What kind of mutual funds to look for 5-10 year SIP? Here is what you need to do first

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Published: October 4, 2017 2:33:13 AM

The asset allocation or the mix of various assets including equity, debt, gold, etc. held in a portfolio is considered one of the key determinants of its performance.

dhaval kapadia, dhaval kapadia investment tips, dhaval kapadia mutual fundsA suitable asset allocation is typically based on one’s investment horizon and risk appetite. (PTI)

What kind of funds should I look at for 5-10 year SIP?

– Gurmeet Singh

The asset allocation or the mix of various assets including equity, debt, gold, etc. held in a portfolio is considered one of the key determinants of its performance. A suitable asset allocation is typically based on one’s investment horizon and risk appetite. Generally, the longer the investment horizon and higher the risk appetite, higher would be the allocation to equity. Considering your investment horizon of 5 to 10 years, 50% to 60% of your investment portfolio could be allocated to equity, 35% to 45% to debt and around 5% to gold. In case you hold other debt investments, in the form of PF, PPF, etc., fresh investments could be made into one or two equity funds through monthly Systematic Investment Plans (SIPs). Given the investment horizon, it would be advisable to select one large cap and one small/mid-cap equity fund or diversified equity funds that invest in large, mid and small cap stocks in varying proportions based on the fund manager’s views.

When selecting funds, it is advisable to consider fund performance over atleast the previous 3 years to 5 years. This along with studying calendar-wise performance vis-à-vis benchmark indices (like Sensex, Nifty, etc.) and peer group would indicate consistency across time frames and market cycles. Additionally, you could consider the fund’s AUM (AUM should be greater than `500 crore) and period of existence (the longer the better). This information along with fund research notes/ratings that are provided by various independent research firms online can help one select suitable funds. You should review your investments in these funds every 18 to 24 months to ensure that the performance is in line with your expectations, market benchmarks & peer group.

How do I buy some tax-free bonds from the secondary markets?

—Kapil Sharma

Tax-free bonds are listed on the debt segment of various exchanges such as NSE and can be traded there, although the liquidity might vary from bond to bond. An important feature of tax-free bonds is the differential coupon applicable for the institutional and retail options of the same bond, which might result in different prices and yields available on those bonds.

The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to

fepersonalfinance@expressindia.com

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