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MF investment: 'Patience will definitely reward you'
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June 12, 2008

The stock markets are in doldrums. As a result mutual funds too are facing the music. Does it still makes sense to invest in mutual funds now that the markets are substantially below their all-time high?

Which mutual funds should you invest in now? What are the mutual funds that you should chuck out from your portfolio?

Is it the right time to buy a home in India? Or will it be better to wait for six months before taking a decision?

In a chat with Get Ahead readers on June 11, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.

For those of you who missed the chat, here is the transcript.


Vetapalem Sridhar says, Hi Friends! Increased Volatility and fall in Markets causes discomfort....this is nothing but, u experiencing the risk hitting you. Bearing this risk and having convictions on ur investments is the path to the rewards that lay ahead..... Welcome to the session on Investing and Financial Planning.....


ankit asked, sir which is the best mutual fund investment today in india?

Vetapalem Sridhar answers, Hi Ankit, u can look at the past and say that X fund is the best performer. It is not possible to know before hand which fund will be a best performer in future. If this were possible then each person would invest only in this best fund and all other funds would be out of business. Hence we should build a portfolio of 4-6 funds to ensure that we are able to make an above average return. Read thro the following link to know some of the factors that u may evaluate to help u pick a fund. How to select a good mutual fund A Slide Show, click NEXT to read thro.


rocky asked, Hi sir. Is LIC [Get Quote] money plus policy a mutual fund??

Vetapalem Sridhar answers, It is a Unit Linked Life Insurance Policy offered by LIC.


Raghu asked, I invest in following SIP's, Franklin Templeton pension-4K, Birla sunlife front line dividend option-28k,Reliance [Get Quote] growth-10K,HDFC [Get Quote] Long Term Advantage Fund - Dividend -->5K and BNP money fund - 4k every month as i don't have much commitments yet, is this a wise choice, also i just changed my company after 7 years, is it a good decision to withdraw PF and invest in a debt fund?

Vetapalem Sridhar answers, Hi Raghu, you need to restructure your portf. FT pension fund should be replaced. It is a debt oriented (as per tax laws) fund with low equity exposure. I would suggest that u manage ur debt/equity asset allocation by investing separately in debt funds and equity funds. Other wise the returns of equity component of the FT Pension fund would be taxed. U should also add one or two large cap core funds to ur portf. Leaving the money in the PF maybe wiser than putting it into a debt fund, unless u plan to use the money in the near future.


ameya asked, In Todays uncertain market how much should be our contribution to mutual funds in personal investements

Vetapalem Sridhar answers, Hi Ameya, investments should happen regularly with discipline if u are building funds with a long term horizon (10-15 yrs). Infact uncertain markets throw up a lot of fantastic opportunities to invest in. But we must invest with an awareness that uncertain times may last longer than we anticipate. Hence invest only that money which u can keep invested for atleast 5 yrs. A SIP is a gud method to invest in uncertain times. Also in uncertain times it is best to stick the high quality (read bluechip cap or high quality companies).


kumar asked, Hi, Which one is best, ULIP or Systematic Investment in mutual fund

Vetapalem Sridhar answers, Both options are there to meet different needs. In a ULIP u get a Insurance cover along with benefit of investing. A Mutual Fund is a pure investment option. First find out what is ur objective based on ur need. The option that satisfies ur need would be the best option to select. If u r comparing purely from view point of return then, a SIP in a Mutual Fund should be ur choice.


yash asked, I want to invest 3 thousand per month through SIP mutual fund ,plz suggest good one , time horizon - long term. thanks

Vetapalem Sridhar answers, Hi yash, u can look at an option from funds like HDFC Growth, Reliance Vision, Sundaram Select Focus. I hope the long term is atleast 5 yrs....


deepak asked, Hi, I have invested one lakh in Fidelity Special situation fund during NFO .What's the future for this fund should i hold it or sell it.Which is the fund which can give me some good returns

Vetapalem Sridhar answers, Hi Deepak, it is primarily a midcap oriented fund. When mkts go thro difficult times midcaps correct much more. Hence the fund has shown poor performance. If this is the only fund that you hold, would suggest that you switch around half the value into Fidelity Equity Fund. Remain invested with a long term focus.


Abhishek asked, Sir, I'm expecting kid this month end, I would like to do a good investement so that I can give a best of education to him/her.

Vetapalem Sridhar answers, Congrats Abhishek on the expected arrival. Get urself an adequate TERM Insurance immediately if u r not already insured. Build funds for ur child thro a SIP in equity oriented Mutual Funds. Plz read thro the link below where I hv comprehensively dealt on the matter of investing for the child's future. Investing for children A Slide Show, click NEXT to read thro.


suresh asked, I have been investing in various MF throughout last year. My total investment in various MF is around 1.50 lac but the present value of is currently only 1.30 lacs should I continue investing or stop the SIP.

Vetapalem Sridhar answers, Dear suresh, if a bird is building a nest and due to heavy rains if the half built nest is destroyed, will the bird quit building a nest? With patience and perseverance the bird will eventually build its nest. Building funds to meet ur objectives in the long run needs patience and perseverance. Continue to invest regularly with discipline irrespective of where the mkts go in the short run, as in the long run the mkts would eventually move up.


vikas asked, After how much time the market is going to run smoothly again?

Vetapalem Sridhar answers, Dear Vikas, it is very difficult to say with certainty how mkts will behave. It seems that volatile times for the mkts will persist for one to two years ahead.... Inflation, Oil prices and a possible correction in the real estate market are the factors that would have a bearing on the mkts in the near term. There is a lot of uncertainty in a lot of matters, including who forms the govt after the next election, which we will see sometime in the near future. Having said that, it makes a lot of sense to invest during uncertain times as once things settle down mkts generally move up. Have a 5-7 yrs to invest into equities.


neha asked, I am 30 & want to invest 10k through SIP pls suggest which is best fund for the pension, I want to invest in single fund.

Vetapalem Sridhar answers, If u are planning to invest to build funds for ur retirement, then a Pension Plan may not be the most ideal option. A SIP into a diversified equity Mutual Fund would be more ideal. U can look at options among HDFC Growth Fund, Sundaram Select Focus, SBI [Get Quote] Magnum Equity, Reliance Vision,...


varun asked, Hi Sridhar, I have invested from last year 2007 and I have HDFC growth, Reliance growth, power diversified, natural resource, DSPML Tiger, Top 100, Kotak 30, Sundram Select focus. I want to know how much stock market will fall and when it will go up. How much time I have to invest in MF from now. I should purchase more diversified fund or reinvest in these Mutual Funds. I have invested around 1.5 lac, what amount I may get around next 10-20 years.

Vetapalem Sridhar answers, U hold 3 Sector funds. With a 10 yrs plus horizon the sectors do have gud potential. The rest of the funds held form a reasonably gud portf. Continue with the existing funds. Remain invested with a minimum 5-7 yrs horizon. Over the next 10-15 yrs an annualised return is a realistic expectation. In 10 yrs u can expect around 6L.


Piyush asked, Hi Sridhar , I have around 1-2 lac to invest in mutual fund.I think that since market is slow its time to buy funds and I want to invest in the following 3 funds . 1) IDFC [Get Quote](Standard Chartered) Premier Equity fund 2) Reliance Regular Savings Fund 3) DWS Inv Opportunities fund Can you please guide me how should I plan my investments and whether my selection of funds is also correct or not?

Vetapalem Sridhar answers, Hi Piyush, the funds selected by u have been the top performers recently. But also they are all midcap oriented aggressive funds. I would suggest that u replace one for the funds with 2 large cap funds, which should add stability to ur portf.


keyur asked, Hi Sridhar, I have invested in Principal Tax Saver (G) , Sundaram Tax Saver (G), Reliance (G), SBI Magnum Tax Gain (G) and HDFC Long Term Advantage (G). How does this portfolio seem?

Vetapalem Sridhar answers, All the above are ELSS funds. Most of them invest in mid cap stocks. To get tax benefit, just one ELSS fund should suffice. U need to have a relook at ur portf. Pick 1 or 2 ELSS funds and trim the rest over time. Start to include a mix of regular diversified funds into ur portf.


kakkireni asked, I have invested close to 2 lacs in different equity mutual funds for the last one year. Even in the current downward, I do not want to touch the above investment and I want to wait for another 5 years to get the fruits. Is it the correct decision?

Vetapalem Sridhar answers, I think a lot of persons can benefit if they are able to learn from you....Patience will bear fruits for u. There cannot be a worse decision than buying when mkts are high and then selling in panic when mkts go down. Always remember, if u BUY HIGH and mkts go down, then........wait till mkts rise........and SELL HIGHER.


Srinidhi asked, where can I get Basic information about mutual funds as am a novice in that field

Vetapalem Sridhar answers, Hi Srinidhi, there are a number of websites where u can get information on Mutual funds and learn by read it. The official website for Mutual Funds is www.amfiindia.com. A lot of information is available on Rediff MoneyWiz


r_222 asked, hello sir, in todays times when bank fixed deposit give a very small return of 5-6% and stock markets r falling down daily basis, wat is ur advise for a small investor who wants to invest for a longer term but doesnt have enough funds for buying property or any other huge investment??

Vetapalem Sridhar answers, Choice of an investment option should depend on ur objective and need. If I put a counter Q, that if inflation is 10% and the bank is offering 6%, then are u not facing a risk of decreasing purchasing power of ur money? Over longer horizons equities protect u against inflation. If u have a long term horizon (5 yrs or more) then equity would be a more suitable option. But if you need to use the money in the short run, then a bank FD would be a more suitable option.


srip asked, Hi Sridhar, i m planning to start with some lumpsum investments and SIPs and this is the first time i m entering the MF market, can you please tell me for lumpsum if i can go with HSBC Equity Fund, HDFC Top 200 Fund Kotak Opportunities Fund, Tata Infrastructure Fund & for SIPs Sundaram BNP Paribas Select Focus Fund, Reliance Diversified Power Sector Fund, DSP Merrill Lynch World Gold Fund, DSP Merrill Lynch India Tiger Fund, i m planning to invest upto 10k everymonth, and i have only long-term plans on returns

Vetapalem Sridhar answers, Would suggest that u should go with HSBC, HDFC, Kotak and Sundaram for lumpsum. Then add a SIP to the above funds itself.


Don asked, What are Fixed maturity plans? Is it good to invest in them at this time? Can you suggest some good Fixed Maturity Plans? Thanks.

Vetapalem Sridhar answers, At this stage would suggest that u go for Fixed Deposits. If inflation continues to remain high and real estate corrects then, risk in some FMPs may be higher than perceived. FMPs invest in papers of companies. If companies face tough times there can be a delay in payment or also the risk of default. Maybe after a few months u can take a fresh look at FMPs as an option.


Don asked, I draw a salary of 470000 pa. I am planning to buy a flat in pune. A flat in pune right now costs minimum 35L. I also plan to get married in a years time. Will it be a good decision to buy a flat at this time? Also let me know how much should I spend in buying a flat.

Vetapalem Sridhar answers, Hi, if u can postpone ur decision for a few mths, I would suggest u to wait. There is a high probability that we will see a reasonable drop in real estate prices in the near future (difficult to put a time - maybe 6-8 mths time). Anyways there is very little probability that the prices will rise soon.


MENON asked, I am an NRI and I want to invest 50 lakhs in mutual funds. Could you suggest a portfolio of mutual funds to get approx. 12 - 15 % yield?

Vetapalem Sridhar answers, Stagger ur investments over the next year or so. U have a realistic expectation if ur horizon of investing is 5 yrs or more. An average performing portf of 4-5 funds should enable u to meet ur trgt. U can look at funds like HDFC Growth, Reliance Vision, Sundaram SMILE, SBI Contra, Franklin Flexicap, etc.....


Rajiv asked, Hello Sir, I am 32 years old and am married. Please advise whether I can go for lump sum investments in mutual funds or SIPs is a better option. Presently I am investing Rs. 12,000 per month in SIPs split amongst Tata infrastructure fund, Birla Top 100 Fund growth, SBI Magnum Global fund Growth, Reliance Regular Savings Fund Equity - growth and Sundaram SMILE fund Growth. Are they good picks or do I have to change my portfolio?

Vetapalem Sridhar answers, Hi Rajiv, ur portf is more to the aggressive side. Would suggest that u add a fund like HDFC Growth Fund and replace SBI Global with SBI Contra... Continue with ur SIPs. Add lumpsums when mkts correct substantially.


sakshi asked, HI Sridhar what kind of investments would you suggest for someone who wants to beat the inflation and at the same time safeguard her/his capital?

Vetapalem Sridhar answers, A right allocation of debt and equity is crucial to meet ur above needs. Plz read thro the link below to understand about it: Asset Allocation -- Secret to Financial Freedom.


index asked, why should I pay 2.25% upfront fees and 2-2.5% annual fees for a MF when an index fund can give me the required market returns at a fraction of the cost? Studies have shown that most MFs underperform the index, especially if fees are taken into account, over a long period of time.

Vetapalem Sridhar answers, The studies that you refer to are true only in mkts of developed economies. In India there is still a reasonable number of years before wat u say would become applicable. The reason is that there are still a lot of companies which are not well researched, but have a gr8 potential to grow in India.


stg asked, Hi sridhar, All MF's returns for the past 1M, 3M and 6M are in the red, so why do you recommend MF's at all?
Vetapalem Sridhar answers, If u look at 3 yr and 5 yrs return, the same funds would be giving very high returns. Hence I recommend MFs for those persons who have a long term horizon of investing (say 5 yrs or more). In short run there maybe volatility, but over the long run we can make reasonable returns.


mehulrrr asked, Hi Mr. Sridhar. Good Afternoon to you. I want to invest Rs. 1000/- each in following funds through SIP. 1. HDFC Top 200 2. Magnum Contra 3. Sundaram Select Focus 4. Kotak 30 / Kotak Opportunity 5. Birla Sunlife Frontline equity Pls. suggest me, whether my selection is right? also suggest, if any fund to drop or new fund to be select in?

Vetapalem Sridhar answers, Hi Mehul, the portf seems reasonably gud. Other than Kotak Opp rest are large cap funds. Would suggest that u replace Birla by JM Emerging Leaders Fund.


Hassan asked, Hi, I'm an unmarried male of 34 yrs, earning Rs 3.6 lacs/annum, having high risk appetite.I'm investing in ELSS of Fidelity and DSPML with a monthly SIP of Rs 2000 on each for tax saving purpose. Along with it I'm also investing in HDFC Equity, Reliance Vision and Franklin Flexicap fund with a monthly SIP of Rs 1000 on each. Also a monthly SIP of Rs 500 in BNP Sundaram Select Midcap. Is my total investment enough according to my salary? Do my choice of funds are good with enough diversification? If no, then please suggest the funds I should invest in and how much. Thanks.

Vetapalem Sridhar answers, Ur choice of funds are reasonably gud. To know whether u r saving enough or not, i would need to a few more things about u. I think u should look at switching Sundaram Midcap into Sundaram SMILE fund.


Ravinder Singh asked, My age is 40 years. I would be expecting expenditure of around 25 lac from 6 to 10 years from today. further, I want to have a total savings of at least Rs.1.50 Crore at the time of my retirement at 60yrs. My total monthly savings are in various SIPs of Rs.21000 for last two years, apart from aggregate savings of around Rs.6 Lac. Pl advise if it is sufficient or what should be the minimum saving and composition thereof.

Vetapalem Sridhar answers, Continuing at the current rate in 10 yrs u should have around 50L. From this u can use up 25L. And if u continue investing till ur age 60 yrs into the SIP at the present rate, u should easily be able to meet ur goal. But if u plan to withdraw money before the 7th year, then u may need to increase ur savings over time (which anyways u should as ur income increases).


Vetapalem Sridhar says, Friends! I have run out of time for now....Hope that u hold on to ur investments, as making returns in the mkts is in ur own hand. Patience will definitely reward u over time.


Vetapalem Sridhar is a financial planning specialist based in Pune. He can be reached at vetapalems@rediffmail.com.


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