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I own 1,000 units in Franklin India Taxshield. Should I continue to hold the investment? I have a sum of Rs 50,000 to invest in mutual funds. Where should I invest to get the best yield?

S.Vani

From your query, we presume that Franklin India Taxshield is your only mutual fund investment so far and you have yet another Rs 50,000 which you would like to park in mutual funds. As its NAV (growth option) now hovers at about Rs 47 per unit, your investment in Franklin India Taxshield would now be worth about Rs 47,000.

Rather than looking at this investment in isolation, it may be better to see if your overall portfolio suits your age profile, investment goals and risk preferences. Your total portfolio size is at about Rs 97,000 now, if your include the value of Franklin India Taxshield units.

Since you have not specified if you want to invest in equity or debt, we presume that you would like to invest in a mix of both so as to generate a reasonable level of return on your portfolio. How much of your portfolio you should allocate in equity and debt would depend on your age, investment goals and risk preferences.

If you are young (say, 20-35 yrs) and have an investment horizon of 5 years or more and are capable of handling downside risk, you can probably park up to 40 per cent of your portfolio in equity funds. If you are middle-aged and less able to handle risks, you can park a lower proportion, say 20 per cent, in equity funds and the rest in debt.

For the equity portion, you can spread your investment equally between three diversified equity funds with good track records. Given its reasonable track record, you can retain a third of your equity portfolio in Franklin India Taxshield, but also invest in funds such as Franklin India Bluechip and HDFC Top 200 Fund.

For the debt portion, if liquidity is not a consideration, you should probably consider small savings schemes such as Post Office Monthly Income Scheme as these remain islands of high returns at present. Returns from debt funds are likely to be in the region of 5-5.5 per cent over the next year.

Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line, 859/860 Anna Salai, Chennai 600002.

Aarati Krishnan

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