As I understand, gilt funds don't have credit risk. If I invest in gilt funds now, which are doing well, what should be my tenure?
Gilt funds face interest rate risk. They are extremely sensitive to events directly and indirectly related to interest rate risk.
These events include oil price, monetary policy, exchange rates, to name a few. Hence there is a risk for sure. Try to match your investment tenure with the average portfolio maturity. If you do not have any such plan and are sure that you want to invest in gilts; then use long term gilt funds. You may need to look at technical factors like modified duration, your taxation level, and the number of years you plan to hold. There is no harm in being invested forever, but understand that a gilt fund's net asset value (NAV) is sensitive to many factors and at all times be prepared to see a swing of 5 per cent or so in the capital value of your investment.
I am a senior citizen. I want to invest Rs 18 lakh and earn interest income from it. I am planning to allocate the funds to three-four different banks fixed deposits (FDs). Is there any mutual fund that is similar to a bank FD where I can invest a portion of the money and earn slightly better returns in the range of 7.5-8 per cent?
There is no mutual fund scheme that can help you to earn a guaranteed rate, or a returns better than the fixed deposit. I reckon you are not going to use the corpus of Rs 18 lakh immediately in one stroke. Consider monthly income plan schemes (conservative hybrid funds). These schemes invest 10-25 per cent in equity and rest in debt. It is difficult to find a fund that yields a higher return than a fixed deposit.
My company is offering an option to employees to shift from the Employee Provident Fund (EPF) to the National Pension Scheme (NPS). I am 46. What would be a better option for me?
Go to NPS. If money is debited from your account and there is a choice to go to NPS; I would consider that as a breakthrough for you. With EPF, you are subject to a fixed rate and reality is that this rate over time will continue to fall. There is no guaranteed return with the NPS; however, we know that the NPS with life cycle option will do far better than the EPF over the long term (10-20 years). You're just 46 and have many years before you retire. What you will accumulate by investing in NPS will be far higher than the corpus you can build by putting money in EPF.
I will be starting a systematic investment plan (SIP) of Rs 8,000. I am planning to use mobile apps to invest in funds. I see that the apps show fund rating from different agencies. There are a few 5-star funds that the three agencies have in common. Is it a good idea to go for such funds which multiple agencies rate highly? If not, can you tell how a do-it-yourself (DIY) investor like me should select equity funds?
Ideally, you should not depend on the rating alone. If you want to do things yourself, you need to go the full mile - there is no short cut.
Undertake an analysis of the fund yourself. Study portfolio and performance over different periods. Compare the performance of the fund you choose with its peers. Also, do your research based on the holdings of the portfolio. Study technical factors like beta and sharp ratios as well. Speak to the asset management company and if necessary, with the fund manager. The last two items are not so easy. Even if you get a chance to talk to them, what would you ask? The rest is available from public data. The regulator has made the facility of direct investments in mutual funds. In doing so, it has automatically implied that investors are expected to learn everything about mutual fund investments
The writer is Transcend Consulting. The views expressed are the expert's own. Send your queries to email@example.com