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Money matters

Money matters
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First Published: Mon, Aug 18 2008. 12 08 AM IST

Updated: Mon, Aug 18 2008. 12 08 AM IST
MF QUERIES
ICICIdirect.com charges entry load for an online demat account. Is there any way to avoid entry load?
—SATYENDRA SINGH
All brokerages that offer online services, including ICICIdirect.com, impose entry loads. If you want to avoid paying entry loads and want to invest online, you can do so through your fund houses’ websites. For that, you need to be an existing customer and also have an online account with each of them. Apart from that, a no-load fund is one that offers all its units without any entry loads. Quantum Mutual Fund India was the country’s first fund house that offered all its schemes without entry loads. After the Securities and Exchange Board of India’s ruling on no-load funds last year, all schemes are now not supposed to have entry loads if you invest in them directly.
What are the monthly income plans in MFs? Suggest some funds that I can invest in.
—SARAVANANWITHU
Monthly income plans (MIPs) are debt-oriented hybrid funds that invest around 80% in debt instruments and the rest in equities. On account of their equity exposure, these are riskier than traditional debt instruments that invest their entire corpus in fixed income instruments. Although MIPs essentially target investors who wish to earn some kind of a monthly return, the Securities and Exchange Board of India’s mutual fund (MF) guidelines ban all MF schemes from assuring returns. Hence, unlike a typical fixed returns products such as post office monthly income scheme and bank and post office term deposits, MF MIPs do not assure any monthly income. Since their underlying instruments are marked-to-market and also due to their equity exposure, MIPs have the potential to give higher returns than the traditional fixed-income options. Some of the good options in this space are HDFC MIP, HSBC MIP, Birla MIP and DSP ML Savings Plus.
I am a 38-year-old salaried employee. I had invested Rs10,000 each in Franklin Templeton Flexi-Cap Fund, Fidelity Equity Fund and SBI Magnum Mid-Cap Fund during their NFOs. Now, I want to start an SIP in Fidelity Equity Fund and Kotak Opportunities Fund. Since last month, I have started investing in Benchmark Equity ETF scheme. How can I reallocate my portfolio?
—T.S. RAGHURAM
You have not mentioned the proportion of investments in your MF schemes. However, exit Franklin India Flexi-Cap Fund. This scheme has delivered moderate returns and there are better options available in the market. Try Birla Sun Life Equity Fund (BSEF), DSP ML Opportunities Fund, or Kotak Opportunities as alternatives. Stay invested in SBI Magnum Mid-Cap Fund. It has done well in market upswings. Stay invested in Fidelity Equity Fund but avoid fresh exposures for now. Instead, start an SIP in DSP ML India Tiger Fund (DTF), a thematic fund that invests in infrastructure and related companies. Also invest in Birla Sun Life Frontline Equity Fund, or DSP ML Top 100 Fund, both large-cap oriented funds. While BSEF will lend stability to your portfolio in the long run because it is a large-cap fund, DTF will add spice to your portfolio as it is an aggressive fund that tracks one of India’s most promising sectors. Continue your investments with Benchmark Nifty BeES as it’s an exchange-traded fund (ETF). ETFs eliminate fund manager’s risk as they are passively managed and track market returns.
LIFE INSURANCE QUERIES
I want to take an insurance policy for my son, who is now two years old. Should I take a policy in his name or in mine?
—BALBIR SINGH
The basic aim of taking a policy is to provide for those who are financially dependent on the life assured. Since children do not have dependents, the purpose of buying a children’s policy is to save for the child’s future. An earning parent is an integral part of child policies as he/she has to propose the policy and pay the premiums. Different insurance companies offer different products. Whether you insure your son or yourself will depend on the policy you choose. The best option for you will be to insure your son under a policy that provides for premium waiver in case something happens to you (the parent). Normally, children’s policies cover the risk after the deferment period, which may be two years after the commencement of the policy.
(Write to us at moneymatters@livemint.com)
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First Published: Mon, Aug 18 2008. 12 08 AM IST
More Topics: Life insurance | Mutual Fund | Money | ETF | SIP |