I have been investing Rs 14,000 a month in mutual funds (balanced, large, small and mid-caps) for the long term (20 years).

I now want to invest Rs 2,000 a month through SIP into Reliance Pharma Fund.

Is it possible to get positive returns after 15 years?

Amarendra Nath Roy

By earmarking a sum for 20 years, you have taken the right path towards building a healthy corpus.

What is more, you have also invested well by taking exposure to funds across market-capitalisation segments. They will give your portfolio the necessary diversification. Hopefully, these are funds that have a good long-term record.

Reliance Pharma has had an excellent run over the past three to four years, thanks to the sector doing exceptionally well as it was regarded both as a value pick and a defensive bet. Whether the same trend would continue over the next 15 years is difficult to say. You may get positive returns as your intended holding period is long.

But in general sector funds are risky and the timing of entry and exit become important. You may be better off investing the additional sum in a diversified equity fund.

Perhaps you can increase investments in one of the funds that you are currently investing in.

***I have been investing in mutual funds through SIPs for the past one-and-a-half years. I have been investing Rs 4,000 each in ICICI Pru Focused Bluechip Equity, HDFC Balanced and Quantum Long Term Equity.

I also invest Rs 2,000 in IDFC Sterling Equity. I have an investment horizon of seven years and want to build a corpus of Rs 25 lakh to reconstruct my house. What should I do?

Chandrasekkar You have chosen a good set of funds for achieving your goals. There is a good blend of large- and multi-cap funds as well as a balanced scheme thrown in for stability.

While you can retain ICICI Pru Focussed Bluechip Equity, Quantum Long Term Equity and HDFC Balanced, you can switch from IDFC Sterling to IDFC Premier Equity.

With the amounts parked over the past one-and-a-half years and your future investments of Rs 16,000 over the next seven years, you can reach the target of Rs 25 lakh, if the return from the portfolio is 15 per cent. This is a reasonable task.

Review your portfolio once every year to weed out underperformers and rebalance. Book profits in case of any abnormal rallies.

Also, if you reach your target ahead of time, exit funds and move the proceeds to safer debt options. Note that we have assumed that you need Rs 25 lakh seven years hence. In case the present value is Rs 25 lakh, you need to factor in inflation that would add to the requirement, necessitating a higher SIP amount.

***I am 24 and earn Rs 20,000 a month. I want to invest every month. Is investing in mutual funds better for me? Please suggest some investment options.

Aswathy Jayan Nair

Investing in any asset class requires you to be clear about: risk appetite, time horizon, goals and disposable income. Without clarity on these factors, suggesting appropriate investment avenues may not be fruitful. Since you are just starting out, consider investing say Rs 1,500 each in Quantum Long Term Equity and HDFC Balanced.

Open a public provident fund account and deposit sums periodically as part of your debt investments and also for tax benefits. You can also consider opening a long-term recurring deposit with a bank. As your surplus increases, you can invest in many other funds and also other debt options.

Queries may be e-mailed to > mf@thehindu.co.in.

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