I am 27 years old and I want to invest a lumpsum — the bonus component of my salary — which amounts to nearly Rs 2 lakh in mutual funds. My financial goals are: near-term investment in real estate and marriage in 2-3 years’ time. I make regular investments in the form of SIPs (systematic investment plans) for other financial goals. These include a total of Rs 20,000 in HDFC Balanced, DSP BR Balanced Fund and HDFC Prudence Fund. Another Rs 5,000 for retirement corpus is parked in DSP BR Tax Saver, DSP BR Top 100 and HDFC Top 200. Kindly suggest funds where I can make a one-time investment with my bonus amount. Please tell me whether there is any need to change my mutual fund portfolio.

Sachet Parida

You have made the process of achieving your goals easier by adopting a systematic approach to investing quite early into your career. With defined goals and timeframes, you are well set to achieve all your goals.

But your choice of schemes with regard to the SIPs that you are running needs an overhaul as there are many flaws in the way you have gone about building your portfolio. Also, your risk appetite appears unclear.

You have chosen too many funds from the same fund houses, which will deprive you of diversification across asset management companies and their varied investing styles.

Also, choosing tax funds for retirement goals will not serve the purpose. You can always invest in a diversified equity fund to achieve all your goals, provided an appropriate timeline is factored in for meaningful capital appreciation.

Coming to your question on lumpsum investment, since both your goals — real-estate investment and marriage — are just 2-3 years away, it may be advisable to adopt a safe approach.

You can put Rs 2 lakh in a bank fixed deposit, so that you can get back your investments whenever you want. You can consider a debt fund such as Birla Sun Life Dynamic Bond or a monthly income plan such as HDFC MIP Long Term as well. Investing in liquid funds is another option. But in general, investing in MFs through the SIP route is advisable.

Coming to your SIP portfolio, you have not stated the goal to direct the Rs 20,000 investment. But you have put money in as many as three balanced funds, suggesting that either the goal is medium term (less than 5 years) or that you are quite conservative. Split Rs 20,000 as follows: Invest Rs 7,000 in HDFC Balanced. Exit HDFC Prudence, a steady performer, as you already have a balanced fund from the same house. Invest Rs 7,000 in Birla Sun Life ‘95, a balanced fund with a proven long-term track record. You can exit DSPBR Balanced and move to a stronger fund in ICICI Pru Balanced and park Rs 6,000 there. If you have a penchant for greater risk, you may also consider some large-cap equity funds.

For your retirement purpose, you do not need a tax plan. For Rs 5,000, you will be better off investing in not more than two funds. Retain HDFC Top 200. Exit DSPBR Tax Saver and DSPBR Top 100. Instead invest in Quantum Long Term Equity.

Alternately, for retirement, you can invest in the national pension system (NPS), which is a simple, low-cost product.

Review your funds periodically and take corrective action, if necessary. Also note that over the long-term building a balanced portfolio is necessary. So do make investments in debt (PPF, FDs and RDs etc) and gold as well.

*** I am 28, married, and my net salary is Rs 43,000. At present, I invest Rs 10,000 in PPF and Rs 5,000 in ETF every month. I have an LIC policy which entails a premium outgo of Rs 72,000 a year. I have paid premiums for two years and minimum returns will be generated after 10 years.

I am planning to invest in mutual funds. In Quantum Long Term Equity and Birla Sun Life Frontline Equity, I wish to invest Rs 3,000 each. In IDFC Premier Equity and HDFC Balanced, I wish to park Rs 2,000 each.

Also, I am considering investing Rs 500 a month in NPS. I have a good surplus as my wife would also start earning Rs 30,000/month. Please go through my portfolio and suggest suitable alternatives if needed.

Ajit Singh

Endowment plans are generally expensive and may not be suitable for achieving long-term goals. Insurance and investment must not be confused. The former must be for just protecting risks, while the latter is the process for reaching financial goals. Pay the premiums for the minimum period and stay invested till the threshold lock-in timeframe and exit the policy later.

All the four funds that you have chosen have proven track record in delivering excellent returns over the long-term of 5-7 years. Investing in the NPS is also a good idea. Step up investments there once your surplus increases.

You have stated that you are investing Rs 10,000 every month in PPF. Please note that the maximum amount that can be invested in a financial year is Rs 1 lakh. With reference to your other investment of Rs 5,000, you have just started ETF. If it is a gold ETF, the amount invested is far too high. Gold must not account for more than 10 per cent of your overall portfolio. When your surplus increases, invest in real-estate as well. Take a term cover for yourself and a medical insurance policy for your family.

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