10-Year G-Sec Benchmark Yield

The 10-year benchmark government security (G-Sec) yield rose by four basis points (bps) in...

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Best Mutual Fund Scheme?
What category of mutual fund schemes should I invest in, considering that the market is at all-time highs?
 
MLF’s Reply: You would need to decide upon a mutual fund category, depending on your investment goal, time horizon and risk profile. There are different categories and sub-categories of mutual fund schemes and, being market-linked, all of them come with a certain amount of risk. We have described in brief the main categories; depending on your investment horizon, you would need to consider all other factors before investing.
 
For an investment period of five years or more, equity mutual fund schemes can generate great long-term tax-free returns, provided you use the right schemes. The key here is long-term investment which should ideally be for a period of at least five years. Assuming that you wish to invest for the long term in an equity fund, you could consider investing through a systematic investment plan (SIP) as the market is currently is not yet overvalued compared to the earlier peaks.
 
SIP investing is ideal for investors who do not have a lump-sum to begin with but can invest small amounts regularly. SIP, being a formula of investing gradually and regularly, also helps you to avoid the dilemma of making a sizeable one-time investment in equity and run the risk of seeing your wealth decline sharply.
 
For short-term investments, you may consider short-term bond schemes (or debt schemes) of mutual funds which invest in low-risk (Please note: not risk-free) debt instruments. Presently, bond yields are over 8.50% and could go higher, or lower, based on the policy decisions taken by the Reserve Bank of India. Short-term debt funds invest in market instruments of short maturities, such as certificates of deposits, commercial paper, etc. These are less sensitive to interest rate fluctuations.
 
If you are looking for high liquidity and wish to earn an interest higher than the interest earned on your bank savings account, you could invest in liquid schemes. Depending on your investment horizon, you may invest in any of these categories or a mix of them.

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COMMENTS

SIVASANKARAN E M

2 years ago

YOU HAVE MADE IT SO SIMPLE THAT ANY BODY CAN PICK UP A FUND FOR GENERATING RETURNS BEATING INFLATION AS WELL AS SAVINGS DEPOSIT AND FIXED DEPOSITS.THANKS FOR THE ENLIGHTENMENT.

Should I Invest in another Scheme?
I have been advised to add a multi-cap scheme to my portfolio. I’m already investing in large-cap, large- and mid-cap, and mid- and small-cap schemes, respectively. How will a multi-cap scheme add value and how is it different from, say, a large- and mid-cap scheme? Is it just another rip off to sell one more scheme with high expenses?
 
MLF’s Reply:  Multi-cap schemes invest in a mix of large- and mid-cap stocks. The percentage mix of large- and mid-cap stocks in the schemes’ portfolio varies from scheme to scheme. Some schemes may invest a small percentage of the portfolio to small-cap stocks as well.
 
If you are investing sufficiently in consistently performing large-cap and mid-cap schemes, a multi-cap scheme may not hold much value as fund managers usually pick the same set of stocks. There are a few multi-cap schemes that have been consistent performers and have a low expense ratio. Again, how well a scheme performs depends on the fund manager’s stock-picking capability. The timing of your investment is crucial as well. A better strategy would be to invest systematically in a few large- and mid-cap schemes.
 
Have a Mutual Fund Query? Try  Moneylife Foundation’s Mutual Fund Helpline. Submit your query here

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