I am 37. Currently, I am investing Rs 10,000 per month in mutual funds through SIPs. The break-up is as follows: Axis Equity fund: Rs 2,000; DSP Blackrock Top 100: Rs 2,500; HDFC Mid cap Opportunities: Rs 2,500; Axis Gold Fund: Rs 1,000; Axis long term equity fund ( ELSS): Rs 2,000. Is the choice right or do I need to make some changes?

I also want to increase my investments in mutual funds by another Rs 10,000 per month. The funds I have in mind are Axis Mid Cap, Axis Focus, ICICI Prudential Discovery. Please suggest options so that my portfolio has good diversification as well as strong returns.

Sudheer Your portfolio of funds has a few flaws in it. You have chosen too many schemes from the same fund house which would deprive you of the opportunity to benefit from different investing styles of other asset management companies, apart from presenting concentration risks.

Ironically, you have asked for funds that would give you diversification benefits and yet have chosen funds from the same fund house!

You have also spread Rs 10,000 across too many funds. For this amount three schemes would suffice.

Finally, you are investing in a tax saving fund through the SIP route. Note that each instalment is locked in for three years.

Now that you have indicated that you can invest Rs 10,000 more, you can spread Rs 20,000 as follows:

Invest Rs 4,000 each in HDFC Equity, DSPBR Top 100 Equity and Quantum Long-Term Equity. Invest Rs 3,000 each in HDFC Midcap Opportunities and ICICI Pru Discovery.

For tax saving purposes invest Rs 2,000 in Canara Robeco Equity Tax saver.

Later, when you have higher surplus, invest in Reliance Gold Saving fund.

Many of the funds in the Axis fund house have performed quite well. But the funds do not have a sufficiently long track record of 5-7 years to say that they have remained consistent across market cycles. Hence we have suggested other funds for you with a longer and strong track record.

Take stock of your portfolio periodically and weed out underperformers and also to rebalance.

You are increasing allocations to mutual funds. We hope you have invested in other asset classes such as debt, gold and real-estate.

*** I am 25 and earn a monthly salary of Rs 32,000. I want to accumulate enough money for a home and a car which I intend to purchase in 10 years with Rs 50 lakh. Till now I have been investing in Tata AIG Lakshya Plus and have taken a traditional policy — LIC Jeevan Anand. I want to plan my investments in the right way to meet the short-term goals mentioned above.

Based on the discussion in these columns I have finalised three funds — HDFC Top 200, HDFC Balanced and IDFC Premier Equity. I can invest Rs 15,000 monthly with an additional Rs 3,000 with minimum risk appetite. Please guide me to plan my investments better so as to achieve my goals.

Aravind Vasu You have made the correct move by starting out on investing early in your life and at the very start of your career. This early start would give you sufficient time to achieve your goals.

Having said that, your current investments do not appear to be well-planned. Unit linked plans are expensive and after deduction of numerous charges in the initial years, only the rest of the premium amount gets invested. Additionally, ULIPs are also subject to the vagaries of market gyrations, which can alter their fund value dramatically. Traditional plans, on the other hand, give assured returns though they are low and may not match inflation.

Pay the premiums for these schemes till the minimum required or lock-in period and then stop further payments.

For insurance purposes, take a term cover and for medical purposes take a health insurance policy. The premiums for these policies are low, especially for a youngster like you.

For the longer term, say 5-10 years, mutual funds are an ideal investment vehicle to achieve goals. You must build a balanced portfolio with equity, debt (FDs, RDs, tax free bonds, etc.), gold and if possible real-estate.

Ideally, for your age, you should be open to taking higher risk and allocate a large portion (say, 75 per cent) of your portfolio to equity mutual funds.

But you have stated that you have a low risk appetite. This means structuring a portfolio with large-cap and balanced funds which can cap returns.

You have indicated that you can invest Rs 18,000 every month. If these investments are made for 10 years and if the amount earns 15 per cent returns, you will be able to accumulate the targeted Rs 50 lakh.

You can split Rs 18,000 as follows: Invest Rs 5,000 each in HDFC Top 200, Quantum Long-Term Equity and IDFC Premier Equity. This portfolio will give you access to large-, multi- and mid-cap funds. All three funds have a strong performance track record. Park Rs 3,000 in HDFC Balanced.

Review your portfolio periodically, say, once every year, to take corrective action and to rebalance.

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