Help with MF Investment

[Kashif.Baig]

Hello,

I am 31 years old & have never invested in mutual funds before. I'm soon going to be a father & would like to start investing for my kid's future (education + marriage) & hopefully my retirement at age 58. Hence, my investment timeframe is rather long and I would like to invest by balancing out the risk as far as possible (medium to low risk).

Here is the investment strategy that I have worked out. Please advise me if this is the right approach:

Mutual Funds -

[ELSS] Canara Robeco Equity Taxsaver (Growth): Initial investment of Rs.500 & thereafter a SIP of Rs. 1,500 per month (for the next 6 years)

[Large Cap] - HDFC Top 200 (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 2,500 per month (for the next 6 years)

[Mid/Small Cap] - Birla Sun Life Dividend Yield Plus (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 1,000 per month (for the next 6 years)

P.S. - The investments in the above funds to be reviewed at the end of 6 years.

regards,
Kashif Baig,
Bangalore.

 

[nsuresh_rasr]

I think your funds selection are good.But i am not sure why do you want to go for 6 years... May be it's not my style, i always go for an year, so that @ the end of the SIP i can review the fund and then decide to continue or not...

 

[nikrod]

Hello,

I am 31 years old & have never invested in mutual funds before. I'm soon going to be a father & would like to start investing for my kid's future (education + marriage) & hopefully my retirement at age 58. Hence, my investment timeframe is rather long and I would like to invest by balancing out the risk as far as possible (medium to low risk).

Here is the investment strategy that I have worked out. Please advise me if this is the right approach:

Mutual Funds -

[ELSS] Canara Robeco Equity Taxsaver (Growth): Initial investment of Rs.500 & thereafter a SIP of Rs. 1,500 per month (for the next 6 years)

[Large Cap] - HDFC Top 200 (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 2,500 per month (for the next 6 years)

[Mid/Small Cap] - Birla Sun Life Dividend Yield Plus (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 1,000 per month (for the next 6 years)

P.S. - The investments in the above funds to be reviewed at the end of 6 years.

regards,
Kashif Baig,
Bangalore.

Your fund selection as well as your strategy is good.

As pointed out by nsuresh, review performance of your funds atleast in a year. If any of your fund is performing poorly for 2 consecutive years, and performance does not improove, redeem that fund completly and invest in another.

 

[Kashif.Baig]

I think your funds selection are good.But i am not sure why do you want to go for 6 years... May be it's not my style, i always go for an year, so that @ the end of the SIP i can review the fund and then decide to continue or not...

Thanks very much for your reply. I wanted to go for 6 years investment timeframe as I'm simutaneously investing in NSC (which matures in 6 years). Also after reading many comments from the MF Experts, I have heard that better to invest for a longer period via SIP to get the benefit of "Cost Averaging". I don't need the money immediately anyways.

However, I see your point regarding reviewing of the investments at the end of the 1st year & then deciding either to continue in it or not.

Thanks again for your help.

- Kashif

 

[Kashif.Baig]

Your fund selection as well as your strategy is good.

As pointed out by nsuresh, review performance of your funds atleast in a year. If any of your fund is performing poorly for 2 consecutive years, and performance does not improove, redeem that fund completly and invest in another.

Thanks very much for your reply. Since one of the MFs that I wish to invest in is an ELSS, do you think that waiting for 3 years will allow sufficient time to see if the fund is performing well or not?

- Kashif

 

[nikrod]

Thanks very much for your reply. Since one of the MFs that I wish to invest in is an ELSS, do you think that waiting for 3 years will allow sufficient time to see if the fund is performing well or not?

- Kashif

Yes the 3 yesrs time frame would be sufficient.

 

[Kashif.Baig]

Yes the 3 yesrs time frame would be sufficient.

I have now decided to increase the quantum of monthly investment to Rs.10,000 per month. Hence, I have shortlisted the following funds. Please help me out with your views on these:

[Large Cap] - HDFC Top 200 (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 2,500 per month

[Multi Cap] - Reliance Growth Fund (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 2,500 per month

[Balanced] - HDFC Prudence Fund (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 1,500 per month

[Mid/Small Cap] - Birla Sun Life Dividend Yield Plus (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 1,000 per month

[Mid/Small Cap] - ICICI Prudential Discovery Fund (Growth): Initial investment of Rs.5,000 & thereafter a SIP of Rs. 1,000 per month

[ELSS] - Canara Robeco Equity Taxsaver (Growth): Initial investment of Rs.500 & thereafter a SIP of Rs. 1,500 per month

thanks very much in advance,
Kashif.

 

[simple_trader]

Dear Kashif.Baig,

One suggestion about increasing your investment size, do not increase investment size too much, rather invest small regularly and do it for long time. If you invest too much and market under-performs for long time, then it will have bearing in your mind. Go small, so that you do not see too much fluctuation in your total asset (equity+debt).

Also plan for withdrawal of the fund well before. It would not be redeeming everything in single day. You would be needing STP kind of thing for last a few years.

Hope this helps.

 

[Kashif.Baig]

Dear Kashif.Baig,

One suggestion about increasing your investment size, do not increase investment size too much, rather invest small regularly and do it for long time. If you invest too much and market under-performs for long time, then it will have bearing in your mind. Go small, so that you do not see too much fluctuation in your total asset (equity+debt).

Also plan for withdrawal of the fund well before. It would not be redeeming everything in single day. You would be needing STP kind of thing for last a few years.

Hope this helps.

Thank you for your suggestions. It clearly makes sense to increase the quantum of investment a little by little. However, my brother who has been investing in MFs for around 4-5 years informed me that the trend for the equity markets is towards the negative side for the next 8-12 months due to Eurozone issues & high likelyhood of interest rate hikes. Hence, his suggestion was that this would be a good time to start investing. Using this as the background, I have decided to increase the monthly investment amount.

Please let me know your thoughts on the portfolio of funds indicated above.

thanks,
Kashif.

 

[simple_trader]

Thank you for your suggestions. It clearly makes sense to increase the quantum of investment a little by little. However, my brother who has been investing in MFs for around 4-5 years informed me that the trend for the equity markets is towards the negative side for the next 8-12 months due to Eurozone issues & high likelyhood of interest rate hikes. Hence, his suggestion was that this would be a good time to start investing. Using this as the background, I have decided to increase the monthly investment amount.

Please let me know your thoughts on the portfolio of funds indicated above.

thanks,
Kashif.

Dear,

Please do not go by those micro analysis and keep some expectations in mind in shorter term. In case market underperforms, then you may see that your fund value is lower in shorter term. This will affect your mind and in a result, you may lose interest in equity investing and even result into withdraw of the fund. Ultimately, your asset building plan will get affected and in the process, you will not only lose some money, but also some valuable time.

Hence I suggested go by small, increase small, be long with the market. Hopefully it will build good asset for you.

Remaining money you can keep in safer assets.

It is like this, if we increase too much in equity, if we have 10L today, after 3 years we may see 7L, after 5 years 6.5 L, after 10 years 25L, after 12 years 35L.

This kind of fluctuations can affect our mind in 3rd year, 5th year.