[nowwhat?]

Originally Posted by bluevolt

I am not sure if this has been discussed - but is Demonetisation going to have any effect on Mutual Fund returns? (negative mainly)

AFAIK demonetization will not affect MF inflows as except for lump-sum and micro-SIPs for less than 50K, no AMC takes any form of cash. Even when they take cash, redemption proceeds are strictly sent to a bank account in the name of the fund holder, so the IT department was always in the know. The vast majority of MF transactions have always been cashless. In fact I spoke to one of only two people at an AMC here in Bangalore, he said no applicant has given him cash in the past 3-4 years. In a nutshell, I don't expect redemption pressure to play havoc with MF returns.

As far as outlook is concerned, for Equity MFs it all depends on how long it takes the dust to settle. The previous PM says GDP will drop 2%, some minister said yesterday GDP will rise 2%. I have no idea what will happen in future, but in my mind the India story is still intact and everything should be fine in a year or two. Reports seem to suggest that the CAPEX cycle spiked up last quarter.

I suspect a lot of action to happen in the bond markets as I think demonetization will see us at historical low interest rates. Of course this has to be seen in the context of the US where it is likely the Fed will get off QE and raise interest rates under Trump, so lower interest rates here may see substantial fund outflows from FIIs.

Please take the above 2 paragraphs with a sprinkling of salt as I am thinking aloud and these are still early days after demonetization.

Originally Posted by anku94

I want to wean my parents off FDs, in the light of lowering interest rates. They're not used to having their retirement savings fluctuate daily and I don't want to put them in the position, hence avoiding funds with any exposure to equity. Something that can give reasonably assured 8-9% CAGR would be great for them.

Honestly, I wouldn't suggest you give any advice to relatives (parents, siblings, or even the extended family). Money problems can quickly escalate and sour a relationship. Having been down that route, I am once bitten twice shy and wouldn't suggest anyone to do that. In fact I don't even give any investment recommendations here on Team-BHP.

That said, FDs, especially long term multi-year ones, may be one of the best avenues these days. If interest rates tank, these FDs will be running on very high yields.

Here's an interesting post on Gilt Funds -> https://freefincal.com/buy-long-term-gilt-mutual-funds/

[bluevolt]

Originally Posted by nowwhat?

Not fully sure if you had existing folios in any of the AMCs you mention. But it is important to note that iSIPs are still relatively new depending on which AMC you are dealing with.
In that case, best way to cancel an iSIP is to inform the AMC via email.

You can also stop the iSIP by removing the biller, but based on my experience AMCs get very cross if you do this. I think they may incur some fees from the bank in the process.

Originally Posted by hserus

SBI needs you to submit the form and kyc documents manually so they can verify your kyc and set up your folio.

I called up the helpline numbers of SBI & ICICI.

SBI people are telling me that it will take a month before my SIP will show up against my portfolio number in the account - sbimf.com.

For submitting registration form, they are saying it is not mandatory, but better to register at their branch as well.

ICICI people are telling to wait for 2-3 days before my transaction request is processed. After 3 days they will generate my folio number and I can then use online login facility.

I hope what all has been told to me is normal procedure with respect to MF.

Birla MF has some issues with their website yesterday, will try again.

[SilentEngine]

Originally Posted by nowwhat?

Here's an interesting post on Gilt Funds -> https://freefincal.com/buy-long-term-gilt-mutual-funds/

Thanks for this link. I learnt something new - 'Modified Duration' of debt funds. I was wondering all this while how a debt fund can attain yearly returns of 15%+ when the underlying debt instruments have a yield of 6-8%.

Originally Posted by J.Ravi

I just now submitted my online request for redemption of my entire investment in Birla Sun Life MF from 2 schemes, viz., BSL Frontline Equity Fund and BSL Top 100 Fund - both Growth-Direct - as their performances were less than half of Franklin India Prima Plus and High Growth Companies Fund in the last 2 years.

Today, I invested ₹ 50 k each in ICICI Prudential Banking and Financial Services Fund - Direct - Growth and Franklin India Smaller Companies Fund - Direct - Growth.

[ghodlur]

Originally Posted by J.Ravi

Today, I invested ₹ 50 k each in ICICI Prudential Banking and Financial Services Fund - Direct - Growth and Franklin India Smaller Companies Fund - Direct - Growth.

Ravi Sir,

What was the rationale for selecting these two funds? Thematic funds like banking - isnt it a risky option??

BSL Front line equity is a fantastic fund, has given me some real good returns as compared to my other equity MF's. Is now the major chunk of my investment.

Originally Posted by ghodlur

What was the rationale for selecting these two funds? Thematic funds like banking - isnt it a risky option?

With India going cashless or less-cash, banking sector will be bullish in the long term, IMO. So, I invested for the first time in ICICI Prudential Banking and Financial Services Fund - Direct - Growth, which has a YTD return of 27.39% and 5-star rating of Morning Star and Value Research. BSL Frontline Equity Fund Growth has also a 5-star rating, but its YTD return is 8.47% only, according to Morning Star.

Franklin India Smaller Companies Fund - Direct - Growth has also a 5-star rating of both Morning Star and Value Research. It has a YTD return of 13.83%. I already have investments in this fund.

[Tapish]

Hi everyone,

I have been tracking a few funds for the past year (couldn't invest earlier due to NRI status) and now i think I am ready to invest. I have a long term horizon and have zeroed in on the following in (almost) equal allocation:

1. Franklin India Smaller Companies- G
2. Birla Sun Life Frontline Equity - G
3. SBI Magnum Midcap - G
4. Birla Sun Life Tax Relief 96 - G (For the 80c limits)

The questions I have are as follows:

1. Does the above make sense. I can take some risk for the time being.
2. I want to do the direct route. Can I set up auto deduct from my account for all these or is it a manual process?
3. I have some lump sum amount to invest. Currently I have this in FDs. Does it make sense to invest this in the above schemes and follow up the SIPs regularly thereby flattening the curve over time. This also helps with the taxation bit since I will keep these for more than one year atleast whereas in FDs, this is getting taxed.
4. What are my other options for the lump sum amount?

Thanks
Tapish

[born_free]

Originally Posted by Tapish

Hi everyone,
1. Does the above make sense. I can take some risk for the time being.

The list is good, all funds have long history and the number of funds is low which is good thing.

2. I want to do the direct route. Can I set up auto deduct from my account for all these or is it a manual process?

If you have already done KYC, the process would be mostly online. You can add the mutual fund as biller to your bank and bank would automatically deduct the money on chosen day. I have been doing this for some of my funds. Better to go via direct route as it saves significant amount over long years.

3. I have some lump sum amount to invest. Currently I have this in FDs. Does it make sense to invest this in the above schemes and follow up the SIPs regularly thereby flattening the curve over time. This also helps with the taxation bit since I will keep these for more than one year atleast whereas in FDs, this is getting taxed.

Yes its good to spread the investment in SIP, another method would be to invest the lump-sum in a Liquid debt fund and do SWP to release money for SIP .

4. What are my other options for the lump sum amount?

As I said you can invest in Liquid fund which will give a little more than FD.

[Tapish]

Originally Posted by born_free

Yes its good to spread the investment in SIP, another method would be to invest the lump-sum in a Liquid debt fund and do SWP to release money for SIP
As I said you can invest in Liquid fund which will give a little more than FD.

Thanks for your comments. Regarding the liquid funds, the tax treatment would be the same as FD and the returns may be uncertain with the current move in interest rates? Am I thinking correct?

[sgiitk]

@Tapish; just a small bit, if you hold a growth fund for over three years, then you get benefit of indexation. One thing for those in higher tax brackets, look at arbitrage funds, returns marginally more than FDs and not taxed if held for over a year.

[nowwhat?]

Originally Posted by Tapish

1. Franklin India Smaller Companies- G
2. Birla Sun Life Frontline Equity - G
3. SBI Magnum Midcap - G
4. Birla Sun Life Tax Relief 96 - G (For the 80c limits)

Funds look fine, but depends on your allocation. Equal SIPs in the first 3 funds will give a mid cap bias, but that may be OK.

Invest in ELSS only if you cannot exhaust your 80C through other means. Also take a look at Axis Long Term Equity.

Originally Posted by Tapish

2. I want to do the direct route. Can I set up auto deduct from my account for all these or is it a manual process?

Most MFs have iSIPs these days. Initial opening of folio may be a bit of a pain depending on MF.

Originally Posted by Tapish

3. I have some lump sum amount to invest. Currently I have this in FDs. Does it make sense to invest this in the above schemes and follow up the SIPs regularly thereby flattening the curve over time. This also helps with the taxation bit since I will keep these for more than one year atleast whereas in FDs, this is getting taxed.

As you're new to MFs, I suggest you keep your FDs and invest fresh funds in MFs until you get the confidence to re-allocate your FDs. Both of these are as different as chalk and cheese, one gives assured returns whereas the other entails living with a whole lot of volatility, MF investment will require a change in mindset and that usually takes time.

Originally Posted by Tapish

4. What are my other options for the lump sum amount?

What @born_free mentioned is the correct approach.

Originally Posted by Tapish

Thanks for your comments. Regarding the liquid funds, the tax treatment would be the same as FD and the returns may be uncertain with the current move in interest rates? Am I thinking correct?

Yes, looks like interest rates will go down over a period of time and liquid funds do have volatility unlike an FD, but then we are only talking about a year at the most. Also interest rates and stock markets have an inverse relationship sort-of, lower interest rates usually lead to a higher stock market.

Basically SIP is preferred into equity MF as that would spread the risk over a year and more.

[Tapish]

Originally Posted by sgiitk

@Tapish; just a small bit, if you hold a growth fund for over three years, then you get benefit of indexation.

Thank you Sir. Will look into those as well.

Originally Posted by nowwhat?

Funds look fine, but depends on your allocation. Equal SIPs in the first 3 funds will give a mid cap bias, but that may be OK.
Invest in ELSS only if you cannot exhaust your 80C through other means. Also take a look at Axis Long Term Equity.

Thanks! I will look at a large cap to balance the portfolio. ELSS is needed since I don't have anything else for 80c. (the lock in for PPF is way too high). I will also look at Axis Long term.

Best
Tapish

[born_free]

Originally Posted by Tapish

Thanks for your comments. Regarding the liquid funds, the tax treatment would be the same as FD and the returns may be uncertain with the current move in interest rates? Am I thinking correct?

The Tax treatment is similar to FD if redeemed within 3 years, after 3 years you get indexation benefit as sgiitk mentioned.

The liquid funds and short term debt funds (in comparison to long term bond and gilt funds) are not affected much by the interest rate fluctuations, as the underlying securities mature within short period of time.

As an example Franklin India Ultra Short Bond Fund - Super Institutional Plan, has been consistently returning 10% CAGR over a 5 year term. This is much better than the FD returns.
You can consider this fund to park your money for short time as it has no exit load and returns are better than FD or Liquid Funds.

I have personally invested my emergency money, in this fund and have never invested in FD as FD's are tax inefficient and we have to pay tax every year.
Debt Mutual Funds allows me to defer my tax liabilities until redemption which is great along with indexation benefits and lower tax rate of 20%.

You can check this link to understand the taxation part in more detail.
http://www.fundsindia.com/blog/mutua...ed-part-i/9107

[Saanil]

Hi Guys,

Are there any mutual funds which track benchmark indexes like NIFTY? Basically I want to invest for long term (more than 5 years) and want to invest in a fund which tracks the NIFTY. Do note that I do not want a fund which has NIFTY as a benchmark but a fund which tracks NIFTY very closely. Any advice will be greatly appreciated.

[nowwhat?]

Originally Posted by Saanil

Are there any mutual funds which track benchmark indexes like NIFTY? Basically I want to invest for long term (more than 5 years) and want to invest in a fund which tracks the NIFTY. Do note that I do not want a fund which has NIFTY as a benchmark but a fund which tracks NIFTY very closely. Any advice will be greatly appreciated.

Yep, we have ETFs and Index Funds in India. Those like SBI Nifty 50 ETF and Kotak Sensex ETF, etc. are traded usually on NSE, whereas others behave like regular mutual funds. Liquidity and how closely they track the index are big factors for ETFs and SBI probably wins among ETFs because of their low expense ratio and substantial EPFO investment. Benchmark Capital was the pioneer in ETFs, they were taken over by Goldman Sachs.and subsequently by Reliance Capital -- All their ETFs end with "Bees". Index Funds offer the convenience of SIP.

Bear in mind though that passively managed funds are not very popular in India as actively managed funds comfortably manage to beat the index most of the time.