You have been investing in mutual funds for quite some time but the returns on your investment is not impressive? Should you sell those mutual funds that have not performed well and add a dash of new ones that are touted as good performers?
When is the right time for you to bring about a change in your portfolio? How often should you run a health check on your mutual fund portfolio?
In a chat with Get Ahead readers on April 16, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.
For those of you who missed the chat, here is the transcript.
guru asked, I am 30yrs old. I am investing in HDFC Equity/Top200, Franklin PrimaPlus/FlexiCap, Reliance Vision, DSP-ML Equity, Fidelity Equity through SIP of 4000 each monthly. I want a corpus of Rs 1 cr after 10 years. Can I achieve this using the existing portfolio within the specified timeframe. Is my portfolio OK. Do changes would you suggest, if any, Thanx
Vetapalem Sridhar answers, Exit one of HDFC and one of Franklin funds. Add aggressive funds like JM Emerging leaders and Sundaram SMILE fund to ur portf. If u r investing 28K p.m., then over the next 10 yrs assuming a return of 15% annualised, u can expect the investments to grow to around 80L.
Radha asked, Hello Sir Jee, My take home is 25 k per month. i want to save Rs 5 thousand per month for long term. Please advice suitable mutual fund to start. How to decide which mutual fund is better?
Vetapalem Sridhar answers, U can look at HDFC Growth and Reliance Vision to start with ur investing. Go thro the following link where I have covered in detail factor to evaluate to pick mutual funds for investments: How to select a good mutual fund. A Slide Show, click NEXT to read thro.
rajeshkumar_221 asked, I am 29, can you tell me what should be my asset allocation in MF. Does MF is enough for my savings or I should look for other more safe avenues for investing like PPF, FD etc. Thanks in advance
Vetapalem Sridhar answers, To determine a suitable Asset Allocation age is just one of the factors to be looked at. There are a number of other factors viz, ur current financial state, when (time) the objectives need to be met, amount of returns needed to be generated to meet those objectives, emotional comfort with volatile investment options, etc. A mix of MF, PPF, FD, etc can be used as investments options not only to attain a suitable asset allocation but also to meet the need for safety and liquidity. It would depend on individual circumstances. Plz read thro the following link to understand the importance and role of Asset Allocation in the life of an Individual: Asset Allocation - Secret to Financial Freedom.
bob asked, Hello sir ..people say that investing anytime in MF is good..but if we time it well say when the fund has declared dividend te nav falls isnt it better to invest after dividend is declared and when market are low
Vetapalem Sridhar answers, Hi Bob, u r thinking on the wrong lines. It would be better to invest when mkts correct (due to which there may be drop in NAVs) and not when dividends r declared. Plz read thro the following link to get more clarity on the mystery surrounding dividend and whether they help u earn higher returns: Dividend Vs Growth....
MONK asked, Hi Sridhar, For 15 to 20 years and continued association with investment, with reference to cost of investment which is better stocks or mutual funds ?
Vetapalem Sridhar answers, It is difficult to say which is better. If u trade too much then cost in stocks maybe higher. But if u r a gud stock picker then there is definitely potential for higher returns thro stocks investing. Having said this most people would struggle to even outperform average mutual fund schemes over the long term.
ramupgt asked, Sir, I am an investor and has been consistently investing in mutual fund through SIP, since 2006. Have investments in Reliance Growth, Reliance Vision, Kotak K30 Growth, Tata Infrastructure, Sundaram BNP Paribas both midcap and SMILE, and HDFC Fund Growth. I would stay invested for 3 years. However, return has not been attractive in the recent time. Pl advise me whether to shrink my basket of different funds or to exit totally from investing in mutual funds. I am 48/married/2 kids
Vetapalem Sridhar answers, Equity investment is not for a 1-2 yrs horizon. U need to have atleast a 5 yrs horizon to make reasonable returns. If u remain invested for a further 3-4 yrs u would see that ur investments have made reasonable returns. Have patience!
Viky asked, Hi Plz Answer I m so confused My Gross salary is 25k is it better to invest in tax saving funds or investing in agressive funds will compensate tax?
Vetapalem Sridhar answers, ELSS fund would definitely be a better option. u can look at a fund like Sundaram Tax Saver, Principal Tax Savings Fund, HDFC Tax Saver, etc.
Reuben asked, If i invest 1 lakh as premium for a ULIP, how much tax exemption can i claim under 80c?
Vetapalem Sridhar answers, Under Section 80C u can claim a total of upto 1L for tax benefit. ULIP qualifies as an investment option u/s 80C.
SIDDHARTH asked, Dear Sir, My question is what will be rate of interest on home loans in near future? whether it will fall or not?
Vetapalem Sridhar answers, Dear Siddharth, it is not possible to say with certainty. But there are indications based on current situation (and inflation fears) that there is a likelihood that home loan rates maybe hiked in the near future.
poonam asked, I have a 1 year son, what are different investment options which can be looked into if I need to ensure his future.
Vetapalem Sridhar answers, First the earning member of the family should get adequate TERM Insurance. To build funds for a child, invest regularly into a Mutual Fund thro a SIP. U can look at funds like HDFC Growth, Sundaram Select Focus and JM Emerging Leaders Fund. Also do read thro the following link to know about how to build funds for ur children. Investing for children A Slide Show, click NEXT to read thro.
bency asked, As an NRI do i need a PAN to begin investing in MF's, even if it is through an intermediary? Also, what about the POA, is it absolutely necessay even if I consider an investment window of 1o-12 yrs?
Vetapalem Sridhar answers, To invest in MFs in India PAN is compulsory (eventhough u maybe an NRI). Infact if u wish to invest more than 50K in a single transaction u need to get a KYC (know your customer) registration done. POA is not necessary. U can directly invest by signing necessary forms to invest in Mutual Fund. Also a lot of mutual funds are offering online transaction facilities. But for this u first need to register with the respective Mutual Funds. Thro this online access and a net banking account u can do all transactions of buy, sell, switch, etc online.
aws asked, Hello, i have asked Qs many times on the chat but never got a reply, hoping at least this time i should get some reply. Would like to what does the star rating signify for the MFs, & where can we get the latest rating. Can u pls guide me.
Vetapalem Sridhar answers, Various agencies/websites are offering star ratings to mutual funds. Each one of them have a criteria on which they evaluate funds. By assigning points to different criteria, they remove a final score. STAR rating is assigned based on this score. But let me mention that the rating is based on past data. And past performance may or may not be sustained in future. Having said that, the rating does give us an insight about how well the fund has been managed and how has it performed as compared to its peers.
Hi-Vetapalem Sridhar asked, Do you think that the Sensex will rise to 25000 level as told by some fund managers in India?
Vetapalem Sridhar answers, It definitely will rise to 25K, but then it is a matter of time. It may reach there within an year or it may also take a lot many more years to reach there. Have patience and invest regularly. Don't bother too much about where the Sensex is. Over the long run u would make reasonably gud returns.
Vetapalem Sridhar says, Have run out of time now...It is not possible to answer all queries, but u will find answers to most of your queries if u read thro the entire chat, as a lot of queries are similar.
Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at email@example.com.