Expert advice

Jun 26, 2013,16.32 IST

Find out: When is right time to begin investing

In an interview to CNBC-TV18, Harsh Roongta, apnapaisa.com explained various aspects of investing and when should one go about it.

Also Read: Here's how portfolio diversification goes wrong

Below is the verbatim transcript of Harsh Roongta.

Caller Q: Given the market is so volatile these days, should a small investor like me start investing now? Or is it better to wait as the market might fall even further?

A: For a lay investor or anybody who does not do investing for a living, I would say do not try and time the market. Market by the very nature is volatile. However, what serves investors well is a systematic investment. So, do not worry whether the market is in a bear phase or a bull phase. A small investor can continue investing in equities systematically. As long as your time horizon is seven-ten years, history shows, one will make money. Pick up a good mutual fund. That is the right way to invest. To reduce risks look at Nifty index fund or a bluechip fund.

Caller Q: I can invest Rs 5,000 per month. How should I divide this amount between mutual funds and gold?

A: Assuming five-six years as your time horizon and if you want to invest in gold then I would recommend strongly that you should do it through a gold fund because that has several advantages over investing in physical gold and even the gold investments should be systematic rather than one shot. So, if you have Rs 5,000 then do Rs 500 in gold fund on a monthly basis and for the balance Rs 4,500, I would recommend a balanced fund, which has about 70-80 percent in equity and 20-30 percent in debt.

The good thing about a balanced fund is automatic rebalancing, which means that when the equity markets are doing well the fund manager is forced to sell some equity to maintain the balance. Reverse when the markets are not doing well he is forced to buy equity. So, there is a contrarian impact inbuilt into the system structure itself. You get the benefit of debt, even the returns on debt is tax free when it is a balanced fund. So, I would say Rs 500 in a gold fund, Rs 4,500 in a balanced fund.

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