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Mutual funds you can buy now

April 16, 2009 13:16 IST
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Which is the best mutual fund plan to invest for your child's future? Which is the best pension plan for you to secure a stress-free retirement life?

Given the current market lows is it a good time to invest in stock markets via mutual funds? How should you invest in tax-saving mutual funds for the new financial year?

To answer these and various other money and invetsment related queries, financial planning expert Vetapalem Sridhar, hosted a chat with GA readers on April 15.

For those of you who missed the chat, here's the unedited transcript:

rajasekar asked, i have invested DSPML TIGER FUND & SUNDARAM SMALLMIDCAP FUND since last 2 yrs as a SIP of Rs.5000/Month,as a net i am losing Rs.30000 till today,pls advise shall I cointue or dicontinue or change to other MF?

Vetapalem Sridhar answers,  at 2009-04-15 14:13:40Hi Raj, u hv started investing from higher levels in mkt and continued ur SIPs through the fall. U hv done half the job. Now continue to invest during this down phase and remain invested till mkts recover.It may take 1-3 yrs. U would hv made gud returns when mkts would hv recovered. U can start a SIP into a large cap fund like HDFC Grwoth or Reliance Vision instead of Sundaram Small Cap.

mamu asked, Hi Sridhar, tell me how to spend less money during tjis economic crisis so that i am able to save more money out of my salary. I earn Rs 40k per month and have fixed expenses at Rs 18k every month.

Vetapalem Sridhar answers, Hi, Tips for saving money: 1. Understand ur income and expenses. Keep a written record of ur expenses. Review it at the end of each month. Look at expenses that u could have avoided. In future avoid such expenses. 2. Look at ur lifestyle habits. if u go to a multipex every week and spend money, cut down on number of visits and try to find activities that cost lesser money and which r more adventurous. 3. Keep a tab on ur mobile bill. select a plan that works out cheapest for ur profile of usage. 4. Get into a SIP into a mutual fund which ensures discipline as far as saving is concerned. 5. If u have a credit card then cut it into 2 pieces as u should not fall into the habit of using it. Keep a debit card handy. Using cash may help cutrail ur spending.

Oliver asked, Hi! I save Rs25000 a month but I am not sure how to channelize that fund. As of now I am planning to buy a property by 2010 february. Please suggest a better alternative for a systematic growth of my funds.

Vetapalem Sridhar answers, Dear Oliver, if u plan to buy a next yr, then it is advisable to collect the money into a Bank FD (a recurring deposit). This will help u build funds for the downpayment to buy the property. With such a short horizon equities would not be a siutable investment option.


Vetapalem Sridhar answers, Hi Rocky, U hv a gud portf in place. However u hv higher exposure to Infra funds (ICICI and DSPBR). U can replace one of them with a fund like Reliance Regular Savings Fund. Continue with ur SIPs with a long term horizon.

sat asked, hi vetapalem my mother sold a home recently in ahmedabad for rs 12lac/- n flat was purchased 1yr 8months back for 7 lack/ should she go about it as she is a house wife n she should be able to save tax as well as invest for long term

Vetapalem Sridhar answers, Hi, the gains r Short Capital gains and would attract tax. I would suggest that u consult a CA so that a proper evaluation of the case is done and the most suiatble course of action to minimize tax is taken. With a long term horizon some exposure to equity MFs is recommended.

MM asked, Hi Sridhar..I lost so much in Futures trading..still i have few short positions..can u adivce me the futures trading is good or bad..

Vetapalem Sridhar answers, Trading is a activity which involves high RISK. If u understand (which u dont seem to understand) this risk and can manage this risk, u can become a gud trader. Futures and Options are derivatives which r highly leveraged instruments. For a common man it is best to avoid getting into trading in these instruments. The day u r forced to cover ur short positions, the mkts would reverse.

Chetan asked, Der Mr. Sridhar. i have planning to buy a home at around 22 lacs in is it the right time ti go ahead or still i have to wait around 1 more year??

Vetapalem Sridhar answers, Dear Chetan, if u plan to buy the property for self use, then u should start looking for a property from now itself and over the next few mths finalise on it. It is difficult to say exactly when real estate would bottom out. But over the coming 3-6 mths interest rates should fall thereby making housing loans attractive and property prices too would be at gud prices.

vdgarg asked, Hi Shridhar I am interested to invest 2 lacs for 5 years . Which option is best. Kindly suggest. My insurance cover is 5 lacs with LIC. Monthly income 30 000 and my age is 41.

Vetapalem Sridhar answers, With a 5 yrs horizon equities would be the options with the most potential. U can invest this money in smaller chunks (say 40-50K each) over the next 2-3 mths. U can look at options like HDFC Growth, Reliance Equity Advantage Fund, Sudnaram Select Focus, DSPBR Top 100, etc. U should evalute ur insurance cover needs. U may need more cover. Look at a TERM Cover like Reliance Term Plan, SBI Shield, ICICI Pru Lifeguard WROP, Kotak Term Plan, etc.

naren asked, Hi My daughter is 3 years old. I have invested money in LIC which i pay 26000rs per year. Is this enough for her Education & for her carrier. Please advice me. thank you

Vetapalem Sridhar answers, Hi Naren, I would suggest that u re-evaluate the investment option that u hv choosen for building funds for ur daughter's future. U should take up a term cover for urself and invest for ur daughter via equity MFs with a 13-15 yrs horizon. Plz read thro the following link to know how to go about it. Investing for children A Slide Show, click NEXT to read thro.

Kunal asked, Hi, Sridhar, I am 26 yrs single male. Just I hav purchased a flat, for which i am paying EMI of 17K for 20 yr loan. also I hav EMI of 4500 for personal loan of 3yrs (1 lakh) which i took for buying furniture. My personal expences are 10k p.m. I hav SIP of Rs 500 each in Magnum comma, DWS opprtunity & reliance RSF & Rs 500 in bank RD. After all these expences I hardly save Rs 1000-1500. Should I ivest this amt also in MF's or in debt. Also I want to repay my home loan in 10 yrs. How should I plan my finances. Pl guide. Thanks in advance!

Vetapalem Sridhar answers, Hi Kunal, it is important that u build a emergency fund which is equal to atleast 3-4 mths worth of regular outflows. So around a 1L fund should be built for this. If u hv this in place then u can invest the addition savings. Otherwise start setting aside this additional savings to build this fund. Also if u do not hv insurance cover, immediately take up adequate TERM Insurance cover.

Chetan asked, Dear sridhar, i am saving around 15000 Bucks in a month from last 9 months....but i am not getting how to invest these fund. I dont like to take too much risk in investments.and i need some where around handsome returns too. so kindly suggest me how can i plan for my investment.i am not interested to invest my funds in stock market at all....... pls suggest?

Vetapalem Sridhar answers, Dear Chetan, as u seem to be new to investing, I would suggest that spend the next 1-2 yrs in learning about investment options and investing in general. This will be the best investment tht u can make at this stage for ur future. Till u r more confident of taking an informed decision this is wat I would suggest tht u do. Of the 15K tht u save invest 3K each via a SIP into 2 funds from among HDFC Growth, Reliance Equity Advantage Fund, Sudnaram Select Focus, DSPBR Top 100, etc. Equity investment should be done with a 5-7 yrs horizon. The rest 9K collect into a bank FD. This u change as u become more knowledgable about investing.

vaidehi asked, Dear Mr. Sridhar. Hope I get lucky this time :-). Could you please advise if I can continue small SIP of 1K each for the following funds or should I change some. I am bit confused and not able to decide in this downfall. a) DSP TIGER b) DSP Equity c)SBI Magnum Contra d) HDFC Prudence. I was thinking of replacing DSP TIGER with ICICI Infrastructure and HDFC Prudence with Birla Sunlife Equity. Kindly advise. Please Please Please. Thanks.

Vetapalem Sridhar answers, Dear Vaidehi, it is not possible to know which funds will be the best performers. But from among the above listed this would be my choice DSP Top 100 (instead of Equity), SBI Magnum Contra,ICICI Infrastructure and Birla Sunlife Equity.

Puneet asked, Hi Sridhar i am investing 2000pm in Sundaram Tax Saver, 2000pm in SBI Magnum TaxGain, 2000pm in HDFC Growth, 2000pm in DSPBR100, 2000pm in HDFC Top 200. Is this a good profile in these times?

Vetapalem Sridhar answers, Dear Puneet, it does make a reasonably gud portf. Continue with ur SIPs and remain invested with a long term horizon.

MyYoungNephew asked, My yound Nephew 10 years old knows importance of saving and he saves around 1000 Rs per month. He keeps on telling me about banks, companies, biscuit and chocolate companies when we visit petrol pumps, malls, shops and theatres. He wants to know whichproduct is owned by which company. He then asks me about can he invest his savings in that company. He is aware of stock market etc. Seeing his eagerness I always wonder how this habit can be converted to a Financial plan so that it helps him in his future.

Vetapalem Sridhar answers, It is gr8 to know that we may hv a potential Warren Buffet in India. Ideally he cannot open a Broking a/c (till age 18 yrs), to buy shares, but he can hv a demat a/c. U can let him buy shares under ur a/c. Alternatively make him invest into the stock mkt via mutual funds and build funds till he attains 18 yrs age. In the interim period u can let him do paper investing, by recording buy and sell on paper of the amt he saves each mth. Proper guidance may really help ur Nephew.

ASHOK asked, Hi, If I want to invest Rs5000/- every month in NPS pension stystem then out of 6 fund manager which one i should choose. I hope my question is clear to you. Thanks Ashok

Vetapalem Sridhar answers, Dear Ashok, as the funds r new, go with the company that u r comfortable with. Most of them hv a track record of managing funds under Mutual Funds. The six fund managers are - UTI Retirement Solutions, SBI , ICICI, Reliance Capital, IDFC AMC and Kotak Mahindra AMC.

psingh asked, Please advice on Gilt Funds, is this a good time to invest? also I need money after 1 year so what kind of fund should i choose to get maximum return, thanks

Vetapalem Sridhar answers, Hi, as long as interest rates a falling gilt funds will give gud returns. But if interest rates start to rise they can give negative returns. Interest rates may bottom out during the next half of the year. With a 1 yr horizon, it maybe a better idea to invest money into a bank FD.

dv asked, HI Sridhar, We have income of about 1.5 lcs per month with the fixed emi expnese 60,0000. Though I do save appx 75000 per month which I have made a habbit of doing the FD, the moment salary comes. Now I have invested a big sum of 15 lacs in one flat and 10 lcs in another one. Though both of them are on Construciton linkeed plan. But I still feel that Whatever I save, I end up paying them.beacues I do not intend to take any HL. How do you look at it. I do nto ahve immediate rqument of cash as of now. DO you think I have done the right thing

Vetapalem Sridhar answers, It would be a wiser idea to take up a housing loan as then u can avail of tax benefits and invest the savings wisely to build wealth. Keeping all u money in a single asset class (real estate), may not be such a gud idea. Plz spend some time to understand a concept called as asset allocation and try to use it to ur advantage to build wealth. Read thro the foll link to know more about asset allocation. Asset Allocation - Secret to Financial Freedom.

araj asked, Hi Sridhar, Thanks for offering this service. I would like to invest in liquid funds, that can be managed online. Any suggestions?? Also pls let me know about Tax implications for NRIs

Vetapalem Sridhar answers, There are a number of Funds that do have online facility - Reliance MF, SBI MF, HDFC MF, ICICI MF, etc. U can register with them respectively and using ur netbanking invest in them online. The gains from liquid funds will be Capital Gains - Long term for more than 1 yr and Short term for less than one, tax at appropriate rates. It maybe a better idea to invest into a bank FD instead of a Liquid if the investment is for less than 1 yr.

sandyera asked, Combined earning of myself and my spouse is 63000. My investment include 97000/pa in LIC and 9K in mediclaim.My spouse investment is 70K in PPF. Kindly suggest?

Vetapalem Sridhar answers, Both of u should get a TERM Insurance cover and re-evalute the amount of money invested in LIC. U need to hv some exposure to equities. I would suggest tht u should divert some of the money towards MFs like HDFC Growth, Reliance Vision, Sundaram Select Focus, etc via a SIP. A suitable asset allocation goes a long way in creating a stable Financial Future. Plz read thro the foll link. Asset Allocation - Secret to Financial Freedom.

ParulV asked, HI Sir, I am newly married, I and my husband want to start with some kind of investments for our future, though he has been investing in ELSS funds, he is keen on Investments in Pension Plans, but as per my knowledge pension Plans are not useful as they are perceived to be because of too many Charges and Tax Restrictions, Please guide us so that we make some wise decision regarding Investments, Thanks

Vetapalem Sridhar answers, Hi Parul, it seems u hv done some research on Pension Plans offered by Insurance companies and u r right. Although it ensures discipline (the problem which most people face), there r better alternatives available thro which u can create more wealth in the long run. If invested with discipline Equity oriented MFs would be a superior alternative to create wealth over the long term. U can also consider registering with the NPS scheme under PFRDA. Plz go thro the website for more info.

Sandeep asked, Sir, can you suggest some good investment plans for investment upto 5-6 years?

Vetapalem Sridhar answers, Hi Sandeep, u can look Mutual Funds likes HDFC Growth, Reliance Equity Advantage Fund, Sudnaram Select Focus, DSPBR Top 100, Reliance Regular Savings Fund, SBI Contra, etc with a 5-6 yrs horizon.

krish asked, Dear sir I have donated a apartment to my sister out of love and compelled to vacate the office quarters during FY 2009-10 and staying in the same apartment rather giving the same apartment on rent to unknown people. I am receiving the HRA from my office. Am I eligible for claiming the rent rebate from my office for the amount paid to my married sister, who has no source of Income

Vetapalem Sridhar answers, If the apt is registered in u sister's name then u can do a rent agreement with her give her rent and can claim rent rebate. I am not sure wat u mean by donate (is the apt on ur sister's name).

VR asked, 28 yrs of age. Earning 85000 pm (in hand) after tax deductions, PF ( 11000 per month) and Company Pension scheme (saves me 6000 per months). I have approx 8.5 lakhs in Mutual Funds & Shares + approx 2 lakhs in pension scheme. I dont run the house-stay with parents & not married. How much should i save per month and in what instrument to ensure retirement at 40. Ps : i pay approx 20,000 towards car & medical insurances

Vetapalem Sridhar answers, U r currently saving around 65K. This translates to around 7.8L p.a. Once u get married ur financials will change considerably. U can estimate by when u can retire once u hv a understanding of the Financial State then. Currently focus on saving and invest the money wisely. Set aside money that u will need for ur marriage into safer avenues. That money which can be invested with a 10 yrs plus horizon should be allocated towards eqquities. U seem to hv a gud shot at achieveing Financial Freedom quite early in life.

dools asked, pls tell me whether the SIPs under tax saver scheme gets compounded or not. The maturity is after 3 years but can the same investment be kept onwards for many years to get a high earnings later.

Vetapalem Sridhar answers, A ELSS Tax Saving is nothing but a regular Mutual Fund scheme with a 3 yrs lockin period. Once 3 yrs r over, it works just a any other normal open ended MF. So if u remain invested the money will continue to grow based on mkt movements.

rkreddy asked, hi , I RkReddy, I purchased a house in HYD, with ICIC loan they are not getting reduce the interest rate for existing customers, what is your advice in this case, try to pay 10L per this year and take a new loan from other bank is it good or not

Vetapalem Sridhar answers, In case rates hv not fallen as per the mkt, u can negotiate with them to reduce the loan rate. I know of cases where rates hv been reduced when loan owners hv conveyed to banks that they r switching their loan to other banks where they r getting a better deal. So u may also need to find out about better deals that are available for switching loans to negotiate with ur bank.

Srikanth asked, Dear Sridhar, I already have SIPs running in the following funds : HDFC Growth, Top 200, Reliance Vision, Sundaram Select Focus, Magnum contra. Now I have around 2 lacs of funds. Do I invest in the existing funds or go for new ones like DSPBR 100. Also, should I invest through STP? Please suggest.

Vetapalem Sridhar answers, Hi Srikanth, the funds u hv are reasonably gud. Continue with them. SIP or STP, it is ur choice.

chandan asked, Hello sir , please answer. I am 26 yrs old. I have monthly saving of 15k. I have 50k ULIP from Max NewYork Life for 5 years , 15 k ULIP from Max NewYork Life for 25 years , 40k LIC from LIC of India for 25 years. I don't know wat I took for the investment is correct or not in the current situation. Now I am looking for the invest of 5k per month. Please can you u suggest me on my prev investments and wat I should choose now. Thanks

Vetapalem Sridhar answers, Hi Chandan, u hv invested in a lot of ULIP policies. I would suggest that u do not invest any further amount towards insruance policies other than a TERM Cover if required. U should not focus on building a balance of debt and equity investments. So split the additional savings into bank and Equity MFs. U can consider doing a SIP into funds like HDFC Growth or Reliance Vision to start off with.

Mark asked, I have 1 Lac which I have kept in bank as saving account. Due to current economic scenario I want to have some cash in hand. Could you please suggest if there is a better way of keeping that fund.

Vetapalem Sridhar answers, A Bank FD would be a better idea instead of keeping it in a Savings a/c.

Vetapalem Sridhar says, Thats all for now friends! Will catch up later......

Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at

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