Ask us: On investments


Q. I want to invest ₹1 lakh for 5 years in a low-risk or no-risk mutual fund. Please guide me.

Arun Moodi

A. There are no zero-risk mutual funds (MFs). For low-risk MFs, the ideal options are debt funds from the short or very short-term duration categories. For a little higher return without too much risk, you can consider hybrid funds such as equity savings funds and conservatively managed balanced advantage funds. These funds will see higher volatility in the 1-1.5-year period, but this reduces if you hold beyond this period. They are also more tax-efficient than debt funds. You can go for a combination of these options or only debt funds. About three funds will be sufficient.

Q. I want to know how I can start investing in cryptocurrency.

Anil Kumar Jain

A. Investment instruments generally follow the rule that when something is riskier, the potential reward (returns) is also higher. However, when it comes to cryptocurrency, especially in the current situation, this rule seems to be falling apart.

There are several high-magnitude risks associated with cryptos and it is hard to see potential returns commensurate with such risks. One, volatility risk — prices have dropped over 50% in the past year; they also oscillate wildly and unpredictably. Two, taxation risk, especially in India. Three, regulatory risk where one cannot chart the future of the legality of such currencies. Four, the high risk of fraud. With all these risks, investing in crypto seems inadvisable now. If you still insist, there are a handful of exchanges operating in India that would allow you to indulge your cravings.

Q. I’m 21. I plan to invest in REITs as stocks and cryptocurrencies are correcting. Is this the right time?

Sanjay Shivakumar

A. You can invest in REITs, as they are a good way to play the real estate space. However, for wealth creation, stocks (or equity MFs) are by far superior. Correcting markets are not bad. Market corrections are, in fact, the best time invest as it allows you to buy at cheaper levels. The key is to stay invested for the long term to let the market cycles to play out.

Q. I am a gynaecologist (41) and a member of the Indian Medical Association which runs a pension scheme. I can deposit any amount monthly until age 60. The corpus will be kept as an FD at 7.5%. At 60, I can opt for a monthly pension or retain part of it as corpus. If I invest ₹20,000 a month till 60, would this give me better returns or an investment in a MF?

Sushanth Y. S.

A. We are not aware of the finer details of the pension scheme, including how returns are generated, corpus managed, and taxation. This makes it hard to compare with other investment products. Second, there are a wide range of MFs, and returns would depend on which fund you went for, how aggressive the fund is, and so on. For example, if you invested in equity-oriented MFs, it is more than likely to generate better returns than the pension scheme (assuming the scheme invests only in debt-based instruments) over a nearly 20-year period. You can simply stick to index-based funds.

Third, the decision will also depend on your other investments. NPS is a good option to build up retirement corpus and may also be more tax-efficient than the pension scheme. To make the right decision, work out the extent of risk you are willing to take which will help you narrow down the funds to invest in. Understand where the pension scheme will invest and how returns will pan out. See how you can allocate among funds, scheme, and NPS. You can always do a combination of these; it does not have to be one or the other.

(The writer is co-founder,

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