Are sector funds risky in the current markets? If I want to opt for one, which one can I look at?
-Pankaj Jha
Sectoral funds are very risky and we would not recommend you go for one, unless you have a diversified portfolio. What is most important is that you must have the appetite for the risks that these funds come with.
As these funds invest their entire corpus in 1-2 sectors, their fortunes depend on these sectors. Like, many mutual funds launched technology funds in 1999-2000, only to burn their fingers in the technology bubble burst.
Have an investment horizon of at least three years for such funds and be fully aware of how the sector behaves and reacts to the overall economy.
I am new to investing. Should I invest in index funds?
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-Raj Kiran
For a new investor, it would be a good idea to start investing in an actively managed balanced fund for few months, to understand, familiarise and experience how investments in an mutual fund works. Index funds are opposite: they're passive and replicate the index you invest in. These are good investments, if you do not have the time to track your investments and have a long-term investing time frame.
I have around 20 mutual funds and would like to consolidate these. What is the way to optimise and bring these to a manageable level?
-Rajneesh Rai
Analyse the 3- and 5-year performance of funds and compare with its peers. Retain funds that beat the benchmark and are category leaders. If you can stomach poor performance of the remaining funds for some more time, do so at your own risk. Wise investors cut losses to make meaningful gains. I want to invest in HDFC Top 200 and IDFC Premier Equity Plan A via Systematic Investment Plan (SIP) for Rs 2,500 each. But their mid- and small-cap allocation is more than half. Is this fine?
-Vineeth Kumar
HDFC Top 200 is a large- and mid-cap fund and IDFC Premier is a mid- and small-cap fund. The combined effect has a small-cap bias. There is nothing wrong investing in these two, as long as you are aware that these are risky compared to large-cap funds. Can I invest in Axis MF Gold ETF for 20 years? Is this a good fund?
-Shilpa Arora
There can be some apprehensions about investing in gold at these levels. But, this asset class has been faring very well in recent years. Gold should not account for over 5-10 per cent of your portfolio. You will need a demat account to invest in ETFs. I want to invest Rs 2 lakh in a fund with lowest risk, for three months to a year and will fetch more than 8 per cent, tax-free, returns. Please suggest.
-Prasad
With the time frame and risk profile you reflect, don’t look beyond bank fixed deposits. Currently, no other product will guarantee your capital and pay over 8 per cent. Mutual funds do not guarantee capital protection. Liquid funds could be an option, if you can muster some risk. I invest in mutual funds directly via fund houses. I heard that websites like fundsupermart.co.in and fundsindia.com are offering free online investing services. Should I opt for these? Will it make any difference if I invest online?
-Rahul Kansal
With entry load ban, you need not pay any entry fee, whether you transact through a broker or with fund houses. You will need an online banking account for online transactions. Banks have nominal or no fees for such accounts.
Online, you can invest in different schemes by a single platform, but you have to visit each fund house's website separately.