Long Term lump sum Investment

Q & A Forum › Category: Fixed Deposits › Long Term lump sum Investment

subbu090102 asked 9 years ago

Dear Srikanth : First of all let me congratulate you on the amazing job you are doing in terms of bringing in awareness on various investment options. I discovered your site recently and have just started following it. Over the years I have graduated from being a novice to a reasonably well informed investor thanks to programs like Investors guide and online portals like value research. I think your site is very good because of the interaction you have with the investors and guide them with their queries. I invest in all the major recommended funds thru SIPs that has been set up with my bank account. I also have a savings of about Rs.1Cr which is in FD on an auto renewal basis. As you might be aware that the interests have gone down consistently each passing year and now most of the FD are generating a return of 6.5% and if you reduce the TDS and the IT return its practically eroding the capital. I would like to split this money into 10 L each and make investment in lump sum basis. I read your article on the MIP and Debt funds. My expectation is a safety of capital and a ROI of 10% Can you please guide me on how to progress and if there are any specific schemes you recommend. I can lock the money in for about 3 years.

3 Answers

0 Vote Up Vote Down

Sreekanth Staff answered 9 years ago

Hi, Thank you for reading my blogs and for your appreciation! 1 - May I know the reason for maintaining high corpus amount in FDs? For any specific goal? Read : https://www.relakhs.com/avoid-fixed-deposits-rds-for-long-term/ 2 - Kindly note that even debt funds or hybrid debt oriented (like MIP) are risk oriented products only. Safety of capital and Returns are not guaranteed. I am sure, you must be aware of this fact! May I now if are you ok to take little bit of risk??

subbu090102 replied 9 years ago

Hi Srikanth : High corpus in FD is largely due to the accumulation of salaries we have a sweep in facility on the corp salary account and over the years the amount accumulated, also I have a separate account for the MF and SIP investments ; I transfer from the salary account on a need basis. It was not so bad until a few years back as the interest component on the FD was reasonable and the stock markets were largely flat from 2008 until 2013. My SIP accumulation shot up considerably due to the bull run but the auto renewal have only resulted in each cycle of renewal dropping ROI to 6.5% range. Entering the market with lump sum investments at these levels might not be wise and neither is it wise keeping the money in FD. That’s when I read your article on MIP and Debt funds and was wondering if It is OK to invest in MIPs. I did invest in Birla Dynamic bond fund which lost its shine after Feb.
Am fine to take calculated risk, so will be ok with whatever you recommend or any approach you suggest or any investment channels you recommend. I would prefer the conservative MIPs to aggressive ones though I already have some exposure to Birla MIP 25. I also like the arbitrage funds because of Tax free returns after one year but am not sure what to expect from them since the market is on a upswing. But if I do not generate a return of at least 10% the inflation will anyway eat up my capital.

0 Vote Up Vote Down

Sreekanth Staff answered 9 years ago

Hi, 1 - You may consider Conservative MIP Fund. 2 - Arbitrage Funds do scout for opportunities in both upward or downward markets. Volatility is the key and the ability of the fundmanagers to identify these opportunities (hedging) is what matters. Considering the gains on Arbitrage funds (after holding for min 1 year) are tax-free, these can be considered. Read : https://www.relakhs.com/best-arbitrage-funds-returns/ 3 - You may also have a look at Secured NCDs (non-convertible debentures, cumulative) which can offer you interest rates in the range of 8 to 9%. Read : https://www.relakhs.com/muthoot-finance-april-2017-ncd-issue/ https://www.relakhs.com/best-ncd-debentures-bonds-issue/ If your expected returns are around 10% and as you can stomach some risk, may be MIPs can be a better choice for next 2 to 4 years horizon. In any case, markets give you a good opportunity to buy at low, you can always switch the corpus to equity oriented funds.

0 Vote Up Vote Down

Sreekanth Staff answered 9 years ago

Hi, 1 - You may consider couple of good MIPs. 2 - If you would like to invest in Direct plans through a common online platform, you may consider portals like MF Utility (industry sponsored one), Invezta, etc., Read : https://www.relakhs.com/mutual-fund-direct-plans-vs-regular-plans/ 3 - If you are investing in Arbitrage fund, you are doing so with at least one year time-frame, so volatility can be there ..so, do note that returns from Arbitrage funds may not be abnormal. 4 - ICICI Child care or SBI Childrn benefit plan, these are hybrid-equity oriented funds. If you can invest for longer period, you may consider these. Other good & consistent funds in this category are : HDFC Balanced fund, TATA Balanced fund or SBI balanced funde tc., You may set up STP (from liquid fund to equity oriented balanced funds)