Mutual Fund Corner: 'I want to invest in US equities, what should I do?'

If he is very aggressive, you can look at what were the erstwhile balanced funds which are now called Aggressive Hybrid Funds. If you are not that aggressive, if you are only moderate, you can look at an Equity Saving Funds. If you are conservative, you can look at the debt hybrid, where the debt component is much higher. The money that you need, do not take it as dividend. Dividends in a mutual fund makes no sense. Except in one very specific circumstance, dividend makes absolutely no sense. Do it through a systematic withdrawal.

You can keep increasing your withdrawal as inflation comes in. The amount that you have and I think probably the expected returns from each of these, it should be comfortable. You should be able to withdraw inflation adjusted Rs 25,000 for the next 20 years or so. I think that should not be a problem. Which liquid fund to put in? Depending on which of these hybrid funds you chose in, that same fund house put in a liquid fund, so that you can systematically transfer it to the hybrid fund that you would choose.

Ashar: The fund component, which he has right now is absolutely fine. He has got fortunately a mix of large mid and hybrid category in the portfolio. So, the fund per se does not need any reshuffle as per the present component. The only thing is that in the last 6-9 months, we have seen that markets have been very choppy and obviously the results of this performance of these funds would not be very great if you look at the returns on this fund.

The real thing, when you do an SIP is the long term view you keep in mind. I would sincerely request that don’t look at the last one year returns. Your fund choice is very good and look at it for a horizon for 5-7 years. Also, considering that you are of 64 years, I think there should be little but more of a conservative bit to your portfolio, because if you look at the fund which you have in your portfolio they are little bit on the aggressive side. I would suggest that you could have a hybrid fund allocation more to the SIPs, which you are doing and then I think you should be good in a 5-7 years’ time horizon.

Roongta: Rather than answer this specific query, my point is that New Fund Offer, you obviously do not know the track record. I think the track record is very important to decide whether you would want to invest in a particular fund or not. So, any New Fund Offer, not just the one that you have highlighted, I would look at it only if it is coming up with a strategy that does not exist today. If similar strategy exists somewhere else and there is already a whole track record to that kind of a scheme, I would any day prefer a tried and tested scheme over a new fund offer. There is no major advantage of going in for an NFO. There is in fact no advantage at all of going in for NFO.

Ashar: It is a paradoxical situation, which the investment profile is based. However, let me compliment you that at least for the car purchase goal, which you have highlighted, you are on the right track. The amount which you wish to set aside in the next 8-10 months of Rs 25,000 per month has to go into a debt fund, and into the debt fund family also into the ultra-short term funds, not the ones which have longer duration in it. So I would suggest the Aditya Birla Sun Life Savings Fund for that period and hopefully right now, the way the interest rates and all are shaping up, it should give you a better return than your conventional savings account or something. So be focused on that and about your complete profile in which you are investing, I think another query is justified.

Roongta: I think direct investment in US equities is not really advisable unless your amounts are very sizeable, because transaction costs are very high. Please remember if you invest directly in US equity, you would have to report it separately in your income tax returns and that could invite specific scrutiny. So how do you take US equity exposure? Do it through the Indian mutual funds who in turn take US exposure. I think there are three to four major players and this is treated as Indian investment, debt fund treatment for tax purposes. The three or four major players, primarily there is Franklin Fund, which feeds into the US Opportunities -- the Templeton US Opportunities Fund, there is the ICICI US Bluechip Fund, which invests directly into the bluechip, there is a DSP Blackrock Fund and there is an Edelweiss Fund. These are the major funds that allow you to take US equity exposure.