Q) I have invested heavily in ‘Regular Growth’ category of mutual funds, mainly of SBI.

At the time of investing, their facilitator had told me that the accretion from investment will be re-invested in my account itself, thereby, my wealth will increase. It is three years now; I am neither getting any of the bonus or other increases nor there is an increase in my share numbers.

If I have to take any money, I am forced to sell my shares. I am unable to take out any increase in share value (of course there was no increase in value in the past three years).

Without selling my shares, I am unable to understand the use or benefit of this scheme.

I want to know the very idea of this investment type and, if there is any chance of misuse by the fund operators.

I am a very old, senior citizen, so, please clear my doubt, as I am not getting a satisfactory answer from anyone.

V.H. Subramoney

A) Mutual funds have what is called Net asset value or NAV. That is the only value that is reflective of the growth in your wealth. You will not get dividend as you have chosen the growth option. Mutual funds do not also issue bonuses anymore.

You need to first understand that mutual funds are not shares. They are a basket of stocks that a fund manager manages. The growth or decline in this basket is reflected in the NAV. Your NAV must grow if the market grows, and the fund manager has done a good job. Your total units (they are not called shares) multiplied by the NAV will give the current value of your investments. If it has not grown, then either your investment timing was bad (market did not return) or your scheme did not perform well.

Please ask for the latest statement and check the current value of your investments. Ask how much the benchmark index has performed as opposed to your fund for the same period of your investment.

Also, the only way to take away some profit or exit fully is to sell your units partly or fully. That is the way it works with mutual funds.

Mutual funds work under a trust set up and there is no scope for anyone running away with your money. You may lose money if your scheme does not perform well.

Given that your expectation from this product is different, we would recommend that you move to simpler, regular-income products like the RBI Floating Rate Bonds and invest in deposits of banks and NBFCs.

Q) I got a new job in Indian Railways. I would like to invest in gold. I don’t know how to do it. I don’t know about trading or any traditional-investment options.

Krishnanand

A) We hope you have started investing in investment options such as PPF or SIPs in mutual funds as well. As for gold, you have multiple options. One is physical gold.

We do not subscribe to it if your intention is to invest and not consume gold as jewellery, etc. The second option is to go for gold funds (or ETFs if you have a demat account) offered by mutual funds. You can choose one and do a monthly SIP.

Third is to go for gold bonds periodically auctioned by the government.

You can buy them and hold them for their tenure of eight years. Apart from getting the rise in the price of gold as returns, you will also earn some interest.

You can hold these through demat till maturity or sell them in between if the bond has liquidity.

You cannot do SIPs in these, though. They are also available in the secondary market (stock exchange) but may or may not reflect gold prices closely, depending on their liquidity. Hence, for a first-timer, it is easier to buy during auctions and simply hold.

In terms of the simplicity of buying and transacting, gold funds are the simplest to invest and sell when you want. Gold bonds need some knowledge and requires knowing when to buy them and where.

(The writer is Co-founder, PrimeInvestor.in)

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