Personal Finance FAQ

Mutual Funds

1. Which is the best Mutual fund to invest for short term ?

There is nothing called as best mutual fund, mutual funds invests in shares and their performance keep going up and down because of which their performance can not be predicted. As mutual funds invest in shares and equities are long term investments, It makes even equity mutual funds a long term investments . So its not at all sensible to try to find “best” mutual funds for short term. For short term you should look at debt options like Fixed Deposits, Debt funds

2. Which is the best Mutual fund to invest for Long term ?

Again, as mutual funds are long term investments , it makes sense to have a really long term view on them. There are many good funds available which have long term good history, some of them are HDFC Equity , HDFC top 200, DSPBR top 100, DSPBR Equity, UTI Opportunities, UTI Dividend Yield, ICICI Discovery Fund and more here and here

3. What is the tax treatment of Mutual Funds ?

Tax treatment of mutual funds is very simple to understand. Incase you earn any profit within 1 yr , then you have to pay tax of 15% on the profits , otherwise if you earn any profits in long term which is more than 1 yr, then its tax free in your hands. However this is true for equity mutual funds where the equity component is more than 65%

4. What are different ways of investing in mutual funds ?

You can invest in mutual funds through an agent , directly through AMC , through your demat account and from websites like, and . Note that an agent and demat account will cost you some money in fees whereas the other platforms are totally free.

5. Can an NRI invest in Mutual funds in India ?

Yes an NRI can invest in mutual funds , however there can be some mutual funds itself who might not allow NRI’s to invest.

6. How many mutual funds should I buy ?

Ideally you should not have more than 5-6 mutual funds because no matter how many mutual funds you have , what really matters is the underlying equity and debt component. Most of the mutual funds are just replica of each other and creates unneccessary confusion . So incase you have a lot of mutual funds and want to clean your portfolio , the best idea would be to reexamine each fund and ask yourself which one would you buy Fresh if given a chance. Then keep only those which you can buy.

7. My mutual fund is performing very badly ? What should I do ?

How much time frame are you looking at ? If you are looking at just few months performance or ever a year performance, its too early to judge it, the real reason why your fund might be doing bad is because of the overall bad performance in market, Its not your fund , but the overall situation which is driving the performance. So better judge a fund in long term and not very short term. If your fund is not doing well in very long term, then you should look for better funds , check out some other funds which have outbeaten their benchmarks in last 3-5 years and are considered as the long term performers.

8. When should  I review my mutual funds portfolio ?

Generally a 1-2 yrs period is good time frame when you should review your portfolio. You should look at cleaning your portfolio for simplicity point of view and see which funds have not beaten its benchmarks. Incase you have not crossed 1 yr, its better not to judge your mutual funds .

9. Should I invest Lumpsum or through SIP ?

Lumpsum investments and SIP investments are for different situations , they cant be compared like this, but in general for a normal investor who is salaried, SIP is a good way of investing in long term.  A lumpsum investment is recommended only for those who can time the market and really understand if the time is good or bad for investments . SIP is for someone who is not following markets and just want to accumulate wealth with disciplined investing over long term.

Life Insurance

1. Should I stop my Endowment/Moneyback Policy ?

Note that a endowment/moneyback policy acquires some worth only after paying 3 yrs premium. Before that if you stop your policy – you loose all your money. Only after 3 yrs of payment it acquires something called as Surrender value, but even this surrender value is very low . Its mostly 30% of the premiums paid (except 1st year premium) just after 3rd year. But as the time passes it would rise from 30% to 100% depending on how much time is left in policy. So you will have to see how much you will get incase of continueing and incase you stop it . Ideally its advised to forget your policy incase it has not completed 3 yrs and incase it has completed 3 yrs , better surrender it

2. How

Q) I have a lumpsum amount, how should I invest it for long term ?

A) Best thing would be invest per month , so you should invest in a DEBT fund and then start a STP to an equity fund . Dont put money in lumpsum if you cant take the huge downside risk in markets .