I am a new investor and would like to start an SIP. Can you suggest the best performing funds for an investment of 15 to 20 years?
It is very important to invest in mutual funds for someone who still has 15 to 20 years to invest. But don't look for best return. Look for a fund which will give reasonable returns and which will give you more than the fixed income given by a fixed deposit. The return which you get from equity fund is far more tax efficient and liquid. For somebody who is investing for the first time, for first three years, don't consider anything like the best performing fund. Invest in a balanced fund. It may not be the best performing fund but it is extremely important to get used to the ups and downs of the market in a measured way. Balanced fund is a great vehicle for it and also derives the best possible return. The ups and downs of equity market drives away investors very quickly. Good markets attract you. The returns of 20 per cent, 30 per cent are tempting. But unfortunately, when these numbers become very attractive, that is the wrong time to invest, they fall soon after because markets are cyclical. So look at two to three balanced mutual funds. I can list some for you--HDFC Balanced, ICICI Prudential Balanced, Aditya Birla Sun Life Balanced 95 and Tata Balanced. Choose one or two of these and invest only via an SIP. Be invested for at least three years and increase your SIP annually. Most investors think on constant terms that I am investing Rs 10,000 per month. But as your income rises, increase your savings and investment. I don't think you will need my guidance for the next three years.