The world of mutual funds is indeed huge. With so many funds and the umpteen number of schemes they launch, it is very easy to get lost in them.
Which are the best mutual funds? How do you identify them? These are a few of the problems nagging investors all the time.
The other questions are: Should one invest in gold mutual funds? Is there a scientific method to identify the best fund manager? What should be the basis of investing in a mutual fund?
What kind of returns can you expect by investing through systematic investment plans, SIPs?
Get Ahead money expert T Srikanth Bhagavat answered these and other mutual fund related queries in a chat with Get Ahead readers on March 29.
For those who missed the chat, here is the transcript.
Part II -- Earn Rs 50 lakhs in 20 years
chr asked, Hi Srikanth, Pls tell me 3 best MF from Equity Dividend for long term investment.
Bhagavat answers, Looking at a 5 year track record of consistent performance, the three equity funds which stand out are Magnum Contra, HDFC Equity and Reliance Vision.
vin4u asked, What should be the expected return of real estate mutual funds?
Bhagavat answers, Real estate mutual funds have not yet been approved by SEBI. It is expected to happen soon!
himanshu asked, there are 4 days for SIP monthly investment, how to decide which date to choose ?
Bhagavat answers, When the plan is to do a systematic investment over a few years, it really does not matter which date you choose. For the sake of convenience, you could choose a date when you will be having clear funds available in your account.
docl asked, hi shri i have invested in mutual funds a few days back. The market is going down since then i am scared. Pls advice.
Bhagavat answers, Equity markets by nature are volatile, that is, continuously changing in both directions. The best way to make the market work in your favor is to continuously make investments (on a regular basis) to average the market and to ensure that you have a 5 year time frame for the returns to happen. Given that we are in a growing economy, the growth is bound to reflect in the stock prices of the companies participating in the growth. Give it time to happen.
Mukesh asked, I want to invest through SIP with an aim to acquire a handsome lumpsum at the end of certain period (say 10 Years), without taking much risk. Can you please suggest some scheme?
Bhagavat answers, Among large cap funds, the top performers have been HDFC Equity Fund, Reliance Vision, DSP Merrill Lynch Equity Fund and Magnum Contra.
Among Mid Cap funds, the top perfromers have clearly been Sundaram Select Mid Cap and Reliance Growth. It would be useful to have your investments regularly reviewed by a financial planner.
patel asked, Sir, there are so many Mutual fund schemes now that we ordinary investors get confused. How to cut thru the nonsense and focus on good ones?
Bhagavat answers, Yes, it is a problem for many. The best way is to look at a 3 year or 5 year track record of performance. Check whether this peformance is among the top five in the category. I generally consider what is called the Sharpe Ratio of the fund, which is a risk adjusted return, and ensure that the fund I am choosing has the highest such number.
asiff asked, Hi Srikanth, what is the best time to sell the fund, how long is it advisable to hold them?
Bhagavat answers, If the fund you own continues to be among the top perfroming set, there is no need to sell. A good way to decide is, check 1) Do you need the money? 2)Has the performance dropped? 3) Any significant change in the management of the fund? If the answer to any of them is yes, you could sell.
Rajat asked, Hi, Can you please tell me , i have to invest Rs 50 lakhs in Mutual funds, kindly advice where to invest.
Bhagavat answers, The portfolio will depend on your investment horizon and risk appetite.
fun asked, I invested in following funds last year through SIP. Can you pls review these if some one needs to be replaced with better performing funds.
DSP BALANCED FUND - GROWTH HDFC PRUDENCE FUND - GROWTH PLAN SBI MAGNUM BALANCED FUND - GROWTH HDFC MIP-LTP-GROWTH RELIANCE MONTHLY INCOME PLAN - GROWTH PLAN DSPML SMALL & MID CAP FUND - REGULAR PLAN - GROWTH HDFC LONG TERM ADVANTAGE FUND - GROWTH** HDFC TAX SAVER - GROWTH PLAN** PRUDENTIAL ICICI TAX PLAN - GROWTH** SBI MAGNUM TAX GAIN SCHEME** SUNDARAM BNP PARIBAS SELECT MIDCAP - GROWTH SBI MAGNUM SECTOR FUNDS UMBRELLA CONTRA -GROWTH.
Bhagavat answers, Prudence and Magnum Balanced funds are doing well. DSPML Balanced does not have as high a score on risk adjusted returns basis. It is lower on returns and higher on risk. Among MIPs, both your MIPS are doing fine.
Among Tax Saving funds,Magnum and HDFC Tax Saver have done well. Your mid caps are also among the top. Overall, you are invested in the best of funds. As an observation, you do not seem to have any large cap funds, which offer better stability to your equity portfolio.
Rajesh asked, Hi Srikanth, could you tell me whether it is wise to invest in gold mutual funds?
Bhagavat answers, As an asset class, I am of the opinion that gold should have a presence in the portfolio, albeit in a smaller way. And a convenient way to own gold is by buying units of a gold fund. It tracks the price of gold faithfully and also removes the hassle of storing gold at home!
mamu asked, Sir, if I have to invest in a MF based on the fund manager, how should I proceed? How important is the role of a fund manager in the success of a MF scheme?
Bhagavat answers, Ideally, the performance of the fund should not depend on a single person or a star. But if you must, there is a performance measure called Alpha, which measures the fund manager's contribution to the returns of the fund. In a way, it measures his stock picking skills.
gaurav k asked, sbi magnum or HDFC Tax Saver, which fund iss better in both funds? kindly advice.
Bhagavat answers, Magnum is higher in returns at 61% per annum versus 50 per cent per annum over the last 3 years. But it has taken a higher risk than HDFC Tax Saver to do so.That is to say, it has been more volatile than HDFC Tax Saver.
Part II -- Earn Rs 50 lakhs in 20 years