Jun 11, 2013 11:08 AM IST | Source: CNBC-TV18

Buck trend, invest in SIPs not sector funds: Mashruwala

Do not go by the trend and because fund managers or market is getting into stock picking, do not get into sectoral fund, personal finance expert, Gaurav Mashruwala said.

In an interview to CNBC-TV18, Gaurav Mashruwala, Certified Financial Planner shared his reading and outlook on sectoral fund.

Below is the verbatim transcript of Mashruwala's interview with CNBC-TV18.

Q: Currently, market participants are following a very stock specific approach towards investing. If we drag that comparison towards mutual funds, would you say that a common investor should also look at sector funds? How should they approach their investments in mutual funds?

A: As a financial planner I am against getting into timing of the market and more so if one is a mutual fund investor where one is relying more on fund manager. So, equity as an asset class, seven to nine years, keep doing systematic investment plan (SIP).

One's core portfolio should be into index fund or a largecap fund. After that if one has some surplus funds and get a kicker on overall portfolio, one may want to get into sector funds but not to forget that by this one is getting into a high risk territory and when one is going to follow these funds on regular basis, which means every month on month, one is going to watch as to how that sector is doing and one has knowledge about this sector.

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Therefore, do not go by the trend and just because fund managers or market is getting into stock picking, do not get into sector fund and do not allocate large amount because sector funds are very high on risk.

Caller Q: I want to know about a policy where in I can invest about Rs 5,000 per month for the future of my 13 year old grandson. In which policy should I invest and what will be the returns from such policy? I want to invest for his higher studies.

A: If the money is required after four-five years then start a systematic investment plan (SIP) into equity based mutual fund because you are saying that initial required amount of two-three years is taken care of, start an SIP on regular basis, you may want to pick up a largecap fund or if you feel that there could be some interim requirement then do two funds, one a debt based fund and an equity based fund.

One more suggestion is that try and make these investments in your name, do not do it in grandson’s name however earmark them for your grandson so that as and when he requires you redeem and give it to him because if you will start investing in his name straightaway while there is nothing wrong, at 18 he has control, which you may or may not want to give. Ideally I encourage grandparents to do it in their name and then give it to grandchildren when they require. So, for four-five years on equity fund and if you want a combination then a debt and equity fund.

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