Here are the answers for this week's mutual fund investments queries

I wish to start investing in mutual funds through the SIP route with Rs 10,000 per month initially and subsequently increasing it as my income goes up. Please suggest some good funds to begin with, and funds I should enter once I increase my investment. — KATY

I assume that you would have a time horizon of at least 7-10 years. A new investor should start by investing in a combination of a balanced fund and passively managed index fund. A balanced fund would enable you to get an exposure to both equity and debt along with the benefit of automatic asset rebalancing. Passively managed index funds are pure equity schemes which replicate the index i.e. Sensex or Nifty, making it easy for a new investor to understand and track. Invest in Tata Balanced Fund and IDFC Nifty Fund. Add actively managed diversified equity funds when you wish to increase your monthly investment at a later stage.

I was investing in HDFC Top 200 fund and then its performance started deteriorating. I stopped the SIP and after few months I redeemed. Now I am investing in ICICI Prudential Top 100 fund. Now this is also not performing well. What should I do? Should I continue, stop SIP and stay invested or redeem? Should I look to start investing in another large cap fund — ASHU

It is not unusual to see that a particular scheme goes through a rough patch over a certain period of time. At the time of selecting a scheme, note the pedigree of the fund house, the long term history of the fund manager, and of the scheme in question. Moreover, when you compare the performance of a particular scheme, it should be compared to its respective benchmark and its peer schemes. I suggest you continue with ICICI Prudential Top 100.

I had SIPs in following funds for 63 months, which ended in December 2015: Reliance Pharma, Reliance Equity Opp, Reliance Mid and Smallcap, Reliance Diversified Power Sector, DSP Black Rock Equity, DSP Opportunities, Principal Tax Saver, HDFC Large Cap, HDFC Equity, Sundaram Infra, L&T Equity, L&T Tax Advantage, SBI Tax Gain. Should I renew these SIPs? Or should I close some and consolidate these schemes? — HABIB SHEIKH

Every mutual fund scheme invests in a basket of 30-50 companies, which are selected based on the scheme objectives. Therefore, for the purpose of diversification, if you invest in 4 or 5 schemes you purpose should be well achieved. Choose the categories in which you wish to invest your money such as Large Cap, Mid cap, tax saving etc and then select just one well performing scheme from that particular category. I suggest that you consolidate your portfolio to just five schemes.