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I would prefer it being a conservative fund with a return of a little more than I would get with a fixed deposit, say around 10% - 13% per annum.
These are the options I have short-listed.
1. HDFC Equity
2. HDFC Growth
3. Templeton India Growth
4. Franklin India Bluechip
- Sahni Harmeet
Your preference for a conservative fund that offers a return above a fixed deposit suggests that you would like to invest in a safer fund.
However, the funds that you have short-listed are pure equity schemes. They invest all of their corpus (total amount available for investment) in stocks, which makes it very susceptible to volatility.
Though the funds that you have chosen have a good performance record, being equity funds, they are bound to be quite volatile.
If that bothers you, consider balanced funds, which are relatively less volatile. They invest around 40% their assets (total investments) in debt (fixed return instruments), which are more stable, and the remaining in equity (stocks), which have the superior return generating capability.
Therefore, these are ideal for somebody looking for decent returns yet with lower volatility than pure equity funds.
Do remember that unlike a fixed deposit, no mutual fund can give you a guarantee of returns or capital (principal amount you invest).
I am 25 and my savings have been confined to the Public Provident Fund, LIC policies and National Savings Certificate.
I would like to start investing in diversified equity mutual funds.
Which funds do you suggest for a start?
Also, should I opt for a Systematic Investment Plan or a bulk investment once in a year?
- Rajkumar Chandrasekaran
On the assumption that at your age you are probably saving and investing for the long haul, your decision to look at equity is appropriate.
But, your other investments are all in fixed return instruments which are very safe. As we mentioned in our above response to Rajkumar Chandrasekaran, we would like you to note that the returns from equity mutual funds are bound to be more volatile and the value of your investments may keep fluctuating from time to time.
There is no need for you to get bothered about that and act in haste. You can go for a few good diversified equity funds.
If you think that the volatility is an issue for you, consider starting with a balanced fund, which is often recommended to a person making mutual fund investments for the first time.
Since balanced funds invest around 40% of the assets in debt (fixed return) instruments, they are relatively less volatile and hence are preferred by the people who move away from assured return instruments towards stock market-linked investments.
But a long-term investor can surely go ahead with pure equity funds without worrying about the short-term gyrations.
You would be advised to make all your investment in the equity-related mutual funds through a Systematic Investment Plan, rather than a bulk investment.
In this way, you buy units when the market is high and low so over time it averages out.
We have mentioned potential funds below.
What are the best funds for children? I want to invest with a time horizon of 18 years.
Can we invest that long through a Systematic Investment Plan?
- Vivek Khariwal
UTI Childrens Career Plan, referred to as UTI CCP Balanced, is a hybrid debt-oriented fund. What this means is that it invests in both debt (fixed return instruments) and equity (stocks).
You can buy these units for a child less than 15 years of age.
It seeks to provide money to the child at regular intervals for higher education, starting from the age of 18.
Among the equity funds, there are no special one specifically designed for children. But to build a sizeable corpus for your child, all you need to do is to save and invest in a disciplined way over a long-term. And for that you don't need any special funds.
Since you have a long time horizon, choose and invest in a few good equity funds that are presently available. But, it may not be very advisable to create an SIP of such a long duration.
You can start investing systematically for shorter periods, maybe a year or two or so, and decide about further investments at a point of time in future.
The reason being that certain developments could occur. Over a period of time, better funds may emerge in which you would like to invest.
Or, there could be other events that may impact your funds negatively causing you to sell the units, leave alone investing more money in them.
Therefore, it would be wiser to make SIPs of relatively shorter durations and take further decisions as time moves on.
Diversified equity mutual funds to consider for investment.
At Value Research, we give mutual funds a star rating (one to five) depending on the returns they have delivered and the risk they have taken to give those returns.
Birla Sun Life Basic Industries, Franklin India Prima, HDFC Equity, HDFC Top 200, Magnum Contra, Reliance Growth and Reliance Vision all have a 5-star rating.
While Birla Mid-Cap, DSPML Equity, DSPML Opportunities, Franklin India Bluechip, Franklin India Prima Plus, HDFC Capital Builder, HSBC Equity, Magnum Global and Principal Resurgent India Equity are some 4-star funds.
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