You should invest in mutual fund! But in which one?

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Everybody says that investing in mutual funds is important. But, it is equally imperative to find out which mutual fund is right for which type of investor. This is the statement of DP Singh, Deputy MD and Joint CEO of SBI Mutual Fund, the country’s largest mutual fund house. In this story, we decode Singh’s insightful conversation with Money9’s Editor, Anshuman Tiwari programmed in the Money Monk series.

According to Singh, citizens who want to start investing in mutual funds can choose a fund that invests some of the funds in equity. He said that for novice investors, conservative hybrid funds, multi-asset allocation funds, balanced advantage funds, or diversified equity funds may be better options.

Singh further said that when the investor’s financial condition improves, he can increase his allotment in shares. He added, “If you want to grow your investment, then it is necessary to have an equity flavor in your investment. Without it, you will not be able to beat inflation on the return front.”

Singh adds on, that in reality, inflation is always higher than retail inflation figures as published by the government, so if someone’s investment portfolio is giving an annual return of 8%, then he will not be able to beat inflation, so in such a situation, it is very important to invest in equities. However, according to him, currently, investing lump sum amount in equity will not be correct.

During a conversation with Money9 editor Anshuman Tiwari, DP Singh said that it is necessary to make SIP mutual funds investors aware of importance of investing in India. This is because most SIP investors do not follow investment discipline. They stop SIP before time and withdraw their money. Due to this reason, most SIP investors are not able to reap the benefit of compounding. He said that SIP withdrawal should be the last option.

Recently, capital market regulator SEBI’s Chairman had said, that, there is a consideration to start a Rs 250 SIP in mutual fund schemes in the country. On this matter, Singh said that the mutual fund industry also wants to encourage small investors to take up SIP. But, it will be a big challenge for the industry to make up for cost of adding feature of Rs 250 SIP . He said that currently, the number of investors investing in mutual funds in the country is about 5 crore. This figure can reach up to 10 crore in the next 3 years.

Singh also gave some mantras to mutual fund investors. He said that new investors should start mutual fund investment with Hybrid Fund. They should not become greedy and should choose a fund which can generate return higher than inflation.

Watch the full interview here.