I want to start a monthly SIP of 2,000 in HDFC Balanced Fund and Birla Sun Life 95 Fund. Are these funds good?


Yes, they are good funds to start SIPs in. Both funds are equity-oriented hybrid funds and invest 65-80% of their portfolio in the stock market and the rest in the bond market. Since bond market investments are less volatile in terms of price movement and more stable in terms of returns, the overall portfolio of an equity-oriented hybrid fund is less risky compared with funds that are fully invested in the equity markets. But historical long-term returns from the bond market have been lower compared with that of the stock market.

From the taxation point of view, equity-oriented hybrid funds are treated as equity funds, which means long-term capital gains tax is nil.

As you get comfortable investing in mutual funds (MFs), diversify into other categories, such as large-cap and multi-cap funds.

I have invested 60,000 in four funds—HDFC Top 200, HDFC Equity, IDFC Premier Equity and Tata Equity. I stopped the payment after one year. How should I start redeeming through a systematic withdrawal plan (SWP)?


All the funds you have invested in are open-ended, which means you can withdraw any time. However, if the tenor of your investments has not crossed a year, your withdrawals will be subject to 1% exit load. Also, they will be treated as short-term redemption, so the profit will be treated as short-term gains, which is taxable. To avoid these, you can withdraw systematically in such a way that you redeem only those units that have completed a year.

You don’t need to specify the number of units when you set up an SWP; you can specify the amount and the date. The number of units redeemed will depend on the net asset value on the date of redemption.

I have 2 lakh in a fixed deposit (FD), which will mature this year. I want to invest it in MFs. I am not a risk taker. How should I invest through systematic investment plan (SIP) to get better-than-FD returns?

—Madhu Basak

Since you are risk-averse, you would be better off investing in products that are predominantly debt-oriented. But you also want better-than-FD returns, for that you will need to take a little exposure to equity, which historically has a higher return potential. The ideal product for you is a monthly income plan (MIP) that are debt-oriented hybrid MFs and invest mostly in debt. They invest about 10-15% of their portfolio in equities. Given the small allocation to equity, you can invest a lump sum as well. Recommended MIP schemes are Birla Sun Life Monthly Income fund and Canara Robeco MIP fund.

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