Want to invest in mutual funds but don't know how to go about it?

Get all your mutual fund related queries answered by our expert, Saket Soni, chief executive officer, Boulevard Finserv.

Q) Ankit Chaudhary writes to us from Punjab. I have invested in following SIPs: SBI Bluechip Fund (Rs 5,000 per month), SBI Small Cap Fund (Rs 5,000 per month), Mirae Asset Bluechip (Rs 5,000 per month), Tata Equity PE Fund (Rs 5,000 per month), Tata India Consumer (Rs 5,000 per month), ICICI Pru Technology (Rs 3,000 per month) and Motilal Oswal 35 focus (Rs 3,000 per month). I am investing around Rs 30,000 per month in SIP since April. My question is, whether my portfolio is a bit aggressive or any changes recommended keeping current market in picture. My investment horizon is 10 years.

A) Good to note that portfolio is getting built for about 10 years, which is a strategic. Every equity MF investor should look at long term. On his question whether the portfolio allocation is well balanced or not, I would dissect his portfolio into a strategic part and a tactical part. In strategic part, I would say a mix of all the large cap bluechip funds, multicap and one of the Midcap, which is well oriented to capture long term growth. In the tactical part, the part the value fund, the thematic fund will come and in here is where one needs to do some tactical management. So today, we feel Tech and Consumer is the right sector to be invested in. But please bear in mind that these themes may be out of favour one day. So, you need constant advice on allocation in thematic funds and when the times change, you may have to change thematic funds tactically. Now on the value fund, probably this is the fund he will need to change because contra style and value style funds tend to do well in challenging times. Currently, economy is growing fast and having a growth style large cap oriented fund like Aditya Birla Sunlife Frontline Equity Fund will do well.

Q) Kunal Jain writes to us from Mumbai. I have invested in following funds: Aditya Birla Sun Life Frontline Equity Fund, Axis Long Term Equity Fund, DSP BlackRock Small Cap Fund, Franklin India Focused Equity Fund, Mirae Asset Emerging Bluechip fund, Motilal Oswal Long Term Equity Fund, Motilal Oswal Multicap 35 Fund, Relaince Tax Saver Fund and Mirae Asset Tax Saver Fund. I have invested atleast Rs 3,000 each in SIP format from last three years. Please let me know if any change needed.

A) Looking at Kunal’s portfolio of mutual funds, it's very evident there is a clear over allocation to tax funds. I am sure what he is doing is looking at saving tax while investing in tax funds via SIP method, that’s a great Idea. Tax funds or ELSS funds have a tax benefit, but only up to Rs 1.5 lakh per annum. On the flipside, all ELSS are three year locked in funds. So he must be sure that it's not more than tax saving part what he is investing or else, he will unnecessarily have liquidity issues with his portfolio. Also by virtue of his allocation, I feel the allocation to mid and small cap is high and he must buy a diversified large cap equity fund, like Birla Frontline or HDFC Equity Fund to add to his portfolio.

Q) Uday Pote writes to us from Bhopal. I have invested Rs 2,000 in HDFC Capital Builder since 3 years, Rs 2,500 in SBI Blue Chip since one year, Rs 4,000 in HDFC Children Gift Fund since 3 years, Rs 5,000 in Axis Multicap Fund since its inception and Rs 2,000 in Axis Mid Cap Fund since two years. All are growth option. My horizon is next 10 years and corpus required is Rs one crore Please advise.

A) Broadly, the funds chosen here will do well in long term and looking at the equity like returns in them, I have some good news and some bad news for him. Bad news first, I feel that his goal of Rs 1 crore will not be reached by these allocations and he will have to save and invest exactly double of these. So now the good news is that he has 10 year to go. So Uday, if you can't double the savings right now, you can step up your savings and save more as your earnings capacity goes up. You will definitely reach your goal with this regular saving method.

Q) Prashant Sasidharan writes to us from Bahrain. Over a period of last 2-3 years, I have invested in following mutual funds: Rs 2,500 in ABSL Equity Fund (G), Rs 10,000 in ABSL Frontline Equity (G), Rs 2,500 in ABSL Midcap Fund (G), Rs 2,500 in ABSL Pure Value Fund (G), Rs 10,000 in DSP Small Cap Fund - Regular (G), Rs 5,000 in Franklin (I) Smaller Cos (G), Rs 2,500 in HDFC Capital Builder Value Fund (G), Rs 2,500 in HDFC MidCap Opportunities (G), Rs 2,500 in ICICI Pru Balanced Adv (G), Rs 2,500 in ICICI Pru Value Discovery Fund (G), Rs 2,500 in IDFC Focused Equity - Regular (G), Rs 10,000 in Kotak Standard Multicap Fund (G), Rs 5,000 in L&T Midcap Fund (G), Rs 5,000 in L&T India Large Cap Fund (G), Rs 2,000 in Reliance Small Cap Fund (G), Rs 5,000 in SBI Blue Chip Fund (G), Rs 2,000 in UTI Mid Cap (G), Rs 2,000 in UTI Multi Asset Fund - R (G), Rs 2,000 in UTI Retirement Benefit Pension - R, Rs 10,000 in Mirae Asset India Opportunities and Rs 10,000 in Parag Parikh Long Term Equity Fund. I would like to stop a few, but would like to keep the monthly investment same. My target is to reach Rs 15 crore in a timeline of 12 years. Appreciate if you could give your expert opinion.

A) His portfolio has long list of funds and he has lot of value funds, which may not be suitable for high growth currently. As I mentioned earlier, a fast growing economy may not support value investing that much. He must look at coming out of balanced funds and allocate those to the 100 percent equity oriented to give fillip to the portfolio. Prashant has a steep goal, even though he has a long period to reach his goal, he has to look at investing some more money may be almost 2.5 times his current savings in regular investment or he should move some lump sum money approximately Rs 1.5 crore of his wealth to this portfolio for high growth and achieving his steep target of Rs 14 crore in 12 years.

Q) Aadil Darvesh writes to us from Mumbai. My goals are as follows: Daughter's education in 13 years and target is Rs 70 lakh; daughter's wedding in 20 years and target is Rs 60 lakh; retirement fund in 25-30 years and target is Rs 4 crore (All amounts are inflation adjusted). My current investment are: For debt, invested Rs 7,344 per year in LIC and Rs 30,000 per year in Sukanya Samriddhi Yojana. In mutual funds (Investment horizon of 20-25 years), invested Rs 2,000 per month in Axis Long Term Equity Fund, Rs 2,000 per month in Invesco India Contra Fund, Rs 2,000 per month in Mirae Asset India Equity Fund, Rs 2,000 per month in Kotak Standard Multicap, Rs 1,000 per month in ICICI pru Value Discovery Fund, Rs 2,000 per month in Mirae Asset Emerging Bluechip Fund and Rs 2,000 per month in DSP BR Micro Cap Fund. The total investments stands at Rs 13,000 per month. I am investing for the past three years and my investment horizon is next 25-30 years. I have taken a term plan of Rs 1 crore with critical illness and I will keep on increasing the amount by 8-10 percent every year. Please tell me the SIP amount required to achieve my goals and please review my portfolio.

A) It's great that he has a term plan that is a good thing so far as insurance is concerned. Starting on debt, he must up his allocation in Sukanya Samriddhi Yojana from Rs 30,000 to at Rs 1.5 lakh a year. This will come handy for his girl child’s education requirements. With his saving speed and the equity orientation of his portfolio for 25 years, he will surely reach his goal and have lots to spare when he reaches his retirement. So the mantra for his success is start early save regularly and choose only equity mutual funds for long term.

Q) DV Raju writes to us from Andhra Pradesh. Started investing into mutual funds through SIPs monthly Rs 40,000 since one year. Invested in Kotak Select Focus Fund, SBI Blue Chip Fund, Mirae Asset Equity Fund, ICICI Blue Chip Fund, HDFC Midcap Opportunity Fund, Canara Mid Cap Fund, Aditya Birla Frontline, ICICI FMCG Fund, ICICI Corporate Bond Fund and HDFC Short Term Debt Fund. My goal is child education - corpus of Rs 2 crore.

A) Assuming the child is three years right now and he will require his money 15 years from now. So first of all, while saving for a relatively long term of 15 years one doesn’t need debt funds. First of all change allocation out of the two debt funds to large cap equity funds, buy ICICI Bluechip and HDFC Equity Fund. The Saving of Rs 40,000 per month is good enough to reach your goal provided you are in equity oriented portfolio and diligent about savings. Here the caveat is that sometimes the inflation of education expense can be much higher than some of the investments. So, if his inflation adjusted cost is Rs 2 crore, he is fine or else save little bit more to beat inflation.

Q) Akaash Joshi writes to us Ahmedabad. If I select dividend scheme in any fund monthly/quarterly/yearly, does dividend credit in bank account or Dividend Distribution Tax (DDT) apply or not. Equity fund and debt fund DDT is same or rules are same?

A) As we know that, dividend in the hands of the investor is tax free after the DDT treatment by mutual fund schemes. So, now in the current year, we do have DDT (payable by mutual fund schemes) across all mutual fund schemes.

For Individuals:

Equity schemes have DDT = 10 percent + 12 percent surcharge + 4 percent cess = 11.648 percent overall.

Debt schemes have DDT = 25 percent + 12 percent surcharge + 4 percent cess = 29.12 percent overall.

For Companies

Equity schemes have DDT = 10 percent + 12 percent surcharge + 4 percent cess = 11.648 percent overall.

Debt schemes have DDT = 30 percent + 12 percent surcharge +4 percent cess = 34.944 percent overall.

NRIs investing in infrastructure debt funds have a lesser rate of tax

For NRI in Infra Debt Fund = 5 percent + 12 percent surcharge + 4 percent cess = 5.824 percent overall.

Q) Debasis Datta asks, whether debt fund income is taxable or not and if it's taxable, the rate of tax for 6-12 months investment period.

A)6-12 months in debt qualifies for short term capital gains tax, which is at 30 percent.

Q) Chirpreet Makhija writes to us Indore. Want to start a SIP of Rs 10,000 per month for 20 years for future expenses of my child, who is currently one year old. Can you please suggest couple of good mutual funds I could invest in?

A) You can look at investing in equity mutual fund specially choose the diversified large cap funds like ABSL Frontline Equity Fund and the HDFC Equity Fund. These funds are from reputed fund houses and have competent fund management teams.

Disclaimer: The views and investment tips expressed by investment experts on CNBCT-V18 are their own and not that of the website or its management. CNBC-TV18 advises users to check with certified experts before taking any investment decisions.

First Published:Sept 4, 2018 3:16 PM IST