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Ask Mint Money

Ask Mint Money
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First Published: Sun, Mar 27 2011. 10 11 PM IST
Updated: Sun, Mar 27 2011. 10 11 PM IST
I am 24 years old and want to start a monthly systematic investment plan (SIP) of Rs2,000, so that I can withdraw Rs18,000 every April. Please suggest a suitable mutual fund (MF).
-Vivek Anand
By investing Rs2,000 every month for a year, you will be investing Rs24,000 in a year. That indicates that you are willing to risk up to 25% erosion of your capital annually. Over the last five years, there have been six months (October 2008 to February 2009) when equity MFs’ returns have been less than this. For all other months, the returns have been better than this and mostly positive. Though past performance is not a definite indicator of future returns, we can make a reasonable assumption that an SIP will have better annual performance than a negative return of 25%.
You can invest Rs1,000 each in two funds—a large-cap such as DSP BlackRock Top 100 and a dynamic fund such as ICICI Prudential Dynamic Fund. These will, in most likelihood, withstand market volatility well.
Both these funds have an exit load of 1% for redemptions within a year of investing. But this exit load will matter less and less over the next two-three years as you start redeeming from older and older investments.
I am 60 years old and have around Rs20 lakh in debt instruments. I want to invest Rs10 lakh in MFs with a mix of equity and debt. Suggest funds keeping in mind the inflation rate. I want to stay invested for 10 years and have medium risk appetite.
-Pramod Agarwal
The best way to protect your corpus from erosion of value due to inflation is to invest in a diversified portfolio. An overall equity-debt split of 70:30.
In the MF space, you can consider fixed maturity plans (FMPs), though they would require periodic renewals over the 10-year time frame. Some short-term fund investments in funds such as Templeton India Short Term Income will ensure liquidity in your portfolio. For equity schemes, you can go for diversified large-cap-oriented funds such as Fidelity Equity or Birla Sun Life Frontline Equity.
What are the ways to invest in gold? Is it possible to redeem exchange-traded fund (ETF) units into physical gold?
-Vivek Chhajer
There are three routes to investing in gold as of now—regular MFs, ETFs and commodities. Under the regular MF route, fund houses such as Reliance and Kotak have launched fund-of-funds (FoFs) schemes that invest in gold ETFs. If you want to invest directly in ETFs, options include Benchmark’s Gold BeES and Quantum’s Gold ETF. The commodity route has e-gold as the investment option. You will require a demat account to invest in ETFs and commodities. The last method—e-gold—provides the option of converting units into physical gold using a simple and reliable process.
Queries and views at mintmoney@livemint.com
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First Published: Sun, Mar 27 2011. 10 11 PM IST