I am a high net-worth individual. I want to invest my surplus funds temporarily. My agent has offered various fixed maturity plans (FMPs) as investment options. Since these plans do not give any indicative returns, on what basis should I choose a plan? I am flexible with regard to the time frame. It can be two-three years.
An FMP is a good investment option for a risk-averse investor. Broadly speaking, one can expect a pre-tax return similar to the one-year bank fixed deposits from a one-year FMP. It is advisable to not invest in an FMP beyond this period in a rising interest rate scenario. You can also consider investing in monthly income plans (MIPs) with low-equity components. Such MIPs will give better returns than FMPs over the next one year, with the flexibility of redemption.
I have been regularly investing in mutual funds for the last four years (Rs 40,000 annually via a systematic investment plan, or SIP). My investment advisor suggests I should switch some part of my investment to a daily SIP. Do you agree? What are its advantages?
Yes, you should go ahead and invest in a daily SIP. It enables you to be more disciplined in not trying to time the market, helps reduce the adverse impact of volatility on your portfolio and is convenient as the denominations are small. However, you must check the load structure for such SIPs before investing. Note that SIPs tend to deliver good returns only in the long term, and hence, regular monitoring of your investments may not be helpful.
Is it advisable to invest in initial public offers (IPOs) and follow-on public offers (FPOs), especially those made by public sector undertakings (PSUs)? I don’t have a direct exposure in equities, but after the euphoria surrounding the Coal India IPO, I think I missed a good opportunity. I would like to invest in the upcoming PSU IPOs and FPOs? How should I go about it?
Successful investing is all about objectivity and never about sentimentality. We, in India, are blessed with a variety of businesses and are fortunate to be among the countries with the most listed stocks on the exchanges. Hence, an idea missed should encourage you to look forward to a new one, which may be better.
One can invest in equities either through the secondary market or IPOs. The basic rules remain the same, irrespective of the medium of investing. While the huge success of the Coal India IPO has aided the sentiment for PSU stocks, it will also be a good idea to evaluate every offer in isolation rather than basing it on a classification. It will be wise going through the offer prospectus and understanding the attractiveness of pricing, before taking the plunge. In case these do not help you in investing, you may seek an expert’s help to enable you to take a decision.
I am 19 years old and studying in Mumbai. I work part-time with an advertising agency and earn a monthly stipend of Rs 5,000. All my expenses are borne by my parents. I want to invest my earnings. How can I start?
It is always a good idea to start investing early. Since you do not have to worry about a living and are starting early, it can be well worth taking a higher risk to be able to generate a higher return. You can invest in a systematic investment plan (SIP) of a mutual fund every month. The fund that you identify for investing should have a medium to large asset base, a fund manager with a proven long-term track record of consistently above-average performance and credible sponsors of the company.
The writer is managing director and principal portfolio manager, Capital Portfolio Advisors. Send your queries to yourmoney@bsmail.in