Query Corner: Mutual Fund

Our MF expert takes you through the labyrinth of MF investments in this weekly column.

I wish to start investing in mutual funds. Will SIP be the right option? How can I decide on the fund house/schemes? I am not looking for tax exemption under Section 80C as that limit has already been exhausted. I have two sons aged 12 and five. I wish to invest in such a manner that an adequate corpus is created in time for funding their
higher education.
— Milind Gandhi

SIP is the ideal mode of investment in mutual funds, particularly in equity funds, as it averages out the cost of investment due to stock market volatility. There are various factors which need to be considered while selecting a fund for investments.

The main factors are the parent organisation, people (investment management team), investment process, performance and costs. Morningstar Qualitative Ratings are primarily based on these factors. You would be able to see the recent qualitative ratings on our website morningstar. in. You can consider starting an SIP for each of your children in diversified equity funds. Here, you can consider HDFC Top-200 Fund and Fidelity Equity Fund for investments.

I am a PSU executive and I will retire in January 2029. My current net salary is around
Rs 50,000 per month. My daughter is 10 while my son is four. I have taken eight LIC p and two ICICI Pru life insurance policies to date. Now, my objective is to create maximum wealth possible through mutual fund schemes by the time my children turn 18. Please suggest avenues for investing Rs 2,000 per month.
— Lalit Srivastava

Mutual fund is an investment vehicle which mobilises money from investors and invest in shares, debt securities, gold, etc, depending upon the nature of a fund. Therefore, investments in mutual funds are subject to various market risks. The returns in mutual funds are not guaranteed and could be very volatile at times. You can invest through SIP route in DSPBR Top-100 and HDFC Top-200 for your children’s education.

I am 23 and am planning to make investments in the stock market for the first time. I intend to invest up to Rs 5,000 per month in diversified equity funds. Suggest some schemes.
— Hitesh Parmar

It would be ideal to diversify your investments in order to optimise the expertise of various fund managers. You have not stated your investment horizon or goal. While investing in equity funds, an investment horizon of around five years is advisable. Assuming your investment horizon would be greater than one year, investing either through growth or dividend options will not impact your returns. SIP is the best option.

(Chintamani Dagade, Senior Research Analyst, Morningstar India)