Some of my fixed deposits have matured and I want to invest this amount in four equity schemes. While the fund ratings and past performance of funds are readily available on your website, there is no clear indication if this is a good time to make a lumpsum investment in these.
-Anand C Shastry
We, at Value Research, believe that markets cannot be timed. And we do not encourage people to attempt to do so. When carefully chosen, based on their past track records, funds are more likely to deliver good returns when investments are made in a disciplined fashion. You should avoid investing lumpsums in equity mutual funds. Instead, invest in debt funds initially and then opt for a systematic transfer plan (STP) into the equity funds. As the investments will be made at all market levels, this will help you insulate your equity investments from sudden market movements.
My mutual fund investments soared until the market slide of 2008 wiped out a lot of those gains. Is profit booking recommended in mutual funds? If not, how should I protect myself against such market risks?
-Harshal Jayavant
It is impossible to fully eliminate the cyclicality of equity returns. Over a longer time frame, equities prove to be the most rewarding asset class. Timing market entry and exit will create psychological barriers to investing.
In a limited way, this goal can be achieved through portfolio rebalancing, but even this is not guaranteed. Rebalancing means that in the light of a specified debt-to-equity ratio, you move investments from equity to debt whenever equities rise beyond their pre-determined asset allocation, and vice versa.
Stay invested in equity funds only if you are a long-term investor. If not, stick to debt funds. The closer you get to your goals, the less should be your equity allocation, so that the markets do not hurt your investments.
Will mutual funds continue charging entry loads on Systematic Investment Plans (SIPs) started before August 1? If yes, should I cancel my current SIPs and start anew? Also, will the new higher exit loads be applicable to direct investments as well?
-Gaurav
Entry loads will continue to be applicable on SIPs started before August 1. If you wish to avoid this, you may discontinue your present SIPs and start afresh. If you approach the mutual fund directly, you pay no commission. But if you invest through a distributor, then you will have to pay him a commission.
Exit loads are levied without any distinction to direct investments or those done via a broker/distributor/advisor.
I would like to know if investing in mutual funds through brokerage services such as icicidirect.com is safe? What happens if the brokerage closes down?
-Abhijit Saha
It is safe to invest through the brokerage services available, though precautions related to online transactions need to be followed. Your investments are made with the fund house and the brokerage service only facilitates the whole process. Your investments will not be affected if the distributor or broker closes business.
