Want to invest in mutual funds but don't know how to go about it?
Get all your mutual fund related queries answered by our expert, Gaurav Gupta of Gaurav Capital Services, on our show Mutual Fund Corner.
Q: 34-year-old Bhawani Singh writes to us from Rajasthan. I am investing Rs 2,500 in HDFC Small Cap Direct Growth, Rs 2,000 in Franklin India Smaller Companies Fund Direct Growth and Rs 2,500 in Motilal Oswal Multicap Focused 35 Direct Growth. I am an aggressive investor and have a horizon of 25 years with a target of around Rs 6 crore corpus. I am investing in the funds for the past two years. I can increase my Systematic Investment Plan (SIP) with the time. Kindly advise your input on the same.
A: I would stop SIP in Motilal Oswal Focused 35 and start a SIP in Mirae Asset India Opportunities Fund, which is also in multicap category. Rest two small cap funds you are doing is fine now. When you increase your SIP, then look at a large cap fund like ICICI Prudential Bluechip Fund as it would balance your portfolio. To achieve your target of Rs 6 crore, Rs 7,000 SIP at 20 percent for 25 years will achieve that. But if you increase to Rs 10,000 monthly, the returns would fall to around 18 percent to achieve in same time period. But I would say expect an average of 15 percent returns over longer periods.
Q: 34-year-old PR Sujoy writes to us from Delhi. I am investing Rs 2,000 in Franklin India Tax Shield Growth, Rs 1,000 in HDFC Tax Saver Growth, Rs 1,000 in ICICI Prudential Long Term Equity Fund (Tax Saving) and Rs 1,000 in ICICI Prud Value Discovery Fund Growth. I have started all these funds from February 2018. I have National Pension System (NPS) of Rs 4,700 per month started in 2013 deducted and Public Provident Fund (PPF) of Rs 10,000 per month started in 2013. Also, I have invested in stocks like Maruti, Bandan Bank, L&T Ltd, HDFC AMC, Lemon Tree etc. Please let me know how to achieve target of Rs 10 to Rs 15 crore. My purpose is for my child's education and he is two years old.
A: All your investments seem to have been taken for tax saving purposes except for ICICI Value Discovery and some shares you are holding. Your NPS and PPF investments, you should carry on as in PPF you would get fixed returns of around 8.5 percent and NPS you have taken for tax purposes, which is similar to a balanced mutual fund. Your PPF and NPS would grow to around Rs 36 lakh and Rs 18 lakh respectively over 15 years. To achieve Rs 10 crore, you would have to save around Rs 70,000 per monthly for 20 years. I have assumed the funds and shares to grow at an average of 15 percent. This can be a combination of large cap, multicap fund and quality equity shares.
Q: 30-year-old DV Raju writes to us from Andhra Pradesh. I started investing into mutual funds through SIPs, monthly Rs 40,000 since one year. My goal is child's education and target corpus is Rs 2 crore. Invested in Kotak Select Focus Fund, SBI Blue Chip Fund, Mirae Asset Equity Fund, ICICI Blue Chip Fund, HDFC Midcap Opportunity Fund, Canara Mid Cap Fund, Aditya Birla Frontline, ICICI FMCG Fund, ICICI Coporate Bond Fund and HDFC Short Term Debt Fund.
A: Rs 40,000 month for 15 years at 15 percent growth gives you a corpus of Rs 2.7 crore after 15 years. Since your goal is long term, I would suggest to stop SIP and exit ICICI Corporate Bond and HDFC Short Term Debt Funds as these are pure debt funds and would return only 7-8 percent and look at balanced advantage funds that invest 40-80 percent equity and balance debt like HDFC Balanced Advantage Fund and ICICI Balanced Advantage Fund. If you want to keep some portion, you can keep in pure debt then look at FMP's or liquid funds.
Q: 40-year-old Veni Prasad writes to us from Allahabad. I have invested Rs 2,000 each in DSP Small Cap Fund, HDFC Midcap Opportunity, SBI Magnum Multicap, Aditya Birla Sun Life Frontline Equity Fund and Aditya Birla Sun Life Tax Relief 96 Fund since 2016. There is no issue of time horizon. In addition, I have invested Rs 5,000 also. Please recommend a suitable equity fund or to distribute among currently invested funds.
A: You have selected one large, multicap, midcap and small cap fund, so diversification is okay. My recommendation us you can start SIP in Mirae Asset India Equity Fund and Axis Focused 25 Fund, Sundaram Rural and Consumption Fund.
Q: 53-year-old Jyoti Gurao writes to us on Facebook. Have some excess Rs 5 lakh. I want to invest in mutual fund. Can I invest lump sum or should it be SIP?
A: Split between one large cap, (ICICI Bluechip Fund), one multicap (Axis Focused 25 Fund) and one midcap Fund (HDFC Small Cap Fund). Since markets are high, you can put into liquid fund and do a Systematic Transfer Plan (STP) on weekly basis of around Rs 5,000 over 6-9 months period to balance your risk.
Q: Anantha Venkata Krishnan PV writes to us on Facebook. Please give your priority out of these: Axis Bluechip Fund, Axis Focused 25 Fund, Axis Multi Cap Fund, Tata Digital India Fund, UTI Equity Fund, Tata Banking & Financial Services Fund.
A: I would avoid sector funds like Tata Digital India and Tata Banking Fund. Axis Bluechip is largecap, Axis Focus 25 and UTI Equity, Axis Multicap are multicap funds. You can invest in Axis Bluechip, Axis Focus 25 and UTI Equity.
Q: 31-year-old Padmanabha Linganna writes to us on Facebook. Want to invest for a period of 10 years. I can take high risk with respect to investment. Can you please suggest for SIP with maximum returns.
A: Past data has shown that there is not too much difference in SIP returns of largecap and midcap funds over longer time periods. So, I would recommend one large cap,(ICICI Bluechip Fund) two multicap funds (Axis Focused 25 Fund), Mirae Asset India Equity Fund and one Midcap Fund (HDFC Small Cap Fund).
Q: Rajeev Nagpal writes to us on Facebook. Can you tell me about Kotak Select Focus & Kotak Classic Equity Fund?
A: Kotak Select Focus name has now changed to Kotak Standard Multicap Fund and is one of best performing multicap funds over last 10 years. Kotak Classic Equity Fund name has changed to Kotak India Equity Contra Fund and now follows a contrarian approach. Fund manager may buy stocks, which may not be in favour now and are fundamentally quality companies that may bounce back at the later stage and that's why the fund manager has a view different from the current market dynamics. Example: Benchmark index has 35 percent exposure to financials, whereas fund has only 20 percent. Similarly, for IT benchmark is 9 percent, whereas fund has 16 percent in IT as he feels IT will do well.
Q: 30-year-old Praba Karan writes to us on Facebook. I invest 60 percent of my mutual funds in small and midcap funds namely, Mirae Asset Emerging Bluechip Fund, L&T Midcap Fund and Reliance Small Cap Fund. The rest two funds (40 percent) are MNC fund and large cap fund. I am doing SIP since January 2016. Probably, I have planned to reduce the risk post 40 years. Please advise.
A: You can look at a multicap fund like Axis Focus 25 Fund or Kotak Standard Multicap Fund instead of MNC Fund as per your current fund holding. After 40 Years, you can reduce samll or midcap exposure to 20-25 percent instead of 60 percent and add balanced funds like Mirae Asset Hybrid Equity Fund and ICICI Balanced Advantage Fund to reduce your risk.
Q: Mukesh Chaturvedi writes to us on Twitter. I have Rs 18.5 lakh in Kotak Multicap. I need Rs 15 lakh for a marriage over six months. Should I redeem now, in instalments as I need it, or in one go?
A: Kotak Standard Multicap is an equity fund and the net asset value (NAV) will go up and down as per the stock market. As you require the funds for marriage, it would be advisable to withdraw Rs 15 lakh and put the same into a liquid fund earning and you get 6-7 percent annum interest. As and when the money is required, you can withdraw the amounts as per your requirement.
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