MIPs: Conservative yet rewarding

I want to invest a lumpsum and I am looking for returns higher than what debt gives over a year. I am also willing to take on some risk (maximum 10 per cent capital erosion). Would monthly income plans (MIP - growth options) serve my purpose? If not, suggest alternatives?
-Mark Lobo MIPs are conservatively positioned funds which invest about 10-20 per cent of their portfolio in equities. Their equity portion helps them better the performance of pure debt funds in rising markets. Considering your willingness to earn more than debt funds and preparedness to accept some capital erosion, you can consider investing in MIPs. However, do not park your the entire amount in one go, invest via the systematic investment route. You may choose any funds from our choice set below.

Alternatively, you could also look at arbitrage funds, since they give returns like debt funds but are more tax-efficient than both MIP or debt funds.

I want to invest Rs 25,000 in equities for 10 years, but with minimum risk. I expect an annual return of 12-13 per cent on my investment. Is it right to invest in funds focused on public sector companies because of the PSU disinvestment and other reforms expected in the coming years?
-Suhas First, avoid investing the entire amount at one go. Instead, invest it on a monthly/quarterly basis via a systematic investment plan (SIP).

This will help average out the cost of investing.

A long-term horizon will help you even out the market volatility, that is, the downside risk in equities will get reduced in the long run. As on March 3, the equity diversified category of mutual funds delivered an annualised 10-year return of around 15 per cent. However, conservatively, you could expect a return close to 10-12 per cent.

Investing in PSU funds can be interesting because various reforms expected, as you pointed. But, due to the restrictions on their investment mandate, such funds will be barred from significant investments in other companies, thereby missing possible opportunities. Also, the two actively managed funds in this category, Religare PSU Equity and Sundaram BNP Paribas PSU Opportunities, are too new to be judged by performance. If this is your only planned investment in mutual funds, we suggest you stay away from such thematic funds. Instead, choose diversified equity funds such as HDFC Top 200, DSPBR Top 100 Equity and Magnum Contra.

I want to invest Rs 4,000 in mutual funds through a monthly systematic investment plan (SIP). Suggest good funds for investing Rs 500-1,000 in each fund every month for about three to five years.
-Rajesh Kumar K We assume you are starting off as a mutual fund investor. Before choosing any fund, you must decide an appropriate asset allocation and then invest accordingly. Also, keep your portfolio compact, by investing in only two-three funds. Choose equity diversified funds such as HDFC Top 200, DSPBR Top 100 Equity, Canara Robeco Equity Diversified or BSL Frontline Equity. For debt funds, choose Fortis Flexi Debt and Canara Robeco Income.

Alternately, you may even invest in balanced funds such as HDFC Prudence or DSPBR Balanced. Such funds automatically take care of your desired asset allocation.

I am working in a private sector company and want to own a house. I want to invest in mutual funds to buy the house costing around Rs 30 lakh. I want to get good return of may be 12 per cent, so that I could book the house in six months. I have around Rs 4 lakh to invest. Where should I invest for six months, so that my money is safe and I get a better return than bank fixed deposits?
-Baliram Gupta Mutual fund investments are not meant for the short-term. For six months, you should keep your money in bank fixed deposits. Bank deposits, unlike mutual funds, would ensure your capital is safe and provide assured fixed returns. So, do not take a chance of capital erosion or incurring loss.

Value Research