What sort of a mutual fund investor are you?

(Source: The Economic Times, Mumbai 7^th August, Page 21)

 

What sort of a mutual fund investor are you?

 

Bakul Chugan has a well-researched questionnaire that can help you choose the right scheme

 

   AN office colleague recommends fund X to you over a coffee machine. Your uncle next door suggests fund Y. The opinions as to which mutual fund to go for are increasing day by day. And with 500 odd schemes in the market, you know how difficult it is to choose the fund of your choice.
   There are several schemes to choose from — liquid, monthly income plans (MIPs), balanced, equity funds and so on. Each has its own risk-return given, making the choice all the more important for an investor. We have attempted to make this process simpler by devising a self-analysing questionnaire. After you are through with answering the following questions, we will suggest the right mix of MF products. So, cross your heart and answer these questions:
1. How would your best friend describe your risk-taking capacity?
(A) A risk-avoider (B) A gambler (C) Willing to take risk after adequate research
2. You are in the final lap of KBC and you’ve won Rs 1 crore. You aren’t fully confident of the answer. Which of the following choices will you go in for?
(A) Go home with the winning amount (B) Play on for 50% chance of winning Rs 2 crore, risking the amount already won
3. What is your comfort level while investing in stocks or mutual funds?
(A) Somewhat comfortable (B) Very comfortable (C) Not my cup of tea
4. When you think of the word risk in investment parlance, what comes to your mind first?
(A) Uncertainty (B) Thrill (C) An opportunity
5. You receive a bonus of Rs 50,000 that you wish to invest. You would:
(A) Invest in stocks, despite the turbulent market (B) Go in for balanced mutual funds (C) Deposit it in a bank FD, earning over 9% interest per annum.
6. You have just finished saving for a once-in-a-lifetime vacation. A month before you plan to leave, you lose your job. You would:
(A) Cancel the vacation (B) Extend your vacation because this may be your last chance to go in first-class (C) Go as scheduled, reasoning that you may need the time to prepare for a job search
7. Which of the following job opportunities are you most likely to opt for?
(A) Extremely high salary, but does not guarantee job security (B) Job security is the first priority (C) Fairly good salary with somewhat assured job security
8. You hold stocks of a highly-reputed company. The stock falls sharply due to a market correction. You would:
(A) Sell it immediately before the worst happens (B) Buy more, it’s a jackpot
So, what type are you?

• Aggressive: You are pretty bold with your investment strategies and believe in the ‘High Risk, High Return’ theory. In fact, you aim for capital appreciation in all your investments. So, think of investing around 60% or more of your portfolio in equities. Actively-managed equity funds , large or mid-cap, can suit the bill. Sector funds such as technology, banking, automobile and pharmaceutical will suit those who have a view on sectors.

• Moderate: You don’t get carried away by huge returns generated by rather risky ventures. You are happy with mediocre returns. You can invest 30-60% in equity funds, and the rest in short-term, debt-oriented funds. Stay away from long-term debt funds as they face interest-rate risk. Index funds are also a good option to start exposure in equities. Among equity funds, index funds or active equity funds can be some options to consider.

• Conservative: You are averse to risk and must, therefore, opt for debt-oriented hybrid funds. MIP funds and short-term debt funds will suit the bill. Equity funds are best avoided.

 

SCORE CARD:

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21-26: Aggressive Investor

15-20: Moderate Investor

10-14: Conservative Investor

 

Scores:

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1. a=1,b=3,c=2
2. a=2, b=4
3. a=2,b=3,c=1
4. a=1,b=3,c=2
5. a=3,b=2,c=1
6. a=1,b=3,c=2
7. a=3,b=1,c=2
8. a=2,b=4