November 2006 – Page 2

Roth IRA Misconceptions

Roth IRA is one of the most favorite retirement plans taken by most American employers. Its tax saving benefits has made it one of the popular plans in United States.

In spite of the popularity, not many people know the intricacies of the plan. Often the general mass has fewer facts and more misconceptions about the plan.

Misconception 1 – Roth IRA is the best IRA for everyone

This assumption can prove to be your biggest pit fall. It probably springs from another misconception that people often have. People think that it’s always monetarily beneficiary to pay tax later than now. The truth is that you can’t escape taxes. The belief that in future taxes will be minimal is nothing more then a figment of imagination that should be strongly thrown out of mind. Any IRA plan, Roth, Simple, Education, SEP or Traditional is good only if it suits your needs. Roth IRA withdrawals are tax free but not contributions. Hence, a Roth IRA account grows at a faster rate compared to a traditional IRA. However, in Traditional IRA the contributions are tax free. Hence, it’s incorrect to say that Roth IRA is the best retirement plan.

Misconception 2 – If you have little savings opt for Roth IRA

This is another misrepresentation of facts. Under Roth IRA, the contributions grow tax free. Hence, irrespective of the fact that whatever be the amount of contribution the tax free growth is for all who have Roth IRA. In fact, if people have higher contributions then they would have higher balance in Roth IRA. Such a class of people can also plan how to pass on the plan benefits to their children.

Misconception 3 – If you are taking Roth IRA, you should hold it for at least 10 years to maximize your gains

This is a popular notion people have in their minds about Roth IRA. There is no scientific proof that Roth IRA is beneficial only for specific term. It all depends on the contribution amount, withdrawals, age of the account owner, etc.

Misconception 4 – Traditional IRA and Roth IRA are nearly the same

Again nothing is same for the same person. The benefits vary as per your needs and use of the plan. Comparing both the schemes requires that you keep all the other parameters such as tax rates, withdrawals, age of account owner, etc. exactly same. This seldom happens in real world. So don’t buy a Traditional IRA just because you’re friend or relative has bought it.

Misconception 5 – Taxes will be low in future

No one of us is expert enough to take a sure prediction at the future. Hence, it’s wise not to make such bold decisions. Such thinking can often prove wrong resulting in huge monetary losses when you need it the most.

For any financial instrument, before taking it, read the policy documents clearly. You don’t have to rush through it especially with your IRA plan. Talk to your family and friends to get a more accurate assessment of your current financial condition and future needs. Take an IRA plan based on facts and not misconceptions other wise your future might hit you hard.

JANUS MUTUAL FUNDS

Janus Capital Management, one of the largest equity managers in the United States of America manages over $76 billion in mutual funds on behalf of their investors. The underlying focus of the company is on growth and core international mutual funds, extending their reach into balanced fixed income and money market funds. With about, 40 mutual funds along with bonds and money market funds Janus offer a full line of individual investor services.
Janus Capital Management, one of the largest equity managers in the United States of America manages over $76 billion in mutual funds on behalf of their investors. The underlying focus of the company is on growth and core international mutual funds, extending their reach into balanced fixed income and money market funds. With about, 40 mutual funds along with bonds and money market funds Janus offer a full line of individual investor services.Janus Mutual Funds make it easy for an investor to get started. In order to open a non-retirement account the minimum requirement is as little as $2,500. For a retirement account or a college saving account the minimum opening investment required of the investor is only $500. About 99.0% of the funds offered by Janus Capital are no load mutual funds. This aspect is important when an investor is thinking of investing in a mutual fund as loads significantly impact the total returns on the investment. Over the last five years the average return on Janus Mutual Funds has been 2.71%.

The expense ratio of Janus Mutual Funds runs from below average to very low as compared to most other mutual funds. On a domestic stock fund the average annual fee that is charged is just 0.91%. Nearly, 75% of Janus Mutual Funds are invested in domestic stocks.
Janus funds have their own unique objectives although they all have the same research-oriented and a hands-on investment approach for picking great companies.
Mutual Funds can be categorized into; stock funds, bond funds and money market funds. The stock funds that are available from Janus are; growth funds, specialty growth funds, core funds, risk-managed funds, value funds, international and global funds.
Although no cornerstone mutual fund such as the Magellan fund, there are some stand out mutual fund performers within the Janus family:

Janus Aspen International Growth (JAIGX): The funds focus is on international growth stocks with over $1.4 billion in assets. The funds main stock holdings are manufacturing (54.9%) and the services industries (34.3%). This no load fund carries an expense ratio of 0.70% and the minimum investment is $500,000. Over the last five years the total returns has been 14.51%. Some of the top companies held under the fund are Reliance Industries, The Tata Iron & Steel and Li & Fung Ltd.

Janus Overseas (JAOSX): Aimed at the large cap sector this overseas growth fund has about $4.2 billion in assets. With a minimum investment of $2,500 for this fund the main stock holding sectors are manufacturing (55.1%) and services (34.1%). This is a no load mutual fund and has an expense ratio of 0.89%. This growth fund invests in overseas companies based not on their geography or industry sector, but rather on their individual merits. Top holdings include Samsung Electronics, Tata Iron & Steel and Reliance Industries.

Janus Contrarian (JSVAX): With over $3.5 billion in assets this is a large blend fund for individual investors. The fund carries an average return of 12.14% calculated for over a period of 5 years. It is a no load mutual fund with an expense ratio of 0.93%. The top three holdings include St. Joe Corporation, Liberty Global and Ceridian Corporation. The funds assets are 100% invested in stocks.

Salary Reduction Plan 401(K)

This is a qualified plan provided by the employer to eligible employees of their organisations. The contributions to this plan are made by the employee on a salary deferral or salary reduction basis. It means that the employee’s pre-tax salary, matching his contribution to the Plan, is deducted and paid into his 401(K) account directly by the employer. The employer too sometimes makes a matching contribution into the employees 401(K) account. Sometimes the employer adds a profit sharing feature to the 401(K) plans as there is a provision in the plan which enables him to do so if it is in the interest of the employees. However it must be understood that all the earnings in this account are tax-deferred, meaning tax has to be paid at the time of withdrawal. There are, of course, limitations placed by the IRS on the contributions to the plan.

The salary reductions which are available to you will depend on your place of work. Many organisations whether privately or publicly held, offer the 401(K) salary reduction plans. However, some non-profit organizations like schools, colleges, museums and hospitals can also offer this plan, though many prefer the 403 (b) plans. The 401(k) plans first introduced in 1981 became so popular that by 2004 they had about 43 million participants. These numbers have steadily been increasing over the years because this plan offers you a choice to take your full salary home or contribute to a qualified plan and not only save for the future but also to save tax not only on your contribution but also on it earnings. The amount of tax that is to be paid can only be known at the time of withdrawal of the monies from the account. However your income being less after retirement there is bound to be a tax benefit at the time.
You can opt for this plan provided you are eligible and to be eligible you have to be employed for 365 days starting with the first day on the job. You can also be eligible if you have put in 1000 working hours during the year. It is also a good to know what you are getting into when you enrol and become a part of the plan. Like your contribution, your employers matching contribution, the decisions you may have to take to direct the growth of your investments and other benefits that make your retired life better.

However, being a part of plan 401(K) provides a good start to your retirement plans. Therefore it is better to start contributing earlier as an early start provides you with a greater chance to save a substantial amount in your retirement account. This plan works for you even if you are self employed and have not yet incorporated your business. The only difference is that you can add only 20% of your compensation over and above your salary deduction. One of the benefits of this plan is that you can transfer your account to the similar one with your new employer in case you plan to join another organisation.

If you are taking a savings retirement plan, then Plan 401(K) definitely deserves a serious consideration.

Simple IRA v/s Simple 401(K)

IRA and 401(K) are the most critical ways of having a steady income in your days of retirement. Most Americans opt for these plans to insure their future against any uncertainties. Hence, as an employer or employee it is very critical to choose the right plan. Though both the plans have certain common features, the differences too, are notable.

Employer Eligibility

If you already have a Simple IRA plan then you cannot have any other plan. So if you are still in the process of setting your IRA plan, ensure that your plan covers all the employees you want to get covered. Also if you have a large organization with 100 or more than 100 employees earning more than $5,000 annually, then you can’t set up Simple IRA or Simple 401(K) plan.
Both the above rules have certain exceptions. But those primarily take into account certain rare events like merger and acquisitions. Hence in your case, if its a normal situation, you can consider the above 2 conditions applicable to you.

Employee eligibility

For any employee to avail benefit of Simple IRA or Simple 401(K) plan, his/her age should be at least 21. Plus you should have been in employment for at least a year to join the IRA or 401(K) sponsored by the employer. You annual income should be at least $5,000.

Establishing the plans

Both Simple IRA and 401(K) plan should be established before October so that it can be used in that financial year.

Contributions

Employees can make their eligible amounts of contribution anytime before the end of the financial year. In both, employers can make same amount of contributions like the employees. However, employer’s contribution should not exceed 3% of employees compensation in Simple IRA.

However, in Simple 401(K), this rule is further subject to an income limit of USD 220,000. Say an employee has a compensation of $400,000 and has a Simple IRA. Say his/her own contribution is $12,000. Then the employer can match up this contribution as 3% of $400,000 is equal to $12,000. However, if he/she has a Simple 401(K), then the employer contribution is limited to 3% of $220,000 which is $6,600 (considerably lower than the Simple IRA employer contribution).

All contributions are immediately forfeited to the employees. Simple 401(K) doesn’t have a provision for employers to make lesser contribution. However, in Simple 401 Individual Retirement Account (IRA) plan, employers can reduce contributions to as low as a per cent of the employee contribution. However, the employer can’t do low contributions throughout the tenure of employee’s service. He/She can do so only 2 times in a period of 5 years.

Using the plans

Often employees need to use the accumulations of plan. There could be some urgent need for money for a short time. Simple 401(K) plan can prove to be of real help under such circumstances. You can take a loan from your Simple 401(K). However, you can‘t do so from your Simple IRA.

So before you set up a retirement plan or join one, keep above points in mind and evaluate the plan accordingly. Remember, the retirement plan single handedly plays a crucial role in deciding how you will spend the last few years of your life.

Establishing a SEP IRA Plan

SEP (Simplified Employee Pension) IRA is established by employers, including self employed individuals like sole proprietors or partnership firms. If you are running a company with say 20 employees, then you can open a SEP IRA for each of your employees. All contributions to the SEP IRA plan are tax deductible. This means if you are contributing say an annual total amount of $50,000 to IRA. You can deduct the same from your annual taxable income and save taxes. Employees too don’t have to pay taxes on contributions. However, if an employee withdraws money from the plan, then he or she will have to pay the tax applicable at that time. If the applicable tax at time of withdrawal is lower then the tax rate during the time of contribution, then your whole investment idea could be considered profitable. Establishing a Simplified Employee Pension Individual Retirement Account is not a difficult task. The US government and its agencies like the IRS have simplified things substantially for you. Moreover you can easily hire finance professional or any finance company to assist you in setting up the plan. There are various flavours of SEP IRA plan. IRS model, 5305 SEP IRA, etc. are some of the popular types of SEP IRA. Irrespective of which type of IRA you opt for your company employees, you will need some basic information. You will need to decide criteria on which an employee can join the plan. Then you will have to arrive at a formula to calculate your contribution. Plus, you will be required to include your basic company details.

The financial institution that you contact for establishing the plan has a critical role to play in the entire plan life cycle. Once the plan is established, they act as a Trustee for the whole plan. They manage the funds received by the plan. They then invest the funds in to suitable instruments thereby ensuring growth of the funds. They also do various administrative functions like providing yearly statements to the members of the plan. As per government guidelines, the employees should receive the statement by end of January each year. Statement shows how much contribution has the employer made in the previous year. Usually reputed mutual funds, banks and insurance companies act as Trustees for any SEP IRA plan. The model that you use for establishing the plan is also a very critical step in the whole process. Most employers opt for the IRS model. The plan acts like a contract or policy document which specifies all terms and conditions for all participants. If you have a need to change anything in the plan, you are free to do so anytime during the life of plan. However, you will have to inform all the participants at least 30 days prior to putting the change in effect. Generally, employee communication is critical to avoid any legal action from government or any of its agencies.

Once established, a SEP IRA plan is simple to operate and maintain as majority of the tasks are carried out by the financial institution. Also your employees will be happy with a good plan. A well established SEP IRA can make notable difference in your employee satisfaction levels and ultimately will help your company bottom line.

401(K) Fees and Expenses

The plan 401(K) is gaining popularity with more and more employees taking part and contributing a part of their salary towards securing their future after retirement. This plan also provides you with a chance to make use of these funds and contribute to their growth by directing your own investments. If you want to direct your own investments, you will have to plan your objectives, learn to weigh the risk and judge the performance of the investment options available so that you may be able to take sound decisions.

The factors that might generally affect the returns on your investment are the fees and expenses. They will also have an impact on your retirement income. Therefore it is necessary for you to study your investment options carefully keeping in mind the fact that cheaper investment options may not necessarily be better options. You must compare the total cost and all available services not forgetting the fees involved in the transactions.
Fees will have to be considered because while your contributions and earnings on the investments provide the required growth to your account, expenses and fees contribute to substantial reduction to that growth. Let us take for example that you have 35 years left for retirement and at present you have $ 25,000 in your 401(K) account. If your investment growth during this period is pegged at 7% with the fees and expenses at 0.5%; your account balance with no further contributions to your account, will have grown to $ 227,000. However, if your fees and expenses increase by 1% and are now at 1.5% then your account will have only $ 163,000. The 1% increase in fees and expenses will have reduced your retirement account balance by 28%. Therefore, of the many investment options now being offered under plan 401(k) with the promise of excellent services to be provided, it will be better to consider the cumulative cost of fees and expenses on your retirement savings, before opting to invest in them.

The 401(k) plan fees and expenses are of three types. a) Plan Administration Fees consist of day to day expenses that are needed to for administering the whole plan. These include accounting, legal services, electronic access to plan information and other such expenses b) Investment Fees are by far the largest component of expenses that are required to manage the Plan investments Therefore you must pay special attention to this aspect as they are charged on percentage basis on investment. They are also deducted directly from your investment returns. As these fees are not specifically shown on the in investment statements, they are not easily apparent c) Individual Service Fees consist of fees charged to a participant for taking a loan or for executing the investment directions given by the participant.
To keep a check and save you from making risky or expensive investments the employers have been given the task of keeping an eye on all investments. They are required to comply with the IRS rules. The sole aim is to protect the interest of the participants and their beneficiaries.

Vanguard Mutual Funds

A leader in the mutual funds industry and a popular choice among investors, the Vanguard Group was founded in the year 1975, and has well over $800 billion under management. The Vanguard family known for its educational outreach and indexing expertise pioneered indeed mutual funds in 1974.

The Vanguard Mutual fund consists of over 100 mutual fund portfolios (no sales commissions on any of them). The Vanguard 500 Index Fund is the single largest fund in the world having out-performed many other competing large mutual funds (nearly $100 billion invested in this fund). Many of their funds have a 5 star rating from Morningstar. Some of Vanguard’s Mutual Funds are invested in so heavily that they have closed them to new people.

Vanguard’s broad array of mutual funds that are both actively managed and indexed are specifically designed to enable and support long-term investment. The fund’s policies, with strict rules protect the investor from costs arising due to short-term trading. The investor is provided with information and perspective which enable one to make smart decisions for investment and thereby increase the chances for a long-term success.

Under the supervision of a professional manager, mutual funds investment portfolios are regularly and continually adjusted. The professional manager forecasts the future performance of investments which will be appropriate for the fund thereby, choosing the ones believed to match closely the fund’s investment objective, such as long-term growth, high current income or the stability of principal. A fund may invest in stocks, bonds, cash investments or even a combination of these financial assets.

Vanguard’s ‘no load’ (meaning that the buyer pays no sales commission-called a ‘load’- when buying or selling the fund shares) mutual funds are very appealing and attractive to the educated investor who clearly knows and understands how much every percentage point counts.

Mutual funds have become very popular as they offer the investorfollowing advantages:

Diversification: A single mutual fund can hold securities from hundreds of issuers. This is far more than what most investors could be able to afford on their own. Serious losses due to problems in an industry or particular company are considerably reduced due to diversification.

Professional management: Investors who do not have the expertise or lack time to manage their personal investments, to be able to reinvest effectively the interest or dividend income or investigate the thousands of securities that are available in the financial market, prefer to rely on a mutual fund investment advisor. The advisor having access to the extensive research and market information decides which securities to buy and sell for the fund.

Liquidity: Investors have easy access to the money as shares in a mutual fund are bought or sold on any business day.

Convenience: Mutual fund shares can be bought or sold by mail, internet or through telephone, enabling the investor to be able to easily move money from one fund to another as and when the financial needs change. Most of the major mutual fund companies offer extensive recordkeeping services, which enable you to track your transactions if so desired, enable you to follow your fund’s performance and complete your tax returns.

What are NAVs and Loads?

Net asset value or “NAV,” of a fund is determined by dividing the net assets of the scheme by the number of outstanding units on the valuation date. NAV is calculated by adding up the present market value of securities, cash, accrued income owned by the fund then subtracting liabilities and dividing the result by the number of units outstanding.

Total Value of Securities (Bonds, Debentures, Equity etc.) : $ 2000

Cash : $2500

Liabilities : $1500

Total outstanding Units : $150

NAV = [(2000 +2500-1500)/150] = $20 per unit

Mutual Funds generally calculate their NAV at least once every business day on basis of market price. A closed-end fund -whose shares are not required to be repurchased by the fund i.e. not redeemable – is not subject to this requirement but may be published at monthly or quarterly intervals. The share price of mutual funds is based on their NAV. The price that investors pay to purchase mutual fund is the approximate per share NAV, plus any fees that the fund imposes at purchase. The price that investors receive on redemptions is the approximate per share NAV at redemption, minus any fees that the fund deducts at that time.

What is LOAD?

A load is a payment an investor makes to the mutual fund’s management team or a broker when he buys or sells the shares .No-load funds are direct opposite of Load funds. They do not charge investors sales fees or commissions. In a load fund, the seller of the fund shares, generally a broker, receives a load i.e. the sales commission paid to the seller. The individual or the company responsible for the fund organization does not receive a load. So, a load is no incentive for the fund manager. However, a secondary party or a broker benefits financially for assisting the investor in buying shares of the fund.

The mutual fund loads can be of following types:

Front End Loads

Purchase Fees

Back End Loads

Redemption Fees

Front end loads and purchase fees are paid by the investor on buying units of the mutual fund are purchased. These loads come in Entry loads so front loads and purchase fees are deducted from the investor’s cash before the money is deposited into the account. For example, Tom wants to buy shares in a mutual fund and pays the broker $4000 on a fund with a 5% front load. Here the money deposited into the account : $4000 – 5% = $3800.

Back end loads and redemption fees come under Exit Load and are paid by the investor when mutual fund shares are sold. Again Back end loads go to the broker and redemption fees is for management team. These loads are deducted from the account of the investor. For example, an investor sells all their shares in a mutual fund and the value of those shares is $5,000 and the fund has a back end load of 2.0%. This means the account holder would receive $5,000 – 2.0% or $4,900.The exchange fee is charged by some mutual funds when the shareholder exchanges shares in one mutual fund for another. This happens when the fund exchange occurs within the same funds.

No Load Mutual Funds: A notion that is false is that a mutual fund that charges a load does not mean that fund is better than a no load mutual fund. Most of times it is really advantageous to buy no load mutual funds. When an individual purchases shares of a no-load fund, the complete amount goes towards the investment. For example, if the individual puts $3,000 into a no-load fund, that entire $3,000 is invested. While a front load of say 4% will set you back by $120 while there is no set back in former case. So unless the fund is giving a consistent performance in the market ,its better to invest into a no load mutual fund. In this example, the fund is already starting out with a 4% disadvantage – which is a considerable amount for short term funds.

What is a Mutual Fund?

A mutual fund is a company that pools money from many investors and invests the money in stocks, debentures/bonds, equities, short-term money market tools or other securities. The income produced through these investments plus the appreciation of capital earned by the scheme are shared by its entity holders depending on the units possessed by them. Thus, mutual funds can be well thought of as financial middleman in the investment trade who collect funds from the people and invest on behalf of the investors. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment goals state the class of securities in which a Mutual Fund can invest. Generally the portfolio of Mutual Funds comprises of various asset classes such as bonds, debentures, equity, and government securities, equipment. Stocks and bonds are the primary assets of the mutual fund while investing in equipment etc. take a back seat.

Like any other corporation, in exchange for cash the mutual fund issues shares of stock to investors. However unlike most corporations, mutual funds do not issue a fixed quantity of stock but with new investments new shares are issued. A mutual fund may be either an actively managed fund or an indexed mutual fund. A fund manager alters actively managed funds regularly in order to maximize their profitability. They fund manager inspects the market and the sectors a fund invests in and reallocate the fund appropriately. An indexed fund follows a different approach by simply taking one of the major indexes and buying according to that index. Indexed funds change much less repeatedly than actively managed funds. However, an active fund is more profit making.

Mutual funds provide transparency, efficient performance, liquidity, tax benefits and a wide range of schemes.

Mutual fund schemes may be classified on the basis of its investment objective and structure.

On the basis of Structure:

Open-ended Funds: An Open-ended Fund allows investors to buy and sell stock in it on an ongoing basis. It is available for subscription all through the year without a fixed maturity. This mutual fund is designed to issue and cash in shares from investors directly rather than through the stock market.

Close-ended Funds: A Close-ended Fund has a predetermined maturity period, ranging from 2 to 14 years. They do not incessantly offer their shares for sale but sell a fixed number of shares in the initial public offering after which the shares characteristically trade on a secondary market. The cost of closed-end fund shares that do business on a secondary market after their initial public offering is dependent on the market. It may be more than or less than the share’s net asset value.

On the basis of Investment Objective:

Growth Funds: Growth funds aim to provide capital appreciation over a long term. These funds look for the rapidly growing companies in the market. Growth managers take up more risk by paying a premium for their stocks to make a portfolio of companies with high price appreciation. These schemes are perfect for investors looking for growth over a long time.

Income Funds: These schemes invest in permanent income securities such as corporate debentures, bonds and Government securities thus aiming at regular and stable income to investors. The capital appreciation is restricted but the risks involved are lower than those in a growth fund.

Balanced Funds:The aim of Balanced Funds is to provide growth as well as regular income. These schemes dispense a part of their income by investing both in equities and fixed income securities in the percentage as mentioned in their offer documents. This proportion affects the risks and the returns associated with the balanced fund. Balanced funds with identical share in fixed income securities and equities are perfect for investors looking for income and reasonable growth.

Money Market Funds: Money market funds invest in government securities, certificates of deposits, and commercial paper of companies, treasury bills, Inter-Bank Call Money and other highly liquid and low-risk securities. They try to keep their net asset value constant and only the dividend yield goes up and down. Returns on these funds may fluctuate depending upon the current interest rates in the market.

Different Types of Mutual Funds

Recently Mutual funds have become popular part of investment portfolio. The range of schemes and income alternatives offered by Mutual Funds can fit in the financial preferences of all classes of investors be it Retail, Corporate or Institutional. Efficiency in performance of mutual funds has inspired a great confidence amongst the investors.

Mutual Funds offer plans keeping in view the risk profile and risk-return preferences of investors. Mutual Funds provide various investments plans in order to suffice a range of investors having various investment plans. These plans depend upon the circumstances of the investor whether he is interested in appreciation, fixed income, reinvestment of this income or retirement and insurance plans.

Some of the important investment plans include:

Growth Plan

Dividend is not paid-out under a Growth Plan and the investor realizes only the capital appreciation on the investment (by an increase in NAV). A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realizes capital appreciation on the investment. This plan appeals to investors in the high- income bracket.

Income Plan

Dividends are distributed to the investors from time to time. But, the net asset value of the mutual fund scheme under an Income Plan is dependent on the dividend payout.

Dividend Re-investment Plan

Generally mutual funds present the investor with an option of taking dividends or an alternative to re-invest the same. In Dividend Re-investment Plan the dividend credited on mutual funds is automatically re-invested on behalf of investor in buying additional units in open-ended funds. This increases the number of units possessed by investor.

Insurance Plan

Depending on your life expectancy, lifetime income, disability income, tax advantages, what fraction of income one can spend, various plans are available that provide insurance cover to investors.

Systematic Investment Plan (SIP)

Also called Automatic Investment Plan, SIP is designed for the investors to plan their savings through an ordered regular monthly savings program. In the investor is given the choice of setting up a fixed number of post-dated cheques in favor of the fund. The investor is allotted units on the date of the respective cheques at the applicable net asset value. The investor invests in a specified frequency of months in a specified scheme of the Mutual Fund for a constant sum of investment.

Systematic Withdrawal Plan

In contrast to the Systematic Investment Plan, the Systematic Withdrawal Plan (also called Automatic Withdrawal Plan) allows the investor with the facility to withdraw a pre-determined amount or units from his fund at a pre-determined interval. The investor’s units will be redeemed at the applicable net asset value as on that day.