Readers

Corner

MUTUAL FUND
Nimesh Shah, Managing Director & Chief Executive Officer, ICICI Prudential Asset Management
Company, answers your questions
ing at the rear view mirror to drive a
car. Also, looking at only recent performance might also not be the right
way to evaluate a fund. Further, it is of
utmost importance to look at the reputation of the fund house and their
investment philosophy. Look also at
the experience and background of
the fund management team, which
would be managing the scheme.

NIMESH SHAH
While choosing an equity fund
scheme, what factors should one
take note of?

It is important to have a long-term

investment horizon, as equities could
be volatile in the short term but tend
to outperform all asset classes over
the longer term. Also, choose equity
schemes according to your risk
appetite. For instance, diversified
equity funds are likely to be less
volatile compared with sector funds.
In the latter, the risk is skewed
towards a particular sector, rather
than being spread across the market.
Look at the long-term performance record of the equity scheme.
Also, past performance of these funds
across market cycles is a good indicator, looking only at this is like look-

The lock-in period of my equitylinked savings scheme (ELSS) is

coming to an end. Is it necessary to
redeem it? If the money remains
invested, will it continue to earn
returns?

Your investment in ELSS would

have helped you to derive the twin
benefits of taxation and capital
appreciation from equities. After
the lock-in period is over, your
investments continue to benefit
from the capital appreciation
offered by equities.
I have some lump-sum money to
invest. Should I invest now or
wait?

This would depend on your current

asset allocation strategy. If underinvested in equities, you may look to

invest it in equity strategies which

are defensive (or have cash), as equity markets have run up and if the
markets offer opportunities over the
next few months or one year, these
strategies will have enough cash to
buy equities. It might be a prudent
strategy, thus, to add flavour of
funds in the balanced, dynamic or
asset allocation category. These
funds seek to increase allocation to
equity when the markets are cheap,
and book profits in equities when
markets are rising, thereby reducing volatility and boosting returns.
However, if well invested in equities, we recommend investing this
amount in a staggered manner
through equity mutual funds over
the next six to nine months. With the
current price of crude oil and good
growth prospects, India is the most
attractive emerging market in the
world and, therefore, it is an opportunity for people to invest long-term
in Indian equities. The outlook for
equity markets is quite positive for
the next three to five years.
The views expressed are the experts own.
Send your queries to
yourmoney@bsmail.in