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Savings schemes or MFs? Here's help

December 14, 2007 08:14 IST
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Do things like mutual funds baffle you? Are you aware of the investment options they provide? What are the best mutual funds available in the market? Which funds accrue maximum profits? What are the crieria for evaluating a fund?

Which funds provide the best SIP options? Are SIPs the easy way of making quick bucks? When and how should one buy mutual funds?

Personal finance expert Rahul Goel answered to many such readers' queries during an hour-long chat on Thursday. Here is the transcript:

Rahul Goel says, 
Good Afternoon! Welcome to the discussion on financial planning... Let's start!

rakesh asked, Hi Goodafternoon Rahul, What is your view on New funds like JP small cap fund..these days lot of small cap funds are being launched..will these merit for buys
Rahul Goel answers,  at 2007-12-13 12:54:37rakesh, hi. well, we are generally cautious in our view on new AMCs. having said that personalfn did recommend a new amc like fidelity when it was launched... reason being two fold. one, fidelity already had been investing in india via its other funds. two, they followed a well-defined process across their set ups. some of the new amcs being launched have very little experience and hence we woudl rather wait for some time and then evaluate them. with regards to small caps, well, these tend to be very high risk - very high return investment propositions. you need to have a high risk appetite for them. at personalfn we tell our clients not to have more than 10% of their monies in sector/thematic funds.
Pavan asked, Hi Rahul, Suggest me what is the best way of investment of Rs.1 lakh to take advantage from the tax cut?
Rahul Goel answers, pavan, hi. the answer to that would depend on your profile. if you are young, can take risk, then a larger component could go towawrds tax saving mutual funds. but if you are say about to retire then the government savings schemes would suit you more. a word of caution here... do not take insurance to save tax. take it for the right reason - to secure the future of your dependents in your absence.
gaurav asked, wat will be your suggestion for me to getting start in share market?
Rahul Goel answers, gaurav, hi. if you do not have atleast a couple of hours every day for the purpose, and also the skill to analyse annual reports etc, you should not be investing in stocks directly. equity mutual funds may be a better option for you. note that even in case of mutual funds one needs guidance... there are hundreds of schemes out there, but very few, in our view, merit any investment.
Rahul Goel answers, 
Rahul Goel answers, hi. the answer to this would depend on the fact whether or not you are comfortable with carrying a liability on your books. if you are not, then simply repay the loan. do not look at the opportnity loss of having invested the money in the stock market.
vinayak asked, hi rahul do you think SIP are the best way get in the stock market
Rahul Goel answers, vinayak, hi. for most people sips tend to be a preferrd option. salaried people are able to save as they earn by entering into sips... its very hepful.
badhri asked, How do you suggest to invest in secondary market equities and mutual funds right now when the sensex has reached 20k? Please suggest some equities and mutual funds scheme that can be opted for investment now.
Rahul Goel answers, badhri, hi. we do not attach much importance to the 20,000 number. we look at whether there are investment opportunities out there or now. we find that despite the markets having run up a lot, one can find attractive investment opportunities; the rally in any case has been driven by a handful of stocks. so look out for funds which are rationale in their stock picks and sector allocations. and invest via the sip route. over the long term this approach should deliver attractive returns.
Rahul Goel answers, a combination of term plans with mutual funds definitely is a preferable option.
Pavan asked, What are best fund houses for ELSS schemes? Is is wise to invest in sectorial funds?
Rahul Goel answers, pavan, hi. we prefer schemes like franklin india taxshield and hdfc tax saver. in our view sector/thematic funds should not account for more than 10% of an individual's portfolio, and that too, if at all. in most instances we believe there is no need for such funds in a portfolio.
Rahul Goel answers, hi. if you are investing for such a long period, then why take the risk of being invested in sector funds! over 10 yrs the cycle in a sector would turn and if you have not timed your exit well, you would be left with a poor performing investment. also notice that you do not have funds like hdfc equity wich in our view are a must in a risk taking investors' portfolio. i recommend that you take a long hard look at your portfolio and then restructure to ensure that you own the well managed diversified equity funds, with very limited exposure to sector funds.
ram asked, Hi Rahul, Is investing in UTI Master index fund via SIP a good option, as there is no entry load and yearls expenses are just 0.75 5 so it has a 5% per year advantage over other equity funds ? what do you say ?
Rahul Goel answers, ram, hi. indeed, index funds appear to be attractive investment propositions in current times. however, we believe that over the long term, in india, the well managed actively managed funds will outperform index funds. while the expense differential is high, but over time it should nullify. in any case entry loads are about 2.25% and annual exp are about 1.6%; so the first yr charge will be less than 4%, and post that about 1.6%.
Pavan asked, What are the future prospects of Sundaram Energy Fund & Kotak Indo Global Infrastructure Fund??
Rahul Goel answers, pavan, hi. well in the near term we do not know where the stock marekets are headed and consequently we are not sure how these funds will do. but over the long term, sector funds tend to be poor performers. examples from recent hitory are tech funds which peaked in year 2000. more recently the pharma funds have done very poorly. if invest you must in such funds, limit your exposure to them.
Pavan asked, How about ICICI Realestate Fund? Is this the right time for investments in realty stocks like DLF, Parsvanath, DS Kulkarni?
Rahul Goel answers, hi again. in line with our stand on sectoral/thematic funds, we have recommended to our clients that they avoid investing in funds like icici real estate fund.
gurkirpal asked, hi can you advice me should i invest in tata aig ulip plan or mutual funds
Rahul Goel answers, hi, if you wish to "invest" then go for a mutual fund. if you want "insurance" go in for term insurance.
venkat asked, Hi Rahul I am 27 years old. I am looking at accumilating wealth via miutual funds over the next 23 years. I have been investing in mutual funds for the last 20 months. My current SIP portfolio is as following:- REliance Vision 15k/month Relaince Growth 15k/month DSPML Tiger 15k/month MAgnum Global 15k/month Franklin Prima Plus 12.5k/month Sundarum Mid Cap 10k/month HDFC Top 200 7.5k/month ICICI Emerging Star 7.5k/month Franklin Flexi Cap 7.5k/month HSBC Advantage 7.5k/month I have recently started a SIP in Reliance Power. ANd I plan to start a debt fund when i turn 30 or when I have a kid. Could you please suggest if I am going at the right direction.
Rahul Goel answers, venkat, hi. to begin with, i think you have too many schemes already. you need to get rid of the sector/thematic funds... most of it atleast. then you need to look at the schemes, which have never performed, and seem to continue on that path in the future. get rid of them too. importantly, you need to get your allocations right. diversified funds should get max allocation; in your case this is not true. so i think your portfolio is a cnadidate for a complete overhaul. and by the way, when you have a kid, you say you wish to invest in a debt fund. well, your child will need money 15yrs after birth.. so be aggressive with the investments to being with!
zak asked, should I book part profits from my SIP at this Sensex level or wait?
Rahul Goel answers, zak, hi. the answer to this question will depend on why you are investing in the first place. if your need for funds is short term, go ahead and book your gains. but if you are investing monies for needs 5Yr+ out, then you should remain invested. remember if you book profits, you run the risk of not being invested in the markets in case the markets were not to correct.
sd asked, Hi Rahul,I have invested in HDFC EQUITY fund(SIP) and RELIANCE GROWTH fund(SIP) these are Large cap and mid cap respectively now i want to invest in small cap can u please suggest one?
Rahul Goel answers, well, in the midcap space the funds we like are sundaram select mid cap... we recently posted a note on the same -
Mathew asked, Hi Rahul, why is that financial mangers role is not as well defined in India as it would be in USA?
Rahul Goel answers, mathew, hi. well the industry in india is very nascent and it will take time for these things to evolve. having said that if you invest some time, you will be able to fund some great financial planning service providers.
sss asked, where and how much to invest in mutual funds to get 15 lakhs after 20 years?
Rahul Goel answers, you will need to invest about rs 7,000 pm to accumulate an inflation adjusted rs 15 lakhs, 10 yrs from now. the assumed return on investments is 15% pa.
vijay asked, Hi Goel, Good Morning. I have post tax income of 1.1 lakh per month of which 42000 i am paying as EMI. 18.5K for House Loan (for 15 years), 14.5K for personal loan (pending 3 more EMI only) and 9K for Car loan (for 4 more years). And my monthly household expenses are 30K. Of the rest I am able to save about 40K per month. I am planning to take a term insurance of 2K per month for 20 yrs ( 1 crore sum assured), and invest 20K per month in ELSS and other mutual funds like Reliance Vision, HDFC Growth, Sundaram Select Focus, Magnam Contra, Birla Sunlife Tax Relief, Principal Personal tax saver, Sundaram Tax Saver. 8K pm in FD/Recurring Deposit and another 10K in Savings bank account as emergency fund. I am also planning to construct a new home in the next 10-12 months with 20 lakh by taking home loan since I will be closing my personal loan by next march I would be able to pay that EMI for house loan. Please advise if I am doing right or any modification required. Thanks in advance...
Rahul Goel answers, vijay, hi. good that you are closing the personal loan! the idea of taking a term insurance is brilliant. be sure the policy covers you till you are atleast 55 yrs of age. you have planned your cash flows well it appears. however, the funds where you
are planning to invest in are not good at all! also i need to understand why you wish to put money in an FD. you already have a significantly EPF deduction, don't you?! maybe you can email me your details on and i can have a look at them and revert to you.
Ahwan asked, Dear Rahul,tell me how much i should invest monthly in equity mutual funds so that i will get Rs 1 crore in 12 years?
Rahul Goel answers, ahwan, hi. you will need to set aside about rs 75,000 pm at 15% pa to accumulate an inflation adjusted rs 1 cr 12 yrs from now. if you do not adjust for inflation the number will be rs 42,000 pm.
Vasu asked, At this point of time, Is it better to wait for ELSS NFO or invest in proven ELSS funds like SBI magnum Tax saving / HDFC tax saver fund ?
Rahul Goel answers, vasu, hi. its always better to go in for funds with track record. investing in nfos offers no advantage at all. in fact there are chances you will be burdened with higher expenses.
ermohitbhatia asked, is the unit link and mutual funds both are same thing ?
Rahul Goel answers, hi. these are very different products. if you wish to understand these in greater details, you can download the free money simplified guides from personalfn -
prashant asked, Hi! Rahul, This is Prashant here and I am 50 Years old and retire in 5 years. I have Rs. 5 lacs to invest just now. Where do I invest this amount so that I get very good returns ? regards
Rahul Goel answers, prashant, hi. i need to understand where your other asets are invested. and also, what is appetite you have for risk that the money may not grow as planned. without this information i am unable to guide you. however if you have enough assets which will take care of your needs post retirement already, then you can invest atleast a portion of this money in well diversified funds. some money could also go in long term fixed maturity plan schemes.
jit asked, hi Rahul, i want to invest 5500/- monthly in ULIP(AVIVA) for a period of 12 yrs and withdraw the whole amount after another 12 yrs, is it possible to achive 1 crore from this plan i have chosen ULIP cause i want both insurance and growth from one plan i have other SIPs in different mutual funds pls advice
Rahul Goel answers, jit, hi. its best that you do the sip in mutual funds and take term insuance separately. if you are putting in monies for 12 yrs only, you may not really be able to shake off the impact of the high initial expenses in a ulip.
M Mohan asked, Hi Rahul. Good Afternoon, i want to save money for my kids future. can you pls suggest some good policy with tax benefits
Rahul Goel answers, mohan, hi. i recommend that you opt for pure investment products to begin with for your children. of course some money can go into insurance plans, but a veyr small portion. most should be in pure investments. also, be sure you have a term insurance policy for yourself so that your family's future is secured in your absence.
Divya asked, For tax benifit, I'm plannign 10K each on the following. #Pls. comment on should I change any thing: #should I go for Growth or Div reinvestment options (as the NAV will be less) # SIP or one time: SBI Magnum TaxGain-G Sundaram BNP TaxSaver-G HDFC TaxSaver BirlaSL TaxRelief96
Rahul Goel answers, divya, hi. like i mentioned our prefered funds include franklin india taxshiled and hdfc taxsaver.
Moneysh asked, HDFC equity or HDFC Top 200 which is the best performer?
Rahul Goel answers, hi. well, the funds are different in their characteristics and hence it may not be right to compare returns. of the two, hdfc equity is a lot more aggressive. hdfc top 200 on the other hand is more diversified and picks stocks only form the bse 200 index. depending on your appetite for risk, one of these two funds should fund a place in your portfolio.
mraj146 asked, hiii Rahul Goel..... wht exactly ELSS means...??? I just want to know if it fits for small investments also.....?? What is the tentative period i should await for maximum returns...??
Rahul Goel answers, ELSS are special schemes in which if you invest you can save tax under section 80C (overall cap of rs 100,000 for all investments done under this section). these schemes have a lock in of 3 yrs.
Firoz asked, Dear Sir, Hi...I know nothing about mutual funds. Just came to know nowadays coz of News and discussions with my friends. I want to invest just 10 - 15K in one go and im not in hurry. This can be invested for the period of 3-5 Years time. Please suggest as per my requirement the best possible MF.
Rahul Goel answers, firoz, hi. since mutual funds are new to you, it is best that you first read up on them so that you know where you are putting in money. on you will get free guides for the purpose. with regards to schemes you can consider hdfc equity and fr india flexicap... both only if you have a high risk appetite.
Dhananjay asked, Hi Rahul, It is year-end time to submit investment proofs for salaried employees. Lot of people invest in ELSS Mutual Funds in this period. Right now Sensex is zooming, which funds will you suggest to go for? Let me know high-risk high return fund and medium-risk medium return fund. How is ICICI Pru Life Time Gold if we do not opt for insurance part of it?
Rahul Goel answers, hi. i am not sure if you can go in for a ulip and not opt for the insurance part of it. you may want to question your advisor about this. what you may want to do is invest money in th tax plan fuds i have suggested earlier but not in one go but in installments over the next couple of months. this way you would have averaged out the cost of your investment in case the markets were to move sharly in one direction or other.
mandar1 asked, Please rate my below portfolio and suggest for if changes need to be done. Have one HDFC top-200. Rs-25000, HDFC Equity fund -Rs.-25000, Frankline Prima fund -25000, Frankline Blue chip – 25000, UTI master share-50000, NFO Sundaram Energy -50000 UTI tax saving 36000 Franklie Tax shield 36000, SBI magnum tax gain - SIP started last month of 3000 each for 1 year.and Kotak tax saver SIP started this month of 3000 for 1 year. Suggest some fund for Child future. Age of child is 1 year. please suggest
Rahul Goel answers, mandar, hi. why do you have both hdfc equity and top 200. and then it is probaly to have franklin flexicap as against bluechip and prima fund. note the switches among these funds will likely be load free... so no expense to you! the ofcourse you have several tax schemes and a sector fund, which you should have avoided. with regards to tax funds you already have several... avoid adding more. with regards to your child'd investments, build a portfolio arond funds like hdfc equity and franklin flexi. have about 5/6 schemes in total. ask your finanical planner to guide you with the exact allocation.
ramv asked, Hi, I am 34 year old. For retirement planning, should I go for pension plans OR rely on mutual funds now?
Rahul Goel answers, ramv, hi. start with mutual funds for now. the pension reforms are on their way... post that you can consider the new schemes which will be launched under the new guidelines.
sanjay asked, I started two SPI for me and my wife 2000 / month each for SBI magnum Blue Chip Growth Fund and Frenklin Tempton Blue chip growth fund resp. Is it a good selection of funds? I just wanted to start investing in MF from this.
Rahul Goel answers, sanjay, hi. sbi bluechip has had a disappointing run since its nfo. franklin bluechip ofcourse has a tremendous track record. but its a large cap fund. you may want to be invested in well managed diversified equity funds like hdfc equity and fr india flexicap instead.
Kavasavada asked, Hi Rahul, ON caparing relatively with others can you share something on SBI Mutual fund?
Rahul Goel answers, presently, despite their recent performance track record, personalfn does not recommend sbi funds to its clients. we however continue to track it from our research perspective. if and when we find that the schemes meet with our minimum criteria on various parameters, we will add to our client portfolios.
ConfusedAboutInvestment asked, What is the way to evaluate weatlt management firms and financial firms. There are too many people offering similar products and services. How to choose?
Rahul Goel answers, one option could be to ask for client references and get feedback.
KiKu asked, Hi Rahul, 1) The Power sector MF gave me very good returns last year…How do u see its future? Should I keep it or do u advice to divert the money to Infra MF? 2) Do u think, Infrastructure and Real estate will give me the very good returns, & is it the thing one should invest in the near future?
Rahul Goel answers, hi. well, power funds have done well. so have infra. but in our view, both should be avoided by most investors! however, if you must invest, then ensure that the overall exposure to sector/thematic funds is limited to 10% of your portfolio. over the long term, sector funds are more likely to destroy value than create it.
KiKu asked, Hi Rahul, 1) The Power sector MF gave me very good returns last year…How do u see its future? Should I keep it or do u advice to divert the money to Infra MF? 2) Do u think, Infrastructure and Real estate will give me the very good returns, & is it the thing one should invest in the near future?
Rahul Goel answers, hi. well, power funds have done well. so have infra. but in our view, both should be avoided by most investors! however, if you must invest, then ensure that the overall exposure to sector/thematic funds is limited to 10% of your portfolio. over the long term, sector funds are more likely to destroy value than create it.
rahuls asked, Hi rahul, thanks for sparing time. I invest every year Rs.50000/- in PPF. What is your suggestion on diverting that amount to MF?
Rahul Goel answers, hi. if your PPF account is new, then you should avoid putting in a lot of money there. the reaosn being by the time maturity happens in 15 yrs, you will be subject to interest rate risk. and then thre is always a chance that the government will favour the lower income groups over wealthier people with regards to their contribution to the PPF account. if you allocation demands that the money stay in debt, then go in for the post office schemes like NSC. this will also qualify as section 80C investments. but if you can move to riskier assets, then consider funds.
sushma asked, Hi Rahul. I would like to invest in Franklin Asian Equity Fund ( An open-end diversified equity fund). Fund offer opened on Nov 19 and closes on 18 Dec 2007. I can invest rs. 1 lac annually. What is your opinion and will it be wise to invest. Pls sugest me
Rahul Goel answers, sushma, hi. we are recommending to our clients at personalfn that they avoid investing in this nfo. frankly, we are looking out for a fund, which will invest 100% of its money across all markets and not just china or something which is hot today. we are looking for funds which will bring true international diversification. so far there have been none!
Rahul Goel says, Thank you all for participating in the discussion. In case you have any specific queries do write in to us at

Chat with Rahul every week!

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