Money Matters

  • Ifthikar Bashir
  • Publish Date: May 14 2018 1:19AM
  • |
  • Updated Date: May 14 2018 1:19AM
Money Matters

I have been investing in real estate for quite some time now. Should I consider my real estate assets as debt or equity?

Mustafa, via email


Real estate should be considered a hybrid investment of equity and debt. If the asset is rented out, you will earn an income from it while, presumably, its price also appreciates over the long term. So, it has a nature of equity as you will sell the property in the future. And if you are going to use it for yourself, then it is just an income avenue since you would be saving on rent.



I am 34-year-old professional and interested in investing for my golden years. Which is a better option to invest for retirement, a mutual fund or an index fund? 

Shadab, via email


You have two options – and actively managed diversified equity fund or an index fund. You should invest via an SIP with timely top-ups. You are only 34 and have about 26 years to invest for your retirement. But I feel it is not yet time for index funds in India. Most of the actively managed funds give superior returns over a period of five, 10, 15 or 20 years. When you look at the yearly performance, you might find many funds that haven’t performed well. But as you increase the timeframe, the context changes. There are lots of reasons for this. Our indexes are weak and have been made for representation, not performance. So, I would suggest you choose one or two actively managed diversified equity funds. Invest regularly and review your investment every two-three years. If you do this you will be able to accumulate a good corpus in an efficient way.



I want to invest in equity funds via a Systematic Investment Plan. I want to understand if it is alright to step-up SIP contributions only for a limited time?

Zayed Bashir, Baramulla


The whole idea is to be systematic with your investments. This is not being systematic. In fact, this is trying to predict the timeliness. If at all you have some extra money, just spread it over a period of time. If you have received an annual bonus, spread it over six months. If you have got a sizeable amount of money from selling an asset, spread it over the next three years. Be methodical and systematic.

Wanting to invest more during a brief period means you expect the market to be relatively cheap. Such methods don’t really work. In the last one year or so, I have come across many investors who have been waiting for a correction. They have been waiting for the market to fall, only to see it go up by 30%.

If you are investing for the long term and you are methodical about it, most of the returns can be derived from the market. If you do what you are suggesting, you may succeed sometimes but it will give you false belief, which could take you in the wrong direction.



I have purchased a few endowment plans and I am interested in investing in equity and debt funds as well. Can’t an endowment plan be considered a part of my debt portfolio? 

Wasim Khan, via email


Endowment plans yield the lowest returns of any fixed income alternative compared to what you pay. So, it is a poor choice. But if you are waiting for an endowment plan to expire or mature soon, or you need to hold it for some reason, you may consider it as a part of your debt portfolio.



I want to invest in mutual funds and have been doing some research before investing my money. I need to know whether I choose a fund that has given return of 14% over 15 years or one that has given 22% over three years?

Mohammad Ahsan, Soura, Srinagar


See, 14% return over 15 years means the fund has witnessed big ups and downs in the market. Fifteen years is a long period, and we have witnessed a couple of booms in that cycle.

In the last three years, the fund has seen only a good time. The markets are cyclical and every fund witnesses a lean time as well. It also depends on whether the same fund manager has been around the fund generating 14% returns. Has he been there all through? If not, you will have to take it with a pinch of salt.

Remember that a fund’s past performance is no indicator of how it will perform in future. The answer lies in understanding the fund. Performance should not be the only criterion for you to choose a fund.



I am a regular reader of your column and like how you address queries. However, I am curious to know why you advise choosing existing funds over new ones?

Taha, via email


It simply comes down to choosing between what you know about and what you don’t. I would rather go with what is tested. Existing funds have an established portfolio and you know where the money is invested. Also, you get to know how the fund has done in both a lean market and a great market to understand its behaviour. On the other hand, a new fund will start from scratch, deploy the money and then start generating returns.

Many people think that you are buy a fund cheap when you buy it early. It doesn’t really matter. The same money will go around and be invested at today’s prices. It is a myth that buying a fund unit at Rs 10 is cheap. It is not.