1 Shriram City - News Letter - Breeze - 1st February 2015 “Healthy discontent is the prelude to progress.” - Mahatma Gandhi 1st FEBRUARY 2015 An Equity Linked Savings Scheme (ELSS) is a diversified equity mutual fund which has a majority of the corpus invested in equities. Since it is an equity fund, returns from an ELSS fund reflect returns from the equity markets. This type of mutual fund has a lock in period of 3 years from the date of investment, which is lower than that of other 80C options like PPF and NSC. While ELSS investment is locked in for 3 years, PPF investments are locked in for 15 years, NSC investments are locked in for 6 years, and bank fixed deposits eligible for tax deduction are locked in for 5 years. If you start a Systematic Investment Plan (SIP) in an ELSS, then each of your investments will be locked in for 3 years from the respective investment date. Investors can exit ELSS by selling it after 3 years. Similar to other equity funds, ELSS funds have both dividend and growth options. Investors get a lump sum on the expiry of 3 years in growth schemes, WHILE investors in dividend schemes get a regular dividend income whenever dividend is declared by the fund, even during the lock-in period. For tax purposes, returns from an ELSS scheme are tax free. You can claim up to Rs. 1.50 lakh of your ELSS investment as a deduction from your gross total income in a financial year under Sec 80C of the Income Tax Act. In the current scenario many investors are unsure of the benefit of taking up ELSS in a market that’s near its all -time high, as they feel that returns may not increase significantly from now on. Also, many of them are happy with the risk-free interest offered by tax-saving bank fixed deposit (TSBFD) and public provident fund (PPF). Financial advisors suggest that such investors take up a combination of ELSS and TSBFD to tide over the tricky situation. Decoding ELSS
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Shriram City - News Letter - Breeze - 1st February 2015
“Healthy discontent is the prelude to progress.” - Mahatma Gandhi
1st FEBRUARY 2015
An Equity Linked Savings Scheme (ELSS) is a diversified equity mutual fund which
has a majority of the corpus invested in equities. Since it is an equity fund, returns from an
ELSS fund reflect returns from the equity markets. This type of mutual fund has a lock in
period of 3 years from the date of investment, which is lower than that of other 80C
options like PPF and NSC. While ELSS investment is locked in for 3 years, PPF investments
are locked in for 15 years, NSC investments are locked in for 6 years, and bank fixed
deposits eligible for tax deduction are locked in for 5 years. If you start a Systematic
Investment Plan (SIP) in an ELSS, then each of your investments will be locked in for 3 years
from the respective investment date. Investors can exit ELSS by selling it after 3 years.
Similar to other equity funds, ELSS funds have both dividend and growth options.
Investors get a lump sum on the expiry of 3 years in growth schemes, WHILE investors in
dividend schemes get a regular dividend income whenever dividend is declared by the fund,
even during the lock-in period. For tax purposes, returns from an ELSS scheme are tax free.
You can claim up to Rs. 1.50 lakh of your ELSS investment as a deduction from your gross
total income in a financial year under Sec 80C of the Income Tax Act.
In the current scenario many investors are unsure of the benefit
of taking up ELSS in a market that’s near its all-time high, as they feel
that returns may not increase significantly from now on. Also, many of
them are happy with the risk-free interest offered by tax-saving bank fixed deposit (TSBFD)
and public provident fund (PPF). Financial advisors suggest that such investors take up a
combination of ELSS and TSBFD to tide over the tricky situation.
Decoding ELSS
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Shriram City - News Letter - Breeze - 1st February 2015
Contd. - Decoding ELSS
Betting on equities through ELSS without risking your capital may sound a bit fantastic,
but consider this scenario before dismissing it. For example, a person planning to invest Rs 1
lakh under section 80C can invest Rs 70,000 in a TSBFD and the rest in an ELSS. At an 8%
interest rate, he will get back Rs 1 lakh from his TSBFD at the end of the fifth year. In other
words, he has succeeded in preserving his capital. The remaining Rs 30,000 invested in ELSS
will offer market-lined returns.
ELSS investments are fundamentally different from the other investment options avail-
able under 80C. ELSS gives investors a higher earning potential with higher risk. Here are
some factors that will help investors to choose the ELSS fund that is best for them.
Nature of investment
The basic thing is that ELSSs are equity oriented and the entire amount that goes to-
wards this area gets an equity exposure. This means that there is a different kind of risk that
is present here as compared to say a Public Provident Fund (PPF) investment or a National
Savings Certificate (NSC) because the asset class is not the same. In a debt investment there
is usually a higher confidence of the safety of the capital invested especially with government
backed instruments. On the other hand when it comes to an equity exposure it is the man-
agement of the money that is very significant and due to this reason there has to be addi-
tional care taken in the investment process. For this reason an investor should look into the
fund manager’s record, performance during bearish periods etc.
Exposure
There are other instruments which will provide an equity exposure as well as a Section
80C benefit at the same time to the investor but none is directly comparable to an ELSS
fund. In NPS the equity exposure is limited to 50 per cent of the total investment so here
half of the investment is still in debt. A similar thing is witnessed when one looks at the pen-
sion fund being offered by mutual funds as this too is a balanced option while in case of
ULIPS there is also a part that goes toward premium payable for life insurance.
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Shriram City - News Letter - Breeze - 1st February 2015
Contd. - Decoding ELSS
Unique risk
There is a lock-in that is present in the ELSS fund which is at 3 years but this might
not have much of a meaning for the investor because if the market conditions are very weak
at the end of the lock in period then it might not make sense for them to actually take out
their investment. This is significant because the money might find itself invested for a long
time to come. This is going to be the situation for other alternatives that have some equity
exposure too. This kind of position is witnessed because the individual should be looking at
equity for the purpose of increasing their wealth and hence not for the purpose of quickly
taking their money out.
The centre of attention for the investor when they choose an equity route is that they
need to build their wealth over a long period of time and one has to ensure that the equity
portfolio is structured towards this particular direction. This kind of situation where the inves-
tor is forced to keep their money invested for a long period is a different kind of risk that
hardly anyone thinks about or considers while they are planning their investment. Ultimately
there is a different kind of exposure that is provided here and some smart work will ensure
that the investor is able to factor this effectively into their planning.
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Shriram City - News Letter - Breeze - 1st February 2015
Notice: Health Check up Offer
Dear Friends,
We bring to you the most convenient way of assuring health and wellness for yourself and
your family. Thyrocare's preventive health checkups help in identifying disease risks early and exactly
so that you can be in control of your health. The checkup is done at your home, takes only 5
The mails should be sent from the official mail ID of the employee.
The response mail should be as follows:
The name of the staff from whom the first correct response comes will be published in the subsequent issue of ‘Breeze’. This will be done for each of the states.
Shriram City - News Letter - Breeze - 1st February 2015
PART IV – State wise correct response to Quiz in January 2015 Issue
By:
Sri D. Srinivasan (Sr. Manager)
BPR, Santhome
S.No State Name State Name S. No
1 HO - Chennai Udhaya Geetha Chandigarh Ravi Prakash Ojha 5
2 Rajasthan Sharvan Das Tamil Nadu D. Arul Prakasam 6
3 Maharashtra Aamir Gaur Andhra Pradesh Srinivas Madishetty 7
4 New Delhi R.D. Narayanan
PART IV – State wise 1st correct response to Quiz in January 2015 Issue
S.No State No. of responses State No. of responses S. No
1 Maharastra 4 Chandigarh 1 5
2 New Delhi 1 Tamil Nadu 1 6
3 Andhra Pradesh 1 Rajasthan 1 7
4 HO-Chennai 2
1 Calculate the Loan To Value (LTV) in the following example:
Vehicle cost- 68500, Down Payment-18500, Gross Loan Amount-50000, EMI-2800, Ad vance EMI Nos- 2, Advance EMI Amount-5600, Processing Fees-1000,Stamp Charges- 200, Net Loan Amount- 44400.
a 35.18%
b 64.82%
c 72.99%
d 27.01%
2 As per RBI, Electronic Clearing Service (ECS) is going to be closed and only ACH (Automated Clearing House) will be available. The last date for receiving ECS mandates is:
a 31 May 2015
b 28 February 2015
c 31 March 2015
d 30 April 2015
3 What is Shriram City “YUVA” ??(Refer our website www.shriramcity.in)
a Fixed Deposit of Shriram City for people above 50 years
b Fixed Deposit of Shriram City for Senior Citizens
c Fixed Deposit of Shriram City for all
d Fixed Deposit of Shriram City for people below 35 years
PART V – Quiz for February 2015
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Shriram City - News Letter - Breeze - 1st February 2015
A helping hand by Shriram City
Mr. Senthil A., Manager at Shriram City Union Finance (Deevattipatti,
Dharmapuri II) tragically lost his life to head injuries sustained in a road
accident, on 27th September’2014.
Shriram City has given Mr. Senthil’s family a sum of Rs 10,00,000
through the Group Personal Accident policy taken by the company. The
amount was handed over as a cheque to Mr. Senthil’s wife, Mrs. Revathi.
The Shriram City family expresses its heartfelt condolences at the passing
of Mr. Senthil A. and prays that his family may find the strength to cope with
this tragic loss. ———————————————————
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Shriram City - News Letter - Breeze - 1st February 2015
Management Lesson
The Japanese have always loved fresh fish. But the waters close to Japan had
not held many fish for decades. So the fishermen had to go further out to sea, and
the farther the fishermen went, the longer it took to bring in the fish. If the return
trip took more than a few days, the fish were not fresh and they lost their fresh
taste.
To solve this problem, fishing companies installed freezers on their boats.
Freezers allowed the boats to go farther, stay longer, and catch the
fish and freeze them at sea. However, the Japanese could taste the
difference, and they did not like frozen fish. Also, the frozen fish
brought a lower price. So the fishing companies installed fish tanks,
and stuffed the fish in the tanks, fin to fin. After a little thrashing around, the fish
stopped moving. They were tired and dull, but alive. Unfortunately, the Japanese
could still taste the difference; because the fish did not move for days, they lost
their fresh-fish taste.
How did Japanese fishing companies solve this problem? How
could they get fresh-tasting fish to Japan? To keep the fish tasting
fresh, the Japanese fishing companies added a small shark to the
tanks that the fish were kept in. The shark of course ate a few fish,
but most of the fish arrived in a very lively state due to the fact that
their survival was challenged.
Some of us also live like fish that have
been caught. We give in too easily, and we are
not challenged. Some of us could use a Shark in
our life. Consider the new challenges and prob-
lems in your life as sharks – the challenges and
problems can keep us motivated and moving
forward. Without challenges we become
complacent, inactive, and find life boring.
“When we long for a life without difficulties, be reminded that oak trees
grow strong in contrary winds, and diamonds are made under pressure.”
Where there’s a problem, there’s an opportunity
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Shriram City - News Letter - Breeze - 1st February 2015
