Mutual(ly) (Beneficial) Fund

I’m not too particular about using Mutual Funds. For one, its the lazy way out… people just want to pass on the responsibility of managing their money to ‘professionals’ or ‘experts’. I agree, many don’t have the time… but there’s also the law of compounding that applies to the management fee of 1% – 2% charged every year by the Fund Manager, despite the performance of his fund. Granted, this is the way business is done.

But just because it’s done like that, it doesn’t mean you have to follow that.

A lot of Fund Managers talk about SIPs – Systematic Investment Plans. They use this as a way for you to continue pumping money into a fund, so they can continue to build up their management fees.

There’s nothing wrong with SIPs – and I sincerely believe it’s best for you over the longterm. But you need to identify which Mutual Funds are worth investing in. You have over 3,000 schemes to chose from – so that’s not easy!!!

If you really want to do well as an investor over the longterm, then here’s my best suggestion:

  1. Identify 10 – 15 companies that you feel strongly about and understand them.
  2. Invest in each company an equal amount of your savings.
  3. Follow your own Systematic Investment Plan – just allocate every month / quarter a fixed amount into these companies. (Set up your calendar)
  4. Retire as a millionaire! (That’s easy :)

I know… you were expecting an article on mutual funds… so I’m giving you my pick of mutual funds, which have performed fairly well over the last couple of years – that consistency is what I look for:

  • DSP BlackRock Equity Fund (Growth)
  • HDFC Top 200 Equity Fund (Growth)
  • HDFC Equity Fund (Growth)
  • Sundaram BNP Select Midcap (Growth)

And for the tax conscious ones:

  • Franklin India Taxshield
  • Fidelity Tax Advantage
  • HDFC Tax Saver

(As you can see, I have a preference for HDFC based funds. That’s not bias… its performance.)

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