Category: Mutual Fund Investment for Defense

17 Sep 2015
Gift to a loved one How about a Mutual Fund SIP

Gift to a loved one? How about a Mutual Fund SIP?

Divesh Kumar has recently retired as a contended man. He hasfulfilled his duties as a devoted father, caring son and loving husband all his life. He now wants to gift something long lasting for his two lovely grandchildren which he and his wife fondly dote on. They both decided to contribute for higher studies for them by contributing some money every month. Their first impulse was to save in a bank Recurring Deposit (RD) but wanted their decision to be validated by us.

We heard them out and asked them, “Have you thought of mutual funds for this purpose?” They never had thought so. We explained to them that they had a long time frame for their gift. The gift should actually work for the recipients to create value as they have planned and not be lost to inflation and taxes. In case of any emergent requirement some time later, they should also be able to take out the money fully or partly without any penalties or severe tax implications, though such withdrawals should be avoided since they were saving for the specific purpose of their grandchildren’s higher education.

We then went on to explain the superior tax-efficient returns that mutual funds offer with a lot of flexibility of how they wish to save or withdraw the money. They could contribute on a monthly basis through SIPs (Systematic Investment Plans) for as long as they wished. In case they could not contribute any longer, they could just let the accumulated money lie there and grow as long as they wanted. They could also put in bulk additional amounts of as low as Rs1000 on special occasions whenever they wished to. We made an illustrative table for them for contributing Rs 5000 per month, comparing RDs and various categories of mutual funds on the basis of current interest rates of RDs and past returns of best mutual funds of various categories.

5 years 10 years
Returns Amount Returns Amount
Bank Recurring Deposits 7.75% ₹ 3,65,000 7.75% ₹ 9,02,083
Pure Debt Funds 10.50% ₹ 3,92,345 9.40% ₹ 9,89,759
Balanced – Debt Funds 13.90% ₹ 4,29,808 13.10% ₹ 12,27,461
Balanced – Equity Funds 16.30% ₹ 4,58,951 17.40% ₹ 15,95,380
Diversified Equity Funds (Large Cap) 14.10% ₹ 4,32,147 17.00% ₹ 15,56,130


It was explained to them that while above returns of RDs will be fully taxable on yearly basis as per tax slab irrespective of time frame of investment, pure debt and balanced debt funds will have indexation benefits beyond 3 years, thus reducing tax liability substantially. In equity products, there will be no tax after one year. They also were made to understand the risks of various products – equity was subject to market risks while debt products including RDs were comparatively safer. However, statistically, risk of equity products declines to negligible levels over long periods of time. Hence, when saving for long periods, it is better to take some equity exposure, depending on one’s comfort level, to make the money grow in real terms.


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03 Apr 2015
Can Your Bank FD or PFDSOPF match this

Can Your Bank FD or PF/DSOPF match this?

We are generally comfortable investing our money in bank FDs, PF/EPF/DSOPF and other fixed income instruments, always smug in the belief that our money is safe and will grow up adequately to meet our aspirations regarding self, spouse and children. However, we neglect the combined damaging effects of Inflation & Taxation from our calculations.

If your safer investments are tax-free (generally the PF/EPF/DSOPF, and Insurance policies), they should generate at least 8% per annum to merely neutralise long-term inflation and your money actually grows only if you earn beyond this. If the investments are not tax-free (all your bank and post office instruments including savings accounts, FDs, PO MIS, SCSS and RDs) and say, you are in 30% tax bracket, your investments should give at least 11.43% annualised returns for you to ‘break-even’. For 20% and 10% tax brackets, the minimum returns to break even are 10% and 8.88% respectively. We call this these the ‘Tread-mill’ rates! When you are earning this return, you feel you are moving fast. But when you get down from this tread-mill and take a reality check, you find you are not even  reaching the place where you started from – you’ve actually lost due to inflation and tax.

Have you ever considered Debt Mutual Funds as an investment? Debt funds generally invest in Govt Bonds, equivalents of bank FDs and Company FDs. They have no component of stock investments. When interest rates go down, while your FDs will lower the rates, the returns from long-term debt funds will actually rise. Even without that, currently long-term debt funds are clocking returns between 11-13% per annum. Also, if you remain invested in them beyond 3 years, you are likely to pay a tax of just about 5-7% after 3 years and maybe Nil tax after 4 years, going by the past 3-4 years’ performance and inflation statistics.

What about Equity Mutual Funds? You take stock market risks and get the risk-premium there. A large number of investors continue to believe that stock market movements can lead to a complete loss of your money if the markets do not behave. This happens only if you try very hard to achieve such a complete loss!Consider this – what was one of the worst financial year for Indian stock markets? Undoubtedly 2001-02. Twin Towers attack in USA took place on 11 Sep 2001 (9/11, famously) and the Indian Parliament attack on 13 Dec 2001. The BSE Sensex was 3604 on 30 Mar 2001 and 3469 on 28 Mar 2002. So if you kept your head when everybody else was losing theirs, there was literally no effect even in the worst of the crisis.

See the returns chart for the last financial year (FY 2014-15) published in Economic Times of 03 April 2015. Do you still think you can afford to leave out mutual funds from your portfolio if you want to meet your future financial commitments comfortably?The Best Performing Assets

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09 Dec 2014
MFs your Financial Supermarket-

MFs your Financial Supermarket

There are a lot of misapprehensions in the minds of most of the people about Mutual Funds. Despite the fact that they are one of the best financial avenues to invest and save while giving a lot of flexibility and convenience to the investor, they have not been able to capture the investing space of a large number of people.

My article below in Times of India today (National Edition, Page 7, 09 Dec 2014, Tue) tries to bring out that Mutual Funds are the most versatile financial instruments, for any period of time and purpose while giving you all the flexibility which no other financial instrument can match. You may also look at the link on our website to read more about it.

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MFs - Your Financial Supermarket

04 Dec 2014


For some unknown reasons, investing in mutual funds in India is almost always taken to be equity investing. This is despite the fact that out of a total of approximately Rs 11 Lakh Crores invested in mutual funds today, 70% is invested in Debt Funds, ie the funds which do not invest in equity markets at all. Consequently, investor perception of mutual funds is of a one horse race and that horse is stock markets.

The reality is quite different though. Mutual Fund as a class of investing is, in fact, not one single product unlike bank FDs, stocks or Gold. It is more like a basket which has three products – stocks, debt products and Gold – in all sorts of proportions. An investor can mix-and-match as per his liking and requirement. So a mutual fund can have all three or any two or just one single product as per the investor’s desire.Investor can choose one product with a mix of these asset classes or choose individual products of different asset classes – the choice is entirely his. And to top it, if chosen correctly, there can be seamless shifting between these classes. Thus, if an investor likes large company stocks today, he can invest in a good large-cap equity fund. But some time down the line, if the investor feels that some part of it should go to a safer debt product and Gold, he can shift a part to a debt fund and a Gold fund, while the balance can be continued in the equity fund. In case the shift is within the ambit of the same mutual fund company, it can be done without exiting out of the fund by simply submitting a switch request. Thus, mutual fund investing is more like an a la carte menu which gives you the flexibility of ordering bulk dishes, in small regular bytes (SIPs) or a combination of both as you like it. Taking out the money is equally easy and investor-friendly – it can be taken out in small bytes (SWP) or in a full or part bulk. Most of the mutual funds redeem the money in 3-4 working days. There are, of course, liquid funds where money is at your call within one working day.

While the mutual fund supermarket gives you this flexibility and ease, it does not disappoint you on the quality either. With expert fund managers managing your money, you would expect them to do better than if you were to manage it yourself. Table below gives out the returns generated by various categories of mutual funds over different time periods:-

Annualised Returns Sensex Top 5 Equity Funds average Bank FDs (past years) Top 5 Debt Fundsaverage Top 5 Balanced Equity Fundsaverage
1 Year Returns 38.1% 111% 9.5% 25% 58.2%
3 Year Returns 17.67% 40% 8.5% 14.1% 25.4%
5 Year Returns 10.9% 25.3% 7.5% 11.1% 17.3%


Bank FD returns have been taken to be of FDs done 1, 3 and 5 years back. Even the Liquid Funds, which are equated to Savings bank account, have traditionally given about double the returns compared to bank accounts.

However, tax incidence on the mutual funds has to be carefully considered. Dividends received from Debt mutual funds would be taxed more heavily than your income tax slab if you are in a tax bracket lower than 30%. Similarly, if you are in 10% tax bracket, short term capital gains (less than 1 year of investing) in equity mutual funds could mean a higher tax for you. On the contrary, long term investing in equity funds (more than 1 year) and debt funds (more than 3 years) could be very tax-efficient, in addition to giving you very good returns.

Due to such varied and beneficial characteristics, mutual fund supermarket could be a one-stop solution for almost all financial shopping (except real estate and alternative investments, for now) while meeting all requirements of a typical investor – wealth creation, retirement planning, children planning, financial goals planning etc. They are an ideal product for long term investing but do not disappoint even for short term investing as short as even a few weeks.


You can either call us on 9999 022 033 or write to us at to schedule a tele meeting with our financial planner and investment advisor.

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20 Feb 2014
Popular myths of Mutual Fund

Popular myths of Mutual Fund Investing

Dear Friend,

Attached herewith is my article published in Times of India (National Edition, 17 Feb 2015, Tuesday) on various myths that surround investing in mutual funds. A large number of people miss out on this excellent investing avenue due to misconceptions which are contrary to ground realities. Mutual Funds, as an investment are tax-efficient, versatile and very remunerative and can be as safe or as growth-oriented as you desire. You can customise it as per your requirement and comfort and still have money available at your beck-and-call all the time.

(Please enable ‘Display Images Below’ in your browser to see the newspaper clipping).

The article can also be accessed at the link


Popular Myths of Mutual Fund Investing

Mahesh Singh, 42 years old, is very keen that he should invest his hard-earned money in the best possible manner. He has two children and wants to make the best of the facilities and education available to them. However, any mention of mutual funds to him for investment evokes a sharp reaction – he wants nothing to do with shares and stocks and would like to keep his money safe. There are large number of such investors in India who miss out on this excellent investment avenue by falling prey to such myths primarily due to lack of knowledge and proper guidance.

Given below are some such myths which surround mutual fund investing in India:-

Myth 1: Mutual Funds invest only in shares and are very risky.

Mutual Funds invest in shares, gold as also fixed income products like Bonds, Non-Convertible Debentures, Government Securities (G-Secs), Corporate Debt instruments, bank Certificate of Deposits (CDs) and corporate Commercial Papers (CPs). In fact,almost 70% of the money invested in mutual funds in India currently is in safer fixed income funds. The risk in mutual funds depends entirely on the risk you wish to take. You can invest in low duration debt funds to have literally no risk to your investments. On the other hand, thematic and diversified equity funds let you have equity markets risks of the degree you prefer.

Myth 2: You need to have a demat account to invest in mutual funds.

Only if you wish to trade mutual funds online do you need to have a demat account. And vice-versa is not true – there are any number of online portals which let you trade online without a demat account. In fact, most of the mutual fund investing in India is without demat account.

Myth 3: New Fund Offers (NFOs) are good since they offer units at lowest NAV.

Performance of mutual funds is measured in annual percentage returns. Whether the NAV is Rs 10 or 100 does not matter then. NFOs could actually be risky since the fund management team managing the NFO may not have an established track record. NFOs should be subscribed to only if they have a very compelling offering theme which is not available in any other existing well-performing open-ended fund.

Myth 4: You can just pick up the best mutual funds from a website and invest.

This could be a way to prepare a portfolio. However, in case of equity funds, care should be taken to pick up good funds of different fund categories so that all the funds do not land up having similar underlying stocks, which defeats the very purpose of diversification. In case of debt funds, interest rate movements and your own fund requirement should dictate the type(s) of funds to pick up. Also, choose funds with stable and well-performing track record and being managed by proven fund managers. Do not look at only short term past returns while choosing funds.

Myth 5: When markets go up, I should get out of my equity mutual funds.

Investing should be for meeting your financial goals and not just to make more money. If the goals are still far away, there is no reason for you to disinvest. If you feel markets are likely to go down, you may shift the funds fully or partially to safer debt funds, rather than disinvesting and then letting that money lie in bank products that give low returns.

Myth 6: Mutual Funds are a product like shares, FDs, insurance etc.

Unlike others, mutual funds are more like a basket of products – you have the safer debt funds which give you exposure to bank, company and Govt securities, equity funds investing in different categories of stocks, gold funds investing in Gold and a large combination of these three products. Facility to seamlessly shift between these different products is also available without selling the funds.

Myth 7: A closed-ended fund is better than an open-ended one since it has a fixed maturity date.

Whatever investing results are desired from closed-ended funds, can be achieved from open-ended funds. In addition, Open-ended funds give you many more advantages in term of flexibility for additional investments, SIP investments, redemption, switching etc, which is not available in closed-ended funds.

Myth 8: Dividend option in a mutual fund is better than Growth option since you periodically get returns.

Dividend in mutual funds is not a fixed return. The date and amount of dividend depends on the fund manager. Hence, you may get dividend when you don’t need it and not get it when you need it. Also, your fund NAV goes down by the amount of dividend when it is declared. Systematic Withdrawal Plan (SWP) in a growth option may provide more certain returns if you need to get periodic money out.

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