Photo: iStock
Photo: iStock

Planned withdrawals are best done using SWP option

It would be prudent to deploy different categories of funds for different purposes

Please suggest a few equity mutual funds that can give maximum returns and safety over a period of 15 years. Do I need to stay invested to save tax? I am in the 30% tax bracket. Will these funds help meeting emergencies and planned withdrawals?

—Durgesh

Over a time period of 15 years, good equity mutual funds have provided good returns (higher than market returns) while affording good downside protection as well. Curated lists of mutual funds such as Mint 30 offer a good choice of such funds that investors can go with at any time. In terms of tax rate, they are subject to changes over the years—although one can be reasonably sure that taxation of returns from investments in equity and equity mutual funds will always be on slightly favourable terms compared to taxation of regular income or fixed deposits. You would need to stay invested in the funds you choose over the long term in order to benefit from the effects of compounding rather than to gain from tax benefits. Mutual funds are among the most liquid investment options that there are since anytime you need money, you can submit a redemption request and the money will come to your bank account in a few days (2-3 days). That said, it would be prudent to deploy different categories of funds for different purposes. For emergency withdrawal purposes, it would be better to go with fund categories such as liquid funds and ultra short-term funds rather than equity funds since that would protect you from having to withdraw at a bad time in the stock market. Planned withdrawals are best done using the systematic withdrawal plan option from any category of fund. 

I can invest around 15,000 from next month which I want to invest in some equity mutual funds ( 5,000 in tax saver and the remaining in equity/hybrid funds). I am a high-risk investor. My target is to achieve a retirement corpus of 2 crore. I am ready to invest for another 20 years from now. I am 39 years old now. Please suggest few funds.

—Selvaraj

To retire in another 20 years with a corpus of 2 crore, you would need to save and invest 22,000 a month in this period (assuming a 12% annualised return). It’s good that you are starting now with your investments, but you should consider increasing the amount over the years so that you can reach your goal without any issue. Since you are a high-risk investor and are investing for the long term, you can go for an all-equity portfolio (with a bit of debt contained in the hybrid fund). For 5,000, you can choose Invesco India Tax plan (for tax saver). For the remaining 10,000, you can go with a three fund portfolio in the form of a large-cap fund for 4,000 (ICICI Prudential Nifty Next 50 fund), a multi-cap fund for 3,000 (Parag Parikh Long term equity fund) and a small-cap fund for 3,000 (Franklin India Smaller Companies fund).

Srikanth Meenakshi is co-founder and COO, FundsIndia.com.

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