto 8% of return whereas the returns given by mutual fund can be upto
70% is kept for long duration.
3) Returns given by fixed deposit are always positive but in case of mutual fund it can be positive
or negetive.
4) Fixed deposit of any fixed particular duration but mutual fund can be of lockin period and non-
lockin period also.

So, i would like to advice that first decide the objective and risk that you can take in investment
and then decide according to that.
Hope this reply would hav cleared your doubts.

Here I would list out the importance of both the services.

FIXED DEPOSIT:
1. The amount invested would not have any risk involved.
2. The amount would be appreciated with a very minimal percent within the investment time.
3. There is no depreciation in the amount.
4. Here, there would be a guarantee given for our amount and can be with drawn with the
appreciated value.

MUTUAL FUND:
1. The amount invested would have a risk involved.
2. The risk factor can be decided with the 3 available categories as "No Risk Fund" "Balanced
Fund" and "High Risk Fund"
3. There is no guarantee given by the funders for the amount invested.
4. The amount invested would not have a guaranteed small percentage of appreciation. This may
be quite high also.
5. As Indian Economy is growing very rapidly every day, the funds can be expected to give good
return in the long term investment like 3 years lock in.

These are the differences between the "Mutual Funds" and "Fixed Deposits". On seeing all the
differences, a long term investor would definitely invest in the "MUTUAL FUNDS" for a long term
perspective.

Conclusion

Why it's time for a fixed deposit

August 0´, 2006 09δ8 IST
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Comment ?

+he heady rise of the stock market over the last three years had made many of us forget all about
fixed income investing.
Sure, bank fixed deposits, RBI bonds, post office schemes, fixed income mutual funds and other such
savings instruments still exist. But few speak of them; even fewer recommend them.

Everyone wants to buy shares or invest in an equity fund. No one is interested in fixed return
investments.

At Value Research, our mutual fund research outfit, debt funds make up 60% of the 855 funds we
cover, but they account for an abysmal 8% of the pages viewed by visitors on our site.

The reason is obvious. Fixed income investments are perceived to earn tiny amounts of money
compared to equityinvestments. While this is sort of true, it is unwise to form such impressions when
the stock market is at a peak. It's easy to see that, in a year when the Sensex rises by 60% or 70%,
the six to eight per cent earned by a fixed income instrument feels like a joke.

However, there have been plenty of times when the shoe has been on the other foot. For example,
the five-year period from 1998 to 2002 saw the Sensex rise wildly and then fall to almost the same
level. During these five years, being invested in the stock market would have seen your money
stagnate. If, instead, you had invested in a fixed deposit where you were earning 11% or 12% interest
on your deposit (which was the rate then), you would have seen your money go up by about 75%.

There's no guarantee that something like this won't happen again. In fact, right now, the stock market
is in an uncertain phase and many problems are looming large. With the Middle East becoming even
more unstable and oil prices rising (causing inflation), the interest rates are rising. Thisclearly
indicates it is time to pay attention to fixed income assets

I'm not saying you must sell every stock and put all your money in fixed income options, but having a
certain percentage of your investment allocated for fixed income options and, more importantly,
maintaining that percentage is something every investor must do. Maintaining this percentage
automatically means that when the stock component rises more than the fixed income part does, one
should sell some stocks and invest that money in a fixed income scheme.

This is a great way of ensuring you keep selling and booking some profits and moving money into a
lower risk investment.

Do note that not all fixed income investments are lower risk, at least in the short-term. Fixed-income
mutual funds, in particular, those that invest in medium and long-term debt, exhibit decidedly unfixed
returns. When interest rates rise, these funds perform poorly; when rates fall, they perform well.

I've oversimplified a little here, but the point is that for investors seeking lower risk, bank and
government deposits and short-term mutual funds are the way to go.

Don't ignore this vital component of your portfolio just because it lacks the excitement of the stock
markets.

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Indian Post offers several Savings Schemes which are safe,8 -+9#,
 % !%"  -  % !#" % #$ !#" $#" %
#! 1and relatively
more interest rates than bank deposits.
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÷ These schemes are offered by the Government of India.

 ÷ Safe, secure and risk-free investment options.
÷ No Tax Deduction at Source (TDS).
÷ Nomination facility is available.
÷ Nomination can be changed at any time
÷ The instruments are transferable to any Post Office anywhere in India.
÷ Attractive rates of interest.

The Post Office Monthly Income Scheme (MIS) is quite popular among investors.
But is there any way the returns from such a safe investment be enhanced
further?

Yes, there is! Read on.

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But this also means that you just get a simple interest ± you get an
interest on the original amount invested, but you don¶t get any interest on
the interest you earn on that amount.

This is because this interest is not invested back ± instead, it is given to you
every month.

You can increase the overall return from your MIS investment if you do not
need the monthly interest. In that case, you can invest this monthly return,
and earn interest on it as well!

Thus, effectively, you would earn a compound interest on your original

MIS investment!


!(##"+#=%($!"!%

Does it sound too difficult? Don¶t worry ± there is a clean and easy way to
achieve this!

In ³#!###$$!81!(#81
!!#´, we saw that the post offices in India offer the facility of a
recurring deposit account.

What is a recurring deposit account? You invest a fixed sum every month,
you earn interest on it, and you get back the amount with interest at
maturity.
(To know more about recurring deposits, please read ³ #!##
!(#´)

So, here we have two products ± one that gives you a fixed monthly
income, and another that needs a fixed monthly investment.

The conclusion is quite obvious ± you can invest the monthly interest you
receive from MIS into the RD account, so that you earn even more interest!

#,!%+!%).

So, do you have to go to the post office every month, get your MIS interest
money and deposit it in your PO recurring deposit account?

No! In this age of automation, that would be too much trouble!

It¶s quite easy: You just have to instruct your post office to deposit the MIS
interest in your RD account every month! That¶s it ± it is a one time
instruction that you have to give at the time of opening your MIS and RD
accounts!

)
As discussed, the most important advantage is that you earn a compound
interest ± you earn interest in your original (MIS) investment, and an
interest on that interest!
Also, since both MIS and PO RD are operated by the post office, which in
turn is operated by the Government of India, the investment is absolutely
safe.

Bottomline: You earn even more through risk -free investments!

(Please check ³Post Office Schemes: Downloadable Forms´ to download

forms for opening the PO MIS account, PO recurring deposit account, etc)

 )

Of course, PO RD is not the only avenue for investment that needs monthly
investments.

Another good option is to invest the monthly interest from PO MIS into
a Systematic Investment Plan (SIP) of a mutual fund (MF) scheme.
(To know more about SIPs, please read ³
&"!)" 
8
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Here, you would need to instruct the post office to deposit the MIS interest
amount in your bank account, and you would have to instruct the MF to
deduct the amount from your bank account.
 Also, investments in MFs are subject to market fluctuations. Thus, your
overall return would vary depending on the performance of the MF scheme
for which you have a SIP.
#! #
If you are risk averse, and want high risk -free return, the Post Office
Monthly Income Scheme (PO MIS) and Post Office Recurring Deposit (PO
RD) combination is one of the best options available to you.

V
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Pankaj has an annual income of Rs 4 lakh. His investments are mainly in property, gold and
mutual funds. He believes property grows in leaps and bounds while gold is slow but steady.
Mutual funds, he thinks, are for taking risks for higher returns. ³It is always good to diversify
investments to lower risk, in case one of t hem depreciates,´ he says. Pankaj thinks one
cannot rely just on fixed deposits as they grow at a lower rate than inflation.

Pankaj saves taxes on home loan EMIs and National Savings Certificates (NSCs), medical
bills and twice-in-four-years LTA claims.

ù  *  
  (
Tax exemptions should be raised by Rs 1 lakh or more as inflation is taking a toll on
finances. Also, with such a high percentage of people below the poverty line, inflation in form
of food price needs to be checked with dras tic steps.

ù     (    

³Personally, changes in the income tax slab were welcome, although some relief in the initial
cutoff mark would have won more appreciation. The Saral 2 form should simplify the process
of tax computation,´ Pa nkaj says.

c
  


Agrita and Harsh have investments only in fixed deposits and life insurance policies from
LIC. They do not have any exposure to equities. The couple is apprehensive of investing in
equities and does not want to participate in the stockmarket, especially in the aftermath of
the market crash that happened in 2008 -09. They have no loans outstanding in their name.

+  *  
  (

The couple had no expectations on the tax front. However, they hoped that the gover nment
would look into inflation and take measures to control it.

+     (    

The couple thinks that the Budget is good, especially considering the tax -saving proposals
that have been introduced. But they feel it will even out. ³T he money we save will have to be
paid for increased service tax and excise duties. So, the finance minister has not given more
money in our hands. It¶s a clever ploy, ³ says Harsh.

The couple believes the government should have taken concrete steps to cont rol inflation.
³Service tax on plane tickets has been raised from 10 per cent to 10 -15 per cent. Service tax
has also been levied on hotels. This will make holidays costlier,´ adds Harsh.

*

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