Saturday, May 10, 2008

I want to invest Rs 10,000 in Mutual Fund via SIP, what is the best strategy to go about selecting good performing Mutual funds

In this uncertain times investing in Mutual Funds should be done via SIP (Systematic Investment Plan) to remove volatility and avoid risk due the value cost averaging property of SIP.

STRATEGY1) Find out best performing funds in Diversified Equity fund category. This can be done by checking the performance of a fund over 1 year, 3 year and 5 years horizon. Double check this performance from at least 2 to 3 different sources regarding returns in percentage. The returns figure you need to look at is Annualized compounded return rather then Absolute return.

2) Split your investment of 10k in around 2 or 3 different Funds from different fund houses. say you can do SIP of 5k and 5k in two different funds or you can do an SIP of 4k, 3k and 3k in three different funds.

3) Few of the top performing funds over the years.
a) SBI contra Fund
b) HDFC Top 200 Fund
c) HDFC Equity Fund
d) UTI MasterShare
e) Reliance Growth Fund
f) Reliance Vision Fund

4) Few top performing Tax saving ELSS Funds.
a) SBI Magnum Tax Gain
b) HDFC Tax saver Fund
c) Reliance Tax saver ELSS

5) Make sure you invest in different kinds of fund maybe 1 or 2 in Large Cap Fund and 1 in Midcap Fund,

6) If you want to take very high risk for long term then you can select a small cap fund in small proportion. Strictly avoid sectoral or thematic funds.

7) Review your portfolio once in six months.

Happy Investing !

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