How to cope with your mutual fund losses?

How to cope with your mutual fund losses?


Are you sitting on big losses on your mutual fund investments? What should you do now that the stock market has moved up so fast since March this year?


Should you put your money into mutual funds now? Or should you wait for an opportunity to invest?


In a chat with Get Ahead readers on June 3, financial planning expert Vetapalem Sridhar answered these and several other queries related to mutual fund investments, financial planning and how to achieve financial freedom for you and your family.


For those of you who missed the chat, here is the transcript.




vidh asked, Hi Sridhar, my current take home is 50k per month. I have a home loan for which i am paying an EMI of 10K/month, I have a 2 personal loan, the total amount being about 10K, I want to purchase a house in Mumbai (suburb limit), with one home loan continuing, how can I plan for the same? The approx cost for the house i plan to buy would be around 40 Lacs.

Vetapalem Sridhar answers, at 2009-06-03 14:09:26Hi Vidh, with 20K going towards existing loans, u r left with 30K. U will not be able to get a sizable loan to buy a house of 40L with ur current Financial state. U can evaluate of the following works.



If u already hv some money for downpayment, then by selling ur existing property and clearing ur existing loans u maybe able to purchase the 40L flat.

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buyORrent asked, Hello Sridhar, first i would like to thank you for your great advices ...then ask a simple question (look like) Should i buy or rent a home?

Vetapalem Sridhar answers, This is a very subjective question and it does not hv a simple answer. U will need to evaluate a number of factors to arrive at a decision.



Owning a house has advantages like u do not hv to shift often, it is an asset which over time will increase in value, etc. If u can afford a to buy a property this would be a gud time.

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Kaushik asked, Which are the stocks that can be bought at these levels for a 2-3 year perspective ? Which are the ones that can be bought for quick gains ? Please suggest. I am not risk averse.

Vetapalem Sridhar answers, Hi Kaushik, the mkts seem set for a gr8 run in the long run with a stable govt in place which seems to be interested in creating an encouraging environment for the economy to grow.


If the reforms process starts and the govt is committed, we will see equities touch newer highs sooner than we anticipate. Most large cap stocks r gud picks at this stage with a 3-5 yrs horizon.


Infrastructure and PSU stocks maybe benefited more over this tenure.

amar asked, Hi, At age of 30 i am investing 20,000/anum each in NSE & PPF, 40,000/anum for LIC of me & my wife, 15,000/month as SIP in Mutual fund. Is it a good blend? I am planning to buy house soon

Vetapalem Sridhar answers, Hi Amar, stop NSC and allocate this money towards ur PPF. A re-evaluation of LIC should be done. Get urself adequate TERM Cover. Continue with SIPs. It maybe better to finalise on ur house with 3-4 mths.

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Suhas asked, Hi Sridhar, I invested in equity and in 15% profit as of now. Shall I sell and buy in dips again?

Vetapalem Sridhar answers, Hi Suhas, timing mkts is not possible. It is best to continue to remain invested with a 5-7 yrs horizon. U should infact look at starting a SIP and invest regularly into equities.

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Suman asked, I have invested 10000/- p.m for the last 1 year (split into 4 funds with 2500/- pm for each - the funds being - Franklin India Prima Plus, DSP ML TIGER, Reliance Vision, Birla Sun Life Frontline Equity), and now my current investment value is Rs.165000 against the cost price of Rs.125000/- (Rs.40000 profit, or 32% annualized growth).



What should be my policy at this very moment - should I partly book some profits, and keep it in some bank FDs, and continue normally (i.e., the same 10K per month), or should I just continue (without any withdrawals whatsoever) as I am doing right now?



My first investment objective is to purchase a flat in the next 2-3 yrs. The next objectives are a bit far away (7-8 yrs from now). So what should be my course of action right now?

Vetapalem Sridhar answers, It would be wiser to keep ur SIPs running and remain invested for a 4-5 yrs period.



Evaluate how much savings can u keep invested with a 4-5 yrs horizon and allocated it towards the SIPs. For ur house purchase it is best to start to collect funds in a bank FD by saving money each mth from ur income.

rakesh asked, Hi Sridhar can you let me know wether this market will be stable.

Vetapalem Sridhar answers, Hi Rakesh, currently mkts look to be in a fair value zone with a little premium. It is difficult to say how mkts will move in future. Indian economy look set for a decent growth over the next 5 yrs with a stable govt in place.


So domestic factors suggest that mkts will be on a upwards trajectory. Incase there is a major negative event in the global economy, it will affect Indian mkts adversely.


So how things will pan out in a 1-2 yrs horizon is difficult to say. With a 5-7 yrs horizon the potential to make gud returns thro equity investing is gr8.

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santanu asked, I have invested in DSP Black top 100 equity dividend, dsp black tax saver, birla tax saver dividend, reliance power diversified dividend, fidilety tax saver total amounting to 9000 under sip. is it oky? wht all other finds shud I tgt in coming 2 months, sip only. regds

Vetapalem Sridhar answers, Hi Shantanu, it is best to stick to one or at max 2 ELSS funds for TAX purposes. DSP top 100 is a gud fund. Reliance power is a sector fund. It is better to stick to diverisfied funds.

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Newbie asked, Hello Sir. I am currently servicing a home loan at a fixed interest of 8% p.a since 2004.



I now have some spare cash available. I want to know if I should be partially prepaying this loan (does not incur prepayment penalty), or use this money to invest elsewhere, like MFs or stocks, or splurge it away on a new car Please advise. Thank you

Vetapalem Sridhar answers, Hi, Prepaying is better than splurging! However it is WISEST to invest this money into equities with a 5-7 yrs horizon. There is gr8 potential in mkts with a long term horizon.

ARP asked, Hello Sridhar, I have invested in tne below mutual funds. As of now all of these are in loss please advise as to what would be a better plan to stay invested for some more time or to book loss and come out.



IDFC PREMIER EQUITY FUND-DIVIDEND KOTAK MAHINDRA MUTUAL FUND KOTAK OPPORTUNITIES-GROWTH RELIANCE MUTUAL FUND RELIANCE DIVERSIFIED POWER SECTOR FUND - GROWTH RELIANCE MUTUAL FUND RELIANCE NATURAL RESOURCES FUND - GROWTH SUNDARAM BNP PARIBAS MUTUAL FUND SUNDARAM BNP PARIBAS CAPEX OPPORTUNITIES FUND

Vetapalem Sridhar answers, Hi, by remaining invested thro this turbulent phase the value of ur investments hv risen by 60-70% from the bottom.



The lesson to learn is that if u wait with Patience for long enough ur investments will grow and deliever u decent returns.



Equities is a long term investment. Dont look at it as something from where u need to recover ur losses. Look at it as an option which over the long run will build wealth for u.

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anand asked, My ctc is 5 Lac and I have to purchse a home in mumbai, navimumbai or in thane. Looking for the single BHK home. Is this the right time to purchase a home?

Vetapalem Sridhar answers, Hi Anand, this is a better time to buy a property. With the economy expected to get better over time it does not seem that real estate prices will go done a lot futher from current levels.



As and when economy recovers, property prices will start to move up. There is however still some time before it happens..

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NITIN asked, At 33 have net income of 25,000 p.m. i am investing 2,000 in SIP 55,000 in LIC 25,000 Infrastructure Bonds 8% additional towards PF 6,700 Home Loan WANT TO KNOW WHETHER I HAVE INVESTED CORRECTLY

Vetapalem Sridhar answers, Hi Nitin, u should evaluate ur LIC. It may be better to get urself an adequate TERM Insruance cover, and invest the rest money wisely. A PPF maybe better than ur Infra bonds. Increase the SIPs in case u decide to replan the insurance part.

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