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Are tax saving MFs a good option?

October 19, 2007 18:09 IST

Are you the one who doesn't understand much of finance? Do numerous MFs as well as other investment options baffle you? What are the best funds available? Which funds accrue maximum profits? In an hour-long chat on on Thursday, Rahul Goel, CEO,, and financial planning expert, answered many such queries.

Here is the chat transcript:

Rahul Goel says, Good afternoon! Let's get started!

Rimpu asked, How is HDFC equity fund doing, also i want to know about investment in funds like Fr Prima Plus, Birla Sun Life eqty, SBI contra. Your views about these funds. I am a long term investor.
Rahul Goel answers,  at 2007-10-18 13:01:11: Hdfc equity has a fantastic track record. Yes, in recent months it has lagged its peers, but we see this only as a blip. We evaluate performances over 3-5 yrs and from that perspective we would rate it very high. Fr prima plus is another well managed diversified fund. its done very well too; we however tend to recommend fr flexicap to our clients. but if you own it, you can continue to hold it. the other two funds that you have mentioned - birla equity and sbi contra - and not recommended by us to our clients for various reasons.
Varusandeep asked, I want to invest in some ELSS fund can you guide me in this , SIP will be good or lumpsum is good pls suggest
Rahul Goel answers, Hi. the minimum tenure of an sip is six months and therefore if you wish to invest for this year only you may have an issue (unless you do the sip immediately). the best would be to invest in 3 - 4 installments in select schemes on your own. another option could be to do 12 month sips which could take care of your tax saving for this year and next. with regards to schemes, we prefer fr india tax shield and hdfc long term advantage.

masoom asked, Hi , Which is good enough MF ,where I can invest for a 3 yrs time period
Rahul Goel answers, masoom, hi. there are several good funds out there but to know which is best for you, we will need to understand you better. so if you have a high risk appetite and are willing to be invested for three years, you may want to invest in well managed equity fund like hdfc equity and fr india flexicap. but if you have a more moderate risk appetite you can opt for a mix of debt and equity funds.

masoom asked, I am a long-term investor and willing to invest 10,000 pm
Rahul Goel answers, well, build a portfolio of 5 - 6 schemes which suit your risk profile and return expectations. also, spread out the sip within the month so that there is some money going in every week. also, before you commit any monies do your homework very well. the last thing you want is having to churn your portfolio as it could be a very expensive proposition.

shashi asked, Hi, I am very new for this type of savings. i have done the savings but inform of NSC/Post-office and LIC but not in MF/ Shares etc. Can you suggest me how to satrt with.
Rahul Goel answers, shashi, hi. i suggest you start of by reading about these instruments and also about financial planning. on personalfn you will find free guides on a lot of these topcis. simply visit this page -' target='_blank'>

Bhasker asked, Is Fidelity and Franklin Flexi Cap Good funds
Rahul Goel answers, bhasker, hi. at personalfn we tend to recommend both these funds to clients with long term investment horizons and adequate risk appetite. if you do not have appetite for risk, these may not be 'good' funds for you though.

Adnan asked, hi it prudent to invest in the new global funds launched by the fund houses. Or is it wiser to go in for plain diversified equity funds.
Rahul Goel answers, adnan, hi. we have not recommended any of the global funds launched till date to our clients at personalfn. we do not find such funds adding much value to a client's portfolio. however, we are looking forward to genuinely global funds that are well managed and have a low expense ratios to become available before we consider recommending them to our clients. so, you may want to give a miss to such funds. in most cases, it is best to invest in well managed diversified equity funds. the global funds are only from a diversification perspective in any case.

Bhasker asked, Is it the right time to sell Franklin Prima Fund as the markets are high and i am holding this fund from the past 2 years
Rahul Goel answers, bhaskar, hi. prima is a sector fund investing in midcap stocks. so from that perspective, we would anyways suggest that if you have anything more than a 5% exposure to such funds, you should switch to the diversified funds. having said that prima is a well managed fund which we believe will do well over a 3-5 yr period.

srk asked, Can you suggest your choice of 3 MF for 3-5 years horizon and agressive return for about 25k investment.
Rahul Goel answers, hi. in terms of the diversified equity funds that we tend to like are hdfc equity and fr india flexicap. however, it is best to customise the portfolio to one's specific needs in terms of both the schemes and the amount of money that should be put into each scheme. we recommend that you employ the servcies of an honest financial planner for the purpose.

Roby asked, Hi, I have got a home loan 28 lakhs, now i am abroad, i can send about 1.75 lakhs per month,should i close home loan now itself,or other investments, please give me the options,if i have to invest
Rahul Goel answers, roby, hi. if you are not comfortable havig a liability on your books, you should prepay it irrespective of the opportunity that lies in other avenues.

DHARMESH asked, Hi Rahul, Which scheme you suggest for SIP route. i want to invest 20,000 per month for next 3-4 years. Should i go for RIL GROWTH, BIRLA sun life frontline eq., HDFC Eq. & Rel.Power. for 5,000 per month each. If not, which scheme you suggest.
Rahul Goel answers, dharmesh, hi. at persoanlfn we are not big fans of sector and thematic funds. these in our view are most of the times marketing strategies to mobilise more monies from unsuspecting investors. we would prefer the money be invested in well managed diversified funds. the selection of funds in our view can be a lot better. some scheme names have been discussed earlier in the chat. the best however would be if you consult a professional for helping your build a portfolio for you.

Sure asked, HI, This question related to ELSS MF. There r two options available for dividends. If not selecting dividend reinvestment option, then dividend will be credited to our account? or is it compulsory to reinvest!
Rahul Goel answers, hi. ususally both options are available - payout and div reinvestment.

Narender asked, Hi! I m single n 26 yrs old .My monthly Income is Rs. 18500 and I have invested Rs. 4000/month in bajaj allianz's capital unit gain policy recently & it gave me Rs.4,80,000 life insurance Now Please suggest me I want to invest some more money. where would i invest so that I will get around Rs. 10,00000 after 05 yrs & how much amount i need to invest in & what stocks?
Rahul Goel answers, narender, hi. if you wish to accumulate Rs 10 lacs five years from now, you need to invest about Rs 12,000 per month in assets which yield about 15% pa. a portfolio for this would consist primarily of equity funds. do not buy more savigs based insurance as it will prove to be a very expensive proposition over this period of time.

Raghul asked, Hi Mr.Goel, My question is iam planning to go for Sip of 2000rs per month for long term 15 yrs.and do i get good returns after that and if so how much approximately ? Thanks, Raghul.
Rahul Goel answers, hi, if you were to invest rs 2,000 pm for 15 yrs, at an averate rate of 15%, you would have accumulated about rs 12 lacs. how you can earn that 15% return? in our view the well managed diversified equity funds are the answer. you will need to select your funds well, avoid churning and being disciplined in investing the planned amount of monies every month.

AJ asked, I am getting some investements done as per adivce from personal fn pune. How can I contact you directly ?
Rahul Goel answers, hi. delighted to hear from a personalfn client! you can write in to me at

Rakesh asked, Hi Rahul.... I'm investing in SBI mag tax gain Rs. 2000 thru SIP mode and would like to invest another 30,000 in ELSS MF's before the end of this financial yr.. what are the best funds to invest with the expectation of good returns in terms of 8-10 yrs horizon?
Rahul Goel answers, rakesh, hi. i have discussed the names of the schemes earlier in the chat... here they are again! fr india tax shield and hdfc long term advantage are two schemes we tend to recommend to our clients. with regards to inevsting in other funds from a 10 yr horizon, opt for schemes like hdfc equity and fr india flexi. you will need to have a portfolio of 5-6 schemes and that too in the right ratio. your financial planner should be able to guide you on this. if he cannot, get in touch with personalfn!

ra asked, Hi I am investing in Fidelity Equity Fund, DSPML T.I.G.E.R,Standard Chartered Premier Equity Fund through SIP route. Meanwhile I have made one time investments in Franklin India Flexi Cap Fund, DSPML Balanced Fund, Reliance Growth, HDFC Prudence and Sundram BNP Paribas Select Midcap. Can you please comment on my portfolio?
Rahul Goel answers, hi. you definitely seem to have some very well managed schemes in your portfolio. and you can definitely do without atleast one of them. the important thing here that is missing is what is the allocation to each scheme. we would like to see some schemes have a much higher allocation than others.

anik asked, hi , I would like to invest Rs5000 every month in MFs pls advise few MFs for me.
Rahul Goel answers, anik, hi. well we need to know more about you before telling you where to invest. if you are looking for names of equity schemes that we tend to recommend to our clients then we have already discussed them earlier in the chat.

lavanya asked, I have invested in hdfc equity fund 15000, sundaram select mid cap 15000, hdfc LTadv 18000, sbi magnum contra 12000, sbi tax gain 40000, franklin india tax shield 14000, Please give me ur views on my portfolio, I am looking tostay invested for2 more years
Rahul Goel answers, lavanya, hi. its odd that you have the same weightage for what we would call a core holding (hdfc equity) and a sector fund (select mid cap). ideally, sector funds should not be more than 5 - 10% of your overall portfolio. you also do not have diversified funds from franklin and dsp in your portfolio. i recommend that you take some time out and discuss with your financial planner on where he is leading you with this portfolio. it can definitely be improvised upon both in terms of the schemes as well as the allocation to the schemes.

Mallik asked, which mutual fund is better. i mean new fund or existing open ended fund.
Rahul Goel answers, mallik, hi. in most instances its better to invest in existing open ended funds. nfos are mostly marketing gimmicks to mobilise monies... very few nfos though do make investment sense.

RANJITDANI asked, sir u had asked not to buy DSP ML GOLD FUND during its NFO. Now its NAV is 13.50 Rs. atleast now can i invest in that fund
Rahul Goel answers, hi. yes, you are right. we had said no to investing in this fund. and we stick to our view. the reason all gold funds and gold related funds like dsp have done well is that the price of gold has appreciated significantly in recent months. our recommendation to clients was that it may be better to buy physical gold or even a gold etf as against the dsp gold fund. if you had done that, then you have done well!

JR asked, Why the MF managers are sitting on cash more now a days? Is it not a good time for MF investments? Thanks
Rahul Goel answers, hi. mutual fund managers could be sitting on cash for several reasons including the lack of inevstment opportunities. you need to appreciate fund managers who ar willing to hold cash rather than investing in stocks that do not meet their investment criteria. however, this is not to say that fully invested funds are not good. they have a mandate to be fully invested at all times and they stick to that.

RANJITDANI asked, i have invested in ICICI PRU DISCOVERY FUND through the SIP. Its not growing fast please advise
Rahul Goel answers, hi. we do not recommend this fund to our clients. we recommend you evaluate the decision on whether to own or redeem this fund based on your needs and expectatios and also the overall composition of your existing portfolio.

anik asked, what is your opinion on the new NFO Tata Global
Rahul Goel answers, anik, hi. we have recommended to our clients at personalfn that they do not invest in this nfo.

Rahul Goel answers, maybe you want to wait and see how the performance is over the long term. as far as we are concerned at personalfn, we are not recommending any of their schemes to our clients. and we follow a disciplined and time tested process for evaluating funds.

harmeet asked, Hi rahul , If i want to invest for 1 year , which is better FD or mutual funds ?
Rahul Goel answers, harmeet, hi. depending on your tax bracket you may want to evaluate FMPs, which are effectively debt mutual funds. if you are in the highest tax bracket, then FMPs may offer you a better post tax yield, with very little incremental risk.

Karthik asked, Hi Rahul.I need to know the best saving methodology?.How to plan our investment?I am earning around 20,000 per month and already investing in ICICI life time super & HDFC tax saver fund.I need your suggestions to improve my savings?.
Rahul Goel answers, karthik, hi. since the question that you have asked is very basic, i take it that you are just about starting to invest. in 2006 personalfn had released a free-to-download guide for the youth - on how they should save and inevst. i suggest you download this guide from' target='_blank'>

Sameer asked, Hi Rahul, My salary is 7 lacs and I have not done any investment and I do not have the money for saving. So I am planning to take the personal loan from HDFC for 13.75% and invest 50k-60k in mutuasl fund/PPF etc. This will save 30% tax on invested amount. So do u suggest taking personal loan and invest in investments for the tax benefit. I am in the thought that i will be able to save 16% tax atleast
Rahul Goel answers, sameer, hi. we are not in sync with the idea of borrowing money at a fixed cost and investing it in a variable return instrument. its best to start investing whatever little you can save and build it over time.

RANJITDANI asked, I am an NRI and want to invest something like a million dollars to start with for the long term. But always feel scared due to the quality of advise i get in India. can u please suggest some quality advisers
Rahul Goel answers, hi. well there are a lot of advisers out there and i guess you will need to evaluate them on your own since there is no standard rating out there. one way could be to talk to the nri clients of advisers to get independent feedback. at personalfn we do advise clients on their investments in india. if you wish to talk to us, please write in to us at

Ash asked, Hi, my income is 2.5 pa. Couls you help me decide some systematic investments to do or plan to have a systematic growth.
Rahul Goel answers, ash, hi. rather than me telling you the funds to invest in, here's some advice that will go much farther in helping you build wealth. identify and employ the services of an honest financial planner.

Kinjal asked, Recently JM Basic, RIL power, std.charter premier equity, sundaram Capex, RIL entertainment & media are performing well. Should i invest some 25,000 in each as lumpsum. what's your advice. are these good schemes for long term ( 3-4 years) perspective.
Rahul Goel answers, kinjal, hi. if you were a personalfn client and you came to us with this idea, we would have told you that it is best that you do not invest in any of these funds!! and the reason is simple - these are sector funds and their performance is likely to be very volatile. and just like tech funds and pharma funds, such funds may not necessarily generate wealth over the long term. its better to be in diversified funds which in any case own stocks from these sectors from time to time. in case of diversified funds the fund manager has an option to exit a sector if valuations are high. in case of sector funds, the fund manager has to remain invested. you may want to think before you go ahead with these investments.

Sattwik asked, I am new to the industry ... just got a job ... i can invest 8 to 10k pm... wat sud i do
Rahul Goel answers, sattwik, hi. before investing a single rupee, do one of two things. either you read up and become an expert yourself or you employ the services of a professional financial planner. and avoid taking a ulip to start with.

krish asked, Hi Rahul, I'm 34 and drawing 10L pa. I'm investing on LIC for a 5L policy; ICICI Prud 10k pm for 20 years and purchased a home with the home loan of 25L. Please advice how I need to invest to get retired after 10 years if I set the target of 3C.
Rahul Goel answers, krish, hi. if you wish to accumulate an inflation adjusted rs 3 cr 10 yrs from now, you need to inevst about rs 2 lakhs per month at about 15% pa. that's just to get you thinking... of course we need to adjust for the maturities of your lic policy etc and also the other assets... so the rs 2 lakh no. will be a lot lower. but in any case what you need to be doing now is saving as much as you can in assets like well managed equity funds. to get into the specifics you will need to have a personalised session with your finanical planner.

raja asked, a perennial question, is it wise to compare/equate ELSS/Tax Saving schemes and Mutual funds in one breath? The consultants seem to favour Tax Saving schemes a lot!
Rahul Goel answers, raja, hi. tax saving mutual fund schemes invest in the stock markets and therefore carry risk as compared to say a PPF or a NSC. however, if your appetite permits you to take risk, then you may want to put atleast some monies in tax saving funds as they could possibly deliver much better returns over the long term. however, if your agent is pushing tax saving funds to an investor with low risk appetite, then its a clear case of mis-selling.

savvyverma asked, I stay in Chandigarh. Where does one go to consult some objective investment advisor ?
Rahul Goel answers, well, i am sure there are honest advisors there... not to mention the fact that personalfn too has a branch in chandigarh (you can reach them at

chaitali asked, I have investible surplus of 25 K every month. I invest 5K each in Reliance Vision, Reliance Growth, HDFC Equity, DSPML equity and Fidelity equity. I am 45 years and using these funds for retirement planning (15 years time horizon). Do you think the portfolio is good.
Rahul Goel answers, chaitali, hi. personalfn has "no view" on reliance funds. other than that the schemes that you own are very well managed. you may want to add fr india flexicap to your portfolio. also, pl ensure you have the funds in the right allocation.

Aman asked, Hi, I have a lakh rupees in fixed deposit at SBI. Should I move it to mutual fund for better results or let it remain? Thanks. Aman
Rahul Goel answers, aman, hi. fixed deposit and mutual funds are two very different types of investment avenues. you will need to be sure of why you want to invest before deciding one over the other.

Dinxie asked, Hi Rahul, Which is better - Money Back Life Insurance Policies or Term Life Insurance Policies???
Rahul Goel answers, it is highly recommended to take a term life insurance policy. the other types of policies are not critical in that sense.

pratish asked, Do you recommend mutual funds with good rating?
Rahul Goel answers, pratish, hi. we are not big beievers in ratings.... we recently wrote a note on ratings of mutual fund schemes.. you can read the same on

Rahul Goel says, thank you all for participating in the discussion. see you all next week!