Index-based mutual funds useful only for long-term investors

Systematic Investment Plan (SIP) is a time-tested,successful and disciplined way of investing in today’s volatile stockmarket. Long-term investments in mutual fund through the SIP route is prudent. Also investing a certain amount of money every month provides you with the benefit of compounding as well as rupee cost averaging.

Also,if any fund house shuts down,the schemes are merged with some other existing fund,or the investments are redeemed to the investor as per the current net asset value.

To beat inflation,I want to invest in some mutual funds that invest abroad. Which are the ones I should look at?

Shailesh Prasad

Investing in countries with lower inflation seems to be a good idea in these times when inflation in our country is high. You can look out for options such as Principal Global Opportunities Fund,Mirae Asset China Advantage Fund,Kotak Global Emerging Markets and JP Morgan JF Greater China Eqt Off Shore Fund.

How much to invest would depend on your disposable income,financial goals and investment horizon.

Does it make sense to invest in index-based mutual funds and are they easy to track?

Ramesh Sood

An index-based mutual fund holds securities in the same proportion as its respective index and intends to track the returns of the index. The concept,though interesting,may be suitable only for a long-term investor. It may be a better idea to consider an equity opportunities/contrarian fund with a good track record in a lacklustre market.

How do fixed maturity plans work when the interest rates go up and what kind of time horizon should I keep in mind?

Deepak Kumar

Fixed maturity plans last only for a fixed period of time — as little as 15 days or as long as five years. FMPs prove to be a great investment option when there is a lot of interest rate volatility as these schemes invest primarily in fixed-return investments like government bonds and money-market instruments (very short-term fixed return investments).

The instruments mature in the same duration as the scheme. This insulates the schemes from volatility in the interest rates.

What are child Ulips and do they work better than say,PPF,over a period of a 10-15 years?

Manoj Sharma

PPF is a debt investment whereas a child Ulip is a life insurance endowment plan,which is market-linked to give your investments an extra returns edge.

PPF,being purely debt,gives a safety cushion to your investments,while returns from Ulips are subject to market conditions. Thus,depending on your goals and risk appetite,you can invest in either of them.

The writer is CEO,Investshoppe.com

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