For regular returns

My aunt is 65. She has invested about Rs 2.5 lakh in bank fixed deposits. The interest rates are dismal (7 per cent). Is there any mutual fund scheme where she can get better returns? She is looking for regular interest payout similar to fixed deposits.

-Yazdi J Wadiwalla

Since your prime concern is regular income, go for the Post Office Monthly Income plan, that will give you a fixed assured return of 8 per cent a year which you may withdraw on a monthly basis to meet your daily expenses. But, note that here your money will get blocked for 6 years. 

Alternatively, she may even park funds in the Senior Citizen Savings Scheme,  also a secured investment, with a maturity of five years and providing a quarterly return of nine per cent yearly.

However, if you can undertake some risk, choose Monthly Income Plans (MIP) that mutual funds offer. These schemes aim to provide monthly dividend to investors through their debt exposure of around 80 per cent. Some of the good MIPs are Reliance MIP and DBS Chola MIP. The 3-year and 5-year return of this category (on April 30) was 8.42 per cent and 9.18 per cent, respectively. But, these plans are not risk-free and returns are not assured.

I want to start a SIP of Rs 5,000. I have picked HDFC Top 200 (Rs 1,000) and IDFC Premier Equity Plan A (Rs 2,000)? Could you suggest one more fund in which I could invest the remaining Rs 2,000? I am currently invested in Reliance Vision, SBI Infrastructure Fund Series-I, ICICI Prudential Infrastructure and Sundram BNP Paribas Select Midcap. Should I continue to hold these or exit?

-Nimit

Since you have not mentioned the amount in existing investments, it's not possible for us to know your exposure. For any long-term portfolio, diversified large-cap funds that can generate more stable returns and should be 80 per of your portfolio. Funds like HDFC Top 200, BSL Frontline Equity, and Magnum Contra are some of the good diversified equity funds.

While Reliance Vision (diversified equity) is an average fund, ICICI Prudential Infrastructure (thematic fund) and Sundaram BNP Paribas Select Midcap (mid-cap fund) are good performing funds. You may continue holding these. Since you already have exposure to an infrastructure fund, you may exit SBI Infrastructure Fund Series-I (close-end fund) when it becomes due for redemption in July 2010. Similarly, do not invest in another mid-cap fund (IDFC Premier Equity) when you already have one in your portfolio.
 
I have invested in Principal Personal Tax Saver and Reliance Tax Saver Fund. The lock-in period is about to get over. Both funds have not given me good returns. Should I withdraw my money and invest in other funds?

-Saurabh Jaiswal

Both Principal Personal Tax Saver and Reliance Tax Saver are average tax-saving funds. You don't seem to need this money, as you have been looking at another fund. Exit these and invest in superior funds for better returns.

In case you need to invest for tax saving, choose Magnum Taxgain, Fidelity Tax Advantage or Canara Robeco Equity Tax Saver. Else, invest in diversified equity funds such as HDFC Top 200, BSL Frontline Equity or DSPBR Top 100 Equity Reg.