[audioholic]

Needed some advise from fellow members for my current situation:
I have started SIPs in small amounts in SBI Blue chip, Large and mid Cap and small cap Mutual funds a few months back and they are performing decently. Now due to some ad hoc monetary gains which I have no plan of spending, I want to infuse them into mutual funds for a term of say five years or so depending on any need which may arise at that time but I will lock it for at least 3 years minimum. Considering that, what will be the best way to go about?
1. Make lumpsum investments in the funds I currently am subscribed to with the extra money I have now.
2. Increase SIP installment size and gradually infuse the extra money over a few months
3. Diversify further into more funds or from other fund management cos than SBI.
4. Use the extra money elsewhere, maybe divert it to my equity portfolio and buy shares.

Please pour in your suggestions/views. Just to clarify, I have already split the total chunk of money into different parts for saving, investing and other purposes. Hence, the thought of using this money for anything other than investment is ruled out.

Thanks in advance

[SmartCat]

Originally Posted by audioholic

Make lumpsum investments in the funds I currently am subscribed to with the extra money I have now.

Not recommended. Over the next 6 months, there will be lots of market moving news flow - elections, trade wars, US interest rates hikes etc. Spread your investments across the next 6 months.

Increase SIP installment size and gradually infuse the extra money over a few months

This is even better! For now, park in debt funds and just increase your SIP size.

Diversify further into more funds or from other fund management cos than SBI.

Investing in just one fund house is a bad idea because all AMCs have a certain investing strategy or style. This might not work in all market conditions. Keep funds in atleast 4 or 5 fund houses.

Use the extra money elsewhere, maybe divert it to my equity portfolio and buy shares.

Worth trying out only if you enjoy picking stocks.

[audioholic]

Originally Posted by smartcat

Not recommended. Over the next 6 months, there will be lots of market moving news flow - elections, trade wars, US interest rates hikes etc. Spread your investments across the next 6 months.
Investing in just one fund house is a bad idea because all AMCs have a certain investing strategy or style. This might not work in all market conditions. Keep funds in atleast 4 or 5 fund houses.

Worth trying out only if you enjoy picking stocks.

Thanks for all the points. So lumpsum investment doesnt look like a good idea now. I will look towards gradually investing over the next few weeks. Apart from SBI, I am considering ICICI Prudential for their Bluechip and other funds. 4 to 5 fund houses seems pretty large to me at the current volume of money I am investing. Maybe in the coming months, I will think of diversifying.

[DigitalOne]

Originally Posted by audioholic

Thanks for all the points. So lumpsum investment doesnt look like a good idea now. I will look towards gradually investing over the next few weeks. Apart from SBI, I am considering ICICI Prudential for their Bluechip and other funds. 4 to 5 fund houses seems pretty large to me at the current volume of money I am investing. Maybe in the coming months, I will think of diversifying.

If you are anyway considering a new fund house, then invest lumpsum into an Liquid fund and do an STP to the chosen equity funds.

Liquid funds give a better return than SB accounts, albeit with a little more risk.
Also STPs are easier to manage in terms of starting/Stopping/cancelling.

[hothatchaway]

Folks, what is your feedback on Equity savings funds, say the one offered by HDFC. Is it a good option with a 1-3 year horizon? This is in comparison with ultra shirt debt funds since the debt funds are taxed at slab rates if redeemed less than 3 years. Understand that the equity savings funds are treated as equity funds for taxation and so the post tax returns should be better than ultra short debt funds if held for upto 3 years. However, they do better in a bull market and I guess in the current scenario with impending elections etc these funds may be volatile. Anybody who has been investing in these?

[SmartCat]

Originally Posted by hothatchaway

Folks, what is your feedback on Equity savings funds, say the one offered by HDFC. Is it a good option with a 1-3 year horizon? This is in comparison with ultra shirt debt funds since the debt funds are taxed at slab rates if redeemed less than 3 years. Understand that the equity savings funds are treated as equity funds for taxation and so the post tax returns should be better than ultra short debt funds if held for upto 3 years. However, they do better in a bull market and I guess in the current scenario with impending elections etc these funds may be volatile. Anybody who has been investing in these?

Invest in both equity and debt funds, all the time. Choose a percentage that you are comfortable with - say 50% in equity funds and 50% in debt funds. If you don't mind volatility, invest higher percentage in equity funds.

[roadjourno]

Folks, is there any tool or link you may be able to share which shows the P/E ratios of mutual funds according to their area ? e.g. Large / Mid / Small ? I googled but didnt find substantial results though :(

I saw one graph at this link https://economictimes.indiatimes.com...w/52161166.cms

Thanks, RJ.

[srikanthns]

A dilemma that many of us face:
I have been given a bonus amount yesterday. Presently I am having a housing loan of around 20 lakhs is outstanding payable over 67 months, which is the time for me to retire. (Interest rate 9.2%)
I have MF investments going on.
Now this bonus amount (around 1.8L), shall i repay part of my housing loan,
or shall I plough it back into existing MF subscription probably over 6 months?
Pl guide considering the present market scenario as well as upcoming political scenario (which may impact market also).
Thanks in advance.

[Thebat]

Winds of change flowing strong in the Asset Management industry.

The positions of many smaller AMC's positions have totally changed while the bigger ones continue to strengthen themselves.

DHFL has taken the biggest burnt with a straight 50% drop in AUM.

HDFC seems like there is no stopping with even their liquid fund touching a lifetime high of 97k crores the previous month.

Interesting times ahead.

[SmartCat]

Originally Posted by roadjourno

Folks, is there any tool or link you may be able to share which shows the P/E ratios of mutual funds according to their area ? e.g. Large / Mid / Small ? I googled but didnt find substantial results though

You can check the portfolio PE ratio of an equity mutual fund at valueresearchonline.com portfolio page of such fund.

Eg: Portfolio PE ratio of Birla Sunlife Frontline Equity Fund is 23.5
https://www.valueresearchonline.com/...chemecode=1400

Originally Posted by srikanthns

A dilemma that many of us face:
I have been given a bonus amount yesterday. Presently I am having a housing loan of around 20 lakhs is outstanding payable over 67 months, which is the time for me to retire. (Interest rate 9.2%) I have MF investments going on. Now this bonus amount (around 1.8L), shall i repay part of my housing loan, or shall I plough it back into existing MF subscription probably over 6 months?

Invest in equity MFs instead of reducing the home loan oustanding payable because:

1) Bonus amount you received will not significantly reduce the outstanding payable home loan amount.

2) Over the next 67 months, it is very likely that equity MFs will offer a lot more than 9.2% (interest rate you are paying on the home loan)

[freedom]

Originally Posted by srikanthns

A dilemma that many of us face:
I have been given a bonus amount yesterday. Presently I am having a housing loan of around 20 lakhs is outstanding payable over 67 months, which is the time for me to retire. (Interest rate 9.2%)
I have MF investments going on.
Now this bonus amount (around 1.8L), shall i repay part of my housing loan,
or shall I plough it back into existing MF subscription probably over 6 months?
Pl guide considering the present market scenario as well as upcoming political scenario (which may impact market also).
Thanks in advance.

Logically...
Invest in a good quality multicap fund. If you stay invested all thru the 67 months you will make a lot of gains
Also look at the liquidity situation. If you feel that you don't have enough cash on hand then just put part of the money in a liquid fund.


Ask yourself...
Over the last 3-5 years have you ever though of selling off MFs when the markets starts falling? If yes then better to pre pay the loan.


Interest rates are going to go down. There is no pressing need to pre pay your homeloan. One major downside of prepayment is that you lose out the cushion of liquidity. Once you pay back 1.8L to your lender you can't get it back if you need it for any reason.

[Jaguar]

Originally Posted by smartcat

Invest in equity MFs instead of reducing the home loan oustanding payable because:

1) Bonus amount you received will not significantly reduce the outstanding payable home loan amount.

2) Over the next 67 months, it is very likely that equity MFs will offer a lot more than 9.2% (interest rate you are paying on the home loan)

Would the advice be the same if the Bonus amount is enough to close the home loan altogether?

I have a home saver loan where I can add or withdraw money at will and do not have to pay interest for the money in the account. So, I have parked my extra funds in this account, and pay only about 18-20k in interest after adjusting the tax benifit.

Does it make sense pay the remaining few lakhs and close the loan when I hopefully get my next bonus or keep the status quo to retain liquidity? Standard chartered increased the interest rate to 10.6% last month but are willing to reduce it to 9.6% without any charge.

[SmartCat]

Originally Posted by Jaguar

I have a home saver loan where I can add or withdraw money at will and do not have to pay interest for the money in the account. So, I have parked my extra funds in this account, and pay only about 18-20k in interest after adjusting the tax benefit. Does it make sense pay the remaining few lakhs and close the loan when I hopefully get my next bonus or keep the status quo to retain liquidity? Standard chartered increased the interest rate to 10.6% last month but are willing to reduce it to 9.6% without any charge.

For majority, it gives a great sense of relief when the home loan is closed early and one becomes debt free. So it is a decision that you have to take - accelerated reduction in home loan debt or possible higher returns via equity mutual fund investments.

Since you have a stable salaried job with family health cover, you don't need too much liquidity. Plus, you can fall back on your existing equity mutual fund investments. But I guess its best to have some money in fixed deposits or debt mutual funds - say, your 6 months salary.

[ghodlur]

Originally Posted by Jaguar

Does it make sense pay the remaining few lakhs and close the loan when I hopefully get my next bonus or keep the status quo to retain liquidity? Standard chartered increased the interest rate to 10.6% last month but are willing to reduce it to 9.6% without any charge.

I had closed my loan account in July 2018 with an additional source of income other than salary. I debated for long whether it would be prudent to close the home loan account. The reducing interest exemption (< 1.5L) from Income tax was one of the main drivers for me closing the loan account. I can tell you the releif one gets when one becomes debt free is something different. The EMI amount saved is now being put into 1) Savings 2) Travelling/trips.

I would suggest you to close the loan account provided you invest the saved EMI and don;t splurge on unnecessary things. If EMI is a way to put a restrain on your spending habits, I would suggest to continue it.

[srsrini]

Originally Posted by Jaguar

Would the advice be the same if the Bonus amount is enough to close the home loan altogether?

I have a home saver loan where I can add or withdraw money at will and do not have to pay interest for the money in the account. So, I have parked my extra funds in this account, and pay only about 18-20k in interest after adjusting the tax benifit.

Does it make sense pay the remaining few lakhs and close the loan when I hopefully get my next bonus or keep the status quo to retain liquidity? Standard chartered increased the interest rate to 10.6% last month but are willing to reduce it to 9.6% without any charge.

One point - many home saver accounts let you carry zero or even positive balances. If your bank allows it, you can park your emergency corpus here to make the balance close to zero, but still keep the account going. You can withdraw the money if an emergency occurs.



For all what-if scenarios, you can trust freefincal to have a calculator. Here is one for this situation: https://freefincal.com/calculator-pr...oan-or-invest/