Mutual funds: Your questions answered

Drop us a line and our expert, Anil Rego of Right Horizons, will answer it.

Got a question for Anil Rego? Please write to us at getahead@rediff.co.in with the subject line as 'Mutual Fund query'.

I started investments when the markets were on a bull run, however, now all my investments are in the red. I have been investing through the systematic route, should I continue investment or stop?

Emotions and investments are better kept separate, when an investor sees the investments in the negative, one is overwhelmed by panic and in order to curtail further losses, stops investing at lower points of the market or sometimes even exits at such levels of the market.

It is pertinent to stay put when the going gets tough, continue your investments, do not stop your SIPs -- the investments that one makes at lower levels are the ones which will provide substantial returns. This averaging will help recover your losses much faster.

Anil Rego is the founder and CEO of Right Horizons (http://www.righthorizons.com/), an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.  

There is plenty of information available on the net which will essentially help you choose the best funds. However, one needs to pick and choose such information and not react on the 'Hot Tips' that every other online portal offers. Often one makes investments in mutual funds in a haphazard manner. It is important that one chalks out the strategy beforehand and invests inline with such strategy. Keep the number of fund additions under check. Some of the parameters one can keep in mind while choosing mutual funds are:

• Past returns/ risk profile
• Size of mutual fund house / fund
• Fund manager expertise
• Investment

Have a query regarding mutual funds? Maybe we can help. Drop us a line and our expert, Anil Rego of Right Horizons, will answer it. Please write to us at getahead@rediff.co.in with the subject line as 'Mutual Fund query'.

Various stakeholders are of the view that the commission paid to the distributors should be determined by the investor in consultation with the distributor depending on the service provided by the distributor ie, to have a variable entry load structure.

This was initiated from the fact that the entry load was charged on the value of investment made and had nothing to do with the service provided by the distributor. SEBI is of the view that variable load structure would bring in greater transparency with regard to the commission paid to the distributor/ agent/ broker.

Systematic investment is a concept which provides the advantage of cost averaging. This mode of investment has stipulated amounts being consistently invested into equity mutual funds, across market trends. Thereby one buys a higher number of units when the markets are lying low (due to low Unit Price called Net Asset Value) and lower units when the markets are at peaks (due to high Unit Price). This ensures that the cost gets averaged over the stipulated period of time.

Hence, over a period of time, there would be higher returns as against someone who makes lumpsum investments. Since 'timing the market' is difficult to achieve consistently.