January 27, 2012 5:54 pm
I want to do an yearly investment of Rs 1Lac through SIP. Please suggest some good mutual funds to go with that can give good returns in 5 yrs time frame.
Dear Jig, As you are an NRI, so you can’t invest in PPF & already being an NRI, there is no EPF for you as the employer is not an Indian Co. All other things are already discussed by dear Justgrowmymoney, hence not commenting any more. Being NRI, these NRE FDs (these are tax free) are one of the best Debt instruments available as on date.
Equity and Debt must be part of everyone’s portfolio. MF return better than FDs only in the long run not every year. In simple words the recommended allocation to Debt must be the same as your age. A 30 year old can have 30% debt and 70% Equity. In Debt go for PPF and EPF primarily. Beyond this look for Short term debt funds and FDs. If you can lock in high RD rates now (9+%) for some small amount it is a good idea as well.
So It is wise to invest in MFs rather than FD?
Well zero tax is actually applicable to NRE FD which is also fully repatriable.
What do you mean by Day dreaming, i couldnt get it correct dear ashal? do you meant that SBI will be shut down and what we will do then?
I have asked and yep the bank is providing such interest rate to NRIs. What NRI should do?
Jig – The rates set by banks are primarily a function of Inflation. Stocks (so MFs) have an inbuilt cushion against inflation in that rising prices means more and more revenues and earnings for the company => Higher stock prices ==> Higher MF returns. See a detailed treatment here: http://localhost/jagoforum2/sip-vs-ppf/2729/
And what is this story on zero tax?! It may be that no tax is deducted at source (when interest is paid). But one will become a tax evader if they don’t mention this income and pay tax.
Dear Jig, All I can say – Day dreaming is the thing you are talking about. In case the bank starts offering such high interest rates, does it not mean that economy is itself not in a good shape. Just look at the coupon rate offered by Greece Govt. for it’s bonds.
What if like SBI NRE deposits giving 9.25% for 10 years yield become 15%. Safest and more than MFs for 10 Yrs. And that also with Zero tax for NRIs.
Is this a good option to NRE or still you will say person should go with Equity?
Dear Alok, a lot of input to you is already given by dear Ramesh, hence I’m not adding any more at this point of time. If you are in doubt, please inform & we ‘ll surely help you out.
Dear Alok, have you ever tried to drive your car keeping your eyes blindfolded? With out knowing much of you, your income, expenses, age, risk profile, current investments, financial liabilities & many more things – selecting any fund ‘ll not be the right thing for you.
Please do share more info about yourself.
I am 29, married + 1 yr daughter+ parents.
Salary approx 11 lac pa….monthly expense- 23K pm….
Current Investments :
70K in PPF, 45K in ULIPs[ICICI Lime Time Super, Gold(Maximiser)]
1.5L in shared property, 50K in FD, 1L in physical Silver,
2L as Flat EMIs(under construction), 20K in Stocks, 50K in savings
Holding 1 Credit Card(no charges)
Risk appetite: Balanced.
I have small Insurances from my ULIPs(6L), Tata AIG(on Death 15L). Apart from that normally use my Company’s Group Mediclaim policies for Hospitalisations….. But not taken any Term Insurance as of now.
So, same question..advice on combination of Mutual Funds(1L total) to buy.
Also suggest, a term insurance with low premiums & high on settling claims..
1. Make a proper financial plan, written preferably. This will give you a proper idea about the asset allocation (in equity, debt and real-estate).
2. From what you have mentioned, you need to consider the various risks you are getting and then modify your portfolio accordingly. eg, at a young age, a significant chunk of money in the PPF and FD will protect you from downside, but will NEVER give you an above inflation return. While real-estate investments will give you a reasonable return over a longer period of time at the cost of liquidity.
3. Your savings money seems to be too low.
You should be increasing the Emergency Fund and term insurance. Equity investments should come later.
Regarding your query of term insurance, if you declare all your medical history properly, you will be able to get settlement of the claim (in case something happens). No company will give you 100% claim, if you dont declare all important things. Aviva, HDFC, ICICI, Kotak, Religare are all good companies.
If you look at the claim ratio data also, you will find that LIC has the highest number of pending claims. Think!
Also, for a small amount of 1 lakh, get only 1 equity MF, if you have to. I would go with Fidelity Equity / Templeton India Equity Income / Quantum Long Term Equity. But only 1 of them. Dividing your money in different MFs doesnt give you any benefit.
hope this helps you.
Thanks for the prompt reply. The above declared investments are on yearly basis which I have been doing from last 6 years. But currently I started feeling that my profile is too much on Balanced side with no good Mutual funds in kit. So I plan to invest 1L amount on annual basis in Mutual funds.
Apart from what you suggested on MFs, some posts on JI also mentions:
– Franklin India Bluechip
– DSP BR Top 100 (large cap)
– HDFC top 200 ( large & mid cap fund)
Please confine to best 2 or 3 that I should go with.
Also do you think that I should lower investments in PPF, FD & put more in MFs at my age??
I will reiterate: Only a proper written financial plan will help you here. You have to decide what part of your portfolio you are comfortable in having in equities, debt and real-estate.
A very skewed allocation should alert you towards possible high risk situation.
Regarding the 3 funds you mentioned, all of them have been good, but suffer from a restricted mandate (limited to large-cap universe). In my opinion, you should let a competent fund manager (and management house) to be free to select whatever stock they want to get into. Hence, the recommendations I made to you. In the end, it all depends what you are comfortable with.
Putting this in your written plan: “I am selecting a large-cap fund like Franklin Blue-chip fund, because it is managed by one of the best management houses in India, with a very reasonable fund management charge. I will be happy if it beats the sensex/nifty by a reasonable margin over every 3-5 years. I have preferred this fund over DSP Top 100 fund, because of no particular feature, but because I dont want to increase the paperwork!. Also, any other benefits as compared to other groups of funds. ….”
See, I havent mentioned any particular amount of growth – 10-12-15-25%, since by definition, we cannot predict. The quality of the fund is important and writing it down helps you in difficult times (and yes, there can be really very difficult times, when the only help is provided by the written paper AND by keeping the TV off).
Regarding the age factor. Remember, you are saving for ‘more than 15 years beyond’ goals. A predominantly equity-oriented approach is the only above-inflation return scenario, NOT a predominantly debt portfolio.
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