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Advantage of Rebalancing

Balanced funds automatically rebalance their assets, making them good starting point for new investors …

My aim is to accumulate wealth for long term of over 10 years and I want to invest in equity mutual funds. Is this the correct decision and also name two good funds in equity (both large and multi cap) category to invest. What is your view on investments in gold for 2012?
-Sai Ram

You come across as a first time mutual fund investor and it will be a good starting point to invest in one or two balanced funds. These are hybrid funds whose average equity exposure over the last one year is greater than 60 per cent. These funds automatically rebalance the asset allocation making them suitable for new investors. You can select the best performing fund from the fund select feature on our website across different categories. Invest regularly in these funds and track its performance to understand the way SIP investment work and how your investments shape up.
As far as gold goes, we seem to have a history of going wrong with our call on the yellow metal. Warren Buffet, who has been a source of immense inspiration feels gold, is a bubble, which is reflected in our view on this precious metal. Yet, over the past 11 years, gold has been the highest earning asset class at the end of each year. That ownership in gold has evolved from physical bars and coins to the more popular paper form of ETF, is a big game changer. The paper investment in gold is safe, simple and convenient; one can make small monthly SIP contribution of Rs 500 to ride the gold wave over time which has been an added reason for its soaring popularity.
Tailpiece: The Indian fascination and lure to gold is legendary and India is known to be the largest consumer of gold globally. The value to gold attached by us is very different, for instance gold at the time of marriage has a different connotation and accounts for a large expense. Suppose you invest through an SIP in gold for the next 15-20 years, you not only average out your acquisition cost, you also avoid timing the market. At the end of this time period you will have a sizeable asset in gold which you can redeem irrespective of the then prevalent gold prices taking away the fear of gold prices and at the same time providing peace of mind for the available gold to use it in whatever way it suits your requirement.



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