[Jaguar]

Originally Posted by warrioraks

The rules allow VPF to be up to 100% of basic salary. My suggestion was that you increase your VPF contribution to maximum allowed (from 30% to 100%).

You can play around with VPF percentage, lump sum amount and other variables for your situation. But this is more or less how you can pump up VPF balance if you have lump sum to invest.

How is VPF better when compared to investing the same amount in good Mutual funds? Doesn't the latter afford more liquidity?

[warrioraks]

Originally Posted by Jaguar

How is VPF better when compared to investing the same amount in good Mutual funds? Doesn't the latter afford more liquidity?

VPF is better for an ultra-conservative investor like me who has a fear of negative returns, but at the same time is unhappy with the current FD rates.

Considering 3-5 years investment horizon, is there any specific debt mutual fund category you would suggest for me that can generate 2-3% higher returns than an SBI FD?

[adimicra]

Originally Posted by warrioraks

VPF is better for an ultra-conservative investor like me who has a fear of negative returns, but at the same time is unhappy with the current FD rates.

Considering 3-5 years investment horizon, is there any specific debt mutual fund category you would suggest for me that can generate 2-3% higher returns than an SBI FD?

Yes, Short term bond funds (Axis/HDFC/Kotak/IDFC) or banking&PSU funds(I have Axis) should be pretty decent for this time frame.

Example - Axis Banking and PSU fund.
Over the last 6 years, the minimum return given is 7.38% while maximum return is 10.4% and 5 year CAGR is 8.96%.

[warrioraks]

Originally Posted by adimicra

Yes, Short term bond funds (Axis/HDFC/Kotak/IDFC) or banking&PSU funds(I have Axis) should be pretty decent for this time frame.

Example - Axis Banking and PSU fund.
Over the last 6 years, the minimum return given is 7.38% while maximum return is 10.4% and 5 year CAGR is 8.96%.

I am invested in one but I don't think the high returns will sustain once interest rates start rising.

It seems the 2010-12 witnessed interest rates going north. It would be interesting to see how the debt funds performed during this time.

To my utter amazement, I could not find a single short term debt fund on value research which had a launch date prior to January, 2013
Is this an effort to deliberately hide the period where returns might have been on the lower side (or negative)? I don't know. But looks suspicious on the face of it.

[Simhi]

Originally Posted by warrioraks

To my utter amazement, I could not find a single short term debt fund on value research which had a launch date prior to January, 2013
Is this an effort to deliberately hide the period where returns might have been on the lower side (or negative)? I don't know. But looks suspicious on the face of it.

Note: Direct mutual funds were introduced by SEBI in January 2013. You can still see returns of Regular mutual funds prior to 2013 in valueresearchonline. I checked and could see annual returns all the way back till 2010.

[warrioraks]

Originally Posted by Simhi

Note: Direct mutual funds were introduced by SEBI in January 2013. You can still see returns of Regular mutual funds prior to 2013 in valueresearchonline. I checked and could see annual returns all the way back till 2010.

Thank you for correcting me. I wasn't aware of this fact. So I picked ICICI short term fund as an example to understand the returns when interest rates increased in the past (specifically 2010-12).

2010 to 2011 - ROI was 4.5%
2011 to 2012 - ROI was 6.5% annualized

Overall not bad. There have been short periods of negative returns but in a 3-5 year scenario, it seems to be averaging returns over and above 7% consistently.

I am going to definitely consider this fund category as an alternate to traditional FDs.

[Jaguar]

Originally Posted by warrioraks

VPF is better for an ultra-conservative investor like me who has a fear of negative returns, but at the same time is unhappy with the current FD rates.

Considering 3-5 years investment horizon, is there any specific debt mutual fund category you would suggest for me that can generate 2-3% higher returns than an SBI FD?

Okay, I misunderstood your earlier post as VPF to be extremely better compared to other investment avenues.

I am no expert to give you fund suggestions but I believe negative returns are never 100% unavoidable in the short term. Paraphrasing from a podcast I listened to recently,

All it takes is a sick man flying a plane into a building to wipe out all your gains. And nobody can predict an event like that. However, even if you had invested all your money just the day before 9/11, today your portfolio would be more than double.

Basically, don't worry too much about negative returns in the short term. Just diversify your portfolio and choose good products.

[adimicra]

Originally Posted by warrioraks

Thank you for correcting me. I wasn't aware of this fact. So I picked ICICI short term fund as an example to understand the returns when interest rates increased in the past (specifically 2010-12).

2010 to 2011 - ROI was 4.5%
2011 to 2012 - ROI was 6.5% annualized

Overall not bad. There have been short periods of negative returns but in a 3-5 year scenario, it seems to be averaging returns over and above 7% consistently.

I am going to definitely consider this fund category as an alternate to traditional FDs.

I don't think ICICI short term is a good choice in that category. There are much better ones. I did a quick comparison of the debt funds in my portfolio which I am attaching below. The returns given below are for Regular Plans. So, you can expect ~0.5% higher returns for direct plans (check the expense ratios below). Based on your risk profile, I think Axis Banking & PSU fund is a good choice. Hope it helps

[warrioraks]

Originally Posted by warrioraks

Considering 3-5 years investment horizon, is there any specific debt mutual fund category you would suggest for me that can generate 2-3% higher returns than an SBI FD?

Originally Posted by adimicra

Yes, Short term bond funds (Axis/HDFC/Kotak/IDFC) or banking&PSU funds(I have Axis) should be pretty decent for this time frame.

Originally Posted by warrioraks

I am going to definitely consider this fund category as an alternate to traditional FDs.

Originally Posted by adimicra

I don't think ICICI short term is a good choice in that category.

Thanks for sharing the comparison sheet and recommendation.
I took ICICI just as an example and will not necessarily go for it. My previous post was more of an agreement with your statement that short term bond funds seem to be a decent alternate to FDs.

Right now I am invested in Axist short term fund and the returns are nothing to complain about. Need to research some more on PSU and banking funds.

[JediKnight]

Originally Posted by adimicra

Yes, Short term bond funds (Axis/HDFC/Kotak/IDFC) or banking&PSU funds(I have Axis) should be pretty decent for this time frame.

Example - Axis Banking and PSU fund.
Over the last 6 years, the minimum return given is 7.38% while maximum return is 10.4% and 5 year CAGR is 8.96%.

You are making the mistake of extrapolating past returns to the future. A short term debt fund won't be able to generate more than 1-1.5% over the repo rate without taking inordinate risk. With the current repo rate I don't think a risk averse short term debt fund can generate more than 5.5 to 6% returns in the medium term.

[fhdowntheline]

Is it a good time to get into Parag Parikh Long term Equity fund? I intend to invest lumpsum as of now. I have heard a lot of good things about this fund house.

[vivek_lm]

Friends, need your help
Is it a good time to book profit on those MFs that currently return, let's say, > 25%?

I read elsewhere that booking profits should not be a reason for selling MF units (rather, investments should be goal-based. Not sure if I understood what I read correctly). However, I have this feeling that such returns may not hold in the long term. But I'm also not sure as to what should be done with the money thus received since I do not have a debt portfolio in MFs.

PS: I'm an inexperienced investor. I'm invested for the long term (at least 10 years into the future) so I'd like to get the withdrawn money back into equities at an opportune time in the immediate future.

[SmartCat]

Originally Posted by vivek_lm

Is it a good time to book profit on those MFs that currently return, let's say, > 25%? But I'm also not sure as to what should be done with the money thus received since I do not have a debt portfolio in MFs.

PS: I'm an inexperienced investor. I'm invested for the long term (at least 10 years into the future) so I'd like to get the withdrawn money back into equities at an opportune time in the immediate future.

Sell 50% of value of equity funds and move the proceeds into liquid funds. After that, there can be three possibilities:

- Stocks can crash. If that happens, book profits in liquid funds and buy equity funds at lower NAVs
- Stocks can continue moving up. If that happens, book profits in equity mutual funds again and move the proceeds to liquid funds
- Stocks can be stuck in a zone. If that happens, do nothing.

For more information on this strategy, Google the phrase "ASSET ALLOCATION" & "PORTFOLIO REBALANCING"

[prateekm]

Thinking out loud, but what are the negatives of following a MF and directly buying those stocks and realigning the portfolio every month instead of subscribing to the MF?

Pros (that I can think of):

• You save on the 1%+ management fees, which is a lot in the long run. No exit loads too
• You can write a script by scraping sites to automate the entire process of giving weightages and probably buying/selling stocks too

Cons:

• Websites like VR don't share the entire portfolio, but at least 95%+ of the portfolio
• You will have to purchase whole stocks, because of which you might have to invest slightly more than your appetite
• Once a month realigning might not be adequate and one would have to do it more frequently, making it cumbersome?

[SmartCat]

Originally Posted by prateekm

following a MF and directly buying those stocks and realigning the portfolio every month instead of subscribing to the MF?

OR

Sign up for www.smallcase.com

Quality Smart Beta replicates a largecap mutual fund, for example.
https://smallcase.zerodha.com/smallcase/SCSB_0004



Stock picking and adjustment is done automatically (one-click needed), based on the algo. Since your brokerage account is used to pick stocks, charges are negligible if you are using a discount broker like Zerodha
https://zerodha-help.smallcase.com/e...for-smallcases