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Target Rs. 1 crore

Every week, Dhirendra Kumar answers investors' questions on the Star News show Fund ka Fund

I have a newborn son. I have a target to give him Rs 1 crore when he is 20 yrs old. Please advice how much should I invest monthly & where.

If we assume that well rated equity funds would generate 20 per cent per annum, you need to invest Rs 4500 per month to achieve your target. Choose some well rated funds like HDFC Top 200, Kotak 30, Birla Sunlife Front Line Equity or Sundaram Select Focus to achieve this.

I invested Rs 50000/- pa for 3 yrs in AVIVA ULIP. My agent told me that I will get Rs 500000/- after 5 yrs. Is it true? Please help
ULIPs have high associated initial costs which eat up your return in the long run. Your policy would need to generate 47 per cent per annum to achieve this (net of charges). This is not a realistic expectation.

I want to invest my money in any energy fund. Please suggest some good funds.
There are no particular energy funds, but you can consider few funds which have heavy exposure to this sector. Some funds are - Reliance Diversified Power, DSP ML Tiger or BoB Growth. Do note that these sector funds have high associated market risks.

For tax planning which one to choose? Lotus India Tax Plan or Sbi Magnum Tax Gain? Kindly help.
- Jitendra, Pune

Opt for SBI Magnum Tax Gain. It is a five star rated fund and has an excellent track record. Lotus India Tax Plan is relatively new and can be skipped.

I have been investing in birla Sunlife Tax relief 96 for two years. However, I do not see any growth in my corpus. Why?
Birla Sun Life Tax Relief 96 is a five star rated fund and has performed exceptionally well in the past two years. As the fund had a compulsory dividend payout option earlier, you would have liquidated much of your investment in the past two years which hampers overall capital growth. The fund has recently launched its growth option and you can invest in it for capital appreciation over long term.

Is ULIP cheaper than MF in 5 to 10 yrs term?

No. Ulips have high initial costs which affect its long term growth prospects. The power of compounding works more effectively in mutual funds as initial charges are not that high.

What is mutual fund capital gain tax after 1 year? Is it taxable or not?
- Dr Bardhan. Vizag

In equity mutual funds, there is no tax on gains if you redeem after one year of investment. In case of debt funds, the tax rate is 10 or 20 per cent (with indexation) of gains- whichever is lower.

I have invested in in Reliance Vision Rs 1500, in Reliance Growth Rs 1000, ICICI Smart Kid Rs.1000 per month. How is my investmemt? My salary is approx Rs 16000 per month.

You have chosen good funds for mutual fund investments. But it is recommended that you exit from your ICICI ULIP plan. ULIPs are not smart investments as they have high associated costs. Invest in well rated funds and opt for a term plan for your insurance requirements.

I have a 1 month old baby and want to invest Rs 1 lakh pa for 3 years for her future. Give me the best possible investment option.
Choose some well diversified equity funds like Kotak 30, HDFC Top 200 or Sundaram Select Focus for investment. Avoid one time investments. Instead, initiate a SIP in these funds and spread you investments to average the cost of your purchase.

I have SIP of Rs 1500 in Reliance Equity Opportunities Fund, Franklin Prima Fund and SBI Magnum Contra every month. Kindly advise to hold or exit.
- Pradeep

You can continue to hold to Reliance Equity Opportunities and Magnum Contra. These are well rated funds and have a good track record. However, you can discontinue your SIP in Franklin Prima as it is an aggressive fund and has not been performing well for few years now. Choose any well rated equity fund instead of this.