Track your investments regularly

I have been investing Rs 5,000 via SIP in Reliance Equity Fund since mid-2010. The returns have been going down steadily. I do not plan to withdraw from this fund, as I am hopeful it will turn around. Should I invest another Rs 5,000 in a similar fund?

-Sukanya Roy

The performance of Reliance Equity has been on the wane and you are right in stopping your SIP in it. Most investors are optimistic about their investments and hold on to them that go bad in the hope of a turnaround; you are no different.

Considering you started investing in mid-2010, your investments will not be much, but do realise there is an opportunity loss by not utilising the money in a better performing fund.

 

Your strategy to start SIP investments in a similar fund is laudable. You should consider investing in BSL Frontline Equity or HDFC Top 200, amongst the best large-cap and mid-cap funds in the category. There is a lesson here: Select a fund with a good track record, performance history and high rating to begin with, and continue reviewing its performance.

The markets have been volatile. Is it the right time to invest in mutual funds?

-Pradeep Kishen

Markets are uncertain and there is little sense predicting these. Hence, there is no right or wrong time to invest. What is required is a financial plan and goal. Risk is integral to equity investing and when you invest, you actually buy a particular company's share. So, you become a partial owner of the company and take all sorts of business risks. If you cannot take such risks, then investing in the markets is not for you.

The role of mutual funds comes is to reduce the risk and spread it, which is why the market uncertainty also creates investment opportunities to gain from. Invest systematically (that is, through systematic investment plan or SIP) to make the most of long-term investments and wealth creation.

My grandson will turn a year old in April and I want to invest Rs 25,000 a year for the next 15 years. What is the best risk-free investment option available?

-Sripad Nadkarni

Equity is the best asset class for long-term investments. However, equity investments come with varying degrees of risks. When you invest in equity mutual funds, you are exposed to market risk, right away, reflected in the volatility of market indicators. Systematic investment plans (SIPs) from mutual funds are a way to ride market volatility over long time frames. You could consider investing in a large-cap fund such as DSPBR Top 100 Equity or Franklin India Bluechip and do so regularly in these for the long term. You may opt for a monthly or quarterly SIP in these funds to increase the frequency of investments to average out investments in the long run.

However, if you wish to stay away from risk completely, consider the Public Provident Fund (PPF) to invest for 15 years that this product carries, at a fixed rate of return (nine per cent), for your grandson. I want to invest for the next 27 years, up to my retirement. I want to invest Rs 5,000 a month through SIPs for my various goals such as retirement, children's education and second home. I am aiming for a corpus of Rs 2 crore.

-Pravin Phadke

At 33, you are not too late to invest through SIPs in mutual funds. If your investment of Rs 5,000 a month across funds earns an annualised return of 12 per cent, you can achieve a corpus of Rs 1.2 crore when you retire or Rs 2.22 crore if the same portfolio earns 15 per cent annual return.

You should split your financial goals and mark out the corpus you need for each of these and the year in which you will need the funds. This way, you will invest for each goal, instead of a collective pool. This will also need higher allocation for goals that are near, and lower for those far away.

You come across as someone new to investing and should consider putting money in balanced funds such as HDFC Balanced or Reliance Regular Savings Balanced for the next six months. This way, you can gain experience in mutual fund investing and how these grow. You can then shift to a large-cap fund such as DSPBR Top 100 Equity or Templeton India Bluechip and invest regularly. Make sure to track the progress of your investment to ascertain performance and if it is reaching your desired goals. This way, you can change the holdings if the need arises. You can also increase your monthly investments with time (at least 10 per cent a year) to achieve your goals.