Large-cap funds suitable for moderate risk profile

I had read about investing in mutual funds and at the time had got the idea to make investment in mutual funds. In the course of last six to eight months, I have made investment in mutual funds. Some of those funds are doing good while others do not seem very promising. Please advise me which investments I should opt for.   
—Bharat Choksey

In many ways, this message shows all this is wrong with “do it yourself” investing. You seem to have invested in 19 different mutual fund schemes. It seems you think you can eliminate risks by spreading them among as many funds.

This is like trying to win a cricket match by picking a cricket team with some of the best batsmen around. You cannot win a match by simply picking more of the best batmen. You will also need good bowlers and good wicker keepers. Also, the type of batsmen and bowlers you pick will depend on the pitch and the opposition team and the format of match you are playing. You will also need a good coach to assist you in team selection and strategy.

Investing is similar. You first need to know for what you are investing. When will you need the money and your own style and risk-taking ability as a captain of the team. Your current investment style is leaving you open to huge timing risks when there will be an inevitable market downtrend. Please get professional assistance to work out your financial goals and a financial plan to achieve those goals.   

I am 64 years of age, retired from a private company. My earnings from investments is Rs 3 lakh per annum. I had purchased a house in Kalyan in the year 1991 for Rs 4.75 lakh and I am selling it now for Rs 65 lakh. I don’t want to invest further in property. I want to know how I can save the income tax as per long-term capital gains rules or by investing in infrastructure bonds. I would also like to know whether I can gift my son Rs 30 lakh to save tax.
—Vikas Kaushal

You will need to find out the fair market value of the Kalyan flat as on April 1, 2001. This will be treated as your cost of acquisition. You should be able to get this figure from the ready reckoner tables for 2001 for your locality. Any good broker is likely to have this data available with him. Let us just assume that this figure is say Rs 12 lakh. If so, then based on indexation your cost will be around Rs 32 lakh. If you sell this property for Rs 65 lakh, then based on these assumptions the long-term capital gains will be Rs 33 lakh (Rs 65 lakh minus Rs 32 lakh).

However, you can save on long-term capital gains tax by investing Rs 33 lakh in capital gains bonds from Rural Electrification Corporation Limited (REC) or National Highways Authority of India (NHAI).

Also, you cannot save on capital gains tax by gifting money to your son.  

I am a small businessman and my sole objective of going for a systematic investment plan (SIP) is long-term maximum benfit. I have not invested anything in mutual fund or the stock market, so far.  Kindly lend me your guidance with regard to the type of fund that woudl be suitable for me because I can lock the fund for five years.  
—Rajan Parekh

Its great that you want to start investing on a systematic basis for the long term. It is always better to start investing with a specific goal in mind. This enables you to choose an appropriate instrument to invest in depending on when the goal is due and your own ability to take risks.

Assuming your goal is five years away and you have at least moderately-aggressive risk profile you can invest a fixed amount every month in a balanced fund. The money is not locked in but it is advisable to continuously invest for a period of at least five years to get the benefit of rupee cost averaging.

Ideally if your goal is more than 10 years away and you  have a moderately aggressive risk profile you can also invest some portion of your investment in a large-cap equity mutual fund.