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Mutual Fund Corner: 'I have investment in UTI Opportunity Fund with SIP at Rs 10,000 per month, what should I do?'

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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, Manoj Nagpal managing director and chief executive officer, Outlook Asia Capital.

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, Manoj Nagpal, managing director and chief executive officer, Outlook Asia Capital.
KK Reddy calls us from New Delhi. He has investment in UTI Opportunity Fund with Systematic Investment Plan
(SIP) at Rs 10,000 per month. Please advise.
I think the portfolio is reasonably largecap oriented. What Reddy has to look at is that the UTI Opportunity Fund has now become the UTI Value Opportunities Fund. So, there has been a shift in the name and also a shift in the mandate. The other two funds continue with the same name and the same mandate and are leaders in their category. However, the UTI Value Opportunities Fund needs to re-position itself to a value fund. Currently, it holds stocks like HDFC Bank, IndusInd Bank, and typically growth oriented stocks and that is where there is some kind of a repositioning that is required and there is higher volatility. So, maybe you would want to relook at that and shift it to a multicap fund like a Motilal Multicap 35 or some other multicap fund and that should really help you go ahead with this three funds in future.

Q: Hariom Mittal calls us from Gurgaon. He wants to invest Rs 10,000, advice on a few SIP funds.
We really do not know what is the overall asset allocation that he is looking at and the risk profile at that age and assuming that his normal source of income is currently limited. Ideally, we advise people to go into wealth preservation stage. However, one of the important points he highlighted was that these are investments in his family’s name and maybe his children and others. So, we assume that his risk profile is not really misaligned at this point of time. So, assuming that his risk profile continues to be on a higher side and he wants to accumulate money for his family for the next 10-30 years, these are three good funds that he could look at. SBI Bluechip is a good largecap fund, the UTI Nifty Index Fund – obviously mutual funds tend to outperform index funds over the long periods of time, but last year has been an anomaly and index funds are doing better than active funds. So, over the long term, however he may want to get into an active diversified fund, largecap fund, if he wants to shift over from the new UTI Nifty Index Fund. The third Fund that is the Mirae Emerging Bluechip. Earlier, it was a midcap fund and now it has become a large and midcap fund. So, there is a repositioning of this fund and you need to think that whether you want to continue in the same fund or want to add midcap fund to add to this. So, that is another thing that you should consider and maybe shift out from the Mirae Emerging Fund and go to a midcap fund.

Just a follow up question on this, given that our investors’ age is 76, he is retired, would it be a good time for him to now start moving some of his equity allocation towards debt, etc.?
If you are in wealth preservation mode, then, ideally you should not do SIPs into equity funds. Even if it's for the long term, you may not be able to take over that volatility. At that age, ideally you should do an SIP in a debt fund or an equity saver fund. An equity saver fund is a category, where the equity allocation is around 25-30 percent. There if you are looking, then you should consider the Axis Equity Saver or the Kotak Equity Saver. Axis Equity Saver is a slightly more aggressive fund with allocation going up to 35-40 percent in equity, whereas the Kotak Equity Saver is a more conservative at between 25 and 30 percent equity. So, if you really want to be in pure wealth preservation mode, but still want to take some kind of risk, then an equity saver fund is better bet to go rather than pure equity funds.

Does that old adage of 100 minus your age into equities work?
That is a good starting point to go ahead with. Most of the people in India are like the rustic person, where the equity allocation is usually between 5 and 10 percent, a huge allocation happens to real assets - 50-60 percent, and the rest 30-35 percent goes into debt. So, that is where we always say, Indians are extremely underexposed to equities, either through mutual funds or direct equities and where they are exposed to equities also, it's primarily in the midcap and smallcap space. So, we say always that it's a good starting point to look at age as the allocation to debt and the balance into equity and you should increase your allocation going there based on the risk profile. Always assess your risk appetite and risk profile before taking the equity allocation for your portfolio.

Ramesh R writes to us from Hyderabad. He has investments in Franklin Templeton Prima Plus fund at Rs 1,000 per month since three years. He wants to know whether to hold or sell?
There are two distinct funds that he is looking at. One is the Franklin India Prima Plus, which is one of the oldest fund in this country. It was the first funds that was launched under Kothari Pioneer and now is managed by Franklin Fund. What happened to this fund is that it has always been a multi cap fund, it has always maintained that mandate over the last 20 years and at this point of time, the name has just changed to become Franklin India Equity Fund. So, there is a name change at this point of time. That should not concern you.
What is really important is that in the last three years, the Franklin Prima Plus or the Franklin India Equity Fund now has been an average performer. So, some of the calls it's has not been able to ride the market momentum and hence its performance is a little tad par. So, it's usually now in the last three years from the time you have invested in the second quartile or in the third quartile. We believe if you are looking for the long term, it should not worry you at all and you should continue with the fund.
On the other fund of the UTI Unit Linked Insurance Plan (ULIP), it's again the only fund which is a ULIP fund offered from the mutual fund category and it was launched in the 1970-1971 at that point of time and it's one of the oldest funds. We always say don’t mix your insurance and investments and for this fund also, we suggest the same thing. However, if you are continuing for the long term and you have already finished your lock in period, you can consider withdrawing and going into a pure diversified equity fund rather than continuing with ULIP fund as it doesn’t serve your purpose we believe at this point in time.

Vishal Prasad writes to us from Kolkata. He wants to invest Rs 25,000 in Indiabulls Liquid Fund?
When you are looking at a liquid fund, liquid fund is kind of a commodity. Most of the liquid funds in the country today will offer you the same benefits, the same features and also the similar returns, because liquid funds can only give you returns which are just closer to the call money rates. Currently, call money rates are in the range of 6 percent and most of the funds will be there. So, what will differentiate really choosing a liquid fund is primarily looking at whether the customer servicing has good facilities like instant redemption. Instant redemption is a new facility that is there, where you can quickly have the money within the next 10 minutes into your bank account. So, if you are looking at investing you should look at that kind of a facility.
You should look at lower expenses. Clearly, liquid funds returns are dependent on expenses, because the portfolio quality of all the funds is going to be the same. As I said, the Indiabulls Liquid Fund tick marks the right check boxes across all these categories, except the size of the fund. Size of the fund is around Rs 6,000 crore and the largest liquid fund in the country today will be the Birla Cash Plus with around Rs 35,000 crore of assets. So, you may want to choose a slightly bigger fund if that gives you more comfort. If that is not the criteria, then the Indiabulls Liquid Fund will serve your purpose, because it has all the features and got extremely lower expense at this point of time. So, Indiabulls charges is around 17 basis points is the expense ratio that is extremely competitive in the market and that will give you returns that are in line with everybody else.
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