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Jignesh Shah

Registered Investment Advisor , Capital Advisors

How to choose the right funds

 

Questions Answered

Q

guest: I want to invest 5000 per month over a period of 20 years to get the maximum return. Please suggest the best mutual funds to get best return. Also let me know about the MIS in mutual fund from which I can pay my SIP.

Jignesh Shah : 20 years is pretty long time and right approach to invest over longer period in growth assets. SIP is right solution for that. Having said that, we suggest to diversify across various MF categories, say 2/3rd in Large-Cap & Multi-Cap funds and 1/3rd in to Mid-Cap & Small-Cap funds. We like Kotak Select Focus & Birla Equity Fund, within Multi-Cap Eq Fund space. We like Birla Frontline Equity Fund & ICICI Pru Focused Bluechip Equity Fund within Large-Cap space. We like Mirae Emerging Businesses, Franklin Smaller Companies Fund & HDFC Mid-Cap Opportunities Fund within Small-Cap & Mid-Cap Fund categories.
Q

guest: top 5 mutual fund for preparing a portfolio.

Jignesh Shah : Generally, we suggest to diversify across various MF categories, say 2/3rd in Large-Cap & Multi-Cap funds and 1/3rd in to Mid-Cap & Small-Cap funds. We like Kotak Select Focus & Birla Equity Fund, within Multi-Cap Eq Fund space. We like Birla Frontline Equity Fund & ICICI Pru Focused Bluechip Equity Fund within Large-Cap space. We like Mirae Emerging Businesses, Franklin Smaller Companies Fund & HDFC Mid-Cap Opportunities Fund within Small-Cap & Mid-Cap Fund categories.
Q

guest: Hello, Request for your help to decide the top 5 mutual funds in terms of performance in equities, balanced strategies, with a holding period of 5 yrs.

Jignesh Shah : Since markets have run up for last couple of months at decent pace, we would have suggested to have investment horizon of more than 5 years. Also, its not only performance (return) that should go in selection of funds. We would look at multiple criteria in selection of funds - Vintage of fund-house in India, experience of fund manger and specifically his/her expertise in this space (Large-Cap or Mid-Cap or Small & Micro-Cap oriented skill), AuM of fund house and specific fund scheme, risk (volatility) in category of fund and specifically fund scheme, and so on. So after considering all above-mentioned factors better to look at risk-adjusted return and not just return/performance. Also, we would suggest to diversify across 3 main categories of equity funds. Generally, we suggest to diversify across various MF categories, say 2/3rd in Large-Cap & Multi-Cap funds and 1/3rd in to Mid-Cap & Small-Cap funds. We like Kotak Select Focus & Birla Equity Fund, within Multi-Cap Eq Fund space. We like Birla Frontline Equity Fund & ICICI Pru Focused Bluechip Equity Fund within Large-Cap space. We like Mirae Emerging Businesses, Franklin Smaller Companies Fund & HDFC Mid-Cap Opportunities Fund within Small-Cap & Mid-Cap Fund categories.
Q

guest: We are inheriting corpus in excess of 60 Lakhs. We need to invest it for long term (more than 10 years), with expected return of atleast average 15% annualized, without much risk of capital erosion. Can you suggest options, pls.

Jignesh Shah : Respected Sir/Madam, 15% expected return without much risk of capital erosion seems too optimistic assumption. However, investment horizon is decent enough at 10 years. We think, its better to first do risk profiling and discussion around that in terms of volatility and range of movement of prices, will make it clear, what kind of asset allocation is good for investor. After one decides on Strategic Asset Allocation (SAA) between Debt & Equity, its fair and justified way to reach to right expectations of return in next 10 years or so. Assuming, lower interest rate regime in near future, expected rate of return of 15% seems higher as debt portion may yield lower return. Once SAA is crystallised one may look at investing into Birla Short Term Debt Fund, HDFC ST Opportunities Fund, or similar ones which are not taking aggressive bets on duration or credit and also are low exp debt funds. As far as equity portion is concerned, we suggest to diversify across various MF categories, say 2/3rd in Large-Cap & Multi-Cap funds and 1/3rd in to Mid-Cap & Small-Cap funds. We like Kotak Select Focus & Birla Equity Fund, within Multi-Cap Eq Fund space. We like Birla Frontline Equity Fund & ICICI Pru Focused Bluechip Equity Fund within Large-Cap space. We like Mirae Emerging Businesses, Franklin Smaller Companies Fund & HDFC Mid-Cap Opportunities Fund within Small-Cap & Mid-Cap Fund categories.
Q

guest: I have invested in Edelweiss Mid and small cap regular growth since 1 year 7 months of Rs 1000 every month, but the problem is that when i invested it was ranked really excellent and now it rated as \"Average\" and comparing with its peers like HDFC mid cap opportunities fund it is performing way much below and in the scenario of falling markets its fall is highest among its peers. Should I switch to HDFC or wait for it?

Jignesh Shah : We would look at multiple criteria in selection of funds - Vintage of fund-house in India, experience of fund manger and specifically his/her expertise in this space (Large-Cap or Mid-Cap or Small & Micro-Cap oriented skill), AuM of fund house and specific fund scheme, risk (volatility) in category of fund and specifically fund scheme, and so on. So after considering all above-mentioned factors better to look at risk-adjusted return and not just return/performance. Based on our qualitative and quantitative parameters we like Mirae Emerging Businesses, Franklin Smaller Companies Fund & HDFC Mid-Cap Opportunities Fund within Small-Cap & Mid-Cap Fund categories.
Q

guest: Which investment best for tax sever?

Jignesh Shah : Among ELSS - Tax Planning schemes, we like Aditya Birla Sun Life Tax Relief 96, Axis Long Term Equity Fund, Reliance Tax Saver (ELSS) Fund and HDFC Taxsaver Fund.
Q

guest: I\`m senior citizen. I want to invest 5 lacs in debt mutual funds which would give me returns more than FDs. My investment horizon is 5 years. I would be withdrawing returns generated in excess of my principal every quarter to meet day to day expenses. Please suggest me funds for investing.

Jignesh Shah : By and large actively managed funds give return better than Bank FDs, if they have not taken any wrong call on Duration or Credit. So, we prefer low exp ratio Short Term Debt Funds like Birla Short Term Fund and HDFC ST Opportunities Fund to give more consistent risk adjusted return. If you are fine to take some credit risk, you may look at conservative Credit Opportunities Fund where exposure to below AA rated paper is lower. Also, please look at multiple of schemes in space of low exp ratio - Banking & PSU Debt Funds, where return could be better than Bank FDs.
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