Selection of mutual funds for different goals

POSTED BY Vishnumoorthy Adiga P ON April 12, 2014 9:49 pm COMMENTS (13)

Hello All

I am planning to invest 10K(or 12k) per month in SIP. I have planned it as following. I need your valuable inputs on the same.

1) Debt fund(For 1 to 2 years goals): I want keep my emergency fund in this MF(65K) and also do small SIP. Please suggest good fund for this. More importantly, don’t want to see -ve returns here since its for short term.

2) Blended funds(for 1.5 to 4 years goal): Preferably I want Debt to Equity ratio of 70:30 or 60:40(by considering goal duration please tell me if I have to change the ratios). For this also please suggest a good fund.

3) Tax saving fund(for 4 to 7 years goal): I want save some tax with this fund and also handsome returns after 4 years. Please suggest a good fund for this

4)Small & Mid cap fund(for above 7 years goal): I have selected ICICI Prudential discovery fund for this. Please let me know if I can consider other fund also.

5) International Fund: This I have included to get benefit of foreign market growth. This fund I want to use for totally unplanned events(Excess amount needed after all insurance or emergency fund got over). Or add it as extra contributor to any of the above goals.

Please guide me whether my way of planning is good or can be improved? Please give you elite guidance.

Thank you,

with love & respect,
Vishnu πŸ™‚

13 replies on this article “Selection of mutual funds for different goals”

  1. ashalanshu says:

    Dear Vishnu, did you get the answers?

    Thanks

    Ashal

  2. ashalanshu says:

    Dear Vishnu, I liked your frankness and for that congratulations from me to you. πŸ™‚

    Thanks

    Ashal

    1. Vishnumoorthy Adiga P says:

      Thank you ashal.
      Will join you in FB soon πŸ™‚

  3. ashalanshu says:

    Dear Vishnu, if you do not mind, please join me over FB in my group Asan Ideas For Wealth. I can answer here itself but Instead of spoonfeeding you, I w’d like if you dig the answers for all your queries by reading the past discussions in my Fb group as well as you can start new discussions also.

    Thanks

    Ashal

    1. Vishnumoorthy Adiga P says:

      Ashal:
      Please let me know where I can find answers for these specific products related questions

  4. ashalanshu says:

    Dear Rajiv, let me try to answer each Question of dear Vishnu.

    1) Debt fund(For 1 to 2 years goals): I want keep my emergency fund in this MF(65K) and also do small SIP. Please suggest good fund for this. More importantly, don’t want to see -ve returns here since its for short term.
    Wrong thinking for the fact that when you are investing in a market linked product and still saying do not want negative return. Please stay away from debt funds. FYI – even liquid funds may provide negative returns for a short period.

    2) Blended funds(for 1.5 to 4 years goal): Preferably I want Debt to Equity ratio of 70:30 or 60:40(by considering goal duration please tell me if I have to change the ratios). For this also please suggest a good fund.
    Opting Eq. even in 10-20% for such short term goal is inviting trouble. Let me say it honestly, I smell your greed here. You want to earn extra for your buck but do not understand the risk you are taking. There is more to it. The blended funds in your own words, which are called hybrid and popularly known as Mly Income plans with varying Eq. exposure from 5% to 40% are huge risk and a big negative on Tax count. How? You are investing in Eq. for 3-4Y period and still paying tax by counting it as Debt. So Bad Idea Sirji.

    3) Tax saving fund(for 4 to 7 years goal): I want save some tax with this fund and also handsome returns after 4 years. Please suggest a good fund for this.
    Read my replies above. Greed and Greed. πŸ™‚

    4)Small & Mid cap fund(for above 7 years goal): I have selected ICICI Prudential discovery fund for this. Please let me know if I can consider other fund also.
    You can stay invested in the mentioned fund or opt some more funds also. problem with your thinking lies in the time frame you are allocating for each investment. Please invest in Eq. funds only if you can remain invested for next 15-20Y at least. I repeat at least. More holding period is always welcome.

    5) International Fund: This I have included to get benefit of foreign market growth. This fund I want to use for totally unplanned events(Excess amount needed after all insurance or emergency fund got over). Or add it as extra contributor to any of the above goals.
    What ‘ll be you say, if you need money in 2018, today invested @ 1USD to 60 INR rate and in 2018 the USD rate is 40 INR. Yes opposite is also possible but what ‘ll you do if the things happen the opposite to your expectations. Also, taxation wise these international funds ‘ll be counted as Debt funds and you ‘ll lose on Tax also.

    Thanks

    Ashal

    1. Vishnumoorthy Adiga P says:

      Dear Ashal:
      Thanks a lot for that detailed, elite, straight forward suggestions..
      Sorry I was offline for many days and couldn’t reply.

      Surprisingly my MF adviser didn’t give this much insight rather, they advised funds to all the above and started SIPs..!!

      To be frank with you, my plan was influenced by comments given by most analysts that “its going to be bull run in next 3 years”(I shouldn’t have assumed things!).

      I presently have few responsibilities in a span of 1 to 3 years, and I don’t have any long term goals as of now..!!(I know sounds wired but I am very frank with you).

      But after your advice I am clear that I should invest at least for 15 years in equity related MFs.

      I wanted your valuable advices in 2 areas
      1) Analysis of funds with which I have started SIPs
      2)Tax-ability on these funds returns.

      1)Advised funds
      *Tax saving :Canara robeco
      *Small & Mid cap : ICICI discovery
      *Liquid fund : Birla sun life cash fund
      *International fund: Birla sun life International fund
      *Balanced fund : HDFC balanced fund

      Please give your opinion on these funds.

      2) According to my MF adviser, return from fund 1 will not be taxable after lock-in period.
      Return from Fund 3 is non-taxable if its redeemed any time(even in a month also).
      Return from Funds 2,4,5 are taxable if redeemed in a year. After 1 year all are non-taxable.
      But in your post I can see International funds are considered as debt funds and attract taxes.!!!
      Please let me know all the above statements are correct? if not please give me some more clarity. Also please give clarity on how tax calculated on debt funds return.

      Thank you,
      with regards & respect,
      Vishnu

  5. Rajiv94 says:

    I liked the questions and their replies.
    But on the same line i will say, it confused me :(.
    Ashal can you please also let us your take on the questions put up by Vishnu?
    I think a reply with suggestive examples would be a great help here.

    Thanks

  6. Viren Phansalkar says:

    Yes, Vishnu. We all are learning here. Just the other day in this forum, I learnt that there are some MFs which can be traded in secondary market too (donno the purpose and i do not plan to buy it from secondary market).
    Yesterday, I learnt that there is strong correlation (same) between returns of growth and dividend funds. Still trying to absorb that. Read that thread here:
    http://freefincal.com/how-to-calculate-returns-from-dividend-mutual-funds/

    1. Vishnumoorthy Adiga P says:

      Dear Viren:
      Thank you for the link.. It was really good…!!

      Thank you,
      Vishnu

  7. Vishnumoorthy Adiga P says:

    Dear Viren:
    Thank you for the suggestion. Since I am still improving my knowledge on MF, I need to contact a proper FP. What ever plan I charted out, was with what minimal knowledge I have.

    Thank you,
    Vishnu

  8. ashalanshu says:

    Dear Vishnu, your counter comment on Viren’s reply? Is it elite or not?

    Thanks

    Ashal

  9. Viren Phansalkar says:

    Hello Vishnu,

    I guess, you better approach a FP for this.

    I do not think, only debt fund is good option for emergency fund. You may consider having a combo of debt and liquid or liquid and FDs.

    Tax saving funds are typically equity funds. You cannot expect good returns just after 4 years.

    Again, small and mid cap for 7 years, may not be a good idea.

    I hope, you are also aware that your returns from foreign fund can be ‘disturbed’ by currency fluctuations.

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