Regular Income, Equity Mutual Fund Returns, VISA ATM Card, Capital Appreciation - Now That's an idea

Do you have grand parents or parents who could use a regular monthly income? Or maybe a child at college who needs monthly funds? You have a number of avenues to meet these sort of requirements; starting from regular savings accounts, joint debit cards charged to your bank account to post office monthly income schemes.

Here I propose a radically different scheme that will not only give you the ability to meet the monthly cash requirements but also allow you to give your dependent an easy way to access that cash. In addition you can get a good rate of return on your monies and create a nice little nest egg that provides an additional financial cushion for your dependent over and above the monthly remittance.

What do you have to do? Well, you will have to budget for a little more than the required monies every month. Not a substantially larger amount but anything that you are comfortable with, even a few hundred rupees.

This scheme is based on the "Reliance Regular Savings Fund", a mutual fund offering from Reliance Mutual Funds. This mutual fund has an unique feature, a Visa ATM cum Debit Card, called the "Reliance Any Time Money Card". The card is offered in association with HDFC Bank. The card is backed by the monies invested in the fund and has a withdrawal limit of 50% of the net invested capital. The HDFC ATM withdrawal limits also apply. That is, 50% of investment value or ATM limit, whichever is lower.

One cash withdrawal and one balance inquiry is free every month if done at a HDFC ATM. Additional transactions are charged at Rs.27/- for cash withdrawal & Rs.14/- for balance inquiries at HDFC ATM's. At other Visa ATM's the charges are Rs.60/- & Rs.20/- respectively for cash withdrawal & balance inquiries, with no free monthly transactions. Lastly, there is no Exit Load on cash withdrawals made on the ATM card.

Let's look at some math. Say your dependent need a sum of Rs.1000/- every month (an arbitrary amount used for ease of computation). Also, lets say you can afford to pay a sum of Rs.1500/- every month. Now, if you invest the Rs.1500/- in this mutual fund every month through the SIP process (1% entry load for SIPs), you will get a VISA card. The investment can be in the name of your dependent so that the card is in their name too. Your dependent uses the ATM card to withdraw their allowance of Rs.1000/- on a monthly basis. If done properly, keeping in mind the withdrawal rules mentioned above, you need never pay the ATM fees. This means that a sum of Rs.500/- is invested in the mutual fund every month and adds to that nice little nest egg I mentioned above. Assuming an average return of 12% per annum, over a period of 3 years this translates to a cool Rs.19,600/- (approx)! A 9% return! Over and above the monthly allowance that was used every single month, coupled with the ease of use of the VISA ATM card! A win win situation if ever I saw one.

Neat eh? No card fees, no hassles, and a neat little pile of money that can be used by your dependent in case of an emergency!

The basic idea here is to provide capital appreciation beyond a regular Bank Savings account. Secondly, ease of cash withdrawals.

Disclaimer:

Do note that I make no assurances about returns. Mutual Fund investments are subject to market risks. You must satisfy yourself about the fund before you invest. I am not responsible for any losses or other issues/problems that might arise.

I invest in Reliance Mutual Funds and beyond the regular investor relationship, I have no relationship with either Reliance Mutual Fund, HDFC Bank or VISA.

Copyright:

Copyright Gautam Satpathy 2006. All rights reserved. This idea may be used by individual investors free of cost (disclaimers above apply). No other use is permitted without written permission from me. This idea cannot be used in advertisement, published articles or in any way disseminated without written permission from me. This copyright notice overrides any other copyright notices that may appear on this web site.

(Posted via Thinga Web)