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MF Queries answered in Economic Times

1) I want to invest my PF amount of Rs 5 lakhs in a mutual fund for a 5 year period. Which mutual fund will be best for this purpose. I need a 10- 12 % return. Also I am operating Rs 5000 recurring deposit for 5 years for my post retirement period and should I switch over to SIP by closing this recurring deposit early because it is taxable. Will SIP give higher return than recurring deposit? —Mukund

A Mutual Fund can be anything from Equity, Debt (Bonds of various types), Gold or a mix of any 2 or3 of these. So it is important for an investor to understand what Mutual Fund he is looking at based on both the risk he is ready to take and the returns expected. From your input i would assume that you want equity / balanced funds since return expected is high. I would recommend diversified multi cap funds such as ICICI Dynamic that have some debt too. That said please understand that you are investing PF proceeds hence invest only amounts that you are comfortable taking some risks with, as markets by nature are volatile and give returns only to the patient investor. MF SIPs are equity investments hence come with considerable risks, they can not be compared to a safe RD/FD. I would suggest that if you dont need the money after completing the 5 year SIP and can wait for 3 years more you can consider an SIP,especially if you have other FDs or bonds etc. If not please do not put all your eggs in one basket, also note that the tax rules on equity can change in future, so investing in equity should not be solely on the basis of past high returns or its tax free status after 1 year.

2) I am 30 years old and I have 10 monthly SIPs of Rs 2000 each since last two years in BSL Top 100, Franklin India High Growth Companies, Franklin Build India, Franklin Smaller Companies, HDFC Midcap Opportunity, ICICI Focussed Bluechip, ICICI FMCG, ICICI Technology, SBI Bluechip and SBI Pharma. All these are in direct plans and growth options. My age is 30 years and I can take high risk long term for 10 years to build fund —Moizz Kara

Congrats on starting a SIP at the age of 28, hope you will be continue investing for the long term even in volatile times. There is no need to have 10 SIP’s, normally 2-3 SIP’s of a large cap, multi-cap & mid-cap fund would do. Sector funds like Pharma and Technology are generally not meant as very long term bets but more of 3-5 year bets, hence if you would like to focus on long term, have 2-3 funds so that it is easy to maintain the portfolio as well. Hope you not only continue your SIP but increase it as well based on your income till 58 and enjoy the returns.

3. I am a doctor by profession and my age is 30 years. I want to invest for accumulating a corpus of about 1.5-2 crore in next 15-20 years for children’s education and around 4 crore for my retirement in next 30-35 years. I can invest about 10-15k(max 20k) per month as SIP, which I can increase by 10% every year. Is this right way to plan? Kindly advise good funds to invest in — Sanket

Heartening to see you plan for your children’s education as well as retirement at 30, While back of the envelope calculations shows that you are on the right track, I would advise you to contact a few financial planners in your city and sit with one to go through a proper financial planning exercise to assess your current financial position, the investment amount monthly, the return required to meet the goals and then we should think of which funds to invest in.

This may take a few hours of your time but can save you lots of time and money in future. Think of it like a health check up we do once with a follow up every year to assess for changes. There are good DIY calculators online too, you can check them for basic planning and then approach a planner. As far as fund selection goes i would suggest a large cap fund such as Birla Frontline or ICICI Bluechip, Multicap funds like Franklin Prima Plus or ICICI Dynamic. All the best.

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