MUTUAL FUND
I earn Rs10,000 per month. Which mutual funds will be suitable for incomes such as mine?
—UZAIR IBRAHIM
Assuming that you have already put away some portion of your salary in safe instruments such as public provident fund and bank fixed deposits, start by investing in mutual funds (MF) through an exchange-traded fund (ETF) that tracks equity stock market indices. ETFs are passively managed funds that invest in all the scrips, and in the same proportion that lie in the benchmark index. All you need to do is open a broker’s trading account and a demat account, because ETFs can be bought and sold like shares on stock exchanges. ETFs are the least risky equity funds that seek to mirror the market returns, and a good way to start your equity investments. Benchmark Nifty BeES, which is an ETF, is a good option.
Next comes an equity-linked savings scheme (ELSS). ELSS are equity funds that offer you Section 80c benefits that reduce your income tax (I-T) outgo. The only catch here is that your money will be locked away for three years. HDFC Long Term Tax Advantage, HDFC Tax Saver and Fidelity Tax Advantage are good choices.
Finally, invest in some well-performing diversified equity schemes. The ideal way would be through systematic investment plans (SIPs), wherein you commit to invest a sum of money every month. Also, opt for auto debit with your bank account; the money will automatically get transferred from your bank account to your MF, and you shall not forget your date of investments.
You may want to consider a mix of SIP and lump sum investment to strike a balance between regular investing and liquidity. DSP ML Opportunities, HDFC Top 200, Fidelity Equity Fund, Reliance Vision, Birla Sun Life Equity Fund are some options.
Please suggest some top-performing diversified equity funds from which I can choose three to invest systematic investment plans of Rs500, each for three years. I’m willing to take high risk. Would I be able to redeem my full amount in a scheme (principal + gain) after three years?
—AKI VENU, EMAIL
DSP ML Tiger, ICICI Prudential Dynamic Plan, Reliance Growth and Birla Sun Life Equity are some of the options. Yes, all the above are diversified equity funds that are open-ended and have no lock-in period. So, you will be able to withdraw your entire investment—principal and gain—after three years.
How good is DSP Tiger Fund for an investment horizon of three to five years and Reliance Power Mutual Fund for six months? Please suggest some funds that would suit my investment plan.
—HARRY OBEROI, EMAIL