Since mutual funds houses also deduct expense ratio, does it make sense to invest in them now as the markets are falling?

Pramod Singhal

Expense ratio is fixed per scheme. That is, irrespective of the movement of the market, the rate remains same. So, it does not matter whether the market is bullish or bearish. This fixed percentage will always be deducted from your latest holding. But expense ratio does impact your returns, depending on your investment horizon. If you are looking from a long-term point of view, say, 10-20 years, a high expense ratio could eat up a substantial chunk of your gains. Given enough time, high expense ratio MFs can cripple your investment growth potential.

How does gold SIP work?

Pooja Awasti

An SIP in gold invests majority of its corpus (90-100%) in gold ETFs; a small portion might also be invested in money market instruments or short-term debt products. Gold SIP is the same as any other SIP; people who don?t have a lump sum to invest in physical gold can park an amount as small as R 100 in a gold SIP. Keep a target of at least 5-7 years to invest in gold SIP to get the full benefit of investing in gold.

A lot of companies have floated non-convertible debentures. Is it better to invest in NCDs after they are listed?

P C Arun

Yes, it is good to invest in an NCD after it?s listed, provided it is a highly rated NCD. Usually, a company issues NCDs with different maturities and interest option at the same time and these are listed separately on the market. However, there is liquidity risk for premature encashment. In fact, you will see many NCDs that have zero volumes for the day or as far out as a week or, sometimes, even a month. In cases where you do see volumes, the spread might be high. Therefore, it?s important for you to place limit orders, and not market orders while buying bonds, so you don?t end up paying more than what you wanted.

Is it the right time to invest in gilt funds?

Arvind Kumar

Interest rates have been volatile so far this year. And, there seems to be some uncertainty on their future direction. There are some signals that interest rates have peaked, and with the equity markets showing a downward trend, gilt funds ?which predominantly invest in government bonds ?can be a good bet.

As interest rates start coming down, government bond prices will improve and, hence, gilt funds will perform better in such circumstances. Typically, a pause or cut in interest rates would benefit longer-duration bond funds, since they are more sensitive to interest rate movement and would, therefore, benefit most from the softening of bond yields. However, this could take time. So, invest only if you have at least 3-5 years’ time-frame. Some of the top-performing gilt funds are Birla Sun Life Government Securities Fund, ICICI Pru Gilt Investment and Kotak Gilt Investment.

n The writer is CEO, Investshoppe.com

n Send your queries at fepersonalfinance@expressindia.com