Can mutual funds help you create wealth in the long-term? If yes, then how should you plan your mutual fund investment strategy?
What are some of the best funds if you were a long-term investor? Is investing in systematic investment plans, SIPs, better than going for an equity linked saving scheme, ELSS?
Is 2-3 years a good investment horizon for mutual funds?
In a chat with readers on July 4, Get Ahead mutual fund expert T Srikanth Bhagavat answered these and many more queries related to the art of building good mutual fund portfolios.
For those of you who missed the chat, here is the transcript.
Part II: SIPs: Is gradual withdrawal a good strategy?
gaurav asked, Is this the right time make investments, as market is at new high of 14,800 points?
Srikanth Bhagavat answers, At current valuations, the market is not undervalued or overvalued. But it is discounting current year's earnings entirely. Entry now will have better chance of pay off only if you have a 3-year timeframe. Markets have to create new highs as time passes - it is a reflection of a healthy economy.
MKay asked, I cannot take up much shock from the market changes. So I am planning to go for SIP. Which mutual fund gives good return? I am interested in long term investment through SIP. Can you suggest which fund is good performer and gives better value for my money?
Srikanth Bhagavat answers, The long term peformers are HDFC Equity Fund, Templeton Prima Plus, Reliance Growth Fund and DSPML equity Fund.
rawat asked, I am looking for MF of high returns. I am an aggressive investor and looking for a timeframe of 3 to 5 years. Suggest five goods MFs for me.
Srikanth Bhagavat answers, Pru Dynamic, Reliance Diversified Power Sector Fund, Pru Services Sector Fund/ Infrastructure Fund, Templeton Prima or Reliance Growth Fund.
Amba asked, For long term suggest good equity funds. Should I pay extra payment to my bank for closing home loans early? Suggest MF for investing Rs 20K.
Srikanth Bhagavat answers, If the high EMI's now are putting pressure on your income, go ahead and prepay some of the loan. Else, your long-term returns from equity are likely to be more than the interest you are paying to the bank.
dsharmas asked, When should one redeem mutual fund units? As in should one also keep on booking some profits when markets are high and just churn the principal amount or inviting exit loads will amount to strategy backfire?
Srikanth Bhagavat answers, If you can make out that there is evidently a bubble situation, then you could exit. Otherwise, churning is expensive. Re-entry in the market is very difficult at low points. In falling markets, one is very often overcome with pessimism and hence miss out on the correct entry points. Leave long-term money invested as long as your fund is performing.
ss123 asked, Hi Srikanth, I have two questions. 1. While investing in debt funds (monthly income plans) is it wise to go for SIP?
2. For the long-term (10 - 15 years) investment how much does the SIP performance differ from one time deposit for diversified equity funds?
Srikanth Bhagavat answers, Debt funds do not have much volatility -- hence a one-time investment is ok. For long term equity investing, the one time investment may be beneficial as compared to an SIP -- but you must have the stomach to sit through the volatility. If you are a first time investor, start with an SIP. If you have already experienced the volatility, go for one time long term!
samir asked, What are the prospects of infrastructure mutual funds for a long-term investments? Which are the good infrastructure funds?
Srikanth Bhagavat answers, Given the lack of infrastructure in India, and the Governments willingness to spend on it, It is regarded as a profitable sector. You could have upto 10 per cent of your equity in such funds (Pru Infrastructure /Tata Infrastructure).
mumtaz asked, Dear Shrikant, good afternoon. I am an NRI and I am investing Rs 10,000 per month in HDFC SIP plan. I have planned to invest for 3 years. Please let me know seeing present market situation what kind of returns can I expect after 5 years. Also please suggest me what are other options where I can invest another Rs 5,000 per month.
Srikanth Bhagavat answers, Given the country's GDP growth of at least 8 per cent, one can expect a 15 per cent to 18 per cent per annum returns. Another good fund is the ICICI Pru Dynamic for NRIs.
sundar asked, Hi Sri! For the short-term suggest a few best schemes?
Srikanth Bhagavat answers, Low risk, short-term funds are liquid plus schemes such as ING Liquid Plus and Deutsche Money Plus. With a 6-month horizon, SBI Arbitrage Fund looks good.
ajit_rai asked, Hi Srikanth,for my tax saving as I have to invest Rs 1 lakh, I have Rs 28k in insurance, Rs 36k in ELSS. Still I need to invest Rs 36k to complete Rs 1 lakh. Where should I invest Rs 36k now? Pls advice.
Srikanth Bhagavat answers, Since any tax saver has a 3 year lock-in, go for another ELSS. HDFC Tax Saver/SBI Tax Saver/ Pru Tax Saver.
sadashiv_salunkhe@rediffmail.com asked, Please give details of monthly income plan. Can I get Rs 1,000 confirmed per month after investing Rs 75,000 in a mutual fund?
Srikanth Bhagavat answers, Doubtful. Unless you do not mind depleting the principal amount!
Sajal asked, Mr. Bhagavat, could you please answer my question? I have taken 3 SIP's for 36 months. HDFC Equity Fund, FT Prima Plus and Reliance Diversified Power Sector Fund (Growth) putting in Rs 4,000 per month for the next 3 years. Do you think it's a wise decision? Please do reply.
Srikanth Bhagavat answers, Seems fine. All are good performers.
Nidhi asked, Hey Srikant, I'm again posting my question to you. Having a running SIP of Rs 5,000 each in 3 funds ie. HDFC Equity fund (Dividend), Reliance vision Fund (Dividend) and Magnum Contra (Dividend). How long will it take for me to become a crorepati?
Srikanth Bhagavat answers, About 16 years, assuming a return of 15 per cent per annum and that you continue with these SIPs.
BINU asked, I have investment in following funds. Can you tell me how are these funds. My investment duration is for 5-6 years. HDFC Equity, HDFC Multicap, HDFC Core and Satellite, HDFC Long Term Advantage Fund, HSBC Equity, Reliance Growth, Reliance Vision, Tata Infrastructure, Sundaram Midcap, Birla Sunlife Equity, Franklin Templeton Blue Chip, Franklin Templeton Flexi Cap and HDFC Top 200. My investment in these entire funds stands today @ Rs 7 lakhs and I am continuing with SIPs in the following funds 1. Reliance Growth and Vision 2. Birla Sunlife Equity 3. SBI Contra. Please advise about the strength and weakness of my investment strategy.
Srikanth Bhagavat answers, 1. There is too much diversification. Reduce your portfolio to about 4 funds. 2. HDFC Multicap and Core and Satellite funds are not performing too well. 3. Birla Sun Life Equity is a recent performer.
sandip asked, Hi, I have taken SIPs in HDFC Equity Fund, RIL Growth Fund and PRU ICICI Power of RS 2,000 each for two years as suggested by my advisor. Is it ok?
Srikanth Bhagavat answers, 1. You can stop the SIP anytime you wish without penalties. 2. Have a longer time frame to invest and remain invested in equity. 3 years plus is a good time frame.
Part II: SIPs: Is gradual withdrawal a good strategy?
T Srikanth Bhagavat is the Managing Director of Hexagon Capital Advisors Pvt Ltd. He has been in the mutual fund industry for more than a decade now.
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