CAPITAL LETTER

Volume 3
G re e ti ngs fro m FundsIndi a!

September 7, 2011

Issue 9

It is difficult not to worry. The equity markets suffered one of the worst Augusts in memory, and the values of our portfolios have taken a beating. Our email inbox here at FundsIndia saw a lot of queries from concerned investors who wanted to know if it would be wise to stay out of the markets till it stabilizes or till it stops falling. True, it is difficult not to worry. And that is not necessarily a bad thing. What is important is to remember to not fall prey to the evil twin of worry - panic. Worry causes us to re-examine our assumptions and decisions - the assumptions we made about our risk tolerance and the decisions we made about our portfolio. Worry might lead us to do a portfolio rebalancing exercise to either move it to a new asset allocation or to restore the current imbalance. Worry keeps us within the ambit of our own rationality and common sense. Panic, on the other hand, lets go of rationality. It causes us to make emotional decisions to stop the short-term suffering of looking at losses. It causes us to sell at, probably, the bottom of the market and ensures that we bought high and sold low. It seeks to restore the security of money in the bank at the cost of losing out on participating in the potential market upswing. Our words of advice to people sending us email have been the following: 1. Redeeming now is not a good idea 2. Stopping or pausing your SIP now (due to market downturn) is not a good idea 3. It is never a bad time to start an SIP 4. If you want to take advantage of the market weakness and make lump-sum investment, go for large-cap funds or equity oriented hybrid funds. 5. If gold or debt portion of your portfolio have appreciated disproportionately in your portfolio, rebalance without hesitation. Also, as one of our advisor remarked to us, if the market downturn and the notional loss in your portfolio makes you feel too queasy, it provides you insight into your own risk tolerance for investments - a very useful insight for making future investment decisions! Happy Investing!

FundsIndia All Insurance Ranking FAIR

FAIR is designed for individuals and families, to simplify their insurance buying decisions. It helps you choose the insurance plan that gets the most out of the money you invest in it. In its first avatar, it ranks the various term insurances available in India, across insurance companies, in a scientific and time-tested manner. Login to http://www.pelicaninsuranceonline.com/ content/jsp/Insurance/FairRankingInsurance.jsp to see how your policy ranks in our FAIR rating!

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

Religare Finvest Ltd.

NCD Issue

Key features of Religare FinvestNCD

Will be listed at Bombay Stock Exchange (BSE) No tax deduction at source (TDS) on the interest component Minimum investment amount is Rs. 10,000 Issue opens - 9th September 2011 Issue closes - 26th September 2011

Ratings This Religare NCD has been rated as ICRA AA- Stable by the ICRA rating company and CARE AA- by CARE. Which means that it is relatively stable to invest via this non-convertible debenture issue.

Interest Rates for Retail investors: Each Religare Finvest NCD is worth Rs. 1000 and the minimum investment is 10 NCDs. Options Tenure Interest Rate for Reserved Category 1 5 years 12.50% 2 3 years 12.25%

The interest will be paid on April 1st of each year and the final interest will be paid at the time of maturity.

Coming soon to www.fundsindia.com

Deposits from Top rated Companies
Company Name HDFC LIMITED ICICI HOME FINANCE COMPANY LIMITED LIC HOUSING FINANACE LTD MAHINDRA AND MAHINDRA SHRIRAM TRANSPORT FINANCE CO.LTD DHFL Rating FAAAA MAAA FAAA FAA TAA AA+ 1 Year 9.4% 8.25% 7.0% 8.25% 9.25% 10.25% 2 Year 9.65% 8.75% 7.4% 9.75% 9.75% 10.25% 3 year 9.75% 8.75% 7.65% 10.25% 10.75% 10.25%

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

Digging Their Own Graves

BY DHIRENDRA KUMAR

As I write this editorial on the 27th of July, the worlds two largest democracies are in the throes of crises that are entirely self-inflicted by their respective political classes. In India, the Reserve Bank has just increased interest rates by a higher margin than almost everyone seemed to expect. The central bank is clearly prepared to tamp down growth in order to contain inflation. Predictably, the reaction has been rather sharp. However, I would say that its more instructive to read what the RBI brass has said rather than focus on the rate hike and its impact. Translated into plain English, heres what the RBI said: We know this will limit growth, but theres no alternative because the government is not doing its job. If enough infrastructure was being built and if the government could have controlled its expenditure, then we could have had low interest rates. As things stand, the governments failure means the choice is between high inflation and lower growth. Between the two, its better to have poor growth rather than high inflation. Subbarao has said in no uncertain terms that policy actions are needed to sustain growth. Unless the government can deliver on these, the RBI has no solution. After the rate hike, there were all kinds of opinions being expressed that this was the end of the cycle and that interest rates wont go any higher. These may be more wishful thinking than have any basis in reality. In a recent edit, The Economist magazine wrote that India has only reformed the output side of the economy; it now needs to act on the input side. That hits the nail on the head. Narasimha Raos reforms of 1991, and practically everything that has followed, has set Indian businesses free to produce as much of and whatever they want. Thats the output. The problem is in the inputs. Two decades later, weve run out of steam on how to produce what people can buy. The inevitable result is that those who have more money can out-bid those who have less. This even goes for resources, which we thought we had a limitless supply of. Skilled people, for example. Today, theres no problem doing any business in India, as long as it doesnt need infrastructure, people, money and land. The rest is fine. The problem is that theres no turnaround in sight. For a while, people had this feeling that growth was a given and that these problems wouldn't matter so much. Unfortunately, that's not true. Leadership matters. There's no limit to how wide the difference between good leaders and bad ones is. If you doubt that, take a look at Bihar. Ruinous politics Sadly, leadership problems are also threatening to engulf the economy that's the second most important to us, and indeed to most people around the world. You would have seen in the media that the US government will run out of money because the president and the legislature can't agree on controlling deficits. US politics has taken a turn towards economic irrationality and this isn't going away any time soon. The world is in for a lot of economic roller coaster rides as this plays out over the next few years. Far from it being a given, prosperity is a precious and rare thing that needs care and attention to grow and flourish. It's unfortunate that these inputs appear to be in such short supply around the world. Syndicated from Value Research Online
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Child Education Plans in India BY RRK Our children are our happiness, our joy, our pride and our world. As a parent, we work hard to make them realize their dreams and give them the very best in their life. It is our duty to provide our children with all the opportunities that gives an edge over others. This includes planning for their higher education needs and marriage. With the rising cost of education, you need a savings plan that is designed to provide adequate funds at key educational milestones. And also provide enough money if they are starting a new life after their marriage with their loved one. While a well designed savings and investment plan can take care of the future needs of the kids, a plan itself is not complete without considering the unfortunate events that can happen in ones life and plan for consequences thereof. While many of the responsible parents thought out the needs of the children and understand what is required, many of us are not clear how to manage the risks that arise when the earning parent dies. While an insurance plan can make the payout to beneficiary at the demise of the earning parent, it does not guarantee the money will be around when the children turn 18 and demand money for college education. Uncertainty of events after the death is real cause of worry for any family head. A simple insurance and mutual fund solution would not solve your problems. You need more than that. You need a guarantee that your children education plan is certain and safe. Is your wife savvy enough to handle money? Can she protect the money and invest wisely after your death and make sure it grows to meet your kids college expenses? Is there a chance that she can be misguided after your death and choose bad investments and lose entire college savings and let your kids suffer ? Is there a chance that she doesnt understand finance and investments as much as you do and keep all the money in bank deposits and not let the money grow enough to meet the college expenses ? Is there a chance your wife can marry again, after all she needs a company for long term? Will that second marriage of your wife lead to cause financial strains in her new family and your kid could end up as a victim? Is there a chance of you being permanently disabled and not able to contribute to your kids education plan and not let the portfolio grow enough? Do you have a good financial planner who can take care of your portfolio when you are not around and do exactly the same thing that you would have done, if you are not around ? What happens if your kid is unfortunate to lose both of you in an accident or something like that? Can the person who would take care of your children, smart enough to manage the money as you or your wife would do?

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

Most of the Indian Child Education Plans address all of the above issues and take your worries off completely. You can sleep peacefully with thoughts in your mind, if you are alive or not, your kids are safe and they can pursue their dreams of higher education, no matter what happens to you. How about a company taking care of your portfolio when anything happens to you and invest the same amount every year, as though you would have done it if you were alive? Not only that, they would invest in the same mutual fund options in the same way that you would have done it, yourself. How safe would you feel, if you know that the insurance company would continue to fund your kids education plan and would not allow that be closed before your kid becomes 18 years old. It is 100% protected and safe. It is so secure, even for a kidnap ransom, your wife could not close or withdraw the money from the plan. No bad advisor or bad advice to your wife can mess up with your kids education future. It is exactly like setting up a trust in the name of your kid and give the control to the trust. But these children education plans go even one step better than the trusts. Most of the trusts are difficult to setup and very expensive. Further once you relinquish control to trust, it is difficult to make adjustments or regain the control back. But these children plans let you keep the cake and eat it too ! Let me explain. As long as you are alive, you have full control over the plan. You can close them, do any adjustments, increase your contributions, move money from one fund to another, etc., After 5 years of lockin period, you can close the plan anytime and take 100% of fund value without any penalty, without any questions.And let you enjoy all the benefits explained above when anything happens to you. Further you dont need to produce any receipts or any documents to show the money received to be spent only for college education. You can use the money for anything you want to do.

And above all everything is 100% tax exempted !!

Children Plan benefits in a glance Most of these children plan also offer an immediate relief to the family by paying sum assured amount to your beneficiary, say your wife. For example, Suresh has selected a child plan with a premium of 1 Lakh per annum for a period of 15 years and with an insurance of 20 Lakhs. And he has selected this plan for his son Rahul who is 3 years old and nominated his wife Radha as guardian to Rahul. If anything happens to Suresh after 3-4 years of Premium payments, insurance company would pay 20 Lakhs sum assured immediately to Radha insurance company will continue to pay 1 Lakh premium per year on the due date every year until the maturity insurance company will Pay the total fund value when Rahul is 18 years old. This payout can be taken as lumpsum one time withdrawal or in installments over period of 4-5 years of education. When it is taken in installment, the fund value continue to grow. If you are alive until the plan matures, You have complete control and do anything you want with the plan and money You can Close the plan and receive 100% fund value anytime after 5th year If allowed to continue the plan to maturity, in the end you can receive the money as lumpsum or in installments, as explained above.
Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

If you are alive until the plan matures, You have complete control and do anything you want with the plan and money You can Close the plan and receive 100% fund value anytime after 5th year If allowed to continue the plan to maturity, in the end you can receive the money as lumpsum or in installments, as explained above.

If you are alive until the plan matures, You have complete control and do anything you want with the plan and money You can Close the plan and receive 100% fund value anytime after 5th year If allowed to continue the plan to maturity, in the end you can receive the money as lumpsum or in installments, as explained above.

Summary of the benefits of child plan 1) In the event of death, sum assured is paid to beneficiary immediately. 2) The plan continues till kid becomes 18 years old. The company continues to fund the plan by paying the premium on behalf of the insured till maturity. 3) When the kid becomes 18 years old, the full fund value is returned by the company. This is the same benefit the parent would have enjoyed had they lived till the maturity of the plan. 4) In addition to all these above benefits, all proceeds are exempted from taxes. Riders Options You can further enhance the child plan with optional riders. These riders offer additional protection in special situations. 1. Accidental Death Benefit (ADB) - Lump sum benefit paid on accidental death 2. Permanent Disability Benefit (PDB) - Installments paid on becoming disabled 3. Critical Illness Benefit (CIB) - Lump sum benefit paid on diagnosis of a critical illness Syndicated from R2iforums.com 17, RMG Complex, TVK Industrial Estate, Guindy, Chennai 600032 Tamil Nadu, India Phone: 044-4344 3100 E-mail: contact@fundsindia.com

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