Download Tax Saving Mutual Fund Application Forms
Invest In Tax Saving Mutual Funds Online
Leave a missed Call on
94 8300 8300
Invest in Debt Options for short term goals
After staying away from equity markets for long, individual investors seem to be returning to this space with a vengeance. Data from mutual funds show retail money is pouring into their schemes.
However, in their rush, many investors are insisting on putting their money in equity, even for short- term goals, making financial planners uneasy.
The case of a client planning to buy a house in a year and seeking to invest the entire money in equity. Even with the markets faring well, the client was advised against such an aggressive allocation, as investing in such allocations with a large proportion in equities is suitable for longer- horizon goals.
Are financial planners being too conservative in advising clients to stick to debt for certain goals? Since equity markets are booming, shouldn't one increase the allocation to equities to gain from it? Well, yes and no. It depends on the criticality of the goal, the time horizon and the investors ability to deal with any shortfall risk. A critical goal, for which you cannot take any risk of deviation, can be chased by a conservative portfolio.
A discretionary goal, which can either be postponed or which can have some deviations, can be fulfilled by an aggressive investment strategy.
Assume you have booked a house and already paid 20 per cent. The next payment of ₹ 5 lakh is due in a year. This is a requirement from which you cannot afford to deviate, as you cannot afford any shortfall risk. The builder will not accept ₹ 3.5 or ₹ 4 lakh. That is why for such a goal, you have to invest in fixed income, which will ensure you get your targeted amount.
Similarly, if your child is to start going attending college next year and you know that you will need ₹ 6- 7 lakh a year, it isn't worth taking a risk by investing large sum in equities, as this, too, is a goal for which you cannot afford any shortfall.
On the other hand, consider a case in which you are planning to buy a second house in a year or two and need ₹ 20 lakh as down payment.
As you haven't zeroed in on a property yet, the amount isn't sacrosanct in this case. So, instead of ₹ 20 lakh, if you save ₹ 18 lakh, you could still look for a property. Or, you could extend your plan by a year, as buying the house is not critical.
"The question investors must ask themselves is if markets fall at the time of the goal, can they postpone the goal? If so, you can choose equity investments. If not, it is better to stick to.
When an expert says one can expect 12 per cent returns from stock markets in a year, he actually means the stock markets are likely to give such returns with volatility of about 20 per cent. Similarly, when a research analyst recommends a stock, he also intends to convey one should look at the current portfolio and only buy if the sock fits the portfolio.
Often, such aspects are ignored.
Financial planners might allow you to increase your equity asset allocation, depending on your age. For instance, if you are aged 30- 35 and are allocating 65- 70 per cent to equity, your advisor might let you increase it to 80 per cent. But if you are aged 45- 50 and investing 50 per cent in equity, increasing the equity share to more than 52- 55 per cent might not be advisable.
At 35, you could recover losses, as there is considerable time left before retirement.
Also, investors must decide when to cash out of equity and move to debt. For instance, if you are saving for your daughters marriage in the next one- two years, it is better to cash out six months before the marriage and keep the funds in a liquid mutual fund or a short- term debt fund. But if you are saving for your daughters college education, it is better to do it a year before the goal.
The bigger and more important the goal, the better it is to cash out well in advance. If the market suddenly falls, say, 30 per cent, your investments will be in jeopardy.
When the need is critical, it is better to secure your money, even if it means losing some returns.
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Leave a missed Call on 94 8300 8300
Leave your comment with mail ID and we will answer them
OR
You can write back to us at
PrajnaCapital [at] Gmail [dot] Com
---------------------------------------------
Invest Mutual Funds Online
Download Mutual Fund Application Forms from all AMCs
Download Mutual Any Fund Application Forms
---------------------------------------------
Best Performing Mutual Funds
- Largecap Funds Invest Online
- DSP BlackRock Top 100 Fund
- ICICI Prudential Focused Blue Chip Fund
- Franklin India Bluechip
- ICICI Prudential Top 100 Fund
B. Large and Midcap Funds Invest Online
- ICICI Prudential Dynamic Plan
- HDFC Top 200 Fund
- UTI Dividend Yield Fund
- Birla Sun Life Front Line Equity Fund
- Franklin India Prima
C. Mid and SmallCap Funds Invest Online
- Reliance Equity Opportunities Fund
- DSP BlackRock Small & Midcap Fund
- Sundaram Select Midcap
- IDFC Premier Equity Fund
- Birla Sun Life Dividend Yield Plus
- SBI Emerging Businesses Fund
- HDFC Mid-Cap Opportunities Fund
- ICICI Prudential Discovery Fund
D. Small and MicroCap Funds Invest Online
- DSP BlackRock MicroCap Fund
- Franklin India Smaller Companies
E. Sector Funds Invest Online
- Reliance Banking Fund
- Reliance Banking Fund
- ICICI Prudential Banking and Financial Services Fund
F. Tax Saver Mutual Funds Invest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
- DSP BlackRock Tax Saver Fund
- Reliance Tax Saver (ELSS) Fund
G. Gold Mutual Funds Invest Online
- Relaince Gold Savings Fund
- ICICI Prudential Regular Gold Savings Fund
- HDFC Gold Fund
- Birla Sun Life Gold
H. International funds Invest Online
1. Birla Sun Life International Equity Plan A
2. DSP BlackRock US Flexible Equity
3. FT India Feeder Franklin US Opportunities
4. ICICI Prudential US Bluechip Equity
5. Motilal Oswal MOSt Shares NASDAQ-100 ETF
Posts
No comments:
Post a Comment