MF QueryBoard

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I would like to know if investing in Motilal Oswal Nasdaq 100 Fund of Funds (FOF) over Indian index funds would be a good bet or not. I am looking for SIP of Rs 5,000 per month for a period of 10 years and above. Please shed some light comparing the two.

- Shiva Dayal

Investing in Motilal Oswal Nasdaq 100 Fund of Funds (FoF) means taking exposure to the Nasdaq index. Nasdaq is a technology-heavy index with the technology sector contributing almost 54 per cent of the index’s weight. Therefore, comparing it with Nifty 50 makes no sense as Nifty 50 is diversified and more tilted towards the banking and financial sectors which contribute 33.16 per cent of Nifty 50’s index weight. Further, as both are from different countries the impact also differs and so do the market risks.

Currently, the Nasdaq 100 index is trading at record levels thanks to companies like Amazon, Apple, Netflix, etc. This performance of Nasdaq 100 has allured many Indian investors to take exposure to the US-based index. But both the markets are different in nature and hence, taking exposure to US-based index calls for various risks such as those of currency, market, geopolitics, economy-related changes, etc. Therefore, we would suggest that you should have exposure to such indices only if your financial goals require you to do so. Financial goals such as child’s higher education abroad would require you to invest not more than 15 per cent in international funds. Going further with your query, we have compared the performance of Motilal Nasdaq 100 Exchange Traded Fund (ETF) with that of Nifty 50 and Nifty 100, as stated below.



The above table shows the performance of Motilal Oswal Nasdaq 100 ETF as against Nifty 50 and Nifty 100. These returns are three-year rolling returns from August 5, 2012 to August 5, 2020. You may find that the Motilal Oswal Nasdaq 100 ETF has performed better than Nifty 50 and Nifty 100. However, as said earlier, it is futile to compare these indices as they are quite different from each other in various aspects. Further, if you wish to save for your child’s higher education abroad (in the US to be specific) or if you wish to further diversify your portfolio by adding exposure to an international portfolio, then you can consider parking your funds in Nasdaq 100. And if you are considering investing in it, then invest in Motilal Oswal Nasdaq 100 ETF rather than FoF. This is because ETFs will help you to invest in a similar manner at a marginally lower cost.

I have invested in Axis Long-Term Equity Fund-Growth since 2013. My three-year lock-in period is now over and I am enjoying absolute returns of more than 70 per cent as against my investment amount. I do not need the money at present and therefore should I stay invested in it? Or should I redeem all the money and invest in another fund?

- Anshul Goel



Equity-linked saving schemes (ELSS) are tax-saving funds and should be used for a similar purpose i.e. saving on tax. And for the rest, you need to invest depending upon what your financial goal is. This is because financial goals can help you to understand how much money you need for what expenditure and when. While investing in mutual funds, apart from the risk tolerance level assessments, investment tenure is equally important. Knowing your investment timeframe helps to pick the right mutual fund products. Currently, if you still require investing in ELSS for tax savings, we would suggest ploughing back your investments.

What we mean is that you may invest in ELSS and post the lock-in period, redeem the amount and then again invest in ELSS to get benefit under Section 80C. This way you can just recycle the same investment to avail tax benefits instead of investing on a continual basis. Further, continuing with the investment would largely derail you from your required asset allocation and it even makes it difficult to rebalance your investment portfolio. Also, in the long-term, even the best funds do keep on changing.

The fund that you find best now might be replaced by other funds in the future. Hence, at least in equity funds, don’t marry a fund. Review your investments at least quarterly and revise annually, if so required. Therefore, we suggest that you should have a separate tax-saving goal which is not linked with your other financial objectives. This will help you manage both – tax-saving as well as achievement of other financial goals.