Do things like mutual funds baffle you? Are you aware of the investment options they provide? What are the best mutual funds available in the market? Which funds accrue maximum profits? What are the crieria for evaluating a fund?
Which funds provide the best SIP options? Are SIPs the easy way of making quick bucks? When and how should one buy mutual funds?
Personal finance expert
Rahul Goel answered to many such readers' queries during an hour-long chat on Thursday. Here is the transcript:
Rahul Goel says, Good Afternoon! Welcome to the discussion on financial planning... Let's start!
rakesh asked, Hi Goodafternoon Rahul, What is your view on New funds like JP small cap fund..these days lot of small cap funds are being launched..will these merit for buys
Rahul Goel answers, at 2007-12-13 12:54:37rakesh, hi. well, we are generally cautious in our view on new AMCs. having said that personalfn did recommend a new amc like fidelity when it was launched... reason being two fold. one, fidelity already had been investing in india via its other funds. two, they followed a well-defined process across their set ups. some of the new amcs being launched have very little experience and hence we woudl rather wait for some time and then evaluate them. with regards to small caps, well, these tend to be very high risk - very high return investment propositions. you need to have a high risk appetite for them. at personalfn we tell our clients not to have more than 10% of their monies in sector/thematic funds.
Pavan asked, Hi Rahul, Suggest me what is the best way of investment of Rs.1 lakh to take advantage from the tax cut?
Rahul Goel answers, pavan, hi. the answer to that would depend on your profile. if you are young, can take risk, then a larger component could go towawrds tax saving mutual funds. but if you are say about to retire then the government savings schemes would suit you more. a word of caution here... do not take insurance to save tax. take it for the right reason - to secure the future of your dependents in your absence.
gaurav asked, wat will be your suggestion for me to getting start in share market?
Rahul Goel answers, gaurav, hi. if you do not have atleast a couple of hours every day for the purpose, and also the skill to analyse annual reports etc, you should not be investing in stocks directly. equity mutual funds may be a better option for you. note that even in case of mutual funds one needs guidance... there are hundreds of schemes out there, but very few, in our view, merit any investment.
KKPATHAK asked, IT IS BETTER TO PAY HOME LOAN FIRST OR DO SAVINGS LATER ON.
Rahul Goel answers,
KKPATHAK asked, IT IS BETTER TO PAY HOME LOAN FIRST OR DO SAVINGS LATER ON.
Rahul Goel answers, hi. the answer to this would depend on the fact whether or not you are comfortable with carrying a liability on your books. if you are not, then simply repay the loan. do not look at the opportnity loss of having invested the money in the stock market.
vinayak asked, hi rahul do you think SIP are the best way get in the stock market
Rahul Goel answers, vinayak, hi. for most people sips tend to be a preferrd option. salaried people are able to save as they earn by entering into sips... its very hepful.
badhri asked, How do you suggest to invest in secondary market equities and mutual funds right now when the sensex has reached 20k? Please suggest some equities and mutual funds scheme that can be opted for investment now.
Rahul Goel answers, badhri, hi. we do not attach much importance to the 20,000 number. we look at whether there are investment opportunities out there or now. we find that despite the markets having run up a lot, one can find attractive investment opportunities; the rally in any case has been driven by a handful of stocks. so look out for funds which are rationale in their stock picks and sector allocations. and invest via the sip route. over the long term this approach should deliver attractive returns.
KKPATHAK asked, PLEASE SUGGEST ME WHETHER WE SHOULD GO FOR TERM PLAN OR ENDOWMENT WITH TERM PLAN
Rahul Goel answers, a combination of term plans with mutual funds definitely is a preferable option.
Pavan asked, What are best fund houses for ELSS schemes? Is is wise to invest in sectorial funds?
Rahul Goel answers, pavan, hi. we prefer schemes like franklin india taxshield and hdfc tax saver. in our view sector/thematic funds should not account for more than 10% of an individual's portfolio, and that too, if at all. in most instances we believe there is no need for such funds in a portfolio.
JKV asked, SIR PRESENTLY I AM CONTRIBUTING IN THE FOLLOWING FUNDS, MAGNUM TAX GAIN 3000 PM, KOTAK TAX SAVER 2000 PM, RELIANCE VISION 1000 PM, FRANKLIN PRIMA PLUS 1000 PM,RELIANCE POWER SECTOR 1000 PM, TATA INFRA 1000 PM. I WANT TWO MORE FUNDS TO BE ADDED IN MY CURRENT PORTFOLIO 1.SBI CONTRA OR HDFC GROWTH 2.STANDARD CHARTERED PREMIER EQUITY OR BIRLA FRONT LINE EQUITY KINDLY ADVICE ME MY INVESTMENT PERIOD WILL BE 8-10 YRS.
Rahul Goel answers, hi. if you are investing for such a long period, then why take the risk of being invested in sector funds! over 10 yrs the cycle in a sector would turn and if you have not timed your exit well, you would be left with a poor performing investment. also notice that you do not have funds like hdfc equity wich in our view are a must in a risk taking investors' portfolio. i recommend that you take a long hard look at your portfolio and then restructure to ensure that you own the well managed diversified equity funds, with very limited exposure to sector funds.
ram asked, Hi Rahul, Is investing in UTI Master index fund via SIP a good option, as there is no entry load and yearls expenses are just 0.75 5 so it has a 5% per year advantage over other equity funds ? what do you say ?
Rahul Goel answers, ram, hi. indeed, index funds appear to be attractive investment propositions in current times. however, we believe that over the long term, in india, the well managed actively managed funds will outperform index funds. while the expense differential is high, but over time it should nullify. in any case entry loads are about 2.25% and annual exp are about 1.6%; so the first yr charge will be less than 4%, and post that about 1.6%.
Pavan asked, What are the future prospects of Sundaram Energy Fund & Kotak Indo Global Infrastructure Fund??
Rahul Goel answers, pavan, hi. well in the near term we do not know where the stock marekets are headed and consequently we are not sure how these funds will do. but over the long term, sector funds tend to be poor performers. examples from recent hitory are tech funds which peaked in year 2000. more recently the pharma funds have done very poorly. if invest you must in such funds, limit your exposure to them.
Pavan asked, How about ICICI Realestate Fund? Is this the right time for investments in realty stocks like DLF, Parsvanath, DS Kulkarni?
Rahul Goel answers, hi again. in line with our stand on sectoral/thematic funds, we have recommended to our clients that they avoid investing in funds like icici real estate fund.
gurkirpal asked, hi can you advice me should i invest in tata aig ulip plan or mutual funds
Rahul Goel answers, hi, if you wish to "invest" then go for a mutual fund. if you want "insurance" go in for term insurance.
venkat asked, Hi Rahul I am 27 years old. I am looking at accumilating wealth via miutual funds over the next 23 years. I have been investing in mutual funds for the last 20 months. My current SIP portfolio is as following:- REliance Vision 15k/month Relaince Growth 15k/month DSPML Tiger 15k/month MAgnum Global 15k/month Franklin Prima Plus 12.5k/month Sundarum Mid Cap 10k/month HDFC Top 200 7.5k/month ICICI Emerging Star 7.5k/month Franklin Flexi Cap 7.5k/month HSBC Advantage 7.5k/month I have recently started a SIP in Reliance Power. ANd I plan to start a debt fund when i turn 30 or when I have a kid. Could you please suggest if I am going at the right direction.
Rahul Goel answers, venkat, hi. to begin with, i think you have too many schemes already. you need to get rid of the sector/thematic funds... most of it atleast. then you need to look at the schemes, which have never performed, and seem to continue on that path in the future. get rid of them too. importantly, you need to get your allocations right. diversified funds should get max allocation; in your case this is not true. so i think your portfolio is a cnadidate for a complete overhaul. and by the way, when you have a kid, you say you wish to invest in a debt fund. well, your child will need money 15yrs after birth.. so be aggressive with the investments to being with!
zak asked, should I book part profits from my SIP at this Sensex level or wait?
Rahul Goel answers, zak, hi. the answer to this question will depend on why you are investing in the first place. if your need for funds is short term, go ahead and book your gains. but if you are investing monies for needs 5Yr+ out, then you should remain invested. remember if you book profits, you run the risk of not being invested in the markets in case the markets were not to correct.
sd asked, Hi Rahul,I have invested in HDFC EQUITY fund(SIP) and RELIANCE GROWTH fund(SIP) these are Large cap and mid cap respectively now i want to invest in small cap can u please suggest one?
Rahul Goel answers, well, in the midcap space the funds we like are sundaram select mid cap... we recently posted a note on the same -
http://www.personalfn.com/detail.asp?date=11/27/2007&story=3
Mathew asked, Hi Rahul, why is that financial mangers role is not as well defined in India as it would be in USA?
Rahul Goel answers, mathew, hi. well the industry in india is very nascent and it will take time for these things to evolve. having said that if you invest some time, you will be able to fund some great financial planning service providers.
sss asked, where and how much to invest in mutual funds to get 15 lakhs after 20 years?
Rahul Goel answers, you will need to invest about rs 7,000 pm to accumulate an inflation adjusted rs 15 lakhs, 10 yrs from now. the assumed return on investments is 15% pa.
vijay asked, Hi Goel, Good Morning. I have post tax income of 1.1 lakh per month of which 42000 i am paying as EMI. 18.5K for House Loan (for 15 years), 14.5K for personal loan (pending 3 more EMI only) and 9K for Car loan (for 4 more years). And my monthly household expenses are 30K. Of the rest I am able to save about 40K per month. I am planning to take a term insurance of 2K per month for 20 yrs ( 1 crore sum assured), and invest 20K per month in ELSS and other mutual funds like Reliance Vision, HDFC Growth, Sundaram Select Focus, Magnam Contra, Birla Sunlife Tax Relief, Principal Personal tax saver, Sundaram Tax Saver. 8K pm in FD/Recurring Deposit and another 10K in Savings bank account as emergency fund. I am also planning to construct a new home in the next 10-12 months with 20 lakh by taking home loan since I will be closing my personal loan by next march I would be able to pay that EMI for house loan. Please advise if I am doing right or any modification required. Thanks in advance...
Rahul Goel answers, vijay, hi. good that you are closing the personal loan! the idea of taking a term insurance is brilliant. be sure the policy covers you till you are atleast 55 yrs of age. you have planned your cash flows well it appears. however, the funds where you