MF queries answered by Kalpesh Ashar, CFP, Full Circle Financial Planners and Advisors

I am a 68-year-old retired person and want to invest Rs 15 lakh for 2-3 years in different mutual funds to get maximum possible return. Can you tell me when I should invest as the rates of MF units are very high at present due to share market?
S.S. GUPTA
Considering you are a retired person, there is a bit of contradiction in your expectations as you seek maximum returns but with a very less time frame. Ideally, above average returns are possible by investing in equity-based mutual funds (MFs) over a 5-7 year investment time horizon.

In your case, given the short time frame, equity MFs are not suggested at all, hence, there is no point looking at present valuations of share market. It would be ideal for you to invest in debt-based MFs with a 3-4 year horizon, i.e., in short to medium-term funds as they would give you a better tax efficient return than a bank AAA rated corporate fixed deposit given that we are in falling interest rate scenario.

Can you please suggest some good MFs for SIP (tax saving)? I want to invest Rs 3,000-5,000 per month.
Ritesh Ranjan
Considering the amount you wish to invest, it would be advisable to do a monthly SIP in any one ELSS (equity-linked savings scheme) fund for the long term to derive the benefit of power of compounding. The funds I suggest are ICICI Prudential Long Term Equity Fund and Reliance Tax Saver.

I am planning to start ELSS (Rs 3,000 per month) for 10 years. I'm 27 and a bit confused between PPF and ELSS. Which one should I choose for the long term?
Chandan
ELSS category of funds (i.e., tax saving funds) are pure equity oriented funds with a lock-in of 3 years and after the lock-in period is over, it automatically converts into a normal open ended equity fund. As this is an equity fund, there is an obvious element of risk in these funds. It has the shortest lock-in period among all the tax saving options under Section 80C today.

On the other hand, PPF is probably the safest long-term investment option as it is backed by a sovereign guarantee. The tenure of PPF is 15 years with an option to rollover in tranches of 5 years as long as the investor desires. Of late as rates on these small savings schemes are heading downwards, the existing interest rate on PPF has also come down to 8% w.e.f October 01, 2016.

In your case, ELSS will be a good option of tax saving and creating wealth over a 10-year period as the power of compounding would boost your returns substantially over a conventional but safer option of PPF.

(Send your queries on mutual funds to et.mfs@timesgroup.com)