I am 29. I have recently started investing in mutual funds through the SIP (systematic investment plan) route. My contribution to MFs is Rs 10,000 monthly.
Do I need to add or remove any funds? If I have to add, I will do so after one year to avoid the exit load. In the next 10-12 years, I want to accumulate Rs 70 lakh.
I have also just started investing money in PPF as a part of my debt portfolio to the tune of Rs one lakh annually (for the education of my child, who is just four months old now).
My investment is as follows: In Franklin India Bluechip, ICICI Prudential Focused Bluechip, HDFC Top 200 and HDFC Prudence, I park Rs 2,000 each.
I also invest Rs 1,000 each in HDFC Mid-cap Opportunities and Reliance Equity Opportunities.
Do I need to add gold to my portfolio?
Jitendra By giving yourself a fairly long time frame for your investments to grow, you have made the task of achieving your goals that much more possible.
Having said that, there are several modifications you need to do to your portfolio so that you reach your target.
If Rs 10,000 is invested every month for a period of 12 years, you can reach a corpus of about Rs 40 lakh, if the portfolio earns 15 per cent annually. The return expectations are slightly on the higher side, though still within a reasonable realm.
Your investment in PPF of Rs 1 lakh every year will help you achieve Rs 30 lakh at the end of 15 years.
So, at the end of 15 years, your mutual fund investments and your savings in PPF may comfortably cross Rs 70 lakh.
You have a comfortable balance between debt and equity with these two investments.
Coming to your funds, there are two points that you must note. First, you have dissipated Rs 10,000 across as many as six funds, which is a tad higher. With that sum, you must ideally restrict yourself to three-four funds.
Second, you have invested in too many funds from the same house, which will deprive you of the potential for diversification and benefit from different investing styles of other asset management companies.
Third, there is also significant overlap in your portfolio with a significant portion allocated to large-cap stocks oriented funds. This needs to be rebalanced to perk up the overall portfolio returns.
Invest Rs 2,500 each in Franklin India Bluechip and ICICI Pru Focussed Bluechip. Since you already have two large-cap funds, you may not need another in the form of HDFC Top 200, though the fund has an exemplary track record over the long-term.
Instead, invest Rs 2,500 in Quantum Long term Equity, which is a multi-cap fund that has delivered top returns over the past four-five years. You can invest Rs 2,500 in HDFC Mid-cap Opportunities, a fund that is delivering significant out-performance over the past few years.
With a long investment horizon of 12 years, you may not need a balanced fund. But if you must have one, consider HDFC Balanced when your surplus increases.
Reliance Equity Opportunities, although a fund with a reasonably strong record, can be exited as you already have a multi-cap fund in the form of Quantum Long Term Equity.
Review your portfolio periodically to remove underperformers and to rebalance.
You can step up the sums invested in each of the above funds, as and when your surplus increases.
You have made a mention of exit loads. Do note that exit loads are applicable to each SIP made for a period of one year.
You can also add gold to your portfolio. But it must be restricted to less than 10 per cent of your assets. You can invest in Goldman Sachs Gold BeES, which is an exchange traded fund or you can invest in Reliance Gold Saving through the SIP route.
*** I work for a PSU. My monthly income is Rs 30,000. My monthly expenses are Rs 16,000. I invest Rs 3,500 in a recurring deposit. Also, I have to pay Rs 8,000 as EMI for a loan which will get repaid by 2015.
Now, I am planning to park an amount of Rs 2,500 monthly in a SIP for three years.
I am a beginner to the world of investing in mutual funds. I may not opt for Dividend payout option. Please suggest an ideal SIP. I have short-listed SBI- Emerging Business, HDFC Mid-Cap Opportunities and HDFC Top 200.
Kindly suggest an ideal fund for starting a SIP.
R. Thampi You have a fairly limited surplus that can be invested every month. We hope you have set aside a reasonable amount as emergency funds, which is generally about six months’ salary.
Your time horizon is just three years, which is pretty short, especially as you are taking the SIP route.
With this time frame, and also because of the fact that you are a beginner to investing in mutual funds, you must first try to park sums in a balanced fund to test the waters.
The funds that you have mentioned have a reasonable track record but may not suit your purpose.
Invest Rs 2,500 in HDFC Balanced for three years, instead.
Investing in too many funds from the same house will deprive you of the potential for diversification and benefit from different investing styles of other asset management companies.
You can add gold to your portfolio. But it must be restricted to less than 10 per cent of your assets.