MUTUAL-INDEX FUNDS/ETFs
INDIA & INTERNATIONAL
A mutual fund is a professionally managed investment fund that pools investors’ money and invests it in stock market and debt products. Company managing mutual funds is called Asset Management Company (AMC) e.g., India- HDFC AMC, ICICI AMC, SBI AMC, & International- BlackRock Group, Vanguard Group, Prudential Group Investment Management etc.
For persons having regular job/business with little/no understanding of stock market and not sufficient time to monitor stocks portfolio, it is better and profitable to simply invest via Index Funds where both Indian (Nifty 500/BSE 500) & International Index (Nasdaq 100, S&P500, VT etc.) funds are available. Here you can even invest a small amount of Rs 100 to Rs 500/- per month that is diversified into a large number of companies. And one gets the services of a professional fund manager at a nominal fee.
There are three main types of mutual funds:
i) EQUITY FUNDS ii) HYBRID (Equity+Debt) FUNDS
iii) DEBT FUNDS
SIP (Systematic Investment Plan)- Lumpsum & SWP (Systematic Withdrawal Plan):
SIP (Systematic Investment Plan)- Lumpsum: SIP is a method/process of regular monthly investment for the long-term.
In Equity Index Funds (Nifty 500/BSE 500, ELSS Index Funds etc.) better to invest through monthly SIP to average out volatility (ups/downs) of the stock market-you get more units when the market is down and less units when market higher. As a general principle, a lumpsum should be spread via SIP over half the period it took you to earn that money. But it should not exceed three years. A market cycle usually completes within that time and captures both the market rise and fall. Beyond this timeline, there isn’t any real advantage to staggering your investment.
So, if you have received your annual bonus, spread it over the next six months. Likewise, if you are investing a huge amount – lifetime savings or retirement money, spread it over the next three years.
SIP amount can be as small as Rs 100 to 500, there is flexibility to increase/decrease/pause-stop or withdraw the investment amount any time but with applicable exit load/tax on gains.
Exit load: 1% if sold in less than 1 year. Index Funds have no exit load.
Always select Growth option, IDCW (Income Distribution cum Capital Withdrawal) option has higher taxation.
To get returns estimates (after 20 years, your investment of ₹ 12.00 lakhs i.e., Rs 5,000/- per month SIP, with expected return @ 15% per annum will grow to ₹ 75.80 lakhs), see SIP return and CAGR calculator below:
Compound Interest Calculator – Calculate Compound Interest Online (hdfclife.com)
CAGR Calculator – Calculate Compound Annual Growth Rate Online
Caution: Some banks charge a one-time fee for setting up an e-mandate, ranging from Rs 50 to Rs 236. Banks that charge a mandate fee: Axis Bank Kotak Mahindra Bank, Punjab National Bank & Canara Bank.
If you start SIP investments in five mutual funds from your Canara Bank account, you’d needlessly cough out a one-time fee of Rs 885 (Rs 177 x 5 funds). This amount effectively reduces your SIP returns. That said, a lot of banks don’t charge any fees either.
Banks that don’t charge a mandate fee: SBI, ICICI Bank, HDFC Bank, Citi Bank & IDFC Bank.
You can link multiple SIPs to a single mandate. But bear in mind that there’s a maximum daily limit of Rs 1 lakh for e-mandates. So, carefully plan your SIP dates.
SIP linked to a mandate can be modified, paused or cancelled, but it must be done two days before the next instalment date.
Penalty for missing SIP instalments Fact:
Also, be careful to maintain sufficient amount for SIP, otherwise there may be charges if SIP is declined unless it is cancelled beforehand.
While it is avoidable, you can miss an SIP instalment by one or two months. You don’t need to pay a penalty; neither does your investment become inactive. But please be aware that banks may charge you for dishonoring auto-debit payments. However, there is a risk of your SIP investment getting cancelled if you miss out on your investment for three consecutive months. In such a case, you will have to lodge a fresh mandate to restart your SIP.
To avoid hassles/annoyance of starting/cancelling/restarting SIPs in so many funds + penalty, you can deposit money in a liquid fund and then withdraw the required total amount and put the money in your different funds every month.
The biggest drawback of SIP is the decrease in returns when markets start to rise continuously. As the market continues to rise, the average value of the units keeps on rising and thus the no. of units bought in each purchase goes on decreasing. So, volatility is good for SIPs.
SIPs are good for salaried class people who have fixed monthly income. But if you don’t have fixed income or have unpredictable cash flows, you should go for lumpsum investments whenever you have funds available.
When invest in mutual funds create only one folio (is like bank account) for each AMC and buy all funds of the AMC in this folio only. Add joint holder and nominee details to avoid problems for inheritors of the funds.
Can buy i) Direct Mutual/Index Fund Plans– (here you do not get financial advisor services) cheaper via any AMC site, Annual Fee- nil, no brokerage. a) India: e.g., edelweissmf.com, can buy only Edelweiss AMC Fund like Edelweiss Nifty 500 Multicap Momentum Quality 50 Index Fund. Minimum Investment required is only Rs 100/500/1000. b) International: e.g., vanguard.com- Vanguard Total World Stock ETF (VT) etc. Minimum Investment required is about $94.
ii) Regular Mutual/Index Fund Plans– more expense via brokers a) India: e.g., icicidirect.com, can buy any AMC’s Fund, Annual Fee- Rs 700/- + brokerage b) International: e.g., interactivebrokers.co.in (USA), cibc.com (Canada).
Can invest/stop-pause SIP/withdraw money any time but stay for the long-term/forever for multi-bagger returns.
https://www.valueresearchonline.com/stories/225571/autobiography-of-an-sip
Instead of HDFC Flexi Cap Fund given in the above article “Autobiography of an SIP” (Mutual Fund Insight Magazine, August 2025, Page 80-81), invest in Factor-based Smart Beta Index Fund Edelweiss Nifty 500 Multicap Momentum Quality 50 Index Fund for much higher returns.
-XIRR is a method used to calculate returns on investments where there are multiple transactions happening at different times. It is a good function to calculate returns. In the case of Mutual funds, if you are investing through SIP or lumpsum or redeeming through SWP or lumpsum, XIRR can take care of all those scenarios.
I am just giving you an example- if you are getting 24% XIRR, it means in approximately, 3 years your money is doubling. Now, just assume you have invested 10 lacs, after 30 years with 24 % XIRR, your money would become 100 crore. That is the power of compounding.
–SWP (Systematic Withdrawal Plan): SWP is the reverse of SIP that helps to systematically withdraw money from a mutual/index fund as given below (start SWP after one year to avoid STCG Tax/Exit Load):
a) A Systematic Withdrawal Plan or SWP is a facility extended to investors allowing them to withdraw a fixed amount from a mutual/index fund scheme regularly. You can choose the amount and frequency (monthly, quarterly, or annually) of withdrawal. You can also choose to just withdraw the gains on your investment keeping your invested capital intact. At the set date, units from your portfolio are sold and the funds are transferred to your account.
The main advantage of an SWP is that it provides a steady income stream. It’s especially useful for people who want a regular income from their investments, such as retirees.
SWPs can be more tax-efficient compared to lump sum withdrawals. The tax is only applicable on the gains made on the withdrawn amount, not on the entire investment. Let’s consider Mr. Kumar, a 45-year-old investor residing in Bengaluru. He has invested ₹10 lakhs in an equity mutual fund and has decided to set up an SWP to withdraw ₹20,000 every month. Assuming that the capital gain per withdrawal is ₹2,000, Mr. Kumar will only be liable to pay tax on this ₹2,000 capital gain, not on the entire ₹20,000 withdrawal.
For monthly income after retirement, may transfer the amount/retirement corpus to some Equity Savings, Balanced Advantage, Nifty 50, etc. funds, and start monthly SWP. Annual SWP amount better not more than 4-5/6% of the total corpus in the fund, so as to protect the capital and allow the balance amount to grow. See SWP calculators in the links below:
https://groww.in/calculators/swp-calculator
https://www.tatamutualfund.com/tools-and-calculators/swp-calculator
-See the following videos in Hindi on SWP (Systematic Withdrawal Plan) from Equity Saving Funds and Balanced Advantage Funds:
https://www.youtube.com/watch?v=e6z-CpqJ1vk&t=37s
(Video Summary: Initial corpus Rs one crore, invest Rs 12 lacs in Equity Savings Fund, and Rs 88 lacs in Balanced Advantage Funds. Do first 2- years Rs 50,000/- per month SWP from Equity Savings Fund, and from 3rd year start SWP from BAFs)
https://www.youtube.com/watch?v=4HWpHZG5ZVA
(Video Summary: Initial corpus Rs 25 lacs in July 2010 in ICICI Prudential Balanced Advantage Fund. After one year in July 2011, started a SWP of Rs 15,000 per month for 10 years. Even after withdrawing Rs 18 lacs in ten years, balance in July’2021 grows to Rs 5,407,114 i.e., around Rs 54 lacs.
For monthly income can also consider following the alternative plan below (in addition to SWP plans given above in videos) depending on personal choice:
Monthly Income Funds/SWP: Keep 5% of your corpus as emergency fund in a sweep-in/flexi savings account with any reputed bank or in a liquid fund for better tax efficiency/less taxes. Deploy the balance amount as under:
i) For income in the first year invest (amount being monthly expense X 12 months) in one or two Liquid Funds: Axis Liquid Fund (Returns as in September’2022 1year/3-year- 3.7/4.1%), HDFC Liquid Fund (3.6/4%), ICICI Pru Liquid Fund (3.6/4%). Then withdraw your monthly expense through SWP. After one year transfer any surplus, if any to the next scheme i.e., Conservative Hybrid Funds.
ii) For next 2 years income invest (amount being monthly expense X 24 months) in one or two Conservative Hybrid Funds: Canara Robeco Conservative Hybrid (Returns as in September’2022 1year/5-year- 3.2/7.5%, HDFC Hybrid Debt, ICICI Prudential Regular Savings (6.8/7.8%). Conservative Hybrid and Liquid funds have debt taxation in India.
iii) For income from 3rd to 5th year, invest (amount being monthly expense X 24 months) in one or two Equity Savings Funds: Axis Equity Saver Fund (Returns as in September’2022 1-Year/5-Year: 2.7/7.7%), HDFC Equity Savings Fund (5.1/7.4%), ICICI Pru Equity Savings, and Mirae Asset Equity Savings Fund (10/).
iv) For Income after 5 years, invest 50% each in Balanced Advantage & Nifty 50 Index Funds. May increase monthly expenditure amount by 5% every year but not at the expense of capital erosion.
– HDFC Balanced Advantage Fund (Returns as in September’2022 5-Year: 10.1%, Expense 1.64%), ICICI Prudential Balanced Advantage Fund (9.8%, Expense 1.54%)
– Large Cap- HDFC Index Nifty 50 Fund (12%, Expense 0.40%)
(Equity Savings, Balanced Advantage, and Nifty 50 funds have equity taxation)
b) SWP is the reverse of SIP that also helps to systematically exit the funds. After a substantial amount has been accumulated in the invested fund, and a goal (house building, child education, daughter’s marriage, etc.) is nearing, then around 18 to 24 months before the goal start transferring the required amount via SWP to a Liquid Fund for better tax efficiency//less taxes in a phased manner to avoid-minimize LTCG tax. This shifting will protect the capital required for your goal in case there is a market fall. If you wish you may continue with your SIPs.
SWP vs Dividend plans: Don’t get fooled by labels
Dividends look attractive again, but only for a narrow band of investors. For most, SWP remains superior.
SWP vs Dividend plans: Don’t get fooled by labels | Value Research
-In Debt Funds can make SIP or lump sum investments. Exit load: Nil.
Preferably select 3/4/5 star rated mutual funds. Wherever available compare 5-Years % Return of Funds. Average Return % has been given for performance idea/relative performance of different funds. However, see the latest return figures.
EQUITY FUNDS
INDIA & INTERNATIONAL
Equity Funds are mutual funds that invest in stocks/shares of various companies, which can earn far higher returns. Hence, they are an ideal choice for wealth creation. However, equity funds can fluctuate much more as compared to debt funds in the short-term. So, they are suitable for time horizons of five years or more.
Can your mutual fund run away with your money?
Let’s find out
Can your mutual fund run away with your money? | Value Research
Invest through secure site like http://icicidirect.com having wide office network and very good customer service. Our family has three accounts including an NRI account on this poral which is user-friendly and easy to browse.
It is astonishing to know that legendary investor Warren Buffett (net worth $130 billion USD + 37 billion given in charity) has generated his enormous wealth from the stock market (4.3 million or 43 lacs percentage returns from 1964 to 2021) with a compounded annual gain of just 19.8% returns (24% if dividends included). So, you require just 20% returns in dollar currency in long-term to be rich like him, your idol becomes your rival (Source-modified: Financial Literacy Awareness Webinar on December 25, 2022/January 08, 2023, etc. by Varun Malhotra, IIM Ahmedabad-India/CFA Institute-USA).
The lion’s share of the 93-year-old’s wealth was built after four decades of investing, 99% of his $130 billion empire was made after his 50th. So, for him 40-50-60 years define ‘long-term (Source: Mutual Fund Insight Magazine- India, December 2023, Page-16). Warren Buffet started investing with just $114.75 in 1942. Later, in his first partnership, he invested only $1001. By the time he was 30, he had a net worth of $1 million.
(Note: Equity Fund Details deleted by error. Will again update, pl wait till then)
HYBRID FUNDS
INDIA & INTERNATIONAL
These funds have a mix of equity and debt. They are classified as per the proportion of the equity in the portfolio. Following are some INDIAN & INTERNATIONAL HYBRID FUNDS:
INDIAN HYBRID FUNDS
They invest in a mix of equity and debt, considered suitable for retirees due to their debt portion. Hybrid Index Fund is present only in the Multi Asset Allocation category; all other categories are actively managed, so they have fund manager bias risk, returns vary widely across funds, and carry risk outlined under Equity Funds. So, invest in equity index funds and a debt fund separately, maintaining your desired asset allocation, say, equity 65% and debt (liquid fund) 35% to get equity taxation benefit, etc.
Exit load 1% if redeemed within one year. There are seven categories in Hybrid Funds; the following five types have equity taxation:
AGGRESSIVE HYBRID FUNDS: (Asset Allocation: Equity 65-80%, Debt 20-35%) They have to maintain minimum 65% equity at all times to be eligible for equity taxation. Suitable for duration of minimum 5-7 years. Being active funds, average 5-years return vary widely from 5.1 to 14% as on April 30, 2023. They are second most popular type of hybrid funds behind Balanced Advantage Funds. Investors have put Rs 1.91 lakh crores in these funds as of September 2023.
Canara Robeco Equity Hybrid (Average 5 years Return- 14.3/Expense 1.96%)
ICICI Pru Equity & Debt (14.1/1.80%)
ICICI Prudential Equity & Debt Fund – Growth Portfolio | Portfolio – Moneycontrol
Mirae Asset Hybrid Equity Fund
Mirae Asset Hybrid – Equity – Growth Portfolio | Mirae Asset Mutual Fund Portfolio – Moneycontrol
BALANCED ADVANTAGE/DYNAMIC ASSET ALLOCATION FUNDS: (Asset Allocation: Equity 0-100%, Debt 0-100%) Balanced Advantage Funds also invest in a mix of equity and debt but unlike the aggressive hybrids etc., they have complete flexibility to alter the allocation between equity and debt based on the market condition. They put more money in equities and less in debt when markets are depressed (PE low etc.), and vice versa i.e., reduce equity portion and shift to debt when markets are higher (PE more).
BAFs’ equity allocation can be between 30-70% to 0-100%. For a regular-income and also others, go for a balanced-advantage fund where the net-equity allocation doesn’t move to extremes and stays in the range of 40–50 per cent.
-Funds making adjustment in asset allocation within a narrow range may work out better than the ones taking extreme calls. Funds taking extreme calls on asset allocation may get wrong-footed and cause an opportunity loss to an income seeker.
-For instance, if a balanced-advantage fund goes aggressive on equity and the market tanks, it can pose hurdle in deriving regular income. At the same time, a balanced-advantage fund which takes a very conservative call on equities (15-20%) may not earn enough returns to support regular income.
Timing the market: Dynamic allocation vs static allocation
Value Research is sceptical of mutual funds that rely on timing the market. You may time the market right occasionally, but it is almost impossible to consistently and accurately predict short-term market movements. Let’s take March 2020. Balanced advantage funds tanked hugely when the markets fell. But after the mayhem, almost all the dynamic funds increased their equity allocation significantly to reap the benefits of low stock prices. However, after three four months, they reduced the equity exposure, even though the market continued to make new highs for the next 12-odd months.
Value Research prefers funds with static allocations, like aggressive hybrids or conservative hybrids as they provide greater visibility and predictability. Moreover, unlike BAFs, static allocation funds eliminate the risk of accurately forecasting market movements, whether model-driven or based on human judgement.
All BAFs aim to offer equity taxation and bump up their equity allocation by adding derivative instruments to ensure that their equity component is at least 65 percent at all times. Financial planners say many first-time investors are using this as an entry to equities as they are less volatile than pure equity funds, some senior citizens are using these to earn higher returns than fixed deposits as FD interest rates are falling.
Due to their investing methodology, BAFs are much talked about funds, and it are the most popular form of hybrid funds with assets worth 2.22 lakh crore under management as of December 2023. Unlike index funds where institutional investors are pouring lots of money, Balanced Advantage Funds are something where the bulk of money is invested by retail investors, as these funds promise to ride the market well and avoid big falls. However, whether or not such lofty promises will work is still dubious (source: Mutual Fund Insight Magazine-India, February 2023, Page 53).
Suitable for minimum 5 years duration. Being an active fund, average 5-years return vary from 4.4 to 12.4% as on April 30, 2023.
HDFC Balanced Advantage Fund (Average 5 years return11.5/Expense 1.67%)
HDFC Balanced Advantage Fund – IDCW Portfolio | Portfolio – Moneycontrol
ICICI Prudential Balanced Advantage Fund (10.7/1.70%)
ICICI Prudential Balanced Advantage Fund – Growth Portfolio | Portfolio – Moneycontrol
EQUITY SAVINGS FUNDS: (Asset Allocation: Equity including arbitrage Minimum 65%, Debt: Minimum 10%) This scheme was introduced to the Indian money market in 2014. A somewhat under-the-radar hybrid category/not noticed much by people in general. Has assets worth 22,230 crore as of November 2023.
Invests about 1/3 in equity, 1/3 in arbitrage (arbitrage refers to exploiting the price difference between two different markets- in this case, cash and derivatives markets. Simply put, arbitrage means buying a stock at Rs 100 and then selling its Futures contract at Rs 101. At the expiry of the contract, you make a profit), and 1/3 (minimum 10%) in debt. Equity along with arbitrage is cumulatively considered to be equity allocation.
The portfolio of these schemes is structured in such a way that the corpus set aside for investing in stocks and arbitrage remains above 65%. Their diversification makes them an attractive option for investors who want capital appreciation in medium term (3 to 5 years). These are suitable for regular income seekers/retirees and also conservative investors who want limited equity allocation in their portfolio. The Equity portion ensures the growth of your money, and the fixed income part will ensure you a steady income.
Being an active fund, the average 5-year return varies from 6.4 to .8.8% as of September 2023.
Axis Equity Saver Fund
Axis Equity Saver Fund – Growth Portfolio | Axis Mutual Fund Portfolio – Moneycontrol
HDFC Equity Savings Fund
HDFC Equity Savings Fund – Growth Portfolio | HDFC Mutual Fund Portfolio – Moneycontrol
SBI Equity Savings Fund
SBI Equity Savings Fund – Regular Plan – Growth Portfolio | SBI Mutual Fund Portfolio – Moneycontrol
Mirae Asset Equity Savings Fund
MULTI-ASSET ALLOCATION FUNDS: (Asset Allocation: Equity- Minimum 10%, Debt- Minimum 10%, & Commodities- Minimum 10%)
Multi Asset Allocation Funds are hybrid funds that must invest a minimum of 10% in at least 3 asset classes. These funds typically have a combination of equity, debt, and commodities (Gold)/real estate etc. The inclusion of commodity and real estate investing is a drag.
Though gold can be a hedge in volatile times, it has underperformed the Nifty 50 (equity) two-thirds of the time over any five- and 10-year period. Even when gold has outperformed Nifty 50, it has done so by just 1% over a 10-year period. Getting hugely popular as it invests in gold; received inflow of around Rs 15,000 crore in 2023. There are Index Funds in this category.
ABSL Multi Index FOF, HDFC Multi Asset Fund, SBI Multi Asset Fund
ICICI Pru Multi Asset Fund
ICICI Prudential Multi-Asset Fund – Growth Portfolio | Portfolio – Moneycontrol
ARBITRAGE FUNDS: (Asset Allocation: Equity-Minimum 65%, mainly arbitrage, Debt- Maximum 35%) They invest in arbitrage, i.e., the funds exploit the price difference between cash and derivatives or futures markets. Arbitrage means buying a stock at Rs 100 and then selling its Futures contract at Rs 101. At the expiry of the contract, you earn a profit. The funds’ one-year returns range is 5.7-7.2/7.4 as of December 2023.
These funds received Rs 43,455 crore, which is 70%of total inflows in hybrid funds in the first half of the financial year 2023-2024. They are similar to Liquid Funds. Their tax treatment is like an equity fund, making them favourable for high-earning individuals. The time horizon for investing in Arbitrage Funds should be at least three months/some experts on Zee Business TV channel- Money Guru programme say time to be six to twelve months. Also, if there are no arbitrage opportunities in the market then it becomes difficult for the fund manager to generate returns.
Arbitrage Funds may appeal to those in the highest tax bracket given their superior tax treatment, for a retail investor looking for capital preservation, liquid funds remain a better alternative.
HDFC Arbitrage, ICICI Pru Equity Arbitrage, SBI Arbitrage Opportunities, UTI Arbitrage Fund
Taxation: All the above five fund categories- Aggressive, Balanced Advantage, Equity Savings, Multi Asset Allocation, Arbitrage have equity taxation as they maintain minimum average 65% equity portion. STCG tax of 20% on capital gains if holding period up to one year, LTCG 12.5% tax on capital gains over Rs 1.25 lac if holding period more than one year.
BALANCED HYBRID FUNDS: (Asset Allocation: Equity 40-60%, Debt 40-60%) Best suited for investors with a moderate risk appetite or looking for a 50-50 portfolio. Long-term return expectation 9-10%. Taxation: Short-term (holding period up to three years)- All gains added to income and taxed as per the applicable slab rate. Long-term (holding period of more than three years)- 20% tax.
There are only five funds with such an asset allocation as of September 2023. All are solution-oriented funds (have five-year lock-in) except one: 360 ONE Balanced Hybrid, Franklin India Pension, UTI Children’s Career Savings, UTI Retirement Fund
CONSERVATIVE HYBRID FUNDS: (Asset Allocation: Equity 10-25%, Debt 75-90%) Suitable for investors, especially retirees looking for conservative growth and regular income. It’s a not-so-popular hybrid fund category with just an AUM of Rs 26,882 crore as of September 2023. Return expectation: The funds’ three-year rolling returns roughly ranged 7-10% since 2013. Taxation: Conservative hybrid funds are taxed in the same way as debt funds. All gains are added to your income and taxed as per the applicable slab rates.
HDFC Hybrid Debt Fund, SBI Conservative Hybrid Fund, UTI Conservative Hybrid Fund
-See the following videos in Hindi on SWP (Systematic Withdrawal Plan) from Equity Saving Funds and Balanced Advantage Funds:
https://www.youtube.com/watch?v=e6z-CpqJ1vk&t=37s
(Video Summary: Initial corpus Rs one crore, invest Rs 12 lacs in Equity Savings Funds, and Rs 88 lacs in Balanced Advantage Funds. Do first 2- years Rs 50,000/- per month SWP from Equity Savings Fund, and from 3rd year start SWP from BAFs)
https://www.youtube.com/watch?v=4HWpHZG5ZVA
(Video Summary: Initial corpus Rs 25 lacs in July’20210 in ICICI Prudential Balanced Advantage Fund. After one year in July’2011, start SWP of Rs 15,000 per month for 10 years. Even after withdrawing Rs 18 lacs in ten years, balance in July’2021 grows to Rs 5,407,114 i.e., around Rs 54 lacs.
(As stated earlier annual SWP amount can be around 4 to 5/6% of the total corpus, so as to protect the capital and allow the balance amount to grow).
For monthly income can also consider following alternative plan below (in addition to SWP plans given above in videos) depending on personal choice:
Monthly Income Funds/SWP: Keep 5% of your corpus as emergency fund in a sweep-in/flexi savings account with any reputed bank or in a liquid fund for better tax efficiency/less taxes. Deploy the balance amount as under:
i) For income in the first year invest (amount being monthly expense X 12 months) in one or two Liquid Funds: Axis Liquid Fund (Returns as in September’2022 1year/3-year- 3.7/4.1%), HDFC Liquid Fund (3.6/4%), ICICI Pru Liquid Fund (3.6/4%). Then withdraw your monthly expense through SWP. After one year transfer any surplus, if any to the next scheme i.e., Conservative Hybrid Funds.
ii) For next 2 years income invest (amount being monthly expense X 24 months) in one or two Conservative Hybrid Funds: Canara Robeco Conservative Hybrid (Returns as in September’2022 1year/5-year- 3.2/7.5%, HDFC Hybrid Debt, ICICI Prudential Regular Savings (6.8/7.8%). Conservative Hybrid and Liquid funds have debt taxation in India.
iii) For income from 3rd to 5th year, invest (amount being monthly expense X 24 months) in one or two Equity Savings Funds: Axis Equity Saver Fund (Returns as in September’2022 1-Year/5-Year: 2.7/7.7%), HDFC Equity Savings Fund (5.1/7.4%), ICICI Pru Equity Savings, and Mirae Asset Equity Savings Fund (10/-).
iv) For Income after 5 years, invest 50% each in Balanced Advantage & Nifty 50 Index Funds. May increase monthly expenditure amount by 5% every year but not at the expense of capital erosion.
– HDFC Balanced Advantage Fund (Returns as in September’2022 5-Year: 10.1%, Expense 1.64%), ICICI Prudential Balanced Advantage Fund (9.8%, Expense 1.54%)
– Large Cap- HDFC Index Nifty 50 Fund (12%, Expense 0.40%)
(Equity Savings, Balanced Advantage, and Nifty 50 funds have equity taxation)
See returns in HDFC Compound Interest Calculator:
Compound Interest Calculator – Calculate Compound Interest Online (hdfclife.com)
INTERNATIONAL HYBRID FUNDS
Following are some of the International Balanced Funds given by money.usnews.com:
7 Best Balanced Funds to Pick Right Now | Investing | U.S. News (usnews.com)
By Tony Dong; Oct. 14, 2022
These funds can keep you on track in a topsy-turvy 2022.
Not all investors have the time horizon or risk tolerance to go 100% stocks for their asset allocation. Older investors on the verge of retirement may opt for a more balanced approach. Often, this consists of a healthy weighting toward lower-risk bonds and cash. When market conditions are volatile, bonds can provide investors with greater safety of principal plus some income potential. A common asset allocation model for a balanced portfolio is a 60/40 mixture of stocks and bonds. While investors can pick and choose individual stock and bond funds to create this mix, an easier solution is an all-in-one balanced fund managed on your behalf by a fund manager. A balanced fund can be used as a core holding in a portfolio and any volatility in the market should not have a substantial impact on the returns. Here are the some best balanced funds to buy in 2022:
Fidelity Balanced Fund (FBALX)
The fund targets a 60% stock allocation (US/International equity). The remainder of FBALX is held in bonds (US/International bonds etc.). Returns 8.42% annualized over the trailing 10 years.
Vanguard Balanced Index Fund Admiral Shares (VBIAX)
VBIAX invests in US stocks (60%) and bonds (40%) Fund has returns of 10.07% over the past 5 years.
Fidelity Freedom 2030 Fund (FFFEX)
FBALX targets a constant stock/bond allocation of 60/40. For most investors seeking a balanced portfolio, this is ideal. However, as investors get older or start retirement, this allocation can still be too aggressive for some. As a target-date fund (mix of stocks & bonds. Fund Manager rebalances the assets as per investors age, making it more conservative as investors approach retirement). FFFEX solves this. This fund automatically adjusts its asset allocation to be more conservative as time goes on. FFFEX uses a “glide path” to automatically decrease its stockholdings and increase its bond holdings as its target date draws near. For this fund, that is 2030, which is the date investors holding FFFEX are expected to retire. Currently, FFFEX is split roughly 33%, 30% and 37% between U.S. stocks, international stocks and global government and corporate bonds, respectively.
Vanguard Wellington Fund Investor Shares (VWELX)
Founded in 1929, VWELX is Vanguard’s oldest mutual fund and the first balanced fund to debut in the U.S. The fund is constructed very simply: 67% in the U.S. stock market, and 33% in U.S. Treasury, agency and investment-grade corporate bonds. That asset allocation is more aggressive than a traditional 60/40, but not excessively so. VWELX has an amazing track record, having returned 8.14% annualized since inception, demonstrating the good risk-return profile of its balanced allocation.
T. Rowe Price Balanced Fund (RPBAX)
Like VWELX, RPBAX also departs from the usual 60/40 allocation, has slightly more aggressive 65/35 stock/bond allocation. U.S. stocks and bonds make 42% and 31%, respectively. There is also a smaller allocation to international stocks and bonds at 20% and 3%, respectively. Finally, the fund holds around 3% in cash for short-term reserves, which are used for trading and rebalancing. Over the trailing 10 years, RPBAX has returned 6.46% annualized.
iShares Core Growth Allocation ETF (AOR)
Don’t let its “growth” name fool you – AOR is still very much a balanced fund, with a 60/40 split between global stocks and bonds. Compared to the previous funds, AOR is different in that it is an exchange-traded fund, or ETF, as opposed to a mutual fund. The benefits? Potentially greater tax-efficiency due to the lower turnover and capital gains distributions, plus the ability to buy and sell intraday on most brokerage platforms. However, you do lose out on the ability to make purchases in any amount you desire, unless your brokerage allows for fractional shares of AOR. Average annual return (10-years) 5.89%, since inception 6.86%.
-See returns in HDFC Compound Interest Calculator:
Compound Interest Calculator – Calculate Compound Interest Online (hdfclife.com)
-Also, see “RETIREMENT PLANNING FUNDS” given under General Savings- INTERNATIONAL: Taken from book titled “If You Can: How Millennials Can Get Rich Slowly” by Williams J. Bernstein (2014).
DEBT FUNDS
INDIA & INTERNATIONAL
Debt Funds (also known as Income Funds or Bond Funds) are a kind of Mutual Funds that generate returns by lending your money to the government and companies. The lending duration and the kind of borrower, determine the risk level of a Debt Fund.
Debt Funds have potential to offer capital appreciation over a period of time. While they have a lower degree of risk than equity funds, the returns are not guaranteed and subject to market risks. Investors are prone to default risk i.e., losing principal and interest payments, and interest rate risk i.e., price fluctuations due to change in interest rates. Given their low-risk/low-return profile, they are a suitable choice to meet short-term goals, where capital preservation assumes precedence over return potential.
There are index funds in debt funds.
Time Horizon
Every investment goal has a specific time limit. If you have a short-term investment goal of around 3 months to 1-year, liquid funds are preferable. If the tenure is between 1-3 years, you can go for short-term debt funds. But if you have an intermediate time horizon of 3-5 years, dynamic/medium-term bond funds are more suitable.
INDIAN DEBT FUNDS
Investment in debt funds make sense than FDs for two reasons. Most important advantage is that returns in debt funds accumulate and compound, while in FDs they do not. In FDs, TDS on interest is charged every quarter irrespective of the maturity date being in that year or later, and transferred out. In debt funds, you pay tax only in the year you redeem and not before that, and so deliver better post-tax returns. Thus, even if the rate of return is nominally the same, you earn more in a fund.
The second reason is they are quite liquid as you can redeem a debt fund partially or completely any time. With a deposit, you have to pay a penalty of around 1% on the interest for premature withdrawal. For some type of deposits, an early withdrawal is not possible.
Better invest in debt funds of big AMC’s like HDFC, ICICI, SBI etc.
Taxation: Beginning April 1’ 2023, capital gains from investments in debt funds are to be taxed as per individuals’ income slab irrespective of the period of holding.
There are 17 categories in Debt Funds, investors may see the following:
CORPORATE BOND FUNDS: Lends to Safe & Sound Companies. These mutual funds invest in the highest-rated bonds issued by corporates/companies. As per SEBI, quality of papers should be 80% in AAA rated bonds. This rating is given only to companies that are financially strong and have a high probability of paying lenders on time. Minimum 80% needed in corporate bond papers, rest can be government papers. Duration not defined, so duration can go up to 7 years, generally it is 2-4 years.
HDFC Corporate Bond ICICI Pru Corporate Bond, UTI Corporate Bond
BANKING AND PSU FUNDs: The Banking and PSU Debt funds belongs to the short- term category of debt funds is one of the most popular types of mutual funds. Invest at least 80% in banks, PSUs, public financial institutions and municipal bonds. In Canara Robeco AMC, the rest 20% is broadly divided into high quality housing finance companies (HFCs), high quality NBFCs and some portion is invested in G-Secs as well because there is a liquidity portion which needs to be maintained.
They are highly demanded in the market, owing to its minimal risk factors since most of these entities are government backed or owned, and so don’t have the credit risk. They are safer than Corporate Bond Funds. However, this doesn’t mean that these schemes do not have any risk at all. For example, these schemes also invest in papers issued by private banks. Since they don’t have government backing, they carry some risk. However, since banks are highly regulated, the risk is minuscule.
They have a short holding period, ranging from 1 to 3 years. Thus, it is not an ideal instrument for individuals for secure long term investment options. Investors who are keen to invest for a short duration, ideally for 2-3 years can invest in this scheme.
HDFC Banking & PSU Debt Fund, ICICI Pru Banking and PSU Debt Fund, SBI Banking and PSU Debt Fund
SHORT TERM DEBT FUND: Lend to government, companies and banks for a period of 1-3 years. Ideal for the money you don’t need for at least 12 to 18 months.
HDFC Short Term Debt, ICICI Pru Short Debt, SBI Short Term Deb
(Medium-term funds come with a portfolio maturity of 3-5 years and long-term funds come with a maturity beyond 5 years. Medium- and long-term funds are relatively riskier than short term funds mainly because longer the tenure, larger is the impact of interest rates on the portfolio. This is also known as duration risk or interest rate risk).
LIQUID FUNDS: As the name suggests, liquid funds are highly liquid. These funds invest in debt instruments with a maturity period of not more than 91 days. They are considered to be among the least risky within mutual funds. Good if your investment horizon is up to a year. Liquid Funds are a great option to park your emergency funds. You can earn better returns than a savings bank account without taking too much risk.
Axis Liquid Fund, HDFC Liquid Fund, ICICI Pru Liquid Fund, SBI Liquid Fund
OVERNIGHT FUNDS: Securities have a maturity of one day.
HDFC Overnight, SBI Overnight, UTI Overnight Fund
INDEX/PASSIVE DEBT FUNDS: A low-cost way to add debt to your portfolio is passive/index debt funds. They simply track an underlying index and seek to generate returns as per that. They comprise index funds and exchange-traded funds/fund of funds (FOF).
Liquid ETFs: HDFC Nifty Liquid ETF, ICICI Prudential S&P BSE Liquid ETF, Mirae Asset Nifty Liquid ETF, Nippon India ETF Liquid BeES
Overnight ETFs: ABSL Crisil Liquid Overnight ETF
TARGET MATURITY FUNDS: Target maturity funds are passive (index funds or ETFs) debt funds tracking an underlying bond index. They account for a majority of the passive debt segment today as of September, 2023 Unlike other open ended mutual fund schemes, target maturity mutual funds have defined maturity dates. On the maturity date, investor get the principal amount along with accumulated interests. Investors may ensure that their investment horizon matches that of the fund and there are no interim liquidity needs.
As per SEBI regulations, target maturity funds can invest only in Government papers (Government Securities/G-Secs, State Development Loans- SDLs and PSU Bonds) that mirror an underlying bond index. As all are owned by the government, the credit quality of target maturity funds is very high.
Bharat Bond ETF-April 2023, SBI Crisil IBX Gilt Index- June 2036
Select debt fund as per your investment horizon. For retail investors, Liquid and Short-Term Debt Funds are sufficient. Don’t get venturesome with debt fund investments. The expectation should be of earning marginally higher returns than deposits. For higher returns invest in equity funds.
Except for Target Maturity Funds, avoid NFO in Debt category as the initial AUM is small and the fund manager cannot make diversified bond purchases thus increasing the risk.
-See returns in HDFC Compound Interest Calculator:
Compound Interest Calculator – Calculate Compound Interest Online (hdfclife.com)
INTERNATIONAL DEBT FUNDS
Date wise compilation of International Debt Funds given by money.usnews.com:
10.01.2023
5 Best Short-Term Investments for Generating Income | Investing | U.S. News (usnews.com)
These investment options are great for those seeking safety of principal while maintaining income potential.
By Tony Dong
The stock market is a great place to invest for those with long-term plans for their retirement portfolios, but what about investors with more short-term objectives? For these investors, ensuring safety of principal and some income potential tends to be more important than all-out growth.
This is where short-term investments can play an important role. These instruments come in a variety of different asset classes, but they all tend to share some similarities: minimal market risk, lower interest rate risk and the potential for some income generation.
These products are best suited for investors who are saving for a large expenditure (e.g., a down payment, college tuition, major purchase, etc.) with a time horizon of roughly one to three years.
“Short-term funds can also be a logical ‘first step’ back into bonds for investors who may have abandoned a traditional fixed income strategy amidst the losses of 2022,” Croke says. “For those who remain nervous about further potential interest rate increases not already anticipated by the market, a short-term fund may be a good starting point,” he says.
With that in mind, here’s what other experts recommend as some of the best short-term investments for generating income:
- Treasury bill ladder.
- High-yield savings accounts.
- Certificates of deposit.
- Series I savings bonds.
- Peer-to-peer lending.
Treasury Bill Ladder
Treasury bills, or “T-bills.” These are short-term bonds issued by the U.S. federal government with maturities of one year or less. T-bills are considered virtually “risk-free” in terms of default and have low interest rate sensitivity.
Anessa Custovic, chief investment officer at Cardinal Retirement Planning, particularly likes the four-, eight- and 13-week T-bills. “The rates are very attractive right now and you are not locking up your money for a significant amount of time,” she says. To better plan cash flows, Custovic recommends building a “ladder” of different staggered maturities.
“For example, suppose an investor has $30,000 to construct a ladder. This investor could invest $10,000 in three-year Treasury notes, $10,000 in 52-week T-bills, and $10,000 into 13-week T-bills. As each one matures, the investor gets guaranteed cash flows to reinvest or spend as they see fit,” Custovic says.
High-Yield Savings Accounts
Investors desiring greater flexibility and liquidity when it comes to their investment can use more traditional bank offerings like a high-yield savings account, or HYSA. HYSAs are as safe as it gets, as they’re insured by the Federal Deposit Insurance Corporation, or FDIC, for up to $250,000 per account.
Thanks to rising interest rates, HYSAs are now paying more competitive interest rates, which is expressed as the account’s annual percentage yield, or APY. Investors willing to shop around can find competitive rates from some banks with additional perks like no monthly fees or minimum balance requirements.
Austin Delery, wealth advisor and partner at The Olivier Group, LLC, notes that many local and online-only banks are paying as much as 4% interest on HYSAs with few restrictions. “At the end of the day, the most critical characteristic of a short-term investment is flexibility to cash out,” he says.
Certificates of Deposit
Short-term investors willing to commit to a lock-up period can target higher yields than a HYSA by investing in a certificate of deposit, or CD. By investing in a CD, investors receive interest on their investment, but cannot withdraw their principal investment before it matures. CD terms typically range from three months to five years.
Allen Mueller, director of financial planning at 7 Saturdays Financial, notes that CDs are currently making a comeback due to higher interest rates. “Depending on the bank, rates for a 12-month CD can be as high as 4.6% right now,” he says. Investors who commit to a longer term can earn even higher rates.
Mueller also likes CDs for the sense of safety. “There is no risk of principal loss, but if you redeem early, you’ll pay a penalty which varies by institution,” he says. Therefore, they’re not the best for investors who need flexibility. Like HYSAs, CDs are also FDIC insured for up to $250,000 per depositor account.
Series I Savings Bonds
As inflation crept steadily upward throughout 2022, one of the more desirable investments was the Series I savings bond, also known as I-bonds. These special government bonds pay a variable interest rate that changes with inflation, which is set twice a year for a six-month period.
Currently, the rate for I-bonds issued Nov. 1, 2022, to April 30, 2023, is 6.89%. Because these bonds are issued by the federal government, there’s virtually no risk of principal loss. However, investors are limited to a $10,000 purchase per year electronically and an additional $5,000 with a tax refund.
However, there are some caveats to watch for. Firstly, I bonds cannot be redeemed in the first 12 months after purchase. In addition, if I-bonds are cashed in before five years, an investor loses the last three month’s worth of interest payments. Finally, the rate paid will fall if inflation abates.
Peer-to-Peer Lending
Investors willing to venture outside the usual top short-term investments can consider higher-risk alternatives like peer-to-peer, or P2P, lending platforms. These services connect retail investors willing to lend money with other individuals or small businesses trying to borrow it.
By loaning money on a P2P lending platform, an investor receives periodic interest payments on their loan, which is usually higher than those on traditional short-term investments. However, the risk of default is also greater, so there’s no free lunch.
“Investing in P2P lending can help diversify your investment portfolio, as it involves a different asset class than stocks or bonds,” says Levon Galstyan, certified public accountant at Oak View Law Group. “P2P lending also offers flexibility, as you can choose which loans to invest in and how much to invest.”
28.11.2022
9 of the Best Bond ETFs to Buy Now
By Tony Dong; Nov. 28, 2022
9 of the best bond ETFs to buy now:
- iShares Core U.S. Aggregate Bond ETF (AGG)
- PIMCO Active Bond ETF (BOND)
- Vanguard Total Bond Market ETF (BND)
- iShares U.S. Treasury Bond ETF (GOVT)
- iShares Broad USD Investment Grade Corporate Bond ETF (USIG)
- SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
- iShares 20+ Year Treasury Bond ETF (TLT)
- Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)
- Vanguard Tax-Exempt Bond ETF (VTEB)
There’s a silver lining to the pummelling the bond market received in 2022 due to rising interest rates.
Thanks to interest rate hikes, bond yields are finally hovering at attractive levels again. While bond prices have fallen, higher yields can result in greater long-term expected returns. There’s no telling where interest rates will go from here, but bonds remain an indispensable portion of a diversified portfolio thanks to their ability to reduce volatility and produce income. Treasury bonds, corporate bonds, municipal bonds, and even junk bonds can provide investors with unique sources of risk and return and have their specific use cases. However, buying and selling individual bond issues can be complicated and illiquid. A better method is via an exchange-traded fund, or ETF, that holds a portfolio of different bonds. Here are the nine best bond ETFs to buy right now.
iShares Core U.S. Aggregate Bond ETF (ticker: AGG)
One of the most popular bond ETFs in the world is AGG, which has over $80 billion in assets under management. This ETF passively tracks the Bloomberg US Aggregate Bond Index, which represents nearly the entire investable U.S. fixed-income market. Forty-one percent of the ETF is held in U.S. government Treasurys, while the remainder consists of mortgage-backed securities, agency bonds and investment-grade corporate bonds. AGG currently has an average duration of 6.35 years, meaning that if rates rose by 1%, AGG would fall by 6.35%, all else being equal. The opposite would occur if rates fell. AGG has an average yield-to-maturity of 4.56%, which is the approximate weighted-average yield of all of its underlying bonds if held to maturity. The ETF costs a low expense ratio of 0.03%, or $3 annually per $10,000 investment.
Pimco Active Bond ETF (BOND)
Most investors favor passive management when it comes to their equity allocations. There’s ample evidence suggesting that, over the long term, index funds beat active funds net of fees. However, the bond market might be an exception. Because bonds trade over the counter and are sensitive to more factors than equities, some active managers can exploit inefficiencies. A great example is BOND, which is an actively managed bond ETF from Pimco, a globally recognized leader in fixed-income trading. Since its inception, BOND has outperformed its benchmark, the Bloomberg U.S. Aggregate Index, net of fees. Currently, BOND has an average duration of 6.06 years and a yield-to-maturity of 6.07%. However, it comes at a higher expense ratio of 0.56%.
Vanguard Total Bond Market ETF (BND)
An alternative to AGG is BND, which tracks the Spliced Bloomberg U.S. Aggregate Float Adjusted Index. BND is very similar, with an average duration of 6.4 years and yield-to-maturity of 4.9%. It does have a higher allocation toward U.S. Treasurys at 46%. Overall, the performance of BND and AGG has been fairly similar over the past 10 years, with annualized returns of 0.72% and 0.85%, respectively. Like most Vanguard ETFs, BND is very cheap, costing an expense ratio of just 0.03%. Many investors combine BND with a U.S. stock market ETF and an international stock market ETF to create the classic “3-Fund Portfolio” recommended by John Bogle, the founder of Vanguard.
(One cheap Total Bond Market Index is sufficient in a MF portfolio)
iShares U.S. Treasury Bond ETF (GOVT)
Both AGG and BND contain allocations to mortgage-backed securities and corporate bonds. While these types of bonds may provide higher yields, they also have greater credit risk. When markets crash, they tend to fall in value as well. In comparison, government Treasurys have rallied during numerous crashes, notably in 2008 where they ended the year in the green. A great way to buy a diversified portfolio of different Treasury maturities is via GOVT, which tracks the ICE US Treasury Core Bond Index. GOVT currently has an average duration of 6.06 years and an average yield-to-maturity of 4.16%. It’s also fairly cheap, with a low expense ratio of 0.05%.
iShares Broad USD Investment Grade Corporate Bond ETF (USIG)
If you don’t mind some credit risk, then an investment-grade corporate bond ETF like USIG could be a possible way of earning a higher yield. This ETF holds bonds rated at least Baa by Moody’s or BBB by Standard & Poor’s and Fitch ratings, respectively, which have a relatively low risk of default. Currently, the fund has a yield-to-maturity of 5.44%, which is higher than AGG despite USIG having a similar average duration of 6.97 years. USIG costs an expense ratio of 0.04%.
SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
Investors looking for maximum safety can look toward the short end of the yield curve. A potential option here is BIL, which tracks the Bloomberg 1-3 Month U.S. Treasury Bill Index. The holdings in BIL have virtually no credit risk given that they’re backed by the U.S. government, and virtually no interest rate risk given its average duration of 0.09 years. If rates rose by 1%, BIL would be expected to lose just 0.09% in value. Thanks to the yield curve inverting recently, it also pays a decent average yield-to-maturity of 3.82%. BIL costs an expense ratio of 0.13%.
iShares 20+ Year Treasury Bond ETF (TLT)
Historically, one of the strongest hedges against equity crashes has been long-term Treasury bonds. These bonds possess high durations and volatility, and thus respond sharply to interest rate changes. When rates get dropped during a crisis to stimulate the economy, long-term Treasurys soar in value. They also have a perceived “safe” status as a “flight to quality” asset thanks to their U.S. government backing. An ETF to buy here is TLT, which holds U.S. Treasurys with 20 or more years until maturity. TLT has an average duration of 17.5 years, an average yield-to-maturity of 3.91% and an expense ratio of 0.15%.
Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)
A good way to guard against sudden spikes in inflation and interest rates, which tend to accompany each other is via short-duration Treasury inflation-protected securities, or TIPs. The price of TIPS and thus their coupon payments is indexed to inflation. If the Consumer Price Index, or CPI, goes up, the price and yield of TIPS will do so in concert. A lower-risk option here is VTIP, which holds TIPS with an average duration of 2.4 years and a yield-to-maturity of 4%. VTIP costs an expense ratio of 0.04%.
Vanguard Tax-Exempt Bond ETF (VTEB)
VTEB holds a portfolio of municipal bonds, which are issued by state and local governments to fund public infrastructure projects. Investors hold municipal bonds for their higher tax efficiency as they are exempt from federal taxes and possibly state taxes in certain cases. A good ETF pick here is VTEB, which tracks the Standard & Poor’s National AMT-Free Municipal Bond Index. VTEB currently holds 6,670 municipal bonds from across the U.S., with an average duration of 6.1 years and yield-to-maturity of 4.1%. Most of VTEB’s holdings are rated AA, as that is the most common rating for municipal bonds. Currently, municipal bonds from California rank among its largest holdings. VTEB costs an expense ratio of 0.05%.
-Additionally, see Schwab US TIPS ETF (SCHP)- also described under General Savings
One of the main weaknesses of bond ETFs is inflation. When goods and services prices soar, central banks tend to respond with interest rate hikes, which negatively affect bond prices.
Treasury inflation-protected securities, or TIPS, are a type of bond somewhat resistant to these conditions as their prices and coupon payments are indexed to the consumer price index. While they’re not immune, TIPS can offer greater protection than bonds if inflation suddenly spikes.
To access a portfolio of broad TIPS, investors can buy SCHP, which has a duration of 6.6 years and a yield to maturity of 4.03%. SCHP charges a 0.04% expense ratio).
25.07.2022
Best Ways to Invest $ 5000
Money Markets Accounts: no lock in period. Money market rates generally range from 0.75 to 1.25.
Certificate of Deposits (CDs): Has lock in e.g., a bank may offer a 2-year CD paying 2% annual percentage yield. As bank products CDs are insured by Federal Deposit Insurance Corp, so you don’t have to worry about losing your money.
(Other funds given are Vanguard Total World Stock ETF, Vanguard S&P 500 ETF, and Target Date Funds which are mix of stocks and bonds)
-See returns in HDFC Compound Interest Calculator:
Compound Interest Calculator – Calculate Compound Interest Online (hdfclife.com)
-Also, see “RETIREMENT PLANNING FUNDS” given under General Savings- INTERNATIONAL: Taken from book titled “If You Can: How Millennials Can Get Rich Slowly” by Williams J. Bernstein (2014).
GOLD & SILVER FUNDS/ETFs
a) GOLD FUNDS/ETFS
INDIA & INTERNATIONAL-GLOBAL
Gold has proven to be a very volatile investment, so don’t put a large amount into it, keep it to less than 10% of your overall investments. In India there is now customs duty on gold imports. Even the government dislikes gold as an investment simply because it is a relative unproductive asset as it lies idle in the locker unlike equity where one gets ownership of factories, industries and services.
In India and China most of the gold is purchased by the public while in other parts of the world gold is mainly bought by central Banks or used in industries. India and China account for the 50% of the annual gold consumption in the world.
The year 2022 was a phenomenal year for gold’s performance because there were several concerns like the Russia-Ukraine war, recession, changes in the dynamics of the US economy etc. Precisely, this was the time when gold did well. However, the long-term picture spells a different story.
If the returns of over the past 10 years are taken into consideration, it has been barely able to match inflation, whereas equity and fixed income are productive assets, which are designed to beat inflation. Not only do the returns on gold tend to be worse than those on other investments historically, but this will likely remain the case always. That’s because gold belongs to a class of investments that does not actually produce anything or create any value. Any rise in its worth is based on the belief that when the time comes to sell it, someone else will pay more. Unlike equity or bonds or deposits, the money that you invest in gold does not contribute to economic growth. An equivalent amount of money deployed in a business or any other productive economic activity will generate actual wealth and will grow larger in a very fundamental way, while a given quantity of gold will just remain the same. For these reasons, we don’t think of gold as a suitable asset class for wealth creation.
Returns as on March 23, 2023, over last 10-years: Flexi-Cap Funds 14.6%, Short-Duration Funds- 7.7% & Gold Funds- 5.9% (source: Page 35, Mutual Fund Insight magazine, India- May 2023).
Over long periods of time, rising gold prices give an illusion that the returns are good. For example, over 41 years (from 1981 to 2022), the price of gold has gone up 30.6 times, from Rs 1800 for 10 gm to Rs 55,000. That sounds amazing, doesn’t it? Well, over the same period, Indian market index Sensex has grown from 100 points (1979) to 60,000 (2022). That’s 600 times! There is no comparison at all, unlike the equity market, gold does not create long-term wealth. It just stores value – there is no meaningful appreciation.
INDIAN SGB & GOLD FUNDS/ETFs
Essentially, there are two types of non-physical investment in gold available in India, gold ETFs/gold funds and Sovereign Gold Bonds (SGBs) issued by RBI. Till 2015, before the SGBs were introduced, for those looking at gold as an investment, ETFs and funds were the best way to own paper gold instead of physical gold but now SGB is the better choice. They have been launched to discourage physical gold purchases, cut imports. Also, they are safer and reliable substitute of holding physical gold.
Annualized Post Tax Return (%): Physical Gold (6.8%), Gold ETF (5.9%) & SGB (10%)
SGBs basically track the price of one gram of gold. They replicate the returns (positive or negative) of gold, but also pays you an interest of 2.5 percent per annum and also capital gains are not taxed if sold after their maturity period of 8 years. If you sell it before, you have to sell them at a discounted price as well. While selling after maturity period, you will get market price of gold, which is always higher than the price of the SGB on the stock exchanges.
SGBs also don’t have transaction costs and annual expenses of 1% like Gold Funds/ETF’s. They are normally issued by RBI at a discount to the average market price, offering an added advantage. These bonds are also free from default risk as the interest payments and the principal redemption are guaranteed by the government of India.
Things to keep in mind: i) Don’t treat SGBs as wealth generating investment ii) You can buy them at a discount on the stock exchange. For instance, the market price of one gram of 24-carat gold was Rs 6,062 on April 6, 2023, was available at a discounted price of Rs 5,605 (2028 Tranche VI cost). The cost at the exchange is lower because there are more sellers than buyers on the exchange iii) There are so many different tranches on the stock exchanges, which one to buy. First and foremost is liquidity, so that it can be sold easily, otherwise you will be compelled to sell it at a discount. Second, ensure your buying price of SGB is lower than the issue price, at which the RBI had launched the SGB tranche iv) Lastly, don’t forget to add a nominee.
Following are some examples Gold Fund and ETFS:
HDFC Gold Fund, SBI Gold Fund, HDFC Gold ETF, ICICI Prudential Gold ETF
– You can see a combo of gold-silver funds like Kotak Gold Silver Passive FOF, Mirae Asset Gold Silver Passive FoF, etc. and where the fund manager decides how much to invest in gold and silver.
INTERNATIONAL-GLOBAL GOLD ETFs:
SDPR Gold Trust ETF (GLD), iShares Gold Trust ETF (IAU),
Gold tends to outperform other asset classes when there is economic flux/growth, geopolitical uncertainty or a debasement/downgrade in the value of fiat/government currencies. We get to see glimpses of all the three in the global economy at this point of time. One only needs to look at Syria, Afghanistan, North Korea, Russia- Ukraine/Middle East wars, and the political flux in Europe. Gold is regarded as a safe-haven investment in such uncertain times and hence elicits a lot of demand. An investor needs to keep this in mind.
Lastly, any decision to invest in gold has to be seen within the framework of your overall portfolio mix and long-term goals. Typically, an exposure of 8-10% gold in the portfolio may be ideal to provide a safety net for your portfolio in uncertain times.
SILVER ETFs: INDIA & INTERNATIONAL-GLOBAL
INDIAN SILVER ETFs: Unlike equity, bonds or deposits, silver is an unproductive asset, and its price depends on the whims of demand and supply, And the number backs our conviction too- silver delivered a modest 1% in the last 10 years, as of January 31, 2023. It’s clear everyone should maintain a healthy distance from all silver-based investments (Excerpts from article “Silver fund’s pomp and show fails to glow” by Chirag Madia- Value Research, March 16, 2023). Some silver ETFs are:
Axis Silver ETF, HDFC Silver ETF, ICICI Pru Silver ETF, Mirae Asset Silver ETF, Nippon India Silver ETF, UTI Silver ETF
However, now the silver demand has increased substantially due to its use as an industrial and precious metal. Silver is used for its high conductivity in electronics, solar panels, and electrical contacts. Its antimicrobial properties are leveraged in medicine, water purification, and some consumer products, while its reflectivity makes it ideal for mirrors and coatings. Other uses include jewellery, silverware, currency, and industrial applications like catalysts and solder.
In 2011, silver prices ranged significantly due to market fluctuations, reaching an all-time high in April but falling sharply later in the year. Prices in the United States went from around $17 to over $49 per ounce, with a peak of nearly $50 in April before falling back to approximately $33 within five days. In October 2025, the price is $1617.18 per kilogram
In India, silver was priced around Rs. 56,900 per kilogram as of March 31, 2011. The price closed at Rs 1,63,000 per kilogram on October 09, 2025.
INTERNATIONAL-GLOBAL SILVER ETFs: Silver Miners ETF (Primary Exchange: NYSE Arca, Average Annualized Return since inception in April 2010- 4.85%), iShares Silver Trust ETF (SLV), Sprott Physical Silver Trust ETF (PSLV)
INDIAN GOLD+SILVER FOFs: Fund of Funds that combine gold and silver assets are available, such as Kotak Gold Silver Passive FOF, Mirae Asset Gold Silver Passive FoF, Edelweiss Gold and Silver ETF FOF, etc., where the fund manager determines the allocation between gold and silver.
Note:
– All types of Indian mutual fund details can be seen in moneycontrol.com and valueresearchonline.com sites.
– A complete list of all Indian Mutual Funds- Equity, Hybrid, Debt & Gold- Silver is published in “Mutual Fund Insight” Magazine, India (Editor: Dhirendra Kumar). Since September 2023, MFI has started publishing a separate “List of Index Funds & ETFs”.
– Global/International Funds detail can be seen in portals like money.usnews.com
PORTFOLIO MANAGEMENT SERVICES (PMS)
There are many ways to invest in equities – direct investment in stocks, through Mutual Fund (MF) or through Portfolio Management Services (PMS). While direct investments call for expertise of the investors, investments through MF and PMS involve active fund management by professional fund managers. A PMS, as the name indicates, manages investment portfolio (stocks, bonds, cash and other assets) on behalf of clients. This is distinct from mutual funds, even though many of the same outfits that run mutual funds also run PMSs.
MF is more popular because an investor may start investing as low as Rs 100, 500/-, while minimum investment amount is Rs 50 lakh for PMS. One should not invest more than 10% of his net worth in PMS. MFs are tightly regulated products and PMS are akin to less regulated mutual funds. It is observed that the performance of PMS Managers is not consistent. Only a handful of them outperform their mutual fund counterparts. Even then PMS fees are high. They can either charge a flat fee or a performance linked one, although the latter is more common. Generally, the fee is likely to be fixed at 2 percent of the asset value, plus about 20% of profits above a pre-decided benchmark (MFs don’t charge additional fees).
Also, in India mutual funds are registered as a tax-exempt trust structure meaning fund manager can sell and buy stocks many times over without any tax implication whatsoever for its investors but for PMS portfolios the tax implications are the same as those for investors investing directly. If stocks are held for more than a year, it results in long term capital gain tax @ 10% plus surcharges. If the portfolio manager indulges in short term trading activity, it may result in short term capital gains tax of 15%, which would mean the investor has to pay tax.
On the one hand, clients worry about costs in regular plans and on the other, they succumb to more expensive complex structures. Also, PMSs can take undue risks- engaging in hedging and derivative trading, among others to deliver higher returns.
See below a comparison of the two options – PMS and Mutual Funds:
Entry Barrier– PMS has High entry barrier. Minimum investment Rs 50 lakh/ MFs- Min. investment Rs 100 to Rs 5,000
Exit Cost– PMS has very high withdrawal expenses/MFs- Relatively much lower. Also, many funds don’t have any exit cost.
Premature Withdrawal- In PMS not easy. There are lock-in periods/MFs withdrawal easy. No lock-in period, barring tax-saving funds.
Portfolio Construction- In PMS you can be highly involved in how your portfolio is built in non-discretionary schemes/In MFs have no such flexibility.
Tax – PMS has high tax, trades stocks from your demat account. So, you bear transaction costs and short- and long-term capital gains/MFs tax low. You pay tax just once.
Management Fees– In PMS it can be very high as there is no SEBI oversight/In MFs it is capped by SEBI and is part of the expense ratio.
Profit-Sharing– PMS can charge additional fees for generating returns beyond a certain point/MFs don’t charge additional fees.
Operating Strategy– PMS can change strategies on the go. No SEBI looking over their shoulders/In MFS strategy largely pre-defined. Also, SEBI regulates them, hence safer.
Transparency– In PMS investment decisions are made in-house. No clarity/MFs are mandated to disclose where they invest.
Performance Indicator– In PMS it is not clear. They don’t need to disclose their holdings. Plus, finding a benchmark to evaluate performance is tough/In MFs it is clear. Funds update their holdings and NAV regularly. Finding a benchmark is easy like Nifty 50, Nifty 500, BSE 500, Sensex etc. indices. The notion of PMSs delivering outsized returns, because they invest in best of the best investments, is misplaced. For one, you can’t even identify a proper benchmark to compare its performance.
Takeaway: PMS is not for all. You need a substantial amount to invest in PMS. With the quality data available in the public domain regarding its track record, most investors are better of investing in well-regulated mutual/index fund schemes which also provide option of investing in International Index Funds.
- Disclaimer: All decisions are yours- we are not responsible for your losses/gains, we just provide information.