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?
In an hour-long chat on rediff.com, personal finance expert Rahul Goel answered to many such readers' queries. Here is the transcript:
Rahul Goel says, Good afternoon! Welcome to the discussion on financial planning! let's start!
MAY asked, Hi, I would like to know about good ELSS which have tax benefits as well. Thanks.
Rahul Goel answers, at 2008-01-24 12:57:59may, hi. in the tax saving fund category we like funds like franklin taxshield. may i recommend that you do not invest monies in tax saving funds till you have understood them well. i suggest you read personalfn's tax planning guide, which is available free here - www.personalfn.com/investment/ms
cinki asked, Hi. I am 30 yrs old. My take home is approx. 100k p.m., expenses around 30k p.m., 36k p.m. SIP (Rs.4k each in FIDELITY EQUITY FUND GROWTH HDFC PRUDENCE FUND GROWTH OPT. DSP ML TIGER FUND GROWTH OPTION HDFC TOP 200 FUND - GROWTH OPT. SBI MAGNUM GLOBAL FUND - GROWTH ICICI SERVICES INDUSTRIES GROWTH RELIANCE GROWTH FUND - GROWTH PLAN PRU. ICICI EMERGING STAR FUND - GROWTH FRANKLIN INDIA OPPORTUNITIES FUND - GROWTH), FD worth 6 lacs, real estate investment worth 80 lacs in today's market, one retirement plan from Icici pru with annual premium of 35k and one child's policy with annual premium of 26k. Also approx 11 lacs (cost price) investment in Equity. Pls tell me of the above funds which ones i needn't have in my portfolio. I have 2 yrs old daughter. I would want to retire in another 15 years from now by when i want to accumulate atleast 1 crore after inflations for my daughter and also have a monthly income of 1lac after inflation for myself. How can i achieve this?
Rahul Goel answers, cinki, hi. in terms of the funds you own, well, you have quite a few of them which we recommend. you have three thematic funds - global, services and emerging star.... we as a policy do not recommend any such schemes. reason being that over the long term the risk return tradeoff in such schemes in our view does not suit most investors. we ofcourse have no view on reliance funds. for your daughter assuming you have not set aside any money as yet, you need to inevst rs 31,000 pm in assets yielding 15% pa to achieve your goal by the time she turns 18. with regards to your montholy income needs, if we were to account for say existing assets of rs 1 cr (growing at 10% pa), then you need to set aside only rs 17,000 pm in assets yielding 15% pa over the next 15 yrs. at maturity the lumpsum will be able to earn you rs 240,000 pm i.e. inflation adjusted rs 100,000.
munni asked, Hi Rahul, let me know if there are any pure equity schemes with the lowest annual expenses, say of less than 2%. I know there are debt schemes with low expenses, but I am looking at growth schemes among equity.
Rahul Goel answers, munni, hi. most of the well managed diversified equity funds have annual expenses of less than 2%... check out schemes like hdfc equity and franklin india flexicap. but should you be inevsting in equity? what allocation?
asdas asked, Hi my take home salary is 80K per month i am 27 right now...i want to make 1 cr in 15 yrs how much i need to save every month to achieve this target...amount
Rahul Goel answers, hi. you will need to set aside about rs 35,000 pm in assets yielding 15% pa... this will give you an inflation adjusted rs 1 cr in 15 yrs.
asked,
Rahul Goel answers, ajay, hi. personalfn does not have a short term view on the market. all i can say is that we were very cautious over the last few months; in the last few days we have had our clients invest some money. but you must note that on average our clients tend to invest for 5 - 10 yrs atleast.
Saurabh asked, Good Noon Rahul,I have 2 options, One to buy SBI Mutual Fund for tax gain Second to buy ICICI Pru Retirement Plan. Both have equal returns in the span of 3 years. Sum I will like to invest is 40,000. My age is 28 years What shud I go for?
Rahul Goel answers, saurabh, hi. i find it very difficult to believe that a ulip and a mutual fund, with the same underlying asset, can deliver similar return in the initial three years. this is very unlikely as the initial expense in a ulip are very high. yes over 10 - 15 yrs this may be possible. my view go with a tax saving scheme like franklin tax shield... but understand the underlying risk.
MAK asked, I've invested some amount in good MFs in August 2007, & I'll be needing money in August 2008. Should I wait for August to save taxes & loads OR should I encash it now?
Rahul Goel answers, hi. if you had a one year tenure, you should not have invested in the stock markets. now that you have, if you can pull out with minimal loss, then maybe you should. no one knows where the markets are headed in the next six months. its all speculation. also, don't forget to pull up your advisor who guided you on this...
asked,
Rahul Goel answers, nitin, hi. if you cannot take risk, then equities, real estate are out. consider dpeosits, post office schemes and even MIPs, which carry some risk, but over time can offer an attractibe risk adjusted return.
kumar asked, Hello Rahul, Please let me know how can i plan a 30k take home salary for getting maximum benefits after 5 years..with a fixed monthly expenses of 8k..
Rahul Goel answers, kumar, hi. best would be to invest a large portion of your surplus in a basket of well managed diversified equity funds via the SIP route. be very careful in fund selection. avoid nfos, sector funds, thematic funds. maybe you should put in efforts to select an honest advisor first!
gauravmmec asked, I want to invest 10K per month in 4 SIP , I have selected KOTAK oppourtunities and DSP TIGER .. please let me know two ... I am long term investor and can take maximum risk at this point
Rahul Goel answers, gaurav, hi. well, our recommedations would be completely different! we prefer schemes like hdfc top 200 and franklin flexicap. but then again, before we recommend we would want to understand whether you actually have appetite for risk, and also, how long your investment horizon is.
pradip asked, Hi Rahul! Do you think retail investors should invest in only premium stocks like INFOSYS, ABB etc? Is mutual fund better then share markets for retail investors?
Rahul Goel answers, pradip, hi. for investors who neither have the time (couple of hourse every day) nor the skill to identify stock opportunities, mutual funds are a preferred option. both these ingredients are very necessary to build a good quality stock portfolio. if you do not have even one of them, avoid stocks. i hasten to add that even in mutual funds the selection has to be done very carefully.
Ganesh asked, Hi, I have finally come around to think I need to invest in MFs to get better and quicker returns. WHen we do invest in MFs, will this be a yearly investment, or should I make a monthly investment? Also, if I am thinking of investing in the medium risk, medium returns category of MFs, can you please suggest a few good ones that I should look into and when I should invest? I know there are a lot of questions in there. I'm sorry about that. I would really appreciate your inputs on these queries.
Rahul Goel answers, ganesh, hi. if you are expecting "quick" returns, then you are likely to be disappointed. to make money from the stock markets one should have an investment horizon of atleast 3 - 5 yrs. forget what has happened in the past in terms of the steep rally. in terms of investing, make it monthly.. this way you will minimise the risk of mistiming the market.
Jay asked, I am 33yrs old and would like to invest about 25,000 a Month in MF for next 15 years for my retirement and my child education(who is 3.5 yrs old), which all schemes should I pick at this juncture? And how frequent should I monitor these funds?
Rahul Goel answers, jay, hi. well, its good that you are starting to save early for your retirement and child. i suggest that before you initiate the process of making any investment, be sure you have your plan well chalked out. any honest financial planner should be able to help you with this... having said that, if your advisor starts to push expensive ulips, nfos... you need to become very cautious. if yuou get time download and read the child planning guide from personalfn.com (its free).
ravisharma_70 asked, Hi Rahul! i would like to ask question behalf of lot of middle calls people earning 8-10L per year as salary. What should be the best financial planing they should do by considering next 20 years as invenstment to get good returns as well as secure child education and old age.Getting one house is important factor and now a days one flat cost has gone up to 40L in Bangalore. please advice.
Rahul Goel answers, ravi, hi. its difficult to generalise... but having said that i think if the surplus is adequate from this compensation, meeting all the needs will not be difficult. i have discussed earlier in this discussion how much one needs to save per month for child education and retirement... its very manageable. all you need to do is start early, and save as much as you can.
ayalurgvs asked, My name is Venkatesh and I am working in Kuwait for 10 years. I used to invest on shares during 1994 and 1995 and lost some money. But I also gained with the good ones. Now I want to invest about 10 Lakhs (long term) Can you please suggest me should I buy some A group shares or should I go for some mutual funds?
Rahul Goel answers, hi, if you have time and the skills to buy the right shares, then go ahead. you can maybe even buy research from a credible organisation. for instance, we do offer independent research services under equitymaster.com. but if you are a busy person, best may be to have most of your monies in mutual funds. here too yuou need to be careful of what you shoudl be buying.
atul asked, Sir, I am a 26 year old man, single & working. I plan to raise corpus of 1 to 2 crores over the next 20 years. How much will I have to save purely through MF monthly SIP to reach my target. How many schemes wil I need to invest in. I plan to invest in HDFC Equity, DSP Tiger, FT Flexicap, Sundaram Taxsaver. Are these sufficient? What kind of allocation should I look at? Thank you.
Rahul Goel answers, atul, hi. to accumulate rs 1 cr, inflation adjusted, 20 yrs from now, you need to invest rs 20,000 pm in assets yielding 15% pa. in terms of schemes, have a portfolio of about 5 - 6 well managed diversified equity scheme. the portfolio and allocation will need to be customised to your profile... with this limited information i am unable to guide on this now.
pavan asked, i m planning to invest about 20000Rs . is Reliance Natural Resources Fund good?? does it have tax Benefits under Section 80C . Is this rite time to invest in stocks for a beginner. tell me some funds with good returns
Rahul Goel answers, pavan, hi. we have no view on the reliance funds. as a policy personalfn recommends to all its clients that they avoid investing in sectoral and thematic funds.
sureshsajnani asked, Hello sir, I am looking at a growth of about 40-50% for 3 years and am planning to get into mutual funds for the 1st time. Which is a good fund to invest in keeping in mind the current senario. kindly advice
Rahul Goel answers, suresh, hi. an expectation of 15% pa over a 3 - 5 yr period is a reasonable expectation. also keep in mind that the returns will not be even... you could earn a lot on a year, and lose in another. also, keep in mind that the instruments you invest in have to be best suited to you.
asked,
Rahul Goel answers, manish, hi. if you were a client of personalfn you would not have most of the schemes you currently own! hdfc top 200 and dsp ml 100 are two schemes that we like. dsp tiger has done well but its a thematic fund... we would like to avoid it. you need to take a relook at your entire portfolio...
Sujan asked, The recent fall in the Stock Exchange have been attributed to reasons in USA recession. Can such an event create so much panic in Indian Market? Some correction I can understand but such a fall looks shocking! Please comment
Rahul Goel answers, sujan, hi. let me put it this way. the markets represented by the bse sensex had become very expensive in terms of valuations... infact the valuation of the market was the same as what had been reached pre the fall in may 2006. so, the sell off happened because of the fact that the market was expensive. the news from the US was only the trigger. the fall has shocked many. but personalfn clients have been sort of holding back their inevstments for some time now waiting for such an opportunity!
sunildoha asked, Hai sir If I want to target 1 crore in 5 years time .Yearly how much shall I invest and in which share / Bank/ Mutual Fund. Or an intial amount of the same?
Rahul Goel answers, sunil, hi. if you wish to accumulate a value of rs 1 cr in 5 yrs, without adjusting for inflation, you will need to set aside about rs 115,000 pm in assets yielding 15% pa. the alternative is that you could invest a lumpsum of rs 50 lacs today in the same assets.
viksun asked, Hi Rahul, Can the agent's name be deleted from the mutual fund statement. I'm not happy with his services and don't want him to deal through him any more. I've taken about 10 differnet mutual funds through him and want to get his name off from all those funds. Regadrs,
Rahul Goel answers, hi. well i am not sure whether this is possible... but no harm in trying! get in touch with the mutual fund directly. or better still look for an honest financial planner and see if he can manage your AUM for you...
asked,
Rahul Goel answers, sandy, hi. it appears that you have planned well... maybe you can increase your term cover substantially. with regards to the funds, you have some very good funds... but surprisingly you do not have the two funds which in our view should be your core holding - hdfc equity and franklin india flexicap (alternate to prima plus - have one of the two only).
Anant asked, I am new to Mutual fund and want to invest 10K per month, can u plz, tell me where i have to invest so that there will be minimum risk, thnks in advance
Rahul Goel answers, anant, hi. since you are new, i suggest you first understand the product very well. best is to read the free mutual fund guide which is available on personalfn.com.
svj asked, hi, Recently I made SIP of 1000 each in SBI mag bal (g),HDFC Tax saver,sundaram bnp paribas tax saver, Relience diversified power(g), ICICI infrastructure (g).I had to increase MF exposure by Rs 5000 per month. Pl suggest if to increase SIP of any of above funds or invest in other mutual fund. My am looking for investment span of 10-15yrs for good returns.
Rahul Goel answers, hi. why the sectoral and thematic funds? in fact if you have the kind of time frame you have indicated, then you should simply invest in well managed diversified equity funds. the debt portion i am assuming will get covered by the EPF etc.
asked,
Rahul Goel answers, rakesh, hi. before you commit the monies uderstand the product well. also undertsand that when inevsting for tax saving, you shoudl aim to not just save tax... but achieve more. is someone advising you? you shoud emplpoy the servcies of an honest financial planner.
Lalit asked, Hi Rahul , I am 30 yrs old and my monthly income is around 35kl ,i wnat to know gud mutual funds name which can give me high returns ? and currently i invensted in ICICI pru infrastruture funds and Rel. diverified power sector funds and Rel. Growth fund .. is my selection is correct ??? pls give me ur valuable advice me
Rahul Goel answers, lalit, hi. we do not recommend sectoral / thematic funds. also, we think the core holding in an equity portfolio shcould include schemes like hdfc equity and franklin india flexicap.
newguy asked, Hi, For diversified portfolio consisting of land, real-estate, stocks, mutual funds and gold, what allocation ratio would you recommend?
Rahul Goel answers, hi the allocation would vary from person to person... its highly customised.
purnendru asked, I am purnendru, i wish to invest around rs.3-4 lacs for my old age as well as for the education of my children, my age is 50 years so where do I invest this money so that I get good returns, my elder child is studying in 10th and younger one in 4th standard.
Rahul Goel answers, hi. for me to be able to guide you, i will need to undersyand your overall assets. if you want to email me details of the same i will be happy to guide you. i can be reached at rahul@personalfn.com
jatin asked, Hi Rahul... In my past experience of 2 yrs in investment industry , I have realized that any investment advisor may it be mutual funds or any other , advise you to buy certain stocks at a certain price but they are always silent about selling the stock and the sell price. What I mean to say is , if I buy certain stock at Rs.100/ and if market starts correction and price reaches 80 , then stock is on hold saying that market wud revert . Again if same stock goes to 50 , then stock is held saying that there is no point in selling the stock for 50 , instead keep it for long term benefit. there are 4 important issues that needs to be answered : 1.entry criteria in a script 2.exit criteria in a script 3.stop loss system 4.profit booking system It is seen that these 4 important concerns are never answered.
Rahul Goel answers, jatin, hi. that is exactly why most people need to be in professionally managed mutual funds... where the fund manager takes the decisions for you...
humpty asked, dude, how safe is DSP ML Technology Fund
Rahul Goel answers, hi, sector/thematic funds carry very high risk... even higher as compared to diversified equity funds.
Guru asked, I am earning 85K take home , My age is 36, one kid 3 Yars old . I have 2 Sites worth 85 Lack, Insureance preium50K /Year, Mututal Fund ( ELSS) 30K /Year, VPF - 84K/Year. Laiability EMI 20K/Month ( 8 Years), Car-7K/Month( 2 years) Mutual fund SIP started from Jan'08- 6K/Month. What do you think I shound change my Stretagy for personal finanace
Rahul Goel answers, guru, hi. you have a portfolio which is real estate, debt and insurance heavy. i am pretty much certain that you have savings based insurance. prima facie, this is what you need to do. take term insurance that will cover you till 55 yrs of age; increase your exposure to the stock market at a faster pace... this will help you increase the overall returns of your portfolio. the underlying assumption is that you have appetite for risk.
pushkar asked, Hi Rahul, this has been the first year of my job. I have invested 50% of my 80C investments in PPF while I have invested around 15% in ELSS. I am planning to increase the investments in ELSS next year. Am I going the right way ?
Rahul Goel answers, pushkar, hi. you probably are... but be sure that you are planning these investments in a manner which helps you achieve a lot more than just saving tax.
VEERA asked, HI, I AM 30, HAVING TWO KIDS AGED 6 & 4. I HAVING LIQUID ASSETS WORTH 1 CRORE, CASH AND OTHER SAVING ACCOUNTS. I WANT TO RETIRE AND MAKE MONTHLY 200,000, WHAT IS THE BEST INVESTMENT I SHOULD GO FOR ?
Rahul Goel answers, veera, hi. well, if you retire now, all you can make on rs 1 cr is about rs 8 lacs a year, which is way below rs 24 lacs that you desire... maybe you need to accumulate more money before considering retiring...
sandeepm1977 asked, HI. This is sandeep/ I investing Rs.30000 in Tata Infrastructure fund & Rs.25000 in UTI Energy fund in Oct & DEC. 2007. What return should i expect
Rahul Goel answers, sandeep, hi. you are invested in very high risk funds... i am unable to comment on what kind of returns you shoudl expect? has your agent given you any estimate?
Rahul Goel says, Thank you all for participating in the financial planning discussion. You can always write in to Personalfn at info@personalfn.com (pl mention contact details - city name and tel nos).
Chat with Rahul every week!
