VR Logo

How Safe is My Money?

I used to invest in NSCs and insurance policies to save tax till now. Three months ago my brother persuaded me to invest in mutual funds. Please review my investments. How safe is my money?
-Mohammad Azam

I am 42 years old and am the only earning member in my family. I used to invest in NSCs and life insurance policies to save tax till now. About three months ago my brother persuaded me to invest in mutual funds. He got me to invest Rs 20,000 each in three funds in monthly intervals - HDFC Taxsaver, HDFC Long Term Advantage Fund and Templeton India Pension Plan. Have I been reckless? Please tell me how safe is my money.
-Mohammad Azam

As far as the selection of funds go, your brother has made you to invest in some of the best available mutual fund schemes which also provide the benefit of tax exemption. All three funds have performed well to generate good returns for their investors. While the first two - HDFC Taxsaver and HDFC Long Term Advantage Fund - are both all-equity funds and invest only in equity shares, and the latter is a hybrid debt-oriented fund which invests a bulk of its money (about 60 per cent) in debt instruments while the remaining goes to equity shares.

We would also like to compliment your brother for choosing the right way of investing at monthly intervals. All equity investments should be made systematically by investing small amounts regularly over a period of time.

But please note that none of the mutual fund schemes provide assured returns, unlike the NSCs where your returns and principal are assured. Though the return potential is significantly higher, but nothing is guaranteed. But having said that, please note that over a longer time period, the risk of equity investments reduces significantly and the chances of your losing money get reduced. Moreover, since you have invested in tax planning funds, your money is anyway locked-in for three years which is well-suited for equity investments. Therefore, you should not worry too much. What we can suggest you is to allocate your investible surpluses appropriately between mutual funds and assured return schemes, like NSC. You being the sole breadwinner of your family, if you think you are not prepared to accept the volatility that comes with equity investments, maybe you can keep investing a larger part in assured return schemes while allocating a part of it to mutual funds. Even among the mutual funds, you can opt for a safer fund like Templeton India Pension Plan rather than going for all-equity funds.



Post Your Query