[ghodlur]

Originally Posted by soarer

Experts,
Looking for some expert advice for my retirement planning and have time horizon of 15 years to accumulate the corpus. My agent has suggested the following funds

My Risk appetite is 80:20 Ratio with 80% being OK to invest in high risk funds for next 5 years.

Fund name
Mirae Asset Large Cap Fund-Reg(G) (16% of my planned investment)
HDFC Small Cap Fund-Reg(G) (16% of my planned investment)
Axis Midcap Fund(G) (16% of my planned investment)
Aditya Birla SL Equity Fund(G) (16% of my planned investment)
Axis Banking & PSU Debt Fund(G) (16% of my planned investment)
SBI Equity Hybrid Fund-Reg(G) (20% of my planned investment)

Kindly advice whether the following are good or should I reconsider any of the above.

I dont know how right I may be but my personal suggestions is as below:
1) First 3 funds are good.
2) Discard Multicap fund - already the midcap & large cap exposure is covered in the first two funds
3) Instead of thematic fund stick to pure debt funds. Check the Medium to Long Duration debt funds.

Your actual allocation for the goal should be 75% equity and 25% debt but your choice of allocation is Ok. Maybe a 3 yr review will give you better direction. I would suggest to stick to 5 funds with 20% allocation each.
Large Cap, Mid Cap, Small Cap - 60%
Hybrid Aggressive - 20%
Pure debt - 20%

I will let the experts say more on the choices. I hope you must have taken the PF, PPF (if investing) into consideration when deciding on the MF route.

[2000rpm]

Is this a good time for buy Debt funds in the bulk? OR SIP is the way to go?

[DigitalOne]

Originally Posted by soarer

Experts,

Fund name
Mirae Asset Large Cap Fund-Reg(G) (16% of my planned investment)
HDFC Small Cap Fund-Reg(G) (16% of my planned investment)
Axis Midcap Fund(G) (16% of my planned investment)
Aditya Birla SL Equity Fund(G) (16% of my planned investment)
Axis Banking & PSU Debt Fund(G) (16% of my planned investment)
SBI Equity Hybrid Fund-Reg(G) (20% of my planned investment)

Originally Posted by ghodlur

Your actual allocation for the goal should be 75% equity and 25% debt but your choice of allocation is Ok. Maybe a 3 yr review will give you better direction. I would suggest to stick to 5 funds with 20% allocation each.
Large Cap, Mid Cap, Small Cap - 60%
Hybrid Aggressive - 20%
Pure debt - 20%

I will let the experts say more on the choices. I hope you must have taken the PF, PPF (if investing) into consideration when deciding on the MF route.

I agree with ghodlur.

First, it is important to decide on the asset allocation; i.e how much of equity and how much of debt. And then in each asset category, decide the mode (e.g. ppf instead of mf).

Once asset allocation is fixed, decide on 3-4 AMCs. Investments should be in direct mode only, despite whatever your agent says. Compensate the agent for the advise separately.

Keeping it restricted to 3-4 AMCs makes it easier to track the investments especially in Direct mode.

Lastly evaluate Systematic Transfer Plan. If you are planning a lump sum then put the lump sum in a Liquid fund and then do an STP to the equity/debt funds. Or a monthly SIP to the Liquid fund and then STP to the other funds (this is how I do it).

Individual fund selection should be the last of your worries. If you follow the above approach any "mistakes" that you make in individual fund selection can be easily corrected.

Originally Posted by 2000rpm

Is this a good time for buy Debt funds in the bulk? OR SIP is the way to go?

Debt funds have interest rate risk and credit risk (bond issuers not returning the money).

Interest rates have been going down and will keep going down for some time now which is good for debt fund investors.

Credit risks are going higher; many NBFCs are stressed. Which is really bad for debt fund investors.

On the whole I would suggest lumpsum in Gilt (government securities) funds where there is minimal credit risk, but SIP in other types of debt funds.

[2000rpm]

Originally Posted by DigitalOne

On the whole I would suggest lumpsum in Gilt (government securities) funds where there is minimal credit risk, but SIP in other types of debt funds.

Can you elaborate on the sentence please?

Sorry, but I have never researched these investment options in details before. Any particular benefits of GILT funds?

"SIP in other types of debt funds", didnt understand this part of the statement.

[Ironhide]

Originally Posted by DigitalOne

--- snip ---
Once asset allocation is fixed, decide on 3-4 AMCs. Investments should be in direct mode only, despite whatever your agent says. Compensate the agent for the advise separately.

Mutual Funds noob here. Any specific reasons as to why you've recommend this?

Cheers !

[ghodlur]

Originally Posted by Ironhide

Mutual Funds noob here. Any specific reasons as to why you've recommend this?

Direct plan have less expenses as it doesn't have the broker fees/commissions which results in a slightly higher NAV than the regular funds. This has a greater impact when the compounding comes into picture too.

[srvm]

Originally Posted by 2000rpm

....
Sorry, but I have never researched these investment options in details before. Any particular benefits of GILT funds?
...

GILT funds are funds which invest mostly or completely in Govt.Securities (Central or State Govts.). They are comparatively safer to Bonds issued by companies (which can default on repayment during tough times or become bankrupt). It is assumed implicitly that GoI or state govts won't go bankrupt or default since they can always raise taxes (or any other means at their disposal to raise money) to pay back the maturity amount.

Originally Posted by 2000rpm

Can you elaborate on the sentence please?

"SIP in other types of debt funds", didnt understand this part of the statement.

What BHPian DigitalOne meant is:
Invest lumpsum amount in Gilt funds.
And invest in monthly or periodically (called Systematic Investment Plans or SIPs) in other debt funds which invest in commerical bonds, CDs, CPs etc.

[DigitalOne]

I found this pdf on Freefincal very useful to explain all questions on debt funds.

[soarer]

Originally Posted by DigitalOne

I agree with ghodlur.

First, it is important to decide on the asset allocation; i.e how much of equity and how much of debt. And then in each asset category, decide the mode (e.g. ppf instead of mf).

Thank you ghodlur & DigitalOne, I will realign to 5 funds for 60% in equity and 20% each in hybrid and debt.

Also one more question on PF/PPF, currently our exposure is what it get deducted from salary and paid by employer ( ~24% of basic) , should I re-consider it? Because I am also investing in sukanya samriddhi scheme for both my kids apart from the above allocation.

[kavensri]

Originally Posted by soarer

Also one more question on PF/PPF, currently our exposure is what it get deducted from salary and paid by employer ( ~24% of basic) , should I re-consider it?

What do you mean by that? You want to increase your PF contribution through VPF?
Also, PPF is different from PF/VPF/EPF. PPF is not through salary deduction, unlike PF/EPF/VPF.

[Simhi]

Friends,

Kindly give me your inputs on options for someone who wants to invest a lumpsum to get monthly income

1. SWP option by investing a debt mutual fund (growth scheme) and withdrawing less than fund's yearly return to ensure principal is not eroded.
2. Dividend option by investing in a debt mutual fund providing monthly dividend.
3. Fixed deposit with regular income
4. Annuity option from Pension schemes like LIC Jeevan Akshay

As per calculations, SWP option seems better than Dividend option and FD both from returns and tax calculations perspective.

As for Pension Scheme, only argument seems to be locking at current interest rates. The justification provided by agent being if we are expecting life expectancy of 80+, then with Indian economy growing, interest rate will go lower and over the years move towards 3 to 5%.

[SmartCat]

Originally Posted by Simhi

Kindly give me your inputs on options for someone who wants to invest a lumpsum to get monthly income

Put 40% in debt fund systematic withdrawal plan, 40% in quarterly payout fixed deposits and 20% in multicap equity funds. You can pull out cash from equity funds manually when the markets are booming.

The justification provided by agent being if we are expecting life expectancy of 80+, then with Indian economy growing, interest rate will go lower and over the years move towards 3 to 5%.

If you fear falling interest rates, choose g-sec mutual funds (a form of debt fund). Maybe you could allocate 20% of your overall capital to g-sec funds. These funds have historically generated 8 to 10% per annum over the long term. They work very well in falling interest rate scenario.

[pnredkar]

Hello folks,

I need some advice about debt funds. I am invested in the following two funds that don't seem to be doing too well:
- Aditya Birla Sun Life Dynamic Bond Fund - Retail Plan (Growth)
- UTI Dynamic Bond Fund (Growth)

Apart from this I have some money held in liquid funds which seems to be outdoing the above two. That is all of my investment on debt side. Though I have been a long time MF investor, I don't seem to get the debt side investments correct.

I would like your suggestions about whether I should change or continue to hold. Also these funds would be completing 3 years next month and I would like to book the losses in long term. I just wanted to confirm that long term cut-off is 3 calendar years. Specifically if bought on 31-Aug-2016 and sold on 01-Sep-2019, would it qualify for long term?

And if I have to buy, what type of debt funds and schemes are advisable. Any direct recommendations or pointers to resources that will help me decide is appreciated.

Thanks,
Prasad

[DigitalOne]

Originally Posted by pnredkar

Apart from this I have some money held in liquid funds which seems to be outdoing the above two. That is all of my investment on debt side. Though I have been a long time MF investor, I don't seem to get the debt side investments correct.

Similar situation as yours. My investments in Liquid and Ultra Short Term funds are outdoing other debt funds.

Debt funds are tricky. I have even lost money in debt funds (ILFS, DHFL, Zee issues). Also if you get interest rates trends call wrong, there can be significant losses.

We live and learn.

No opinion on the individual funds mentioned.

And if I have to buy, what type of debt funds and schemes are advisable. Any direct recommendations or pointers to resources that will help me decide is appreciated.

Thanks,
Prasad

Please check my post#2617 in this thread.

[bullrun87]

Originally Posted by pnredkar

Hello folks,


- Aditya Birla Sun Life Dynamic Bond Fund - Retail Plan (Growth)
- UTI Dynamic Bond Fund (Growth)


I would like your suggestions about whether I should change or continue to hold. Also these funds would be completing 3 years next month and I would like to book the losses in long term. I just wanted to confirm that long term cut-off is 3 calendar years. Specifically if bought on 31-Aug-2016 and sold on 01-Sep-2019, would it qualify for long term?

And if I have to buy, what type of debt funds and schemes are advisable. Any direct recommendations or pointers to resources that will help me decide is appreciated.

Thanks,
Prasad

Yes, three years is cutoff when long term capital gain starts to apply and one is taxed at 20% with indexation as opposed to one's IT slab rate. Both the schemes you have mentioned take duration risk as well as credit risk. Do not exit the UTI scheme even on completion of 3 years as it has already fully written down DHFL exposure and you may see an NAV bump if some money is recovered from DHFL.



Debt funds can be especially tricky especially with 16 different type of debt funds now available after the SEBI reclassification.
There have been lots of defaults and diversification and proper fund selection is now more important then ever. Here are a few things I consider while constructing a debt portfolio.
I never buy any scheme less than 5000 crores in AUM and holding less than 50 papers for diversification and credit risk mitigation. This is a rule that must not be broken!. In the debt space more AUM is usually better.

I only buy from among these categories for duration less than 3 years

a)liquid funds
b) AAA rated ultra short term/ low duration funds
c) arbitrage funds( they are best for people in 30% slab for investments between 1-3 years)

Safety must be the the priority for short duration investments.


For long term debt allocation over 3 years
a) short term funds(only mostly AAA funds)/ banking and psu debt funds/ corporate bond funds must form the core of the portfolio
b)credit risk funds can be chosen as a returns booster if one has the risk appetite
I usually dont invest in gilts and duration strategies as i feel fund managers often get duration strategies wrong. ICICI, SBI, kotak and IDFC are some AMC's that have handled the debt crisis rather well and one can choose short duration funds from these for debt allocation.