The Mutual Fund Show: Are New Flexi-Cap Schemes A Good Bet?
Here are the pros and cons of investing in new mutual funds.
A track record helps understand the kind of risks the fund is taking, how well it does in a bear market and bull market, according to Salonee Sanghvi, founder of My Wealth Guide. In a new fund or AMC, you only know the broad strategy and mandate, but you don't know whether the strategy is actually going to work. A good fund manager will definitely add confidence, she told NDTV Profit.
"However, if there are sufficient funds already available in the category with a proven track record, I would rather consider those. Even if there are unique strategies, it is advisable to wait and observe if the scheme proves successful, before investing in those funds," Sanghvi advised investors on new AMCs.
There is nothing to worry as flexi-cap schemes are here to stay and will do even better, according to Santosh Joseph, founder of Germinate Investor Services LLP. "I like all the new funds that have come in the last 12 months. All of them come with great experience," he said.
"The markets themselves broadly have actually grown quite a bit. With an AUM of Rs 50 lakh crore, the mutual fund industry has grown, leading to the emergence of several funds with a strong track record and performance to become large funds," Joseph said.
He lists the pros of the new mutual funds:
Allocate new or incremental money.
Don't stop and exit funds because they are large.
Large funds deliver good returns.
New and small funds don't guarantee better returns.
FDs Vs Debt Funds
The choice between fixed deposits and debt funds depend on investors' convenience and risk appetite, according to Joseph. "Choose a product that's best for meeting financial goals."
While there is no harm in choosing FDs, investors can consider other funds for hybrid or equity requirements, he said.
"FDs are definitely a great option, especially if you know the exact duration and don't need to break the FD... One thing people should know that, if you break the FD you could be charged a penalty and you could also get a lower interest rate for the premature withdrawal," Sanghvi said.
FDs offer higher rate for longer durations and tax to be paid every year even if it hasn't matured, she said.
"Debt mutual funds are good for short-term needs, while target maturity funds can help lock-in rates. One can also choose arbitrage funds, as it's a good option due to tax arbitrage," Sanghvi said.
Query 1: I have been investing Rs 50,000 per month since last one year in mutual funds. My goal is to buy a home after 20 years and the house currently costs Rs 1.2 crore. Will I be able to achieve my goal without a bank loan through these investments, or do I need to change my strategy?
Quant Small Cap: Rs 10,000.
ICICI Prudential Blue Chip: Rs 10,000.
HDFC Flexi Cap: Rs 10,000.
HDFC Top 100: Rs 10,000.
Quant Mid Cap: Rs 10,000.
Name: Venkatesh Miriyala I Age: 39 years
Santosh Joseph: You don't need a home loan. I think you are well sorted with this. With the amount of investment and considering 20 years of investment, you will be able to buy a house very comfortably.
Query 2: I am planning to invest around Rs 75,000 per month for the next 10 years. I am ready to take moderate-to-high risk. Please suggest 4-5 funds to diversify my investment.
Name: Rahul Das
Salonee Sanghvi: The way you could split the Rs 75,000 is by 30% in two good flexi-cap funds like PPF and 360 Focus. You could invest the other 30% in a mid-cap fund like Kotak or Emerging Equity; the 10% in a small-cap fund like Nippon, SBI or Axis.
Watch the full show below:
