[carboy]

Thank you for the reply

Originally Posted by SmartCat

For a newbie, Index MF is actually a good first step.

No, he wants to go for managed funds. And he isn't really a total newbie.

Originally Posted by SmartCat

Another option is to invest in hybrid fund that invests up to 65% in equities and 35% in bonds.

Again, he already has pure debt investments separately. This money is to totally go towards equity.

So the questions are

- What are different categories of Equity funds, he should split his money in?

- In each category (which he would invest in), which would you consider as the best fund currently.

[SmartCat]

Originally Posted by carboy

So the questions are - What are different categories of Equity funds, he should split his money in? - In each category (which he would invest in), which would you consider as the best fund currently.

I will let somebody else make specific recommendations. I avoid recommending a fund because I won't be able to track or follow up if any changes are to be made (Eg: exiting a fund or stopping SIP).

One size fits all category for managed funds is Multicap funds. We let the fund manager decide where (sector or market capitalization) he wants to invest.
https://www.valueresearchonline.com/...s&tab=snapshot

[sagarpadaki]

Originally Posted by thoma

I've never done an SIP before. So I'm confused between OTM and biller options. Should I personally visit the bank or AMC for either of these?

No need to visit bank for either of them .

Both of them work and are easy to setup. Bank mandate takes a bit longer time to get enabled. Choose whichever you like

[Latheesh]

For each big fall I invested amount equal to SIP amount to my large cap fund. Do not want to take more risk.

[ValarMorghulis]

Originally Posted by Latheesh

For each big fall I invested amount equal to SIP amount to my large cap fund. Do not want to take more risk.

Somehow both my equity portfolio and SIPs are down. Arrrghhh


@Smartcat: Any suggestions on buying Gold ETF in the present market? Are they safer from a specific scheme like SBI or HDFC?

[navin]

Originally Posted by JMaruru

Please share the names for the benefit of other members.

Sorry. My FIL and I are both long term investors. We meet about twice a week for lunch and never discuss the market or stocks.

Originally Posted by saket77

Actually the problem with recommending scrips are many.

Thanks.

Originally Posted by SmartCat

You should pick stocks only if you enjoy the process.

Thanks.

Originally Posted by sagarpadaki

I will stick to Mutual Funds then!

Please choose MFs with the same diligence you would use for stocks. Please!!

[ashish.uno]

Originally Posted by carboy

Thank you for the reply

No, he wants to go for managed funds. And he isn't really a total newbie.

Again, he already has pure debt investments separately. This money is to totally go towards equity.

So the questions are

- What are different categories of Equity funds, he should split his money in?

- In each category (which he would invest in), which would you consider as the best fund currently.

The markets are down right now and it could be a good idea to accumulate units through good mutual funds.
The categories are obviously and broadly speaking Large cap, mid cap, multi cap and small cap.
In my opinion, it could be a good idea to stay with large caps if his horizon of investment is 5 years or less as there are too many global factors which might depress the stocks performance here. So better safe than sorry.
Incase he intends to stay invested for a decade then suggest him to buy a liquid fund and set up STP (spread over 6 months) to an equity fund of his choice.

Two things to remember here.
1. Withdrawal of money is similar to investing. If the market is down 20% you will lose money cashing out at once. Therefore, prior to the targeted withdrawal date STP should be set from equity fund to liquid fund or bank account. (again spread over at least 6 months)

2. Selection of good mutual fund is important. Though past performance is no indicator of what's about to come, consistency and same team managing the fund over a considerable period of time inspires confidence. There is no best fund, although you could check out PPFAS.

[SmartCat]

Originally Posted by ValarMorghulis

@Smartcat: Any suggestions on buying Gold ETF in the present market? Are they safer from a specific scheme like SBI or HDFC?

Go for Gold if you fear a global recession because of coronavirus. Money chases Gold and 10 yr US treasury bonds during such times. Since Gold is priced in USD, it offers some returns when INR depreciates against USD. So Gold works well as an investment when there is trouble in the Indian economy too. Historically, Gold has returned about 10% to 12% pa on an average. More than fixed deposits and bonds, but less than equities and real estate.

If you want to invest in Gold for the long term, Sovereign Gold Bonds is the best option since you earn 2.5% pa interest on your investment. But if you are not sure about holding for the long term, go ahead and invest in GOLD ETFs. Things to watch out for is liquidity (invest in Gold MF instead) and "tracking error"(difference in returns between a particular and Gold price).

Another option is to invest in multi-asset funds. The fund manager decides on allocation between stocks, bonds and gold.
https://www.valueresearchonline.com/...s&tab=snapshot
Most funds in the list are either too small or fund of funds. But ICICI Pru Multi-Asset fund has been around since 2002, has Rs. 11,000 cr AUM and returned 20% per year on an average.
https://www.valueresearchonline.com/...lti-asset-fund

Do proper due diligence before investing though!

[AltoLXI]

Not related to MFs though.

Looking at all the turmoil going through in the banking sector, I am planning to close the FDs and buy the GOI bonds which have lock-in period of 7 years. They have fairly comparable to the FD interest rates. Looking to utilize the maturity value to fund kid's college education.

How is the safety of these bonds? Though read that GOI is guarantor, one never knows, if they come up with ideas like FRDI bills.

[SmartCat]

Originally Posted by AltoLXI

Looking at all the turmoil going through in the banking sector, I am planning to close the FDs and buy the GOI bonds which have lock-in period of 7 years. They have fairly comparable to the FD interest rates. Looking to utilize the maturity value to fund kid's college education..

Take the mutual fund route instead, to invest in GOI Bonds. You can redeem your investment in T+1 days. That's because bonds are always tradeable (like stocks). But retail is not allowed to trade (fund managers can). Now, there are two categories of Govt Bond Funds (also called G-sec funds or Gilt Funds or Govt Securities fund) -

- 10 Yr Constant Duration Funds
https://www.valueresearchonline.com/...s&tab=snapshot
- Variable Duration Funds
https://www.valueresearchonline.com/...s&tab=snapshot

Do NOT opt for constant duration funds. They are more volatile (roughly 1/3rd volatility of equity funds) and its NAV has fallen up to 15% per year too, albeit temporarily. This happens when RBI increases interest rates. But when RBI slashes interest rates drastically, these funds have returned up to 30% per year.

Go for variable duration G-sec funds. These are less volatile than the former, and are not affected that much by interest rates. That's because they invest in RBI bonds across duration (3 months, 1 year, 5 year, 10 year etc). If the fund manager thinks interest rates will rise, he will invest in 90 day treasury bonds.

So when investing in G-sec funds, remember that -

- There is ZERO credit risk
- NAV can rise and fall, based on RBI interest rate decisions
- These are not short term investments. You should be ready to hold for 5 to 7 years, to ride through the minor ups and downs
- These funds have historically returned 8% per year on an average.
- Can offer huge returns when there is a global/Indian economic/geopolitical crisis (because RBI will slash rates).

[gupta_chd]

@SmartCat, sir I have one specific question. If a large bank or financial institution or NBFC fails, is there any impact on it's mutual fund arm even if it is wholly owned. My understanding is that there should not be much impact as the money is invested in securities and debt instruments which should be safe. Please correct if it is wrong or wrong to some extent?

[SmartCat]

Originally Posted by gupta_chd

If a large bank or financial institution or NBFC fails, is there any impact on it's mutual fund arm even if it is wholly owned. My understanding is that there should not be much impact as the money is invested in securities and debt instruments which should be safe. Please correct if it is wrong or wrong to some extent?

AMC's business model is such that it makes money consistently only when they can deliver decent performance over time. If they perform poorly, customers will flee with their money. So by design, they have to do things right continuously for many years. This ensures that AMCs are "clean" businesses, with low probability of fraud.

Unlike NBFCs or banks, AMCs don't indulge in lending their own money or do they have the need to borrow money (for growth). So they don't have the NPA risk that NBFCs or banks carry.

So AMCs end up being a valuable asset owned by NBFC or banks. And when these NBFCs/banks are in trouble, these assets will have lot of takers.

[sushantr5]

I want to park considerable amount for two months. I am feeling little uncomfortable with savings account or normal fixed deposit. I am afraid of account scams.

I would like to know, is the liquid fund option to feel secure?

[carboy]

Originally Posted by sushantr5

I want to park considerable amount for two months. I am feeling little uncomfortable with savings account or normal fixed deposit. I am afraid of account scams.

I would like to know, is the liquid fund option to feel secure?

Upto 5 lakhs is insured per account at each branch. So the safest option is FDs.

[thoma]

Originally Posted by carboy

Upto 5 lakhs is insured per account at each branch. So the safest option is FDs.

Earlier it was one lakh, right?

I always had this question in mind when it was one lakh. If I split my 3 lakh into 3 FD accounts, will I be protected for each or just for the amount limit of 1 lakh irrespective of number of accounts (same branch)?

One another thing is that there are only few (if any) FD that give considerable advantage over SB account for a period of 2 months.