So, did you decide to invest your savings in mutual funds? Then I’d say you’re halfway towards achieving your financial goals.
Deciding on the kind of mutual fund that suits your goals can be tricky. Nevertheless, write down your goal, term, risk exposure and savings and consider the options available.
What about Debt Mutual Funds?
- If you are considering a short-term investment, debt mutual funds are the right choice.
- Even for plans of less than five years, they have better post-tax returns.
Some of the mutual funds to earn more:
- Aditya Birla Sun Life Medium Term Plan-One can invest in its portfolio of debt securities with medium-term maturity. It aims to generate regular income. The NAV (Net Asset Value) of the fund as on 05 Sep 2018 is Rs 22.3832. This fund yields a 3-year return of 8.15%.
- Reliance Credit Risk Plan- The scheme aims to make optimal returns besides having reduced levels of risk. The portfolio of this fund is usually more of debt holdings with less exposure to government holdings. The fund yields a 3-year return of 8.78%. The NAV of the fund as on 05 Sep 2018 stands at Rs 13.3902.
- Reliance Liquid Treasury Plan- As this fund is invested in debt and money market, it produces ace returns with low risk. The NAV of the fund as on 05 Sep 2018 stands at Rs 4372.9798. The fund yields a 3-year return of 7.35%.
Do check out the equity mutual funds
- These schemes are suitable for a tenure of five to seven years.
- Conservative investors can pick hybrid and large-cap schemes.
- Aggressive investors can choose mid cap and small cap schemes.
Funds suitable in this category and their 3-year returns are:
- Principal Hybrid Equity Fund- This fund aims to bring long-term capital appreciation. It’s NAV as on 06 Sep 2018 stands at Rs78.4300 and 3-year returns are 17.5%.
- BNP Paribas Conservative Hybrid Fund(G)- This open-ended fund aims to generate consistent returns along with long-term capital appreciation. The NAV as on 06 Sep 2018 is Rs 27.4107. The fund yields a 5year return of 7.57%.
- IDFC Regular Savings Fund(G)- As it invests both in debt and equity instruments, the fund generates consistent returns along with long-term capital appreciation. The NAV as on 06 Sep 2018 is Rs 12.8871. The fund yields a 5-year return of 9.75%.
Also, with the growth option, profits can be reinvested in the scheme. This will generate compound interest.
Diversity is the key.
- A diversified portfolio is equally important to benefit from mutual funds although one must tread the risk factor carefully.
- Instead of having a similar type of securities, choose different asset classes.
- This helps in reducing the holding’s exposure to risk.
Kaun Banega Crorepati
Yes, that’s right. One can make a crore through mutual funds if invested properly.
- Go with the equity market. Choose an equity mutual fund.
- With SIPs (Systematic Investment Plan), regular amounts can be added to the investment.
- A diversified asset allocation is critical for better returns. The investor must find a correct balance between the equity and debt mutual funds.
- To earn a crore through a mutual fund, Nimesh Shah, MD & CEO, ICICI Prudential AMC noted that the investor should opt for a monthly SIP plan of Rs 20,000. Given a time-period of 15 years, it would grow to become a crore.
Pay taxes or Play it smart.
- It is indeed advised to shift the funds occasionally. However, selling one’s holding before 1-year results in a 15% tax. Also, selling it after one year brings in 10% tax.
- Instead, the investor can opt for funds which perform consistently and avoid selling the holdings continuously.
Consistently performing mutual funds in India are as follows:
- Among large and mid-cap:
(1) Aditya Birla SL India GenNext Fund- The fund invests in the equity securities which can gain from the consumption patterns rising in India. The NAV as on 06 Sep 2018 is Rs 82.3900. The fund has a 5-year return of 22.75%.
(2) Aditya Birla SL small and midcap fund- As the name suggests, the fund invests in the equity securities of small-cap companies. The main purpose of the scheme is to generate consistent long-term capital appreciation. The NAV as on 06 Sep 2018 is Rs 38.5263. The fund has a 5-year return of 28.27%.
(3) Canara Rob Emerg Equities fund- This holding is a diversified portfolio of large and mid-cap stocks and generates capital appreciation. The NAV as on 06 Sep 2018 is Rs 96.9800. The fund has a 5-year return of 34.24%.
- Among multi-cap:
(1) Aditya Birla SL Pure Value Fund- The fund has a 10-year return of 20.5 % and follows value investing strategy. It is the best match for aggressive investors and it managed to produce consistent results. The NAV (06 SEP 2018) is Rs 57.574.
(2) HDFC Capital Builder Fund- With an aim of generating capital appreciation/income, this scheme cashes in on undervalued stocks. The fund has a 10-year return of 15.71%. The NAV (06 SEP 2018) is Rs 302.7400.
(3) Mirae Asset Great Consumer Fund- This great consumer fund targets the equity securities which are expected to grow due to the consumer demand in India. The fund has a 5-year return of 22.49%. The NAV (06 SEP 2018) is Rs 37.2310.
- Among Small Cap:
(1) HSBC Small Cap Equity Fund- This holding prefers the equity securities of small-cap companies to bring out long-term capital growth. The fund has a 5-year return of 30.27%. The NAV (06 SEP 2018) is Rs 53.7533.
(2) Reliance Small Cap Fund- This fund invests in the equity securities of small-cap companies to bring out long-term capital growth. The fund has a 5-year return of 38.47%. The NAV (06 SEP 2018) is Rs 44.4702.
- Instead of paying a chunk of the returns to agents, investors should go for direct plans.
- Investing through direct plans has become easier with the advent of online investment platforms.
- Direct plans come with a lower expense ratio with a higher NAV (Net Asset Value).
Systematic Withdrawal Plan
- Just like you invested using a systematic plan, you can withdraw your money through SWP.
- A fixed amount can be withdrawn at regular intervals using this plan.
Well, the early bird gets the worm, right? It works the same in the case of mutual funds too. By starting out early, an investor can reap the benefits of compounding.