Question: What are the type of debt funds suitable for a person in 20% tax bracket who wants to shift from Fixed Deposits to harness the benefit of indexation to reduce tax?
Details from Call: Want to invest in pure debt funds for indexation benefits, No dividend option,
You can invest in debt mutual fund which will provide you a risk profile like fixed deposit and but which may provide you better returns if you hold it for more than 3 years. So if a bank fixed deposit gives you a post-tax return of around 6.80% (8.50% less 20% tax) the pure debt fund 3 years returns maybe higher around at 8.5%-9% (which is also likely to be the post-tax return due to indexing). You can consider to invest in Income Fund category of Mutual Fund which is the pure debt category. It is within your debt allocation
Another option you can consider is long term gilt fund which may provide even better post tax return but carries interest rate risk (Relatively Higher Risk) or Arbitrage fund (Relatively Lower Risk).
Recommended debt (Income Funds) mutual fund: ‘Franklin India Income Opportunities fund’
Recommended Arbitrage Mutual Fund: ‘ICICI Prudential Blended Plan – Plan A
Recommended Gilt Fund: ‘’ICICI Pru Long Term Gilt Fund’’
Age: 35 yrs
Question: I want to invest lumpsum of 12 lakhs for long term, please suggest suitable investment funds
Details from Call – Want to invest for 2 years for Partial Retirement, Current Portfolio is 60% equity and 40% debt
You have taken right decision to invest in Mutual Fund. Your investment decision should be based on the risk taking ability, time horizon and goals. For investment time horizon less than 3 years you should invest in less risk mutual fund schemes i.e. debt funds. You can invest in Income Fund category of Mutual Fund.
Recommended Income Fund: Franklin India Income Opportunities fund
Age: 30 Yrs
Question: I have invested in HDFC equity fund. Have I invested in the right fund? I can additionally invest 3000/month for short term. Which are the other funds I can invest in?
HDFC Equity fund is a pure equity fund and it is beneficial to invest in Equity funds for long term i.e. more than 10 years. You have taken right decision to invest in Mutual Fund via SIP route. Your investment decision should be based on the time horizon, risk taking ability and goals you want to achieve by investing. As you have mentioned that you want to invest per month Rs. 3,000/- for short term. Assuming you want to invest for 3 years, you can invest in less risky mutual fund schemes i.e. MIP funds. Recommended MIP Fund: “HDFC Multiple Yield Fund – Plan 2005” and “Birla Sun Life Monthly Income Plan II – Savings 5 Plan”