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Dev Ashish  | Answer  |Ask -

MF Expert, Financial Planner - Answered on Sep 30, 2023

Dev Ashish is a fee-only SEBI-registered investment advisor with over 15 years of active experience in the stock market. In 2011, he founded StableInvestor, a platform for personal finance and financial planning.
He provides professional fee-only investment advisory services to small and high networth individuals in order to help them achieve their financial goals.
Ashish's views are regularly published in national business publications. He has an MBA degree from NMIMS, Mumbai and also holds an engineering degree.... more
Dipali Question by Dipali on Sep 24, 2023Hindi
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Can you suggest a good MF ,with good returns. Long term and less risk

Ans: If you plan to invest for the long term, then equity funds are suitable vehicles to participate in equity returns. The idea of less risk does not clearly specify your risk appetite, but if you want to go for pure equity funds, then choose from largecap/flexicap funds and if you want a comparatively safer (with some debt allocation in addition to equity), then you can consider Aggressive Hybrid Funds as well.

Note (Disclaimer) - As a SEBI RIA, I cannot comment on specific schemes/funds that are provided or asked for in the questions in the platform. And the views expressed above should not be considered professional investment advice or advertisement or otherwise. No specific product/service recommendations have been made and the answers here are for general educational purposes only. The readers are requested to take into consideration all the risk factors including their financial condition, suitability to risk-return profile and the like and take professional investment advice before investing.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 03, 2024

Asked by Anonymous - Jun 03, 2024Hindi
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Sir, which MF is best for one time safe investment to get maximum return?
Ans: Choosing the Best Mutual Fund for One-Time Safe Investment

Understanding the goal of a one-time safe investment is essential. You want a balance of safety and maximum returns. It’s great that you’re considering mutual funds for this purpose. Let’s dive into the details.

Importance of Investment Goals

Your investment goal influences the type of mutual fund suitable for you. Understanding whether your goal is wealth preservation, moderate growth, or aggressive growth helps in selecting the right fund. Each goal requires a different approach and fund type.

Types of Mutual Funds

Mutual funds come in various types, each with its risk and return profile. It’s essential to understand these types before making an investment decision.

Debt Funds

Debt funds invest in fixed-income securities like bonds and treasury bills. They are considered safer than equity funds and provide regular income. They suit conservative investors who prioritise capital preservation over high returns.

Balanced Funds

Balanced funds, also known as hybrid funds, invest in a mix of equities and debt. They offer a balance between safety and growth. These funds are suitable for investors looking for moderate risk and moderate returns.

Equity Funds

Equity funds invest in stocks and aim for higher returns. They carry higher risk compared to debt and balanced funds. They are suitable for investors with a higher risk appetite and a long-term investment horizon.

Choosing Safety with Debt Funds

For one-time safe investment, debt funds are often recommended. They offer stability and lower risk compared to equity funds. Debt funds come in various categories, each with different risk and return profiles.

Liquid Funds

Liquid funds invest in short-term instruments like treasury bills and commercial papers. They offer high liquidity and safety, making them suitable for short-term goals. They provide moderate returns with low risk.

Short-Term Debt Funds

Short-term debt funds invest in securities with a maturity of one to three years. They offer slightly higher returns than liquid funds but come with slightly higher risk. They are suitable for investors with a medium-term horizon.

Dynamic Bond Funds

Dynamic bond funds invest in debt instruments with varying maturities. Fund managers actively manage the portfolio based on interest rate movements. These funds offer potentially higher returns but come with moderate risk.

Analysing Returns and Risk

When choosing a debt fund, it’s crucial to analyse historical returns and risk. Look for funds with consistent performance over different market cycles. Lower volatility and stable returns are indicators of a good debt fund.

Role of Credit Rating

Credit rating of the securities in which a debt fund invests is vital. Higher credit-rated securities offer more safety but may provide lower returns. Balancing credit rating with returns helps in selecting the right debt fund.

Benefits of Actively Managed Debt Funds

Actively managed debt funds can adapt to market conditions. Fund managers can switch between securities to optimise returns and manage risk. This active management can lead to better performance compared to passive debt funds.

Disadvantages of Index Funds

Index funds track a specific index and cannot outperform it. They lack flexibility and adaptability to market changes. This limitation makes them less suitable for achieving maximum returns with safety.

Advantages of Regular Funds

Regular funds offer the expertise of a Certified Financial Planner. Investing through regular funds ensures professional management and personalised advice. This guidance helps in aligning your investments with your financial goals.

Disadvantages of Direct Funds

Direct funds may have lower expense ratios but lack professional guidance. Without expert advice, managing investments can be challenging. Regular funds provide the added benefit of expert advice and better alignment with goals.

Tax Efficiency in Debt Funds

Debt funds are tax-efficient compared to traditional fixed deposits. Long-term capital gains from debt funds are taxed at a lower rate after three years. This tax efficiency can enhance the net returns from your investment.

Importance of Investment Horizon

The investment horizon is critical in selecting the right mutual fund. For short-term goals, liquid funds and short-term debt funds are suitable. For medium to long-term goals, dynamic bond funds offer better potential returns.

Periodic Review and Rebalancing

Regularly reviewing and rebalancing your investment portfolio ensures alignment with goals. Market conditions and personal circumstances change over time. Periodic review helps in making necessary adjustments to optimise returns.

Understanding Expense Ratios

Expense ratio is the fee charged by mutual funds for managing your investment. Lower expense ratios mean higher net returns. However, it's essential to balance cost with the benefits of professional management.

Selecting a Reputable Fund House

Choose mutual funds from reputable fund houses with a proven track record. Reputable fund houses offer better management and governance. They ensure your investment is managed with high standards of professionalism.

Emergency Fund and Liquidity

Maintaining an emergency fund separate from your investment is vital. It ensures liquidity for unforeseen expenses without disrupting your investment. Liquid funds can also serve as a part of your emergency fund due to their high liquidity.

Risk Assessment and Diversification

Assessing your risk tolerance is crucial before investing. Diversification within debt funds can spread risk and enhance returns. A well-diversified portfolio balances safety with potential for higher returns.

Consulting a Certified Financial Planner

A Certified Financial Planner can provide personalised advice based on your financial situation. They help in selecting the right mutual funds that align with your goals. Professional guidance ensures that your investment strategy is effective and efficient.

Conclusion

Investing in mutual funds for one-time safe investment requires careful analysis. Debt funds offer a balance of safety and returns. Consulting a Certified Financial Planner ensures that your investment aligns with your goals and risk tolerance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7201 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 2024

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Hi sir right now 22 I want to invest in MF around 2500 per month for next 28 years suggest some best MF
Ans: Investing in mutual funds is a smart decision. It's a great way to build wealth over time. Starting at 22 gives you a long investment horizon, which is advantageous.

Benefits of Mutual Funds
Diversification: Spreading risk across various assets.
Professional Management: Managed by experienced fund managers.
Liquidity: Easy to buy and sell.
Convenience: Suitable for different financial goals.
Evaluating Investment Options
Avoid index funds. They often track market indices passively. This means lower returns compared to actively managed funds.

Disadvantages of Index Funds:

Lower Flexibility: Limited to the index performance.
No Active Management: No adjustments based on market conditions.
Potential for Mediocre Returns: Follows the average market performance.
Instead, consider actively managed funds. They aim to outperform the market. Professional fund managers adjust the portfolio based on market trends.

Benefits of Actively Managed Funds
Higher Return Potential: Aims to beat the market.
Professional Management: Fund managers actively monitor and adjust the portfolio.
Flexibility: Can adapt to market changes.
Regular Funds vs Direct Funds
Investing through a Certified Financial Planner (CFP) has distinct advantages over direct funds.

Disadvantages of Direct Funds:

Lack of Professional Guidance: No expert advice.
Time-Consuming: Requires constant monitoring.
Higher Risk: Without professional insights, the risk increases.
Benefits of Regular Funds with CFP:

Professional Advice: Access to expert insights.
Better Decision Making: Informed investment choices.
Regular Monitoring: Constant portfolio reviews and adjustments.
Risk Management: Strategies to mitigate potential risks.
Recommended Strategy
Diversified Portfolio: Invest in a mix of large-cap, mid-cap, and small-cap funds.
Systematic Investment Plan (SIP): Invest Rs 2500 monthly via SIP.
Long-term Horizon: Continue investing for the next 28 years for optimal returns.
Steps to Start
Choose a Reliable Fund House: Ensure credibility and good track record.

Consult a Certified Financial Planner: Get personalized advice.

Start SIP: Automate your monthly investments.

Review Regularly: Monitor and adjust based on performance.

Final Insights
Starting early with mutual funds is commendable. By avoiding index funds and opting for actively managed funds, you can aim for better returns. Investing through a CFP provides professional guidance, ensuring informed decisions and effective risk management. Keep investing consistently, review periodically, and stay focused on your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Milind

Milind Vadjikar  |741 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 03, 2024

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What happens when a Mutual Fund company shuts down / gets sold off?
Ans: Hello;

If a mutual fund company gets sold or fails, the process is prescribed by SEBI:

In case MF company is Sold,
The new fund house may:
1. Continue the scheme with a new name and management.

2. Merge the scheme with similar funds and offer investors the option to exit without any exit load.

In case MF company shuts down,
The fund house will:
1. Pay out investors based on the fund's last recorded Net Asset Value (NAV) and the number of units the investor holds, after deducting expenses.

2. If the company is not in a position to do so then SEBI may liquidate the funds assets and distribute the proceeds to unit holders.

It is also pertinent to note that mutual fund regulation in India is one of the most stringent and hence best, from investor's point of view, globally.

This is not just in theory. We have seen how the Franklin Templeton abrupt closure of debt funds was handled with surgical precision, by SEBI, with no loss to unitholders.


Skin in the game regulation mandates that 20% salary of key mutual fund personnel and fund managers is paid in terms of units of their funds with a 3 year lock-in.

The stocks and bonds purchased by the AMC for the fund are held by a custodian, appointed by the trust that administers the fund.

The trust engages into a investment management agreement with the AMC for managing the fund as per their mandate and within regulatory guidelines.

Registrar and Transfer Agents handle the investor registration,kyc, maintaining records, providing account and tax statements etc.

Happy Investing;
X: @mars_invest

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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