The confidence level of retail investors was once again shaken with the continuous volatility in the global and domestic share market during the month of January and the first fortnight of February. But long-term investors need not worry too much about this volatility. They should not panic but invest with a long-term horizon.
To soothe investors' nerves we have been addressing the issues and concerns of retail investors as they are sending us queries to be answered.
In this series, V Ramesh, CEO, Prabhudas Lilladher Financial Services has answered all the questions sent by readers.
There is a correction in domestic equity market. Is this the right time to redeem mutual funds (MFs) units which we are holding for more than a year?
No. The longer you hold, the better it would be, generally speaking.
Currently the market is falling not because of any concern which is internal to our country. Therefore, this is an opportunity to invest more in mutual funds. The market is expected to be better in the coming years. My view would be not to redeem it for another 2-3 years, unless you have some cash flow issue.
How long should I hold mutual fund units? Or should I keep changing according to the returns?
You need not keep changing the funds looking at the returns. Typically, you should invest in a fund with good track record and hold it for at least 3 to 5 years.
Is there any security for our investments in mutual funds?
Mutual funds are highly regulated entities. The Securities and Exchange Board of India (SEBI) regulations govern the mutual fund industry and there is no worry about the security aspect of the same. You can be rest assured.
What are the criteria for deciding the best MF to invest in? Which MF scheme provides maximum returns?
You have to decide on a few things -- track record of the fund, objective of the fund, your objective and the period of investment, reputation of the fund house and if possible reputation of the fund manager. There is nothing like 'maximum' return� it's a myth! No one can consistently invest in the high performing funds.
Depending on your portfolio and the market, there could be different schemes topping the performance list. Therefore, you should look at a scheme which provides above average returns.
I am a working girl, single at the moment earning Rs 10,000 per month. Please advice, should I go for shares to earn quick money or should I invest in MFs?
Quick money in shares is mouth watering.
But do not tread this path unless you understand the share market. For a small investor like you, investment through systematic investment plans (SIPs) is the ideal way of investment.
SIPs are monthly investment you make in a particular scheme for a specific period on a specific date. You invest in a good diversified scheme for a minimum period of 5 or 10 years and you will get a very reasonable sum (return/profit) on the same. It would be ideal for you to invest 20 per cent of your monthly net take home in SIPs.
I had invested in an IT sector fund one year back and the fund is on decline since then. As there are no chances of the IT sector coming up in near future, how long shall I stay invested in the IT sector fund? Or, is it good to sell it at a loss?
Yours is a classic case of investing in mutual funds without much understanding.
Either you have taken a considered decision understanding the risk or you have been guided wrongly. The second looks more likely in your case.
Whenever you invest in a 'sector' fund, you have to be ready for such surprises. IT sector's problem today vastly is the rupee appreciation and nothing else. The business model and industry growth and other related issues are absolutely fine. Therefore, there is a hit in the bottom line (net profits). This will be corrected and you will see the IT sector looking up sometime in the near future.
However, if you have any apprehensions, you can take a choice of booking the loss now and move into a diversified fund which you would like better depending on your risk appetite.
Is a MF similar to an initial public offering? In an IPO after listing price is announced, can one sell to make short-term gains? Is this the case with MFs too?
No. It is different. Of course you can sell your units once a particular mutual fund scheme opens for redemption. There is no listing in this case. This is a mutual fund scheme and typically you should look for remaining invested in this fund for a 3-5 year period.
Please suggest an ideal portfolio for maximum returns with adequate safety. Percentage wise breakup of large caps, small and midaps.
Again, the definition of the word 'ideal' would depend on various factors about your profile.
By a general yardstick I can mention that you should invest 20-25 per cent in large caps, 20-25 per cent in mid caps and 15-20 per cent in sector funds and the rest may be divided between small caps and other special products like special situation funds, etc.
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