How to choose the right fund to attain our Financial goals?

Many people are quite happy taking the Rajdhani Express to travel from Mumbai to Delhi. However, if you need to get there in four hours it becomes imperative to take a flight. Similarly, you need to know your investment goals and the time period required to get there.

The same holds good for investments. Know where you want to be and by when. If you can define your goal well, you can better find a solution for the same. If you are looking for earning a 15% post-tax return year-on-year, you need to have a diversified equity fund in the portfolio.

But if you are content with an 8% assured return, you may consider shunning equity totally.

Why restrict to Mutual funds. The investor must have different investment portfolio like Mutual funds, Insurance (Regular, ULIP, etc.), Equity (Long term, short term, etc.), Bonds and FDs, Property (start with a Rental Portfolio – buy in semi urban / outskirt areas to start with), Fine Art and Antiques, etc.

For an initial investor (I assume a youngster) he/she has to first know their “Financial Personality” types – (i.e.) Aggressive Spender, Thrift, Spendthrift, Miserly, tight fisted, Careful Spender, etc., etc. Based on this he/she can formulate the strategy of investment. The spending personality type can train themselves to restrict the unnecessary spending.

However for mutual funds these are some first steps that can be undertaken by the initial investor in MFs –

a. Through Study of the Mutual Funds market and each fund’s past performance.

b. Taking suggestions from relevant people (those who have been there and done that).

c. Invest in different funds.

d. Invest in small amounts initially and gradually increase.

e. Have SIPs in each fund. SIPs are better than lump sum investment.

f. Remember that the investment is for long term and need not worry about the downs in NAV.

g. As far as possible don’t go for dividend payout scheme. Go for dividend reinvest.

h. Keep regular track of investments. If possible mark the progress in an excel sheet for each fund.

i. Shift to another fund if any particular one is not producing as good a result as others.

identifying what you want is not enough, but it should be available, so one has to compare the available offers and choose one that suits their requirements on most parameters

Past performance of the fund means to see at least 3-5 yrs of average rate of return a particular fund had generated. Viewing the current fund manger gives you the idea experience and expertise of the manager in the particular field. So this criteria is sufficient for the first time investor to invest. Start with small investment in at least 2-3 funds like one balanced fund, one full equity fund or debt fund, etc. A balanced combination is ideal form of investment. But before investing in any fund have your own viewpoint about it, so you can know where your money is going.

For getting a return of approximately 12% Annually !!!

Invest, if you prefer & think fit for investment, in the following Scheme:-

Franklin Templeton Blue-chip Fund / Prima  Fund / Prima Plus Fund

Franklin Templeton Tax-shield Fund / Pension Plan (Min. Invest Rs.500/-)

Tata Young Citizens Fund (For Child from 0 year age to 17 year age; Maturity payment at completion of 18 years' age; Min. Invest Rs.10,000/-)

As an Investor, as an Adviser, as a Consultant; I can say with confidence that all this Six Schemes gave An Average Return of 12% Annually since inception; whatever the NAV rate of purchase was upto 31/03/2010.