Switch ELSS Fund, Direct Equity Vs. Mutual Fund, Balanced Fund Importance & More

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Here are few questions commonly asked by mutual fund investors.

Can you switch from one ELSS fund to another with same or different fund house?

Switching ELSS is not allowed to different fund house. However if you want to move from one ELSS fund to another within the same fund then you will have to stop making contribution in the existing fund and start new investment in another.

Also be noted that ELSS funds have a lock-in period of 3 years.

If I plan to invest in multiple SIPs for a longer duration, what date should I start putting money?

There is no golden rule for investing on any day or date to start SIP. There is no return differentiation as in the long run, returns won’t change drastically if they are invested in a same month but at different date. But experts always recommend to invest in the first week of any given month.

Why investing through mutual fund is recommended over direct investment in equity?

Although anyone has an option to investing in equity directly, but investing in it through mutual fund is recommended especially to those who are not enough knowledgable or have time to track market. Reasons are fund managers and their team who manages respective funds are highly skilled and knowledgable. Decisions on what to invest in, when and how much to invest is taken by these managers and their team. It is their job. Investors only role is to go through all the terms and conditions of the fund and select the fund house and put money. Not everyone has time and especially knowledge of selecting best stocks from plethora of options, analyse, when to invest and exit, keep track of economy, market trends to name a few. So for such individuals investing through MF is worth recommended. Basically MF route minimizes losses, as careful evaluation is done before investing. And that’s what makes them easiest and safest way to invest in equity.

Why balanced funds should not be ignored over tax saving funds?

Compared to tax savings ELSS funds, balanced fund offers lower returns. However the risks involved are lesser in case of balanced fund also called as hybrid fund. The reason they are called hybrid is because investment is done in equity and debt in a certain ratio through asset rebalance, which is not possible in case of pure equity funds. The fall in market will not lead to higher losses in case of balanced fund. So for low risk investors, balanced funds offer higher returns compared to traditional options such as PPF, LIC, etc. but lesser returns compared to equity oriented funds which involves higher risk.

When should you invest in short term debt fund?

If your investment horizon is very short e.g. 3 months, then you should opt for short term funds. Other option is liquid fund which is tax efficient. But both these avenues involve risk. So in such case, bank fixed deposit is also a recommended solution.

Is there any mutual fund with zero risk involved?

Answer is NO. Every MF carries risk. So if someone who wants to play completely safe bet then public provident fund, bank fixed deposit, recurring deposit, Sukanya Samriddhi yojana, etc. are worth recommended. Check out zero risk, high return investment options in India.

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