Do you have low risk taking capacity? Are you a first time investor? If yes, then how do you go about investing in mutual funds?
Is it a good idea to invest through mutual funds' systematic investment plans, SIPs, in such volatile times? If yes, then which are the best mutual fund schemes that you should put your money into?
In a chat with readers on August 16, Get Ahead mutual fund expert T Srikanth Bhagavat discussed these and other mutual fund-related issues affecting the investors.
For those of you who missed the chat, here is the transcript.
Part I: 5 good mutual funds for the long term
prashant asked, Hi i have Birla Advantage fund shall i remain invested and how is the Reliance Entertainment Fund?
Srikanth Bhagavat answers, Birla funds have improved in performance of late. They had gone through a bad patch but management seems to have recovered. Entertainment is a good concept. Logically one can relate to the fact that as disposable incomes increase, one spends more on such past times and consequently, their business improves. Hence you may want a share in the sector as such.
Kamlesh asked, Hi, Srikant, I am thinking of investing thru SIP in Mutual Funds (diversified equity). But after doing a rough calculation of returns with the assumption that the NAV of mutual fund is high when stock market rises (which happens when the economy is booming) and vice versa, you tend to get very low returns (even compared to PPF) in case you happen to redeem your investments even after a period of 10 yrs. or more and the economy is passing thru recession. Pls advise on how to make investments in MF thru SIP and into which schemes. rgds.
Srikanth Bhagavat answers, I am assuming that you are apeaking of equity funds. There has been no instance where after such a long term, that returns are at PPF rates! There are a few funds with 12 years plus track records. they have all delivered gains of 25% compounded per annum and they have passed thru recessions and wars and terrorist attacks!
user asked, sir. Do u think Reliance Vision & SBI Magnum Global fund (Growth) are good fund for investing over a period of 8-10 yrs through SIP?
Srikanth Bhagavat answers, Yes. it is always more important in the long run to be in the right asset class than the specific scheme! Even blindly following the index over the long run will fetch you gains.
Vikas asked, Hi, I am holding following mutual funds (SIP). Please suggest whether my portfolio is good or not? Also, please let me know your view, whether I should reorganise my portfolio. - HDFC Tax Saver : Rs .1000/- p.m. - HDFC Equity : Rs. 2000/- p.m. - Reliance Growth: Rs. 3000/- p.m. - Reliance Growth: Rs. 2000/- p.m. - Reliance Power : Rs. 2000/- p.m. - SBI Magnum Contra: Rs. 3000/- p.m. - SBI Magnum Tax Gain : Rs. 1000/- p.m. - DSPML TIGER : Rs. 2000 p.m. - ICICI Prudential Service Industries : Rs. 2000 p.m. I would like to continue with SIP in these funds for next 3 years and would like to withdraw money from all my investments after 15-20 years. Can you suggest me how better I can organise my portfolio? Regards Vikas.
Srikanth Bhagavat answers, You only have Rs 24,000 per annum in Tax Saving funds. Can increase subject to your overall limit of Rs1 lakh uner sec 80C. Increase HDFC Equity compared to Contra; Could increase Power sector instead of Services. Your exposure to sector funds is 30% of total. Unless you are agressive, one could reduce this to 10% to 20% range.
harsha asked, Is it a good idea to buy MF units when there is a crash in the stock market? Or is the SIP route the best?
Srikanth Bhagavat answers, If you clearly make out that there is fair or less than fair valuation when markets fall, then you could make lumpsum investments. If your risk tolerance is low, better opt for the SIP route.
sudip asked, What is the best liquid fund now and what kind of return I can expect post tax?
Srikanth Bhagavat answers, ING Liquid Plus/Deutsche money Plus. Expect a tax free dividend yield of around 6% pa to 7% pa.
niting asked, Is it technically right that investment in ELSS fund with Dividend Reinvestment plan is locked for life assuming the fund house declares dividend regularly? Thanks.
Srikanth Bhagavat answers, A purchase is locked for 3 years. A dividend if reinvested will have a 3 year lock in from date of re-investment. You original investment will be free for withdrwals after 3 years from date of its purchase. Dividend or no dividend.
sd asked, What is Long Term and Shot Term time horizon as per you?
Srikanth Bhagavat answers, Short term is below one year. Long term is above 3 years.
kiran asked, Hi Srikant, My name is Kiran and I am an NRI working in a Gulf country...I have Rs 2 lakhs as a saving in my NRI account. I Don't have any investment yet. Now Please tell me How I invest this money to get High returns safely.......Please guide me .....
Srikanth Bhagavat answers, High returns and 'safely' do not go together! You will have to accept some risk But the risk reduces as you allow more time for the investment to perform. Any of the equity schemes that I have mentioned earlier are fine. As you are a beginner, an SIP route or regular investment route is advisable.
Ruthra asked, Hi Sri, If i invest Rs 30,000 in HDFC Equity (Tax Saving fund) today, what would be the returns in terms of Rs I can expect after 3 years? I am not good at calculating % rate. It will be great if you can give the expected amount in Principle + Gain. Thanks so much.
Srikanth Bhagavat answers, About Rs.36,000 to Rs.45,000 kind of range is feasible. at a rate of 10% pa to 15% pa.
sudip asked, Do you suggest Portfolio Management Schemes (PMS) over MF?
Srikanth Bhagavat answers, Most PMS schemes are no different from MFs today.
govindasamy asked, I have invested in Sundaram Tax Saver last year (dividend option). How is it performing now? Shall I switch to Growth option?
Srikanth Bhagavat answers, It has grown 22% over the last 365 days. No need to switch to growth option unless you do not need the dividend. Growth will be advisable as calculating lock-in periods becomes simpler.
sr asked, sir I want to invest in mutual fund for future planning. is it wise to depend upon retirement planning for mutual fund thru sip please advise.
Srikanth Bhagavat answers, Yes. But it is the asset allocation between equity funds and debt funds which should be paid sufficient attention.
sanjaymridula asked, SIP in SBI Blue chip at present levels?
Srikanth Bhagavat answers, Levels do not matter in an SIP.
Tejinder asked, Is past return the main criteria for selection of funds? Which other criteria is to be considered for selection of funds? Should a portfolio consist of all types -- equity, debt, balanced funds.
Srikanth Bhagavat answers, No. The risk adjusted return or Sharpe ratio is. Equity and debt funds are enough. Between them, the balance is created.
Srikanth Bhagavat says, Thank you friends, my time is up.
Part I: 5 good mutual funds for the long term
T Srikanth Bhagavat is the Managing Director of Hexagon Capital Advisors Pvt Ltd. He has been in the mutual fund industry for more than a decade now.