I am 43 and work with the Government. Apart from saving regularly through debt options such as bank recurring deposits and provident fund, I invest Rs 20,000 each month in equity funds to accumulate Rs 75 lakh towards my retirement corpus and daughter’s marriage. I require this sum by 2028. The following is my mutual fund portfolio. Suggest any changes if required.

Rs 4,000 per month in HDFC Equity; Rs 2,000 per month in Franklin India Bluechip, Birla Frontline Equity, UTI Opportunities, Quantum Long Term Equity, Reliance Equity Opportunities, IDFC Premier Equity and ICICI Pru Discovery; Rs 1,000 per month in HDFC Balanced; Rs 1,000 per month in Quantum Gold Savings.

Venkatram

Khammam

You are quite comfortably placed to reach the targeted sum of Rs 75 lakh in 15 year’s time. We hope that you have estimated this sum correctly. This is even without factoring in your debt investments and any accumulated sums that you have already invested in equity funds.

When setting a goal such as your daughter’s wedding or lifestyle needs on retirement, you need to factor in inflation. If you estimate that a wedding will cost Rs 15 lakh at today’s prices, it is likely to cost Rs 47 lakh in 2028, assuming an 8 per cent annual inflation rate. If you accumulate Rs 75 lakh by 2028, that would leave you with just Rs 28 lakh towards your lifestyle needs on retirement.

However, going by your details, we see that you are likely to earn a pension after retirement and have also been saving regularly in debt instruments. These may help see you through retirement.

Now, coming to your investments, your systematic investment of Rs 20,000 per month in the chosen funds will easily get you to your target in 15 years.

In fact, if your investments earn you even a moderate annualised return of 12 per cent, an SIP of Rs 20,000 will result in your accumulating a Rs 1-crore corpus in 15 years’ time. We therefore suggest a few changes to your investment plans.

Given your moderate return requirements, you can afford to have fewer equity funds and more balanced funds in your portfolio, if you would like to thus bring down your overall risk.

We would also suggest streamlining the number of funds in your portfolio in order to make it easier to monitor.

With these two objectives in mind, we suggest the following

Replace investments in IDFC Premier Equity, Reliance Equity Opportunities and ICICI Pru Discovery Fund with a balanced fund such as FT India Dynamic PE Fund. While the three equity funds are good performers in their own right, their small/mid-cap stock bias ups their risk profile. With moderate return expectations, there may be no need for you to take on the extra risk.

Invest Rs 3,000 in HDFC Balanced Fund and Rs 4,000 in FT India Dynamic PE Ratio Fund. Out of the remaining sum of Rs 13,000, you can increase your exposure to Quantum Gold Savings Fund to Rs 2,000 per month, as a diversifier. Reduce investment in one of the equity funds.

However, if you are quite comfortable with your current level of risks, you can continue with your existing funds. The choice of funds is quite good and includes only funds with a good long term record. In this case you may reach your goals ahead of the targeted 15 year time-frame. In that case, once you reach the goal of Rs 75 lakh you can withdraw from the said equity funds and move that money into safer investments such as fixed deposits or debt funds, when you have 4-5 years left to retire.

Do track your portfolio regularly to check whether your equity and balanced funds are consistently beating their benchmarks.

I am investing Rs 5,000 each in the following funds for the last six months – HDFC Top 200, Quantum Long Term Equity, Franklin India Bluechip, IDFC Premier Equity and HDFC Prudence. I also invest Rs 3,000 per month in SBI Gold Fund. I would like to have an amount of Rs 1 crore in 10 years time for my two children’s education and marriage needs. Please advise me about whether I can meet my financial goal with these funds. I am 39 and work as an Associate Professor in a medical college. I earn a monthly income of Rs 90,000 after tax. My monthly expenses are Rs 42,000 including my home loan instalment.

Dr. S. Ramesh

While you seem to have planned for your children’s education and marriage needs, you have made no mention of retirement. Do factor that into your calculations. Retirement planning should take equal priority, particularly as expenses towards marriage or education of children may not ensure your own financial security post retirement.

Having said this, the funds you have selected are quite good. Using a return assumption of 14 per cent for the portfolio, investing a sum of Rs 28,000 per month in equity and gold (90:10) may fetch you a sum of Rs 72.5 lakh at the end of ten years. You could make a higher return from equities if stock markets perform well. However it would be better not to factor a much higher return into your calculations.

To get to Rs 1 crore with a similar portfolio mix, you will need to invest Rs 38,600 per month. Going by the details you have provided, you do have a surplus of another Rs 20,000 per month after providing for your monthly expenses and the investments in mutual funds. As you mention a home loan, you also seem to own a home or property. However, you need to own assets that will provide risk cover and safety too. Do invest in term insurance, health insurance and debt options such as fixed deposits, debt mutual funds or bonds.

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

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