Do you think this is for real? Can investment in systematic investment plans, SIPs, make you a millionaire in 20 years? How much do you need to invest every month to hit the Rs 5 million mark?
Can you save on tax while investing in mutual funds? If yes, which is the best mutual fund that can help you do this?
Should you invest directly in the stock markets or take the mutual fund route? What are fixed maturity plans? What are open-ended and close-ended schemes?
Get Ahead money expert T Srikanth Bhagavat answered these and other mutual fund related queries in a chat with Get Ahead readers on March 29.
For those who missed the chat, here is the transcript.
Part I: How to identify best mutual funds
prisca asked, how much interest would I get if I would like to invest Rs 10,000 in a mutual fund? Can you suggest which mutual fund is the best?
Bhagavat answers, Mutual funds do not pay out interest. Instead, a (bond) fund invests in interest bearing securities of various companies and the interest so earned by the fund is paid out as a dividend to the unit holders. A liquid fund, which is a safe bond fund, has earned in the range of 7 per cent per annum tax-free.
manuji asked, As the market has fallen considerably, and it's expected that the quarterly results may not be up to the expectations, suppose market falls another 1,000 points. Won't it be wise to put a lump sum amount (about Rs 30k-40k) in mutual funds? or should I stick to SIPs?
Bhagavat answers, Sticking to an SIP is always the safest option. Timing the market, really, has more to do with luck. If no more bad news follows after the point you thought was the lowest, you may be lucky -- if not, unlucky!
Debashree asked, Please let me know how is Tata Infrastructure fund and how about investing in that through SIP for next one year?
Bhagavat answers, As an infrastructure fund, it has been an underperformer as compared to Pru Infrastructure and DSP Tiger. But the sector promises performance. Do remember that concentrating investments in any one sector is always risky. In my view, sector funds should not occupy more than 10 per cent of your equity portfolio. More is aggressive.
ravichandran asked, IS SBI magnum contra reliable fund?
Bhagavat answers, Contra has a good performance track record over the last 5 years. It has an aggressive philosophy of buying stocks in beaten down sectors. In the recent past, it has underperformed the Nifty. Much of its past performance may be attributed to its exposure to mid caps. The fund does have a good backing in terms of SBI.
rengs asked, Why TATA contra fund is not performing well? Is this the right time to exit?
Bhagavat answers, Though the investment philosophy may show results only in the long term, the fund has seen too many changes in fund managers. You could evaluate your options again.
Akshay asked, Hi Srikanth I find it very difficult to invest in Fixed Maturity Plans as the application forms are not easily available.
Bhagavat answers, Pick them up from the Mutual funds directly. It is worth the additional effort!
Raman asked, Is there any mutual fund with Tax Benefit. Required by an elderly person of 85 years. ULIP won't help, because of his age.
Bhagavat answers, There is a category called equity linked savings schemes (ELSS), where you could invest upto Rs 1 lakh per annum under Sec 80C. There is lock-in period of 3 years.
RRN asked, Hi Srikanth, Post dividend announcement, how does this reflect in the growth funds?
Bhagavat answers, Dividends do not impact growth options of the funds.
Mihir asked, Why MF performance varies with market? Does the same get even out in long run?
Bhagavat answers, Funds are eventually invested in equities (if it is an equity fund). They cannot buck the trend. In the long run, it should be alright.
Debashree asked, How can I achieve Rs 50 lakhs in next 20 year through Mutual fund route? Tell me how to plan it.
Bhagavat answers, An SIP of Rs 2,228 for 20 years in a Balanced portfolio should do it. Half in, say, HDFC Equity Fund and half into liquid fund such as Deutsche Money Plus Fund.
sgupta asked, Hi Which is better to enter market -- through MF or direct for a long term perspective say above 10 years?
Bhagavat answers, A mutual fund route is definitely safer, since the task of stock selection will be the fund manager's and not yours!
Santosh asked, What are open-ended and close-ended schemes?
Bhagavat answers, Open-ended funds allow investors to buy and sell units anytime, without restrictions, as opposed to a close-ended fund.
robinverma asked, Hi Sir, Please respond to my query. I want to invest in TAX saving funds, which can give me the maximum returns. Should I choose Franklin Templeton Taxshield 96? Or can you suggest anything else?
Bhagavat answers, Among the most aggressive tax saver funds are the Magnum Tax Gain.
Bhagavat says, Thank you all for participating in the session. It is only due to paucity in time that I am unable to answer all the questions! This is Srikanth signing off!
Part I -- How to identify best mutual funds