I have lost the hope on MFs
Posted by sushilgirdher on June 18th, 2008
Padma asked, Hi Girdher,.I am 27 years, married, no kids. I had planned to invest 2000rs in SIP MFs from this year April. I have a holding of Rs.1 lakh from previous occasional one-time investments in ELSS. But after seeing the market going down steeply and my previous investments at loss, I have lost the hope on MFs and decided to drop the idea of putting some money into it. What is your take on my decision? Can I opt for some other saving avenues other than FDs & MFs for better returns?
Sushil Girdher answers, I have always advised that only such investors who are disciplined in terms of regular investing and have a long term investment horizon would benefit from the equity investments. As you have used the SIP route, at least your average cost might be lower and it is just a question of holding on to the investment for a longer time horizon. MFs may not be suitable if you require the funds in a short term time frame and you would be better off in terms of investing in safe debt instruments such as Time deposits with bank or post office. In case you want to invest a bulk amount in MF then you could use Systematic Transfer Plan (STP) route where your bulk amount is invested in debt funds and is systematically transferred to equity MF. This method essentially symbolises the SIP investment mode and again helps in reducing the overall risk of price fluctuations.