SIP can give higher returns than RD

A child Ulip is basically a market-linked life insurance endowment plan. A child Ulip plan is best suited for children in the age group of 5 to 15 years. These plans offer flexibility of withdrawal at stipulated time intervals. It offers a mix of debt and equity instruments and you can even make a switch among the various investment styles available. Apart from this,these plans also provide various riders. Before considering these plans,you should make sure that you have a longer time horizon as these plans usually charge a high upfront cost that gets adjusted over a period of time. Check the charge structure,number of switches allowed and terms for withdrawal facility. You may opt for HDFC Child Gift Investment Plan or ICICI Child Care Plan.

How do I buy mutual funds from the stock exchanges?

-Mahinder Butola

You can buy exchange-traded mutual funds the same way as you trade in stocks. You need to have a depository and a trading account for the same. These transactions on the exchange are cost efficient as they have low distribution and accounting expenses. Holding mutual fund units in depository accounts is far more convenient than holding them in paper form. Also,payment for funds sold are received in two working days,faster than redemption by the conventional method.

Will liquid funds give more returns than a bank fixed deposit for an investment horizon of one to two years?

– Ramesh Chauhan

Liquid mutual funds are open-ended debt mutual funds. There is zero entry or exit load and are quite safe as they are not investing in equity or any other volatile markets. These are the best options to invest for a short time horizon. They give better returns than FD usually over a shorter-term duration,say one to two months,and are also tax efficient.

I am a salaried employee and want to invest R2,000 every month in a SIP for five years. The other option is opening a recurring deposit. Out of the two,which will give me more returns and also ensure safety of the capital?

-Avinash Mittal

The way of investing in an SIP & recurring deposit is the same regular instalments at fixed time intervals. The returns on the SIP depend upon the performance of the fund in which investments are made,which is further linked to the market performance. Hence,it is an instrument that can generate higher returns than recurring deposits but are accompanied by higher risk as well. Recurring deposit investments,on the other hand,offer you a fixed rate of return over a stipulated time period. Also,SIP investments do not have a lock-in whereas recurring deposits have a minimum three-year lock-in period.

The writer is CEO,Investshoppe.com