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New to MFs? Get your portfolio right

February 04, 2008 14:40 IST
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?

In an hour-long chat on on Friday, mutual fund expert Rahul Goel answered to many such readers' queries. Here is the transcript:

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

meenal asked,  Hi, Rahul, I am 26 years old & have invested in following fund through SIP: HDFC top 200/3000 & SBI magnum quantra. for the next financial year i need to plan for saving tax Please suggest me good investment ioption to save the tax & also tell give your take on above funds, How long should i bee invested in above funds?
Rahul Goel answers,  at 2008-02-01 13:01:34meenal, hi. to begin with why are you investing in these funds?! what is the objective you have in mind when putting aside this money? next year you wish to invest to save tax. but i would advise that before you do that, please get clarity on your objectives. a smart financial planner can then guide you in a manner that with the same amount of money you can achieve multiple objectives.
arijit asked, Hi Rahul, Till now i have not invested in any of the ELSS funds how many ELSS funds should one have in his portfolio?..any advice about SBI tax gain?????
Rahul Goel answers, arijit, hi. two tax saving funds are more than enough. NFOs are a no-no. there are brilliantly managed existing schemes out there... why take unnecessary risk by investing in a new fund....
Rahul Goel answers, manisha, hi. its good that you started saving. but did you plan the investments right? i guess not. there are a couple of points here. one, if you are planning for retirement, you should haev ample clarity on how much you need to save to achieve this objective. any financial planner can guide you with this. a simple calc is also available on the other point is that when you are investing money, you should never put all of it in in one scheme! you should invest your monies in a portfolio of funds which are best suited to you. this is not an easy task and definitely requires professional help!
super asked, hi, i m 31 yrs old & want to invest in ULIP @35,000 per annum for next five year which plan will give better results in coming year
Rahul Goel answers, hi. why do you want to inevst in a ulip?! and that too for 5 years?!! in our view, even the most cost effective ulips take about 10 - 12 yrs to start looking as attractive as a comparable invetment in a mutual fund... investing in a ULIP only for 5-yrs should be a losing proposition to begin with.
Rahul Goel answers, hi. each sip insallment that goes in, will have its own 3-yr lock in. so the installment which goes 12 months from now, will be redeemable only three years after the investment is made. switches between equity schemes from the same mutual fund can be load free... but please confirm this at the time of executing the transaction.
Rahul Goel answers, shetty, hi. pl do not invest in a fund which is giving a good return. look for a fund which suits you best.
sdfsd asked, Hi I am 30 yrs old and want to invest in MF to save tax. Whats the best fund. should I go for NFO for ELSS. As a matter of principle I want to go for 100% Equity
Rahul Goel answers, hi. funds like franklin india tax shield make it to the list of good tax saving schemes. not sure why you wish to go for an NFO. as far as we are concerned, most of the NFOs are no more than a marketing initiative aimed at increasing the assets under management of the fund house.
parthamca asked, hi sir, i am planning to invest MF instead of shares,what u will suggest on this and which is the best sector to invest MF pls suggest on this issue
Rahul Goel answers, hi. well, if you do not have either the time or the skill to pick and manage a stock portfolio, you should opt for mutual funds. investing in sector funds is something that we advise you do not do. such funds, in the long term, are more likely to destroy value rather than create it. in fact most personalfn clients have no more than 10% of their money in thematic funds... and here too we are very conservative in our selection. best for you would be to invest in diversified equity funds to begin with, given that you have appetite for risk.
Rahul Goel answers, i will answer your second question first.... the reason people invest in close ended funds is that such funds pay higher commission to agents... so they have an incentive to push these funds onto unsuspecting invetors. however, sebi has now banned this practice... expect the craze for close ended funds to end very quickly.
Lakshmanan asked, I am aged 24,Working as engineer.I plan to invest in Mutual funds around (Rs2000 - 3000) monthly.I need the returns in 2 - 3 Years.Which banks/Companies mutual funds i need to go for to get the maximum return ?
Rahul Goel answers, lakshmanan, hi. if your time period is less than three years, then you must avoid investing all your money in equities. one option is to go in for balanced funds... or even MIPs in a small amount. the long term return from equities should be over 15% pa; a well managed balanced fund could generate about 12% pa.
murtuza asked, Hi. I made SIP in following funds DSP Tiger, JM Basic and ICICI Infra for 10000 in dec 07 what is your view on this funds for another 1 year period. Thanks
Rahul Goel answers, murtuza, hi. if you have a 1-yr investment horizon then you are not only in the wrong funds, but also in the wrong asset class. inour view, any investment in equity should be done with a minimum investment horizon of atleast 3 - 5 yrs. for a 1-yr horizon, FMPs and low risk MIPs are best in our view.
Rahul Goel answers, hi. yes, you can have some money in index funds... however, we believe that actively managed funds will continue to outperform index funds in the forseeable future. yes, in the last year or two index funds have done better... but this in our view is not a trend...
Rahul Goel answers, ravi, hi. if you have appetite for risk, and are willing to remain invested for a minimum of 3-yrs, then consider schemes like hdfc equity and franklin inda flexicap.
Rahul Goel answers, raani, hi. it seems your agent has gone
out of his way to keep you out of the best managed funds in the country... the ones from HDFC and Franklin Templeton!!! i recommend that you avoid this piece meal method of investing and draw up a plan and then invest in line with that... things will be a lot simpler then, and also more rewarding. also, keep in mind that small and mid cap funds carry higher risk on average...
Rahul Goel answers, nanda, hi. any reason your allocation to deposits is so high?? you say you are a risk taker, but your portfolio does not reflect that.... 10 yrs is a great time to invest for in the stock markets... if you do indeed have appetite for risk, then build a predominantly equity stock/fund portfolio with your incremental cash flows... be sure to invest in the stocks/funds which are best suited to you... definitely avoid sector funds.
Rahul Goel answers, hi. again it seems that your agent has not done justice to your portfolio! you do not own any of the diversified equity funds which in our view are by far the best in the industry! its time you reworked your portfolio...
dktewari asked, tell me best mutual growth fund for monthly income
Rahul Goel answers, hi. mutual funds are instruments which are subject to risk... but if you are looking for regular as against monthly income you can consider short term FMPs and even low risk MIPs. but if monthly income it is, consider post office mis.
Sukhavasi asked, Hi, I want to invest a part of my salary every month. So where should I start and what are the pros and cons of different mutual fund schemes? Thank you for you time.
Rahul Goel answers, sukhavasi, hi. the most important thing you must do is employ the services of an honest financial planner! i can assure you that will be the best investment you will make! i suggest you read the money simplified guides on to understand various aspects of investing.
Rahul Goel answers, pradeep, hi. i think if your portfolio is constructed well to begin with, then you do not need to add more schemes... all you need to do is add to the same schemes in the original planned ratio. should you book profits? well, if your need is still atleast 3 - 5 yrs out, it may be wise to remain invested...
Rahul Goel answers, hi. if you wish to accumulate say rs 1 cr in 15 yrs, adjusted for inflation (5% pa), then all you need to do is save about rs 35,000 pm in instruments which will yield about 15% pa....
Rahul Goel answers, eddie, hi. from a 3 - 5 yr perspective we expect the markets to yield about 15% pa... when i say markets i mean a well-diversified carefully selected portfolio of stocks. we have no short term view on the markets.
Rahul Goel answers, hari, hi. for your children build a portfolio of funds which will include schemes like hdfc equity and franklin flexicap. have about 6 schemes... in the right allocations. franklin taxshield is a scheme which personalfn recommends to its clients... definitely a well managed scheme.
ANILKAGN asked, Dear Rahul, I want to invest in ELSS but i am confused between Principal Personal Tax Saver, Principal Tax Savings Fund. Which of the two is better?
Rahul Goel answers, anil, hi. we prefer the tax schemes on offer by hdfc and templeton...
Rahul Goel answers, karthik, hi. i am not sure what you are trying to achieve with this portfolio.... if you can share with me what you are trying to achieve then maybe i can guide you with this. but definitely, there are quite a few schemes which you can do without in my opinion...
Rahul Goel answers, deepak, hi. yes you can do that. all you need to do is accumulate monies in mutual funds for now... and at the time you need pension, shift the corpus to instruments which will generate a monthly income... its definitely possible.
Rahul Goel answers, ajay, hi. difficult for me to recommend until i know why you wish to invest, your appetite for risk etc...
Rahul Goel answers, neo, hi. if you have a couple of hours every day to dedicate to this activity, and also the skill to identify and track your stock investmetns, they you can have a stock portfolio.
Rahul Goel answers, manish, hi. 5/6 funds will be better... diversified across styles of management, amcs. be sure to allocate suitably between these schemes...
Rahul Goel answers, amjad, hi. do what i have suggested to manish earlier in terms of building a mutual fund portfolio. invest via SIPs and accumulate wealth. you should have a pure term insurance for yourself... in case you are not there, your family should be provided for.
Rahul Goel answers, hi. if you assume inflation of about 5% pa, then you need to invest rs 18,000 pm in instruments which yield 15% pa... by the time you retire, the equivalent of rs 1 cr today will be rs 2.8 cr.
Rahul Goel answers, swar, hi. your query is particularly interesting because at personalfn both the aspects of whay you have asked surprise us. one, the desire of people to invest in an NFO. in our view most of the times when you put money in an NFO, you are going to be disappointed with the relative returns you have earned... as compared to the better managed, existing schemes. two, the desire for infrastructure and other sector funds. in our view in the long term the risk return trade off for these funds does not work to the advantage of the investor. think tech funds in 2000, pharma funds earlier this century...
Rahul Goel answers, senthil, hi. if you are new to mutual funds, then you must spend more time on getting your overall portfolio right.. both in terms of schemes and allocation. once that is in place you should do your SIPs. as and when opportunties present themselves, you can always add in form of a lumpsum. do not try and capitalise on an opportunity when you are not clear where you should be investing.
Rahul Goel says, Thank you all for participating in the discussion. In case you have any query, you can always write in to us at

Chat with Rahul every Thursday at 1 pm

(Due to circumstances beyond our control, the date and time of chat may change)

For more transcripts, click here!