Equity markets in India and across the globe have corrected sharply on concerns over global growth amid the coronavirus outbreak.
My mutual fund SIP is showing negative return now after four years of investment? Should I stop investing?
– RV Krishnan
Equity investments have delivered higher returns than fixed income over long periods (10+ years), albeit with higher volatility. However, recently equity markets in India and across the globe have corrected sharply on concerns over global growth amid the coronavirus outbreak. The steep correction has led to the trailing two year SIP returns being negative across the large-, mid- and small-cap segments. Even the trailing 4-year SIP annualised returns in equities are only marginally positive (<1% in annualised terms). An SIP investment in the large cap index (BSE 100) would have delivered an annualised 0.42% (as of April 22, 2020), while the mid-cap (BSE Midcap) and small-cap (BSE Small cap) segments would have delivered 0.19%, and minus 0.01%, respectively.
Equities tend to bounce back after sharp corrections and have delivered positive inflation-adjusted returns in the long run, despite witnessing similar corrections in the past too. Hence, you may remain invested if you have a long time horizon.
I am working in a private company and my age is 37 years. Please suggest some mutual funds for my long term goals like retirement planning and wealth creation.
—Ajay Kumar Pandey
Given the long-term goals of retirement and assuming moderately-high risk appetite, you may invest with a portfolio mix of about 80% into equities (LC/MC/SC/International – 50/9/6/15) and 20% into fixed-income funds. For equity exposure, you may consider Mirae Large Cap, Aditya Birla Frontline Equity (large-cap funds), DSP Midcap and HDFC small cap funds.
For international equity exposure, you may consider ICICI Pru US Bluechip and Franklin Asian Equity fund. For fixed income exposure, you may consider Kotak Banking & PSU funds for short term debt exposure and IDFC Bond fund for long-term debt exposure. To avail of tax benefits, you may invest in tax-saving mutual funds and other tax saving fixed income instruments such as VPF. You can also look to avail the additional deduction of Rs 50,000 by investing in NPS.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to fepersonal firstname.lastname@example.org