According to him, with around 9% annual returns on these deposits, it can be a very good instrument for accruing assured return. Along with this, an investor can strengthen the portfolio with a certain amount of money in gold savings funds.
Below is the edited transcript of the interview on CNBC-TV18.
Q: Investor wants to invest Rs 10,000 per month for two years. She has got a short time horizon. What's the advice?
A: Because you want to invest only for two years, I will not recommend you to invest in equity mutual funds. If your goal is child education after two years, you need some assured return instrument. I advise you to invest in bank recurring deposits because banks are nowadays offering around 9% annual return on a two year term.
Out of Rs 10,000, if you invest Rs 7,000 in bank RD and Rs 3,000 in a gold saving fund, though mutual fund returns are not assured, still if you expect an average return of 10% from your portfolio you can accumulate around Rs 265,000 in two years.
As you said, your goal is around Rs 500,000. For that, you will have to invest around Rs 19,000 per month. Since the time horizon is very small, you should avoid equity and if you are not comfortable due to any reason in bank RD etc. then some bond funds can be a choice.
Q: Would you want to make some specific names of funds to her?
A: Yes, in gold saving funds she can invest in Reliance Gold Savings Fund or Kotak Gold Fund . But if she wants to take a decision on bond fund then it maybe SBI Dynamic Bond Fund .
Q: Investor wants to invest a lump sum of Rs 200,000. He is expecting returns of 20-25%. He has two years timeframe. That's a tall order. Will that be manageable?
A: No. For 20-25% returns I cannot suggest any instrument. He can just try in the stock market. Maybe some good stocks where he can expect some good returns, in stocks which are undervalued.
It's a different thing, but my suggestion is if he wants a good investment instrument for two years, he can go for some mutual fund fixed maturity plan.
Q: That is what 11%, what would you get in that?
A: With around 10% per annum on fixed maturity plan for two years horizon, in the next two years he can get a CAGR of 10%. But, he is saying over 24%. I think he expects 24% in one year. That is something which is not possible.
Whenever these come, it is in the name of fixed maturity plans only and any mutual fund which launches. For example, if it's HDFC then it will be HDFC Fixed Maturity Plan. It will be series A, B, C, D or 1, 2, 3, 4 something like that. These are close-ended funds. He can buy whenever these are offered.
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