Advise on Mutual Funds SIP for begineer

POSTED BY Ajay Kumar ON May 1, 2013 10:16 pm COMMENTS (7)

Hi

I have been following your blog/forum for quite some time now and it has enhanced my knowledge about financial planning a lot. But as its said i keep on reading and reading and not doing anything so i finally decided to take a dive in uncertain waters and i am sure advisors like you people i am going to sail through.

to start with i am married and working in mumbai with monthly income of 1 Lakh.

have liabilities of around 70k a month (till 2015) and monthly expenditure of 20k

of the remaining 10k i have started 5k a month for PPF and the other 5k i would like to invest in Mutual funds through SIP route

I Plan to increase my investment in mutual funds yearly basis eg 5k this year then 6k next year and so on.

I have 2 goals In mind for now

  1. Brother’s Marriage (3 years)
  2. Buying a flat (5-7 years) 

My querries are 

  1. What kind of mutual funds are best suited for these 2 goals?
  2. Are direct mutual funds same as regular mutual funds in terms of performance because not much trend is available since it has been only 4-5 months for direct funds?
  3. What are the things to keep in mind when buying a SIP?
  4. I do not have a Demat account and am not KYC compliant i am unable to buy SIP online, I went to my bank ICICI with the KYC forms filled with all proofs etc but they asked the reason for submitting this and on explaining that i want to buy SIP later they told that the SIP forms will have KYC forms in it and its of no use submitting here you will have to go to the ICICI-Prudential office is that true or the fellow just did not want to entertain me because i did not want to take his GSIP (Gauranteed Savings Insurance Plan).

I have done a bit of research of my own and come up with 3 SIP Mutual funds and would like your views on it and suggestions if you have pertaining to my goals.

  1. Franklin India Taxshield Direct (Growth) [invest SIP Rs. 2000 monthly]
  2. SBI Emerging Businesses Direct (Growth) [invest SIP Rs. 2000 monthly]
  3. ICICI Prudential Tax Plan Direct (Growth) [invest SIP Rs. 1000 monthly]

 

Thanks a Lot

7 replies on this article “Advise on Mutual Funds SIP for begineer”

  1. Prasanna Kottapalli says:

    Dear Ajay,

    Please find here how much you need to invest inorder to reach your goals. I worked out 2 plans for your property. 1- 15lacs and the other for 10lacs

    Besides, i believe your fund selections with lockins are the ones which give you tax benefits. I wouldnt say they are bad but you can look beyond tax benefits.

    As Mr. sumit said, you can consider debt funds for your short term goal which is your brother’s marriage and equity for your House purchase. Also, split your amounts in different funds according the calculation mentioned under. You need not select just one fund to put your 9000/-

    Brother’s Marriage Remarks
    Time to Goal 3
    Present Value 300000
    Inflation 7.50%
    Future value 372,689.06 This is what is required when you want
    SIP Amount (9,056.24)

    New Property Remarks
    Time to Goal 7
    Present value 1500000
    Inflation 7.50%
    Future Value 2,488,573.71 Your 1500000 is equal to this amount
    SIP Amount (21,374.55)

    New Property Remarks
    Time to Goal 7
    Present value 1000000
    Inflation 7.50%
    Future Value 1,659,049.14 Your 1000000 is equal to this amount
    SIP Amount (14,249.70)

    Do reply if you have any further doubts on the calculations. The returns calculate above is assumed at 9%.

  2. Dear Ajay, how much amount youw amount for the 2 goals mentioned by you?

    Thanks

    Ashal

  3. Sumit says:

    Let me try to answer your questions –

    1) We should invest in debt funds/fixed income products for any short term goal (less than3-4 years) – equity exposure is good for long term goals only (when you go at least more than 5 years). Obviously your equity MFs can produce better results than debt products in a bull market – but understand the risk involves in it.
    2) The underlying portfolio of direct and regular plan of any fund is same, only difference is in expense ratio (0.5 – 0.7 less for direct plans as brokers are not involved), so in long run direct plans are expected to produce much better results.
    3) Just to clarify – you are not buying SIP – SIP is a plan by which you invest a fixed amount systematically every month (or week, quarter, day etc) in a mutual fund.
    4) DMAT account is not required to buy mutual funds, but yes you have to be KYC compliant. Please understand your bank or any other bank has nothing to do with it. Mutual fund transactions are dealt in AMCs. If you go to Banks, they may act as a broker and can open an investment service account/dmat account for you – by which can invest in MFs regular plans.

    You need to read and follow more about mutual funds in this forum or in other – to learn and understand better,

    1. Ajay Kumar says:

      Thanks Sumit for clearing my doubts, will learn more about MF on the forum.

  4. Prasanna Kottapalli says:

    Hi

    First thing first investing in PPF monthly is waste as the interest calculated on it is at the year end and so no compounding benefit is added to you. You might as well divert that investment also into an equity sip and then remove after 365th day from the date of ur investment to avoid tax. You gotta plan well for this.

    About the 2 goals which you mentioned, it needs more clarity as to if given a chance what would be the present value (today’s value) of the goals mentioned. Based on that i should be in a position to tell you how much you need to save for each goal.

    Fnds look ok to me. I vote for SBI emerging than the other 2 as i feel the other two may not suit your goal requirements and as you have one of the goals nearing in 3 years time sbi emerging shud help due to its aggressive portfolio which suits your timeline of one goal which is in 3 years time frame.

    Do come back with more info.

    1. Ajay Kumar says:

      Thanks for the suggestions Prasanna i did not think about PPF in that ways as shelling out a large sum is inconvenient at the end of the financial year hence wanted to save small amounts every month in PPF. can you suggest some options where i could invest the PPF amount (5k) and then withdraw it after 365 days most of the mutual funds i checked have minimum lockin period of 3 years a few pointers would be very helpful.

      About my goals the amount that i would like to generate for my brothers marriage is just to help my father and i am hoping somewhere around a sum of 2-3 Lakhs
      For my House I am expecting to generate around 10-15 Lakh but given the small investment amount and short term will have to rethink this amount.

    2. Syamantak says:

      “First thing first investing in PPF monthly is waste as the interest calculated on it is at the year end and so no compounding benefit is added to you.”

      — Thats a completely wrong statement. PPF interest is calcualted on 5th of every month. the best way to utilize PPF is to deposit the whole 100000 between 1st and 4th of April of the prevailing FY

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