The stock markets are touching new highs everyday. And the money that you had invested in mutual funds' systematic investment plans, SIPs, is giving you good returns.
In such a situation should you sell your SIP units and take profits home? Is it a good strategy for you to now remain invested for more returns? Or does a gradual withdrawal of your money from SIPs sounds like a good idea?
In a chat with readers on July 4, Get Ahead mutual fund expert T Srikanth Bhagavat answered these and many more queries related to SIPs and the art of managing your mutual fund portfolios.
For those of you who missed the chat, here is the transcript.
Part I: 5 mutual funds that can make you RICH
Purav asked, Would it be right to invest in mutual funds with a short-term view? For example, if we make 10-15 per cent returns in a month, then should I redeem the money and wait for a correction?
Srikanth Bhagavat answers, Re-entry into the market at the right times is difficult to replicate many times. Once or twice you may be lucky -- not all the time. So remain invested in the right funds till you need the money!
PREETI asked, Hi Srikant, I have invested Rs 20,000 in HDFC Growth Fund recently. Please advise prospects. I have 5/7-year horizon.
Srikanth Bhagavat answers, It is a conservative equity fund. On that time frame, it should be ok.
sanjaya asked, I had invested in ICICI FMCG fund in May '06 when it was at its peak unfortunately. It has given less than 1 per cent returns so far. Should I exit or hold on?
Srikanth Bhagavat answers, FMCG as a sector will do well only in the longer run because of our demographics, which encourage demand. But better to have diversified funds also in your portfolio.
reji asked, Hi Srikanth, I have invested in Franklin Flexi Cap, Reliance Vision Fund, HDFC Core and Satellite and HDFC Tax Saver. All are SIPs. Advice me whether I have invested in the right SIPs or shall I continue with another mutual fund?
Srikanth Bhagavat answers, Flexi and Core and Satellite have not been doing well. Change to HDFC Equity / Franklin Prima Plus.
gthth asked, Hi, I invested around Rs 1,16,000 in MF since March 2006 to February 2007 (SIP + one-time investment across different funds like Reliance Vision/ ICICI Pru/ SBI Magnum/ DSP TIGER..and so on). As of today I received an average of 30 per cent return. Is it good time to withdraw the money or else can I expect some more returns in another one year?
Srikanth Bhagavat answers, A bad event or bad turn of global events could always impact the market. It may take more than a year to recover from such events. You must be prepared only for such eventualities. Else the markets seem to be in a fairly valued zone. If you do need the money at the end of the year, have a gradual withdrawal strategy.
jitenderkothari asked, Hi, Srikant, I want to invest in mutual fund for long term say 10-15 years for my daughter. Which one is a better option: equity, balance, debts and should I Invest in SIP or one time?
Srikanth Bhagavat answers, For such a long term, equity is fine. Take the SIP route if you are an inexperienced investor.
rajeshrai25 asked, I have started investing through SIP of Rs 3,000 each in Birla Sunlife Equity, DSPML Tiger, Reliance Vision and Franklin India Prima Plus. Could you please review my portfolio?
Srikanth Bhagavat answers, 1. Birla Sun Life Equity is a recent entry in the top performer list. Reliance Growth has been there consistently. 2. DSPML TIGER is ok. 3. Vision and Prima Plus are good, too.
vijay123 asked, If Iran-USA war happens how will it effect the Mutual funds?
Srikanth Bhagavat answers, God bless us all! And wait for the recovery.
pan asked, Hi Srikanth, If, for example, I invested Rs 20,000 in a mutual fund and I got back 50 per cent as dividend, then what would be my investment? It is Rs 20,000 or Rs 10,000? How will it change the NAV?
Srikanth Bhagavat answers, Dividends are paid out of the NAV. It will fall to the extent of the dividend paid out immediately after.
v_anusha asked, Dear Srikanth, Should we sell Franklin Prima funds in view of its poor performance?
Srikanth Bhagavat answers, Though Prima has performed poorly of late the attitude of the fund manager seems to be 'Better safe than sorry'. It is a mid cap fund which is cautious.
manulasereye asked, Since markets are due for correction which are safer funds to invest.
Srikanth Bhagavat answers, I am not sure that this is so. We are fairly valued as of now. But if you are worried of that, you could invest in a liquid/ arbitrage fund. To remain in equity, Franklin PE Ratio fund will be defensive.
Bhuvi asked, Could a person build one's retirement portfolio entirely of mutual funds?
Srikanth Bhagavat answers, Yes. It will be most convenient and flexible, especially for regular wihtdrawals in a tax efficient manner.
priyaragav asked, Hi Sri, I have invested in a mutual fund in the month of March '07. I could see the NAV increasing gradually. What is the right time to withdraw to get the maximum benefit?
Srikanth Bhagavat answers, You must not have such a short horizon, unless you are a speculator. Withdraw when you need the money. Increase your wealth through regular investing.
Srikanth Bhagavat says, My time is up! Thank you all.
Part I: 5 mutual funds that can make you RICH
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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