The Hindu Business Line : Rejigging your portfolio with care

I am 30 years old and my wife is a homemaker. I work in a private organisation, with an income of about Rs 19,000 a month. I have a bank balance of about Rs 1 lakh after my investments. My present investments include HDFC Premier Multicap Fund (Rs 10,000), Fidelity Equity Fund (Rs 10,000), HDFC Taxsaver (Rs 17,000), HDFC Long Term Advantage (Rs 5,000) and ING Vysya TaxSaver (Rs 8,000).

Kindly let me know what would be the adequate investments for a secure future, in mutual funds, equities, post-office savings and fixed deposits. Please suggest a good equity-linked insurance plan. I have a house of my own and all the other basic amenities.

Murali Krishna

Your investments are at present divided between two extremes on the risk-return scale.

Your savings bank account offers low returns for negligible risk and your equity funds offer the potential for high returns with a matching risk profile. You need to rejig your asset allocation so that you shift some of your savings into debt investments. Investments such as National Savings Certificates, fixed deposits in good companies and the post-office monthly income scheme appear to be good choices.

In addition, you can maximise your contribution to the Employees Provident Fund, if your workplace allows this.

We would suggest that you take care of your insurance needs through a pure term insurance plan and use equity mutual funds for your investment needs.

The latter would offer you the potential for better returns with lower costs and higher liquidity. Do invest in a pure term insurance plan, so that you have adequate life cover to protect your dependents.

Before you begin a rejig of your portfolio, however, do estimate your savings potential based on your income and financial goals at the end of 10 or 15 years.

Your savings plan has to be formulated on basis of these two factors.

Based on your age and income level, you can probably afford to invest about 30 per cent of your portfolio in equity-related instruments; the rest can be parked in debt investments.

Retain a bare minimum in your savings bank account for an emergency. You may have to step up your equity investments, if you are targeting a higher return in order to meet your financial goals.

We have the following suggestions on your mutual funds portfolio:

Given your risk profile, stick to diversified equity funds with a good record for all your equity investments. Avoid direct investments in stocks, as they may be quite risky.

You seem to have made the bulk of your equity fund investments through the IPO route. In future, please stick to established equity funds that have a good five-year record.

We would suggest you consider funds such as HDFC Top 200 Fund, Templeton India Growth Fund and Franklin Prima for regular investments.

Since one-time investments in equity funds can be very vulnerable to a market meltdown, always invest in funds through the systematic investment route.

This will ensure that some part of your monthly income is ploughed into equities on a regular basis.

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

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page