ELSSs start declaring dividends, as usual
CANARA ROBECO Equity Tax Saver (CTS) declared a dividend of 20%. Nothing unusual here, except that CTS is an equity-linked saving scheme (ELSS). These are equity diversified schemes that offer you a tax deduction under section 80C on an investment of up to Rs1 lakh.
With the close of the present accounting year (2009-10) barely three months away, expect a lot of ELSS funds to declare dividends. This is an age-old trick in an ELSS book.
Data provided by mutual funds tracker Morningstar India shows that 18 and 19 ELSSs declared dividends between January and March as against just six and eight funds between April and December in the accounting years of 2006-07 and 2007-08, respectively. The story in 2008-09 was different on account of the equity market crash. “These are smart ways to attract assets, but attracts the wrong kind of investors,” says Ranjit Dani, a Nagpur-based financial planner and partner, Think Consultants.
When mutual funds declare dividends, the scheme’s net asset value (NAV) comes down by the same margin. This means that if your fund’s NAV goes up from Rs10 to Rs15 and the fund declares a dividend of Rs2, your fund’s NAV drops to Rs13 (Rs15 less Rs2). In other words, you get your own gains back.
High dividend amounts or even a higher declaration frequency doesn’t necessarily mean that the fund is good. However, by making much noise about dividends being declared, especially in an ELSS which has a lock-in period of three years, investors get attracted by droves and the assets under management of these funds see a surge.
ELSS funds are good investments if you are willing to stick around for three years. But don’t get swayed by dividends and the quantum of dividend being declared by ELSS funds. Look at your fund’s track record and its consistency across time periods before making any decision.
--Kayezad E. Adjania
Axis Bank launches card pretection plan
AXIS BANK Ltd along with CPP Assistance Services Pvt. Ltd (CPP) has launched a card protection plan for its customers. The plan would cover credit and debit cards from other banks as well. Documents such as passport, driving licence and insurance policies can also be included in the cover, said a spokesperson. The annual membership fee for an individual is Rs1,295, while for a joint account is Rs1,945. The cover needs to be renewed every year.
The plan would give emergency assistance while the customer is travelling. For instance, if the customer’s credit card gets lost or stolen, the plan will facilitate the payment of, say, a hotel bill through its authorized dealer. The plan also gives replacement for travel tickets and even emergency cash advance.
Customers need to repay within 28 days, after which they will have to pay interest rate on the balance.
What looks good about this plan is the fact that transactions made seven days before the loss of card is reported are covered. Other such plans offer a cover only for transactions made seven hours before the loss of a card is reported. The card loss needs to be reported within 24 hours of the loss.
However, plans such as these make more sense only for those who travel abroad frequently.