March 30, 2017

What can we learn from 80 Yrs old Mutual Fund?

Do you know a Mutual Fund which is almost 80 years old? You may get surprised. But there is an equity mutual fund on this earth which is almost 80 Yrs old Mutual Fund. What can we learn from this fund?

Many of use listen to the advice from GENUINE Financial Planners or Advisers that you must stay invested for long term. However, the definition of the long-term varies from person to person. For few enthusiastic investors, the long term may be 2-3 yrs. For few, it may be 10 Yrs and for few, it may be 20-30 yrs.

Hence, we assume the meaning of LONG TERM as per our comfort and start investing. But I found many that they neither do asset allocation (may be many times because of not knowing the meaning of it) or stay invested for long term.

In my view, if you are equity investors, then I classify the time horizon as below.

0-5 Yrs-Short Term

6-10 Yrs-Medium Term

More than 10 Yrs Long Term.

I never suggest you invest in equity if your goal is short term. Be calm with your investment within the available debt assets like FDs, RDs or Debt Funds.

If your time horizon is medium term, then never go beyond 40% into equity. Rest 60% should be in debt.

For long term goals also, the asset allocation between equity and debt should be 70:30. Don’t overboard beyond this into equity.

Now coming back to our topic of this post.

Why always is it beneficial of staying invested for the long term in equity mutual funds? It is not because of equity mutual funds but also in any asset class it is important to understand the power of compounding. The more you stay invested the more benefit you will get through the power of compounding.

How to become Crorepati easily??

Yes, EASILY you can become Crorepati. You no need to work hard. Here are some number and products using them you can easily become a crorepati.

Become Crorepati Easily

Notice the difference between years of becoming Crorepati by keeping money in the savings account to investing in debt products. It is almost 49 years early by merely investing more than 3% return. Same way if we consider equity investment, then the difference is almost 3 times lesser.

By showing above numbers, I am not saying you that you take a risk and invest all your investable surplus in equity asset class. But here my point is that, debt products alone not sufficient to create wealth.

Therefore, by investing in any asset class you can become a crorepati. But what matters is WHEN.

What can we learn from 80 Yrs old Mutual Fund?

Investment is lazy exercise. Means you no need to act on news based or event based actions for investing. Every now and then we hear in media or from financial experts that we must either BUY or SELL. They never suggest you to hold if forever.

Because the experts who appear in media are almost brokers or sellers. They never feel happy with your laziness. They need some action of either BUY or SELL. If you buy or sell then they earn otherwise NO.

However, wealth can be created by investing for LONG TERM. The proof is the USA’s 80 Yrs old Mutual Fund. You may surprise with listing to this that how this 80 Yrs old Mutual Fund survived for so long. But if you check their strategy then you also feel of zealous.

The Fund Name-Voya Corporate Leaders Trust

Inception Date-18/11/1935

Now let us see the fund performance since it’s inception.

80 Yrs Old Mutual Fund Performance

You notice that since inception I mean since 1935 to date, the fund has generated 10.12% returns. It may not be a great number to those who running behind star ratings or chasing fund returns.

However, this 10% to 12% are great numbers who are investing for their long-term goals.

Few facts about Voya Corp Leaders Trust Fund

# It is almost 82 Yrs old Fund.

# The fund is holding the same stocks which it started in the year of 1935. It invested in 30 leading US companies equally in 1935.

# It invested in 30 leading US companies equally in 1935. After that, it has not made any changes to portfolio except for automatic corporate actions like a merger, spinoffs, bankruptcy etc. So it sells stocks when company go bankrupt or if the dividend is suspended.

# Currently the fund is holding 22 companies.

# If you invested Rs.10,000 as lump sum investment in this fund in 1935, then that will be now worth of Rs.2.71 Cr. (It is USA Fund but for simplification, I assumed rupee as an investment value).

# The fund has outperformed the market in 40 years without adding or deleting the new stocks.

# The fund buys same company stocks when an investor invests and sell same stock when investor request for withdrawal. But portfolio remained same forever.

# Few stocks which the fund holding since 82 years are DuPont, General Electric, Procter & Gamble, and Union Pacific.

# It also has positions that came through mergers and/or spinoffs. For example, it owns Berkshire Hathaway via an original position in the Atchison Topeka and Santa Fe Railway. It has CBS via a stake in Westinghouse Electric. It owns Honeywell through a stake in Allied Chemical.

# It is a low-cost fund with expense as 0.52%. Its expenses are less. Because of no frequent trading. Holding the same set of stocks for long.

# The formula fund following as per the product brochure is “The founders of the Trust bought equal shares of 30 leading companies in 1935 and decreed they could never be sold. The only exception was companies that went bankrupt, merged or spun off”.

These are the few facts which I learned about funds. This is just a SLAP to all those who churn their portfolio frequently. This is the SLAP to all those who feel EQUITY is not a worthy investment.

This is all about the story of USA based 80 Yrs old Mutual Fund. How can we assume the same with Indian market? Because there are few sets of experts who believe that we must not follow what it happened in the USA. For those, here are few funds which were started in 90’s era and their performance are as below.

1) HDFC Top 200 Fund

Inception date-03/09/1996

Returns of 3 Yrs-16.43%

Returns of 5 Yrs-15.24%

Returns of 10 Yrs-14.44%

2) Franklin India Bluechip Fund

Inception date-01/12/1993

Returns of 3 Yrs-16.11%

Returns of 5 Yrs-14.27%

Returns of 10 Yrs-12.82%

3) SBI Magnum Equity Fund

Inception date-01/01/1991

Returns of 3 Yrs-16.72%

Returns of 5 Yrs-15.33%

Returns of 10 Yrs-12.51%

4) UTI Equity Fund

Inception date-18/05/1992

Returns of 3 Yrs-16.84%

Returns of 5 Yrs-16.45%

Returns of 10 Yrs-14.19%

5) Reliance Growth Fund

Inception date-08/10/1995

Returns of 3 Yrs-23.54%

Returns of 5 Yrs-17.73%

Returns of 10 Yrs-14.09%

6) Franklin India Prima Fund

Inception date-01/12/1993

Returns of 3 Yrs-29.47%

Returns of 5 Yrs-26.20%

Returns of 10 Yrs-16.44%

These are the few among many funds which are since 90’s era and still giving us decent around 10% to 12% returns. There is no specific attachment to these Indian funds. However, I randomly selected.

Notice one thing, all funds 10 yrs returns are over and above 12%. I just IGNORED the star ratings of these funds. I am not saying that these are the BEST funds. However, my point here is investing for the long term without bothering about ups and down of market is actually what the secret of wealth creation.

Few posts related to Mutual Funds which I wrote in 2017 are as below.

103 Comments

  1. Hi basavaraj

    Heard that indians can invest upto $250000 per year without any approval in foreign stocks or mutual funds.

    What are the steps to invest in this Voya Corporate Leaders Trust mutual fund?

    Reply
    • Dear Srikanth,
      The news what you said is true. However, I am unaware of the process of the investment in the said fund. Better you directly be in touch with fund house.

      Reply
  2. Sir………….today I have go through the multiple of answers provided by you……..all these really make me learn a lot……Thank a lot…..

    Further, Sir………I am a new comer/investor in market……..I have few query….may I have the help of your kind expertise:-

    1. I want to invest 1,50,000/- annually for tax saving purposes for 20 years and my risk taking capacity is moderate so where and in which funds should I invest.
    2. Further, I want to invest 30,000/- per month for investment purposes for 22 years and my risk taking capacity is moderate so where and in which funds should I invest.
    3. One more question, sir should I invest in Index funds or not as per the lessons of Sir Warren Buffet…..as it may validate for US market (Developed) not yet in Indian Market (Developing)

    …………………Sir please help me out I am stuck…………This is Pankaj Sharma………Mobile No……..9654508919…

    Reply
    • Dear Pankaj,

      1) Never invest just for tax saving purpose but invest for the sake of achieving your financial goals.
      2) May I know what is the meaning of moderate as per you?
      3) Index Funds are popular in USA. However, our Index are not so matured to rely. Hence, we need active funds. For further reading, refer my post “Top 10 Best SIP Mutual Funds to invest in India in 2018“.

      Reply
  3. Hi Basunivesh,

    Is it true that ICICI Balanced Advanatage fund and Birla Balanced Advanatage fund maintains equity :debt ratio like 80:20 when market is up and 30:70 in equity :debt when market is down there by minimizing the risk . So can we invest lumpsum and do SWP later after 1 year to avoid tax?

    Reply
    • Krishna-They are equity oriented balanced funds. Hence, they manage both equity and debt as the ratio you stated. However, it does not mean they are RISK FREE. There is a risk in both equity and debt portfolio. Hence, jumping into such balanced funds just to avoid tax or investing with short-term nature will be a disaster for you.

      Reply
  4. Last week i read in newspaper is instead of dividend in balanced funds, SWP in equity savings fund is good. But what about SWP in balanced fund? are they good too?

    Planning to invest 40 lacs as lumpsum in 4 different funds to diversify.

    Please suggest top 4 equity savings fund for monthly swp after an year
    Or also advise if i can choose balanced funds with SWP monthly is fine.Goal is about more than 20+years

    Reply
    • Srikanth-SWP in equity savings fund is good, but on what basis? Will you be able to generate a constant income stream from equity savings funds? If the answer is now, then SWP may happen from your principal.
      If goal is 20 years away, then why this CIRCUS of SWP which is creation of advisers and mutual fund companies?

      Reply
      • SWP i for my parents monthly income for home maintenance .Is there any alternative for monthly 40-50K other then SWP from balanced funds?

        Moreover now i am thingking to invest 40 lacs in 4 liquid funds and do STP to balanced funds in 22 months (close to 2 years) and once all the corpus moved to 4 different balanced funds , want to start SWP only for purpose of Monthly income .

        Reply
        • Srikanth-I am not sure who planted you the theory of SWP or STP. First understand your requirement (which must be realistic). Balanced funds nowadays became hot cake. People blindly investing without bothering the underlying equity and debt portfolio. Rest you have to decide.

          Reply
  5. I am planning for my father retirement this way.My father gets around 80lakh after retirement .So i want him to do fixed deposit of 40lakh (with monthly interest payout) and another 40lakh (10 lakh in each fund) in 3 balanced funds and 1 equity saving fund as a lumpsum and want to do a SWP of 10,000 per month (total 40,000 in 4 funds) after 1 year to avoid tax.So in total he gets 25k per month from Bank FD(approximate for 40 lakh FD) and 40K per month via SWP . So total he gets 65K per month and in addition to 13K per month pension.Now we want to put 40K for monthly house expenses and re-invest remaining 38K in existing equity funds which we are currently investing till life long(may be next 20-30 years) to gain a suitable corpus which will be usefull for all of our family. Please suggest if this idea is fine

    Reply
    • Satya-If your Rs.40 lakh FD makes your monthly need to suffice, then why this CIRCUS of investing in 3 balanced funds and doing SWP and again putting Rs.38,000 into equity for long term?

      Reply
      • Basavaraj–Actually 40 Lac does not meet the household expenses.Through FDs we get only 20K approx.So now we are planning to invest 40 lacs in multiples of 10 Lacs each in

        1) HDFC BALANCED fund -10 lacs
        2) ICICI Balanced FUND -10lacs
        3) SBI BALANCED fund-10lacs and
        4) BIRLA 95 balanced-10lacs

        and opt for 40k SWP (by 10K *4 funds) 10k in each 4 funds monthly after an YEAR to avoid exit load and tax.
        now my family monthly income will be 20K from FD, 40K from Balanced MF and 13K pension total to 73K per month

        the Goal here is 2 goals
        1) to have monthly income after retirement and continue lumpsum of 40 lacs as long my parents are alive, say may be 20-30 years also.of 73K
        2) out of 73K accumulated monthly income taking 50 k for household expenses, we want to invest remaining 20-23k per month in monthly SIP and continue as along they are alive .This goal is to provide liquidity for me as well as my parents medical treatments and in future my children.

        So finally

        since market is at PEAK now, is it advisable to invest lumpsum of 40 lacs in above mentioned 4 balanced fund
        Is it necessary to wait for market for correction or not required since our time horizon both goals is 25-30 years from now

        Reply
        • Satya-SWP of Rs.40,000 from the invested Rs.40 lakh a month means you are withdrawing 12% of the invested amount (yearly). Do think equity products generate constantly 10% a month throughout the life? If any particular month the returns are not Rs.40,000, then your that particular month SWP will be withdrawn from principal part of what you have invested.
          SWP is the biggest scam in MF industry created by advisers and AMCs to garner the lump and force to believe investors that you can constantly withdraw money FIXED, but at what cost?
          Even the dividend paid in either debt or equity funds are not constant. The product MIS of Mutual Funds is such a misleading that it force us to believe that there will be some monthly income. But it depends on the profit and dividend payout of company.
          If your need is only around Rs.50,000 (where the FD return of Rs.20,000+Pension Rs.13,000), then why not only opt for Rs.17,000 from MF (debt or equity as per your comfort) and let the remaining money grow as usual for next 20-30 years? In that case your withdrawal yearly rate from MF will be around 5%, this seems be realistic than that SWP CIRCUS.

          Reply
  6. My Family has a retirement corpus of 1 cr atmost.We want to invest this in DEBT Mutual Fund and put SWP of 50K per month which is equal to nearly 8lacs per annum.So after i year
    of SWP 8lacs, due to 8-10% returns still the capital amount will be 1cr or wil reduce to 92 lacs at end of 1st year???

    Also, there are multiple debt funds, so our requirement is CAPITAL PROTECTION of 1 CRORE and taking 50k SWP per monthly and in that 50K per month meeeting 20-30K per month house expenses, want to re-invest 20K in equity..

    So to invest 1CRORE in debt funds for 20-25 years which debt funds are good??Please name them.
    Also tell us as asked above due to SWP of 50k per month , will capital reduce to 92Lacs at end of year or will remian at 1cr due to 8-10% return..Please clarify these two questions

    Reply
    • Krishna-Hard to guide BLINDLY with mere few lines of sharing.

      Reply
      • Hi Basunivesh,

        Could you please tell me what you requrire more as i mentioned 1crore safe investment for 20-25 years ,do ultra short term funds safe for 20-25 years time period?Also, regarding monthly SWP,if i draw 8 lacs annually, and due to annualized returns of 8-10% (8 lacs on capital 1 crore), does 1crore remains same as (1 crore -8 lacs (SWP annually) + 8 lacs (8-10% annualized returns).

        Please advise and tell me if you require more info

        Reply
        • Krishna-Yes, it is small sharing. How did you assume that you earn FIXED 8% return? Why do you want to invest that Rs.8 lakh and what is the goal of that investment and reasons for protecting this Rs.1 Cr? In such a way there are many questions which are unanswered or shared. Hence, hard to guide you BLINDLY.

          Reply
          • Basavaraj,

            You advised Ultra Short term debt fund right in debt category, when i checked its return i just approximatly calcautesd 8%.

            I already mentioned but will make it clear again.

            Reason for protecting 1CRORE lumpsum investment is whole family is dependent on it and CAN”T Afford to Lose it and so choosen debt funds with low risk as Bank FD’s interest rate decreasing so that is the reason to plan to park 1 CR in debt funds .

            Reason for monthly 50K or yearly 8Lacs using SWP is to meet monthly expenses after father retirement of approx 30K and re invest another 20K in Equity to grow the returns.the Goal of 20K per month to invest in equity MF as a monthly SIP to grow the returns for a period as long as my parents alive and later we are planning to invest under my name to meet goals like my children, children education, and thei marriage which is closely 25 years or more than that from now.

            HENCE PLEASE GUIDE ME now and tell if this is a good choice or not

            Reply
            • Krishna-I accept around 7% return from Ultra Short Term Debt Fund. They generated good return because of falling inflation and interest rate, which is now paused or bleak. Regarding Rs.20,000 investment, don’t invest without knowing the time horizon. Define it and based on that you can easily select the fund (must also do asset allocation in debt and equity as per time horizon of the goal).

              Reply
  7. Is it safe to invest my father retirement money of 1 crore in lumpsum in debt mutual funds.since it comes with tax after 3 years holding, if debt funds returns is say 10%, so we get 7% after tax deduction in debt funds?? Also tell me how to file return for all types of mutual fund to online tax expert like hrblock.in

    Reply
    • Srikant-There is no flat tax if your holding is more than 3 years. Please refer my post regarding debt fund taxation. Regarding safety, if you use Ultra Short Term debt Funds or Short Term Gilt Funds, then I don’t think there is any risk in putting all your corpus as a lump sum.

      Reply
      • I read in money control website and the same in many newspapers that if we invest more than 3 years in debt funds there is we need to pay indexsation plus 20% tax.can you confirm this?

        Also, regarding safety, as my family survive on that 1 crore, we are planning to invest life long in Ultra Short Term debt Funds or Short Term Gilt Funds and put monthly SWP of 50k and after meeting monthly expenses at home, planning to reinvest 30k in equity for 15-20 years.

        Can we invest life long in Ultra Short Term debt Funds or Short Term Gilt Funds??

        Also, if we do monthly SWP of 50K (which is 6% return per month or 8 lacs per annum)again at end of each year, 1 crore will remain as 1 crore only right inspite of withdrawing 8lacs per annum and the reason behind is 8-10% CAGR.Am i correct

        Reply
        • Krishna-YES, post 3 years you have to pay the tax by using indexation benefit. You can invest as many years as you wish in debt funds.Regarding SWP, it is CORRECT if the fund consistently generated 6% returns. Instead of SWP, why can’t you opt for dividend payout option (which is tax free income for you)?

          Reply
  8. I have a question..if our Target is to invest 20 years and so we invest in equity market but if suppose market crashes like in 2008 all the profit will be gone and we need to hold the mutual fund for more time in extra…so is still mutual funds secured in equity even if chooses to invest 20-25 years .what if market crashes in 24th year before we are about to reach goal in 25th year.how to prevent profit from becoming evaporated

    Reply
    • Krishna-This is where many fail. If your goal is 25 years away from today, then your all equity investments should be moved to debt 2-3 years prior to your goal approach.

      Reply
      • Hi Basavaraj,

        Thanks for confirmation.I also read the same that we need to move 2-3 years from equity to debt before we reach our goal.But , what if the market crashes in middle of my goal term say at 8th year or 9th year, where my goal term is 20 years .Here in this case, my money has time to recover from losses since it has more than 10 years, but it effects returns right?Is there a way to earn decent return even if market crashes?

        Reply
        • Krishna-Nothing is permanent. Why I suggest long term is that if market falls tomorrow itself, you have enough time to recover (maybe 1-2 years for market to come back). Hence, you no need to worry of losses. You will be in loss when you COME OUT of investment.

          Reply
  9. Can we park money in Liquid funds life long means that range of 20-25 and even more years and whenever we require we will draw money, since savings accountin bank gives only 4 % Where as liquid funds give 8%-9%.Though it has some risk, but it will be minimal if we park money and do an STP to equity funds .Is it Recommended? Please advise

    Reply
    • Srikanth-Yes, you can park the money as long as you wish. But don’t expect more than 5% from liquid funds. STP is the strategy developed by Mutual Funds and advisers. Hence, don’t follow such tactics.

      Reply
  10. My father has 2 years for retirement..so I am asking him to do sip in balanced, debt mutual funds.But he is interested in taking pension plan…where it has 1.5 lakh per year investment till 5 years and another 5 years waiting period..so after 10 years he get 8-13k based on market…
    Please suggest whether what I suggested is correct or my father plan is correct..who is correct and which one you recommend

    Reply
    • Krishna-Stay him from BALANCED FUNDS and PENSION Plans. Let him use debt mutual funds ONLY.

      Reply
      • He is not interested and listening to me to invest in debt funds…. meanwhile what is your take on pension plan…

        Reply
  11. Hi Basunivesh ,

    Please advise for the below.My parent is nearing retirement age.Once they retired, to get a mothly income,i am advising my parent to invest some portion say 50 lakh lumpsum in debt MIP (Monthly income plan) and remaining money say 30 lakh in balanced mutual fund and opt for a MONTHLY DIVIDEND.So both DEBT MIP mutual fund(Monthly income plan) and Monthly dividend in balanced fund meets monthly expenses for both my parents.Later once they expire, i am planning to do a STP of debt to equity and invest them for 15-20 years there by meeting my children education and marriage expenses. where as balanced fund swill continue in same category for same 15-20 years Please advise , since this meets both my parent mpnthly expenses as well as future requirements of my children.

    NOTE: Since it is my parent hard earned moeny MIP Debt funds comes with low risk where as balanced fund (opting for monthly dividend) also we plan to invest 15-20 years as said above

    Reply
    • Srikanth-Whether they are dependent on this income for their survival?

      Reply
      • Yes ..Basavaraj

        Reply
        • Srikanth-Then stay away from dividend option of MF. Because they are irregular and sometimes they may NOT. Go for products like LIC Jeevan Akashay or Postal SCSS.

          Reply
          • ok will stayy away from monthly dividend of balanced fund .How about debt funds of MIP (Monthly income plan)..Ca we invest lumpsum here and take monthly pension ???and later once my parents expire i will move it to equity for my children future and to meet their expenses, Please advise

            Reply
            • Srikanth-You can do so. But don’t expect that they give you MONTHLY INCOME!! The product is terribly branded to believe that one will get monthly income.

              Reply
              • ok fine..is there anything better available than MIP, for monthly pension since he retires in 2 and half years

                Reply
                • Srikanth-Use debt products as much as possible. Like Ultra short Term Debt Funds, Jeevan Akshay or SCSS. Only small portion (like not more than 20% to 30%) equity is fine.

                  Reply
                  • ok ..But my father is running behind private bank pension plans .since he is 57 years and nearing retirement is it recommended to take pension plan which goes like this..

                    Investing 3 lacs for 10 years total to 30 lacks and later to get a monthly pension of 40-50K???I didnt recommended..what would you say??

                    Also second question is in debt funds like Ultra short Term Debt Funds how many years to invest… my father requirement is to invest as long as he is alive to get monthly income for him and my mother..His medical expenses are covered upto some extent by his employer..Please advise

                    Reply
                    • Srikanth-You may not recommend. But their priority is KEEPING PRINCIPLE INTACT and expecting fixed regular flow of income. It is hard for me to guide everything with mere few lines of your sharing.

  12. Our Investment plan looks likes this..My father retires in 32 months.We are planning to invest nearly 10-15 years ,so these 32 months in his salary I am asking him to invest in equity MF (Large cap and Balanced) for 50 K per month till 32 months as he gets salary..Once he gets retired Say if he gets 1 cr PF and other retirement money, i am asking him to do Fixed deposit in bank for that and opt for monthly interest..Say if it bank gives 5% rate of interest ..It would generate 42K per month as monthly interest on 1crore fixed deposit. He also gets 13K pension.So total monthly icnome he gets is 43 +13 =56K..Taking 25 K f or house expenses..I am asking him to invest remianig 40 K per month in SIP in equity and continue that as long as possible nearly 10-15 years..Is this a good idea . Please suggest.

    Reply
  13. Hi Basunivesh,

    I am investing a total of 60K per month in SIP in Mutual Funds. As we know,we need to revise MF portfolio every 6 months/1 year and make changes accordingly.So here my question is if i invested for 1 year 1.2 Lakh (10K per month for 12 months in different SIPs) and later transferred via SWP to another fund/funds .Will i get
    1)Compounded returns??Since 1 year investment is now transferred to another funds which is similar like lumpsum amount where as compounded returns are compounded anually.

    Please clarify.

    Thanks,
    Srikanth

    Reply
    • Sorry Its not SWP, Its STP (Systematic Transfer Plan)

      Reply
    • Srikanth-Valid question. Simply to say, your compounding will END when you come out of investment but not when you re-invest. Also, during such re-balancing, why to use STP but why not a lump sum movement?

      Reply
  14. Hi Basavraj,

    My Father is going to retire in 30 months (close to 3 years). He has some money in ficed deposits. I am advising him to keep money in mutual funds.Since equity is high risk, i am planning for debt mutual funds. Please let me know if this is correct option or not? I also have other alternative plan

    Also, i want to divide his money into chunks and have paln to invest in smaller SIPS (say 10K per month) till 20 years in equity mutual funds.Please advise if this one is also correct option or not.

    Always welcome if you refer us to any other money making investment in the market.

    Reply
      • Nothign specific, Want to grow money , by keeping some amount for monthly expenses and remaining he want the moeny to grow unlike FD give only 6% inerest

        Reply
          • His Requirement is to grow money with full security with compound interest..as it is his hard earned money as FD’s are giving less interest these days.and also leaving some amount for monthly expenses, he want to invest somewhere.This is his requirement

            Reply
            • Srikanth-Easy to say hard to digest that to earn somewhere to earn more than FDs. Will he be in a position to digest the volatility, negative return or the risk of loss in some % of principal?

              Reply
              • Yes basavaraj but not less than 5% loss or minimal loss.Please advise both
                1)secured investments to grow more interest than FDs
                2) A bit of little risk but not to extent of losing principal

                Reply
                • Srikanth-Don’t risk his money by entering into equity. Use debt products like Ultra Short Term Debt Funds or Short Term Gilt Funds. I will not suggest more than 10% of his corpus should be in equity (and that too only in large cap and if time horizon is more than 5+ Years).

                  Reply
                  • Ok Basavraj..But debt funds will attract 20%tax for 3 years right. So my father do not want to pay taxes, So any alternative to avoid taxes and invest in MF or any other investment without paying any taxes??

                    Reply
                    • Srikanth-Debt Funds attract 20% tax with indexation. As I said earlier, equity MF I not suggest just to avoid tax. Rest left with you.

                    • ok fine.Apart from MF, any other investment is there which can give more return than FD??with or without taxes not an issue

                    • Srikanth-You can check with earlier issues of bonds in secondary market or corporate FDs.

  15. Should a senior citizen invest a part of their retirement corpus in Mutual Funds instead of Fixed Deposits and Small Saving Schemes in the wake of reduction in interest rates of debt products?

    I heard it also minimizes tax burden.

    Reply
    • Ritesh-Yes, that is said as bucket strategy. Like for first 5 years requirement, don’t touch equity. For next 6th year onward requirement, you can increase the exposure towards equity.

      Reply
  16. I want to start investing in MF..since I don’t have required knowledge & unable to analyse funds thoroughly…
    So I want to invest through offline mode…But I am unable to find a good broker or distributors nearby me…Confused about to whom should I consult for starting my investment…

    Eg. when I visited SBI MF house..they sell on SBI units..
    If a go to Axis..they sell their units…

    Pls suggest me a distributor or brokerage house (in Chandigarh )where all AMC product are available….

    Reply
  17. Thanks for sharing very nice article.
    I am currently investing in mutual fund through FUNDSINDIA since 1 year. My time horizon is 20 years. Is it possible to change those fund to direct mutual fund.
    or I will close all fund and then open in direct mode as the time horizon is more with investment of 21ooo/month.
    Please advice

    Reply
    • Saba-Moving from regular to direct is nothing but redeeming from one fund and investing freshly in new fund. Hence, you have to as per your comfort. Do remember that about the applicable exit loads (if any) and taxation.

      Reply
  18. What is difference between Direct and Growth in funds and what is better !

    Reply
    • Shahnawaz-Difference between Direct and Regular-Regular funds means you are investing through an agent who earns the commission whenever you invest. Direct means you are avoiding agent and saving that part of expenses. Growth and Dividend-Growth means the value grown will be kept again and re-invested again so that it grow in long run. Dividend is whatever the growth, you will get it back whenever MF announces payout of such dividend.

      Reply
  19. Dear Basu ,

    1) Would you still recommend UTI Equity Fund . I am currently invested in the fund through SIP for long term ( 7-8 years minimum)
    Also have a query if you could be kind enough to help

    2) If I wish to switch from a non performing fund to a better fund is it advisable to just stop the SIP initially and start in better fund and not redeem the all units immediately ( so as to avoid exit load) or to also redeem all the units ( irrespective of the exit load ) to put it in a better fund along with starting the SIP

    Reply
    • Varun-1) It may be under performing it’s peer and benchmark since a year, but better you give more time.
      2) Switching means stop the SIP in current fund. Move all units (which are older than one year to avoid tax) into new fund and also start a SIP.

      Reply
      • Ok so redeem all units older than 1 year ( & put in better fund) and for the balance units wait till exit load is not applicable and redeem the remaing units ?

        Thank you so much for advice regarding UTI equity will wait for 1 year to evaluate

        Reply
  20. i have read your articles of best mutual funds. you have suggest frankline mutual fund in various categories . I have studied frnakline bluechip mutual fund. In last one year this mutual fund gives only 3 to 4 percent return. While in 5years and 10year 15years returns are very good approx 20 precent. So is you suggest to invest in bluechip mutul fund of frankline.

    Reply
    • A-I does not look for short term returns and also I will not recommend for equity investment if your time horizon is within 5 years. Hence, no question of looking at short term 1 yr or 2 yrs returns.

      Reply
  21. Really informative blog. I’m very new to it please let us know –
    Do cams provide direct mutual funds, and what is the difference between cams, karvy, nsenmf and my platforms.

    Reply
    • Vineet-Yes, CAMS provide you option to invest in DIRECT funds. Compare to other options you mentioned, nothing much difference than the features one will see. Hence, it is purely your comfort to choose the platform of your choice.

      Reply
      • Thanks a lot. I mistakenly put my instead of mfu.

        Reply
  22. Hi Basu Ji,

    Am a beginner in Mutual Fund Investment and have no idea about it. Planning to invest Rs.1000 initially until i get good hold of it. Planning for a long term investment say 10Yrs. Which one is ideal to invest for this bracket?

    Reply
      • Thanks Basu

        Reply
  23. Sirji
    I am invested in Canara Robeco emerging equity direct growth fund since 2013
    Several changes occur
    Fund manager shri Krishna sanghvi quit
    Fund moved from midcap and small cap to only midcap fund
    Several ranking agency downgrade to 3star

    Kindly advise further action

    Reply
    • Manoj-What was your expected return while investing in 2013 and how much the fund generated?

      Reply
  24. Dear Sir,
    what is you invest a lumpsum say 30 lac in HDFC Prudence Fund- Monthly dividend. You will get 30K/month dividend which you again re-invest in the same scheme. This way you create nest and also make decent return which is tax free ( as i will be under Rs.10Lac dividend return). Does this make a sensible investment of Rs.30Lac
    Views pls

    Reply
    • Shridhar-If your idea is to invest the same in same fund for long term view, then why this CIRCUS? Why not opting for GROWTH option? Also, whether you are sure of Rs.30,000 a month definitely you get as a dividend?

      Reply
  25. A very nice example. This example shows the virtues of patience and steadfastness that a long term investor needs to imbibe to reap the benefits.

    Reply
  26. Hi Basu,

    I am a new investor and want to invest in equity mutual funds with a time horizon of 5yr+. Can you please suggest some good funds to start with. Also how much investment would be required every year to have a corpus of around 25 lakhs few years down the line.

    Reply
  27. Hi Basu. Point very well made and extremely valid. To be able to reap actual benefits it pays to be invested for a long time.

    Thanks for the post.

    Reply
  28. I want to talk with Mr, Basavraj.

    Reply
  29. Nice post. Basu

    Reply
  30. Out of the topic can u tell what is gst and how does that affect my savings and premium of all insurance policies

    Reply
    • Rahul-Let us wait for implementation. As of now there is no clarity.

      Reply
  31. Sir, You have discussed in depth about investing in mutual funds and concluded that mutual fund investment over a period of ten years would fetch nearly 14%.
    Thanks a lot.

    Reply
    • Sankarasubramanian-I never said that if you invest for 10 years then you will get 14% returns. My expectation from equity mutual fund is not more than 12%.

      Reply
  32. Dear Basu sir,
    Fantastic explanation and worth of long term investment with calm mind. Thank you.

    Reply

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