Advice For The Wise: June'2011
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Showing posts with label alpha ratio. Show all posts
Showing posts with label alpha ratio. Show all posts
Wednesday, 8 June 2011
Thursday, 10 March 2011
India – A tax haven?
Infrastructure investment and social sector programmes have so far been the interests of the two UPA Governments to increase spending.
This is entirely understandable, given the glaring deficiencies in both areas; but from the perspective of fiscal rectitude, there is the affordability question to be considered.
If things go to plan, the reduction of the ratio proposed by the Finance Commission for 2014-15 will be achieved next year -- three years ahead of target. But the task of fiscal correction has barely begun.
Sources reveal that the revenue foregone last year on account of tax concessions and incentives was Rs 79,554 crore (Rs 795.54 billion) on corporate income tax -- mainly accelerated depreciation, software technology parks, etc. -- and on personal income tax a further Rs 36,186 crore (Rs 361.86 billion) -- mostly long-term savings.
Excise concessions cost Rs 170,765 crore (Rs 1,707.65 billion), while customs concessions had the biggest bill: Rs 2,02,240 crore (Rs 2,022.40 billion).
The total bill -- Rs 4.89 lakh crore (Rs 4.89 trillion) -- was nearly 80 per cent of the tax collection in 2009-10!
The peak income tax, for both companies and individuals, could then be no more than 22%. That would make India a tax haven and there would be much less incentive to take money out of the country; if the incentives work, tax revenue would actually climb as people report incomes more honestly.
Sources also reveal the second transition waiting to be achieved is on the subsidy front. The central subsidy bill, mostly on food, oil-related products and fertiliser, is slated to be Rs 1,43,570 crore (Rs 1,435.70 billion) next year.
The Economic Survey cites research, which suggests that between 40% and 55 % of foodgrain meant for the poor is pilfered.
Taking the budgets for all these, every one of about 50 million families that are below the poverty line could be given Rs 3,000 every month as a cash transfer -- better than what NREG offers, and enough to bring all of them above the poverty line, at no extra cost to the government.
India could be transformed into a tax haven, and a land without absolute poverty. Both dreams can become reality if managed and with the help of our Finance Minister considering the growth of the poor and the disabled.
Source: http://www.rediff.com/business
This is entirely understandable, given the glaring deficiencies in both areas; but from the perspective of fiscal rectitude, there is the affordability question to be considered.
If things go to plan, the reduction of the ratio proposed by the Finance Commission for 2014-15 will be achieved next year -- three years ahead of target. But the task of fiscal correction has barely begun.
Sources reveal that the revenue foregone last year on account of tax concessions and incentives was Rs 79,554 crore (Rs 795.54 billion) on corporate income tax -- mainly accelerated depreciation, software technology parks, etc. -- and on personal income tax a further Rs 36,186 crore (Rs 361.86 billion) -- mostly long-term savings.
Excise concessions cost Rs 170,765 crore (Rs 1,707.65 billion), while customs concessions had the biggest bill: Rs 2,02,240 crore (Rs 2,022.40 billion).
The total bill -- Rs 4.89 lakh crore (Rs 4.89 trillion) -- was nearly 80 per cent of the tax collection in 2009-10!
The peak income tax, for both companies and individuals, could then be no more than 22%. That would make India a tax haven and there would be much less incentive to take money out of the country; if the incentives work, tax revenue would actually climb as people report incomes more honestly.
Sources also reveal the second transition waiting to be achieved is on the subsidy front. The central subsidy bill, mostly on food, oil-related products and fertiliser, is slated to be Rs 1,43,570 crore (Rs 1,435.70 billion) next year.
The Economic Survey cites research, which suggests that between 40% and 55 % of foodgrain meant for the poor is pilfered.
Taking the budgets for all these, every one of about 50 million families that are below the poverty line could be given Rs 3,000 every month as a cash transfer -- better than what NREG offers, and enough to bring all of them above the poverty line, at no extra cost to the government.
India could be transformed into a tax haven, and a land without absolute poverty. Both dreams can become reality if managed and with the help of our Finance Minister considering the growth of the poor and the disabled.
Source: http://www.rediff.com/business
Wednesday, 16 February 2011
Key Ratios you should know before choosing a Mutual Fund...
BETA Ratio
This common measure compares a mutual fund’s volatility with that of a benchmark index. It gives a sense of how much you can expect a fund’s returns to move up or down, given the swing in its benchmark. A fund with a beta of 1 will move in tandem with the market. A beta greater than 1 indicates that a fund’s return will fluctuate more than the index gains... Conservative investors looking to preserve capital should focus on portfolios with beta values less than one, since it signifies lesser volatility in returns relative to that of the benchmark. Investors with a higher risk appetite may prefer funds with higher beta, since it tends to amplify the gains of the benchmark.
ALPHA Ratio
Alpha is the difference between a fund’s expected return based on its beta and its actual returns. Alpha is sometimes interpreted as the value that a portfolio manager adds above and beyond a relevant index’s risk/reward profile. If a fund returns more than what you’d expect given its beta, it has a positive alpha. If instead it earns lower than anticipated return, its alpha is negative. Though higher alpha is desirable, this measure of a fund’s performance should be used cautiously while evaluating funds that are not fully diversified. This is because funds with less diversified portfolios are prone to the company-specific risks.
SORTINO Ratio
The Sortino ratio highlights whether the returns on an investment are due to smart investment decisions or merely due to the excess risk taken by the fund manager. This measurement is very useful because it tells us if the higher returns are accompanied by a higher risk. Sortino ratio penalizes only those returns falling below a user-specified target. The greater an investment’s Sortino ratio, the better is its risk-adjusted performance.
Though this ratio does not measure the risk related to the mutual fund, it certainly impacts the investor’s returns. Expense ratio is a percentage of fees paid to the mutual fund company to manage and operate the fund. Since this is charged regularly (annually) a high expense ratio over the long term may eat into your returns massively through the power of compounding. For instance, Rs 1 lakh over 10 years at the rate of 15% will grow to Rs 4.05 lakh. But if we consider an expense ratio of 1.5%, your total returns would actually be Rs 3.55 lakh, nearly 14% less than what would have been achieved without any expense charge. So, the lower the expense ratio, the higher returns one would enjoy in future.
Source: ICRA/Value Research
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