The Mutual Funds Investment Thread

What is a Mutual Fund?

A mutual fund is a kind of investment that uses money from many investors to invest in stocks. It is professionally managed by a Fund Manager who does his independent research and decide where the investment should be made. When a lot of shares are available on stock exchanges, you and me don’t know which companies to invest in. But let us say a guy named Investmentwala knows, and keeps track of the market daily. So we give him our money and he buys and sells stocks for us. This is a mutual fund – it’s our money (mutual), and Investmentwala is a Fund Manager.

Advantages:
  • Professional management.: Qualified professionals manage your money, but they are not alone. They have a research team that continuously analyses the performance and prospects of companies.
  • Diversification: You get the benefit of diversification when you invest through MF schemes. You get diversification across all sectors and also among different stocks listed in the share market.
  • Affordability: Ability to participate in investments that may be available only to larger investors.
  • Liquidity: you are able to sell your mutual funds in a short period of time without there being much difference between the sale price and the most current market value.
  • Tax Benefits: Equity Linked Savings Scheme (ELSS) Mutual Fund class is completely tax free upto the limit of your Section 80C Tax Deduction.

Disadvantages:
No Major Disadvantage

Major AMC/Fund Houses in India:

  • HDFC
  • SBI
  • ICICI
  • Reliance MF
  • Sundaram Finance
  • Birla Sun Life
  • DSP Black Rock
  • Franklin Templeton
  • IDFC

Types of Mutual Funds and my views on it:

  • Equity: Main Wealth Generation Product. :D High Risk, High Return.
  • Tax Saving: Useful for saving up Tax under Section 80C
  • Debt Funds: Less Risky, Good Returns. Marginally Higher Returns than to FD, PPF.
  • Gold: For Diversification.
  • Balanced Funds: Balanced Funds is a mixture of Stocks and Bonds. Less Risky, Good Returns.

How can you invest in Mutual Funds?

Please do not follow the traditional approach of using a broker or online portals like FundsIndia, etc. Go for Direct investment in Mutual Funds.

A few years back, SEBI directed mutual fund houses/Asset management companies (AMCs) to offer a separate investment plan to investors who were investing directly with the fund house. Subsequently, fund houses started offering two plans for every mutual fund scheme. The two plans are regular plan and direct plan.

Benefits of Investing Directly in Mutual Funds.

1. NAV for the regular and direct plans are different

Though the portfolio for the regular and direct plans is same, the NAV for the direct plan is higher than regular plan due to lower expense ratio. For example, NAV for Axis Long Term Equity fund (Growth) is Rs 31.110 for direct plan and Rs 29.99 for regular plan. Do not make the mistake of believing that the regular plan is cheaper (because of lower NAV). Both had started at the same level post SEBI directive. Owing to the difference in cost structures, this gap will only widen over a period of time.

2. Higher Returns

Let’s see the impact on absolute returns through the help of an example. We have assumed two different SIP amounts (Rs 10,000 and Rs 15,000), two tenors (10 and 15 years) and two levels of returns (8% and 12%). If return mentioned is 12%, we have taken return for regular plan at 12% and for direct plan at 12.64%.

xnrVMsN.jpg


You can see the power of compounding in full force. The difference between the absolute returns grows with the increase in SIP tenor. This makes the case for investing in direct plans of mutual funds so much stronger. In no way, do we mean that the difference in returns between the direct and regular plans will be 0.64% per annum. We have used the figure for illustration purposes.

How can you invest in Mutual Funds directly?

MF Utility (MFU) is an innovative initiative from the Mutual Fund Industry which offers convenience and empowers the investors of Mutual Fund schemes. MFU facilitates the investors with a Common Account Number (CAN) which enables them to transact in multiple schemes of various Mutual Funds participating in MFU through a single transaction and consolidated payment. They also have an online platform for direct investment. :p

Steps necessary to use the online facility of MF Utility

  1. Obtain a Common Account Number (CAN) following the instructions in the investor page of MFU in a new window
  2. The CAN form with required documents to be submitted can be found here CANforms in a new window
  3. The completed CAN form has to submitted (in-person or couriered) to one of the point of service locations: MFUPOS in a new window
  4. Once you receive the CAN number, send an email to clientservices [AT] mfuindia.com, quoting your CAN number and request for online access.
  5. You will receive your login details from them.
  6. Once you receive details, activate your account with your credentials and a one-time password (OTP) sent to your email and mobile number.
  7. The system will then allow you to create a login and password.

The following activities are possible via the MFU Online portal from 1st Jan 2016 (the year of the direct mutual fund!) (extract from email sent to CAN holder who requested online access)

  • Transact online under the CANs where you are the sole / primary holder.
  • You can transact on Purchase, Redemption, SIP, STP and SWP.
  • For purchases, you will have the option of making payment through Netbanking, NEFT, RTGS or a pre-registered PayEezz Mandate.
  • View your Account Profile.
  • View transactions in the CANs where you are the second or third holder.
  • View your holdings in the schemes of various participating Mutual Funds.
  • View your Normal and Systematic Order Books.
  • Log a complaint or Feedback online.
  • We will soon be enabling more features in the coming months.
  • At this time the online access is enabled only for individual CANs with mode of holding as 'Single' or 'Anyone or Survivor'.

If you want more features then you can always invest offline using your CAN Number.

How to pick the Mutual Funds Schemes for investment?

First you need to identify the following things:-

1. Your Risk Profile (High Risk Investor, Medium Risk Investor or Low Risk Investor)
2. Goals (Children Education/Marriage or Retirement Corpus, etc)
3. Horizon (Short Term, Long Term)

Once you identify these, you are ready to select the Mutual Funds for investment. I have put articles which I find useful further to help in this.

Important things to look when selecting a mutual fund:-

A. Average Annual Returns of Last 5 Years
B. Size of the Fund. Do not invest in Funds with less than 1000 Crores of Assets
C. Duration of Fund Manager and returns in his period.

My personal advice:

1. SIP: Invest in Mutual Funds using Systematic Investment Plan (SIP) over lump sump to generate higher returns and to understand the power of compounding.

2. Equity Funds: Equity Funds are the best wealth creating asset. Your major investment should go there. Your allocation to Equity Mutual Funds should be more if you are a high risk investor. Who is a High Risk Investor? A person who is young, earning good and have less dependencies on him/her.

3: NFO: Do not invest in New Fund Offerings (NFO) unless you are a expert and rich investor.


Useful Resources for further diving into the world of Mutual Funds:-

I have tried to classify them as much as possible.

Sites to do Mutual Fund Research on

https://www.valueresearchonline.com/funds/
Mutual Fund Ratings, Research, Best Mutual Funds, Growth Fund Ratings, Performance, Category Performance, Closed End Funds

Mutual Funds to invest in for 2016.

http://myinvestmentideas.com/2015/10/top-10-best-performing-sip-mutual-funds-to-invest-in-2016/
http://www.basunivesh.com/2015/10/26/top-10-best-sip-mutual-funds-to-invest-in-india-in-2016/
http://www.simpleinterest.in/best-sip-mutual-funds-investment-in-2016-in-india/
http://www.planmoneytax.com/best-mutual-fund-to-invest-in-india-for-2016/
http://www.relakhs.com/top-15-best-mutual-funds-schemes-2016-sip-lumpsum/#
http://bestelss.com/top/best-elss-invest-2016/

Direct Plans in Mutual Funds

http://www.business-standard.com/ar...ns-of-mutual-fund-schemes-115061600723_1.html
http://economictimes.indiatimes.com...ct-mutual-fund-plans/articleshow/46001371.cms
http://www.personalfinanceplan.in/m...hould-invest-in-direct-plans-of-mutual-funds/

SIP: Power of Compounding

http://www.stableinvestor.com/2015/02/How-I-Created-Corpus-Rs-3-Crores-10-Years-Part-1.html
https://www.advisorkhoj.com/article...st-15-years:-Large-Cap-and-Diversified-Equity

Good luck in Mutual Funds Investments.
 

Vyom

The Power of x480
Staff member
Admin
I am. But I am interested since one year now. Been busy ever since.

Will have to sit down to digest the first post and plan how will I invest in SIPs.
 

arijitsinha

﴾͡๏̯͡๏﴿ O'RLY?
Even I am interested, the return doesnot matter, atleast it should be same as what I invest. All I want is to save tax. What are the best options available?
 

Desmond

Destroy Erase Improve
Staff member
Admin
My dad tells me not to invest in Mutual Funds. His justification is that its not worth the risk.
 

Vyom

The Power of x480
Staff member
Admin
My dad tells me not to invest in Mutual Funds. His justification is that its not worth the risk.

How is there any risk at all, if I invest in say, debt funds (which are government funds) where return is low but funds are secure?
I would say its a very shortsighted perspective.
 
OP
G

Geek-With-Lens

Padawan
Even I am interested, the return doesnot matter, atleast it should be same as what I invest. All I want is to save tax. What are the best options available?

Where do you invest currently? I guess FD. You can do SIP in a few Mutual funds after looking over the total fund size and their average returns over last 1/3/5/10 years. You wouldn't need to worry much here or do much of a research here as your investments are managed by a professional. You should have a mixed of Equity and Debt Funds. You can go for completely equity investment if you are a high risk taker and willing to have patience.

My dad tells me not to invest in Mutual Funds. His justification is that its not worth the risk.

How is there any risk at all, if I invest in say, debt funds (which are government funds) where return is low but funds are secure?
I would say its a very shortsighted perspective.


Vyom is correct. There are different types of Mutual Funds and you can choose them according to your risk appetite. Even equity mutual funds are quite safer compared to direct equity investing.
 

rajmehta373

Right off the assembly line
The thread to the ICICI Prudential Mutual Fund investments is, the fund manager uses money from many investors to invest in stock and on the basis of the daily market research he is independent enough to invest your money in the companies that suits him.
 

PratikV

Broken In
My whole family has Mutual Fund SIP Plans usually 3-4 per head. The returns are consistent and very appealing.
At the age of 25 if you can take the risk of riding a bike in your city, the risk of investing in MF is pretty less than that. :p

For majority of financial goals, CFP's do recommend 70:30 plan for Equity:Debt. such as Shares or Mutual funds and PPF or long term FD's.
 

Vyom

The Power of x480
Staff member
Admin
Zoom past 7 months.. and I still am just "planning to invest in Mutual funds".
I will get there soon. Just need a bit more research.

Geek-With-Lens have done a good job of creating this thread. So, [MENTION=118788]Geek-With-Lens[/MENTION] are you investing in MF? How is it turning out?
 
OP
G

Geek-With-Lens

Padawan

Thank you!

I have invested in Bajaj Allianz SIP for 30 years!!

Would you mind if I ask you your age?

My whole family has Mutual Fund SIP Plans usually 3-4 per head. The returns are consistent and very appealing.
At the age of 25 if you can take the risk of riding a bike in your city, the risk of investing in MF is pretty less than that. :p

For majority of financial goals, CFP's do recommend 70:30 plan for Equity:Debt. such as Shares or Mutual funds and PPF or long term FD's.

I liked your way of comparison. I'm sure people will understand the need of equity investing going ahead in India. Btw, my exposure to equity market is 95% but I'm comfortable to take more risk as I'm in the market for a long term and being young gives you another advantage.

Zoom past 7 months.. and I still am just "planning to invest in Mutual funds".
I will get there soon. Just need a bit more research.

Geek-With-Lens have done a good job of creating this thread. So, [MENTION=118788]Geek-With-Lens[/MENTION] are you investing in MF? How is it turning out?

Thanks Vyom. Sorry for the late response. I've been inactive on TDF from many months now. It was very difficult for me to focus at multiple things at once. Coming to your question, my mutual funds investment are doing very good and the returns are now averaging around 20%. Although, I'm only investing in ELSS mutual funds now as to use the Tax deduction benefit under Section 80C. Rest of my portfolio is invested in direct equity. I've been investing in direct equity since last 8 months and the portfolio returns for direct equity is more than 50 % as of now. Don't get overwhelmed as I had invested in stocks during Feb when majority of the stocks were in bearish phase. I'm finding direct equity very rewarding and a knowledgeable experience. Although, consider it as a full time activity. You cannot get away with it as a part time activity. I've been following Indian stocks market since 3 last years and gain confidence only 8 months back to invest in them. I also got to know about a valuable online community called "Valuepickr" to discuss about the stock ideas.
 

tekiagadi

Broken In
Good Information about Mutual Funds. I am investing in mutual funds from last 3 years. For Long-term goals investing in mutual funds will give you the return to achieve your goals. Mutual Funds will gives the return which will beat the Inflation. If you Invest for more than 1 year in Equity related Mutual Funds the returns after 1 year will be Tax-Free.
 

desai_amogh

In the zone
What are the best funds right now for SIP? equity/high risk types ??

What SIPs you are investing in. I want to start SIPS and check for an year or 2 for now.
 

Vyom

The Power of x480
Staff member
Admin
^^Ya do keep us updated
So I still haven't seen all the videos on Khan academy. But I did manage to FINALLY submit the KYC form to get a Folio number. The fun I choose to start with is DSP Black Rock Tax saver fund. This.

I submitted the documents on saturday morning along with Rs 1000, and by Monday morning I had the Folio details on my email. I then registered at DSP Black Rock website and can see the details of the investment of Rs 1000 which I did. Today Rs 1,003.34. It's nice to see Rs 3 growth in 3 days. :p Although this isn't right way to keep a watch on my investment. >_>

Anyway, so now I can track my investments from the site, can invest more money in same fund, or invest in different types of funds using same folio or even create more folios. I am still trying to understand lots of jargons since I am over whelmed now. Not using an agent, and investing directly sure is confusing.

Currently I am trying to increase my conceptual knowledge by watching video tutorials at the site: http://learn.dspblackrock.com/personal-home-page

Let's see how it goes!
 
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