I am 42 and plan to invest Rs 1,000 every month through the SIP (systematic investment plan) mode for the next three years. I wish to invest in the US market through the mutual fund route. In this regard, I want to know if I should choose FT India Feeder – Franklin US Opportunities or MOSt Shares NASDAQ 100 ETF. Kindly advise.
V. Jagan
It is interesting to note that you wish to invest overseas. While this move is desirable, given the volatility in the Indian markets, you must understand that your overseas investments must only be for the sake of diversification and must not account for more than 5-10 per cent of your portfolio. We also hope that you have invested in other domestic funds before taking the plunge overseas, even if the amount that you wish to invest abroad is not that substantial.
Coming to your query, it is important to know the difference between the two schemes that you have mentioned. The FT India Feeder - Franklin US Opportunities is a fund-of-funds. The MOSt Shares NASDAQ 100 ETF is a passive investment made in an exchange-traded fund. The former is a more diversified fund, while the latter slants towards technology stocks, while also investing in pharma and consumer stocks.
We would suggest investing in FT India Feeder – Franklin US Opportunities, among the two choices. In rupee terms, the fund has given returns of over 34 per cent in the past one year.
You must note that there is a minimum investment of Rs 5,000 to be paid for buying units initially. It would also be advisable to check with the fund house if a SIP investment is allowed for Rs 1,000. You can also check with mutual fund investment portals on whether they allow you to directly start a SIP for smaller amounts.
*** I am 35 and recently received Rs 45 lakh through sale of employee stock options. Assuming that debt funds are safe, I invested Rs 10 lakh in FMP (fixed maturity plan) and debt funds of HDFC and Franklin Templeton. However, the returns came down last week and have now gone into negative territory.
Please advise as to whether debt funds are safe. How should I invest the balance Rs 35 lakh? I have five more years to take VRS and want to use this amount for my retirement corpus (other than my PF). I want the portfolio to generate post-tax returns of 8 per cent annually for five years.
Seema While debt funds are generally safe, they are subject to price risks based on the interest rate scenario. Owing to the RBI’s moves aimed at tightening liquidity and curb the fall in the rupee, yields have risen while bond prices have fallen, as a result of which you have suffered losses. It is unlikely that you would have any losses in your FMP portfolio, though. You have not given the specific scheme names, so commenting on them becomes difficult.
Debt fund managers, however, believe that this correction presents a buying opportunity for investors with a medium-term time-frame.
Now, given that you have just five years to take voluntary retirement, investing in safer instruments is an ideal option. This is especially so given that you have set aside the amount of Rs 35 lakh for your retirement kitty.
You can consider investing in monthly income plans that invest in a variety of debt instruments and are relatively safer.
But instead of directly putting your money in these schemes, we recommend a different strategy.
Invest the amount in a fixed deposit with a monthly interest payout scheme. Invest this interest amount in MIPs. You can opt for the dividend option if you wish to get regular cash flows. The options you can consider are Reliance MIP, Birla Sun Life MIP II – Savings 5 and HDFC MIP - Long Term Plan.
If you can take a little bit more risk, you can consider investing the interest amount in balanced funds, such as HDFC Balanced, Tata Balanced, Birla Sun Life 95 and ICICI Pru Balanced.
*** I am a resident of Imphal where investment awareness is very poor. I am 38 years of age and work for a micro finance company. I want to start investing for my son’s higher education. He is one-and-a-half years old. Please advise me on how to invest, especially in the light of the location factor. I can invest Rs 10,000 every month for 15 years. What will be the corpus that I am likely to have in place?
A. Budhachandra Singh We understand your difficulty in investing given the remote location in which you live. But you may note that most banks and fund houses in Imphal have the electronic clearing service (ECS) facility, by which you can set up systematic investment plans in mutual funds and put aside specified amounts every month. Many fund houses and online mutual fund distributors also allow you to invest directly online, so location should not be a disadvantage. Of course, there would be one-time paper work in terms of setting up the ECS mandate, submitting PAN number, application form, address proof, etc., which may sound daunting but is actually quite simple.
Coming to your query, it is nice to note that you wish to save for your son’s education at such an early stage.
Since you have a 15-year time frame, we would recommend adding a couple of large-cap funds and a balanced scheme.
Spread out Rs 10,000 as follows: Invest Rs 4,000 in HDFC Children’s Gift Plan – Investment Plan, which allows you to invest for a minor. Park Rs 3,000 each in Franklin India Bluechip and Quantum Long Term Equity, if you have a moderate risk appetite. But if you want to play it safe, invest Rs 3,000 each in balanced schemes, such as ICICI Pru Balanced and Birla Sun Life 95. Coming to the second part of your question, it is not possible to predict the exact amount that you will get after 15 years. But if your investments earn 12 per cent annually, then you would be able to generate close to Rs 75 lakh after 15 years.Review the performance of the funds regularly, say, once every year and take corrective action. Book profits in case of strong rallies in the market and move proceeds to safer avenues.