My company recently closed down and I have received a lumpsum amount as a severance package. I would like to set aside daily expenses needed for the next six months from this amount and invest what remains to maximise returns with very little risk to capital. Since I fall in the highest tax bracket, I am thinking about investing my surplus money in arbitrage funds, which I understand are safe and superior from the tax angle as well.
-Sharath
Yes, you can invest in arbitrage funds. These funds try to take advantage of the opportunities arising out of the pricing mismatch in the equity and derivative (futures and options) segment of the stock market. These funds are ideal investments for those who want decent returns and can take a moderate amount of risk. You can enter into these funds any time and not worry where the market is headed. Since these funds invest predominantly in equities, they are treated like equity-oriented mutual funds and have identical tax treatment. They attract a short-term capital gains tax of 15 per cent and become completely tax-free if you hold them for more than a year. But, remember, while arbitrage funds are relatively safe, since they skip the volatility of equity markets, they don't guarantee any kind of returns or capital safety.
I bought Reliance Tax Saver MF on May 21, 2005, for Rs 50,000, with a lock-in period of three years. I received a dividend of Rs 5,000 per year over the first two years. The fund's current NAV (June 4, 2009) is Rs.14.17. Is it a good time to sell this fund? I do not have plans to keep it for long.
-Shiva
Reliance Tax Saver is a 3-star fund. So far, the performance of the fund has been just about average. This mid-cap oriented fund has delivered an annualised return of 5.58 per cent over the past three years ending June 8, almost equal to that of the category average of tax-planning funds. You invested in this fund for tax saving and your lock-in period of three years is over. So, if you need money you can withdraw.
Birla Sun Life Mutual Fund has come out with Century SIP, wherein they give 100 times cover of the amount of SIP. My question is, will they be paying the premium to some insurance company for the cover? They are charging an entry load of only 2.25 per cent, which they are giving to the broker; then, where do they charge this premium? Does the insurance really come free of cost to me?
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-Marzee Kerawala
I had purchased the GIC Growth Fund and GIC Tax Saver Growth in 1994. I am unable to get any information regarding the present position of these funds. Kindly help.
-S.K.Sharma
You are not getting any information because both these schemes are closed. GIC Growth was closed in March 2003 and GIC Tax Saver Growth in March 2004. GIC Mutual Fund was taken over by Canbank Mutual Fund, which is now Canara Robeco Mutual Fund. So, you will have to write an application to Canara Robeco Mutual Fund for the redemption.
Value Research