I am 27 years old, working in a financial services firm. I invest Rs 10,000 every month in mutual funds, as follows: Rs 1,000 in DSP Blackrock Top 100 Equity, Rs 2,000 in Franklin India Bluechip, Rs 1,000 in Fidelity Equity, Rs 1,000 in IDFC Premier Equity, Rs 2,000 in Templeton India Pension Plan, Rs 2,000 in Axis Equity and Rs 1,000 in DSP Blackrock Focus 25.

I am looking to stay invested for the next 15-20 years. My financial goals are basically wealth generation over a period of time and a good retirement corpus.

I can currently invest an additional Rs 2,000-3,000 a month. I want to add a bit of debt component to my portfolio. Can I add HDFC Balanced/Prudence or Birla Sun Life Dynamic Bond? Do I opt for growth or dividend options?

Please advise and suggest changes to my portfolio.

Rajaram

There are many good things to the way you are going about the task of generating a healthy corpus.

Starting early is the best among them, as is your ability to invest a reasonable some of money in mutual funds for a fairly long period of 15-20 years.

What is more, you are even willing to step up investments, indicating a fair level of savings discipline.

If you can invest Rs 12,000 per month for the next 20 years, you will be able to generate a corpus of about Rs 1.2 crore, if the returns are 12 per cent per annum, a reasonable expectation.

That said, you have far too many funds in your portfolio, offering a poor mix. You can do with considerable rebalancing.

Invest Rs 4,000 in Franklin India Bluechip, Rs 3,000 in IDFC Premier Equity and add Rs 3,000 in Canara Robeco Equity Diversified. These would give you exposure to large-, mid- and multi-cap funds.

If you have a low risk appetite, for the debt fund, you can choose between HDFC Multiple Yield and Birla Sun Life Dynamic Bond and park Rs 2,000 there.

Although DSPBR Top 100 has a good track record, it is a large-cap fund and would cause duplication of theme with Franklin Bluechip. So you can exit it.

DSPBR Focus 25 has had a disappointing run and you can get out of this fund too.

Templeton India Pension Fund may not be suitable for the long term as it is a debt-oriented fund and may not be able to match equity returns. Its returns have lagged even its category over 3-5 year timeframes.

With the change in management, we are not sure about Fidelity Equity's prospects and would prefer a ‘wait and watch' approach.

Axis Equity has a track record of a little over two years and has not been able to contain downsides well compared with standard benchmarks.

Coming to the second part about choosing growth or dividend option, we would generally prefer you taking the former route. Dividends from mutual funds means simply pulling a part of your NAV out and giving it back to you in cash.Unless you need the cash or can redeploy it suitably, you should choose the growth option.

It is also important to understand that wealth creation happens through appropriate asset allocation. This should be done by investing in equity, debt, gold and real-estate, in accordance with your age, risk appetite and time horizon.

Review your portfolio once every year to weed out underperformers and rebalance.

*** I am 50 years old and serving in a PSU Bank. I have invested some amount in mutual funds as given below. HDFC Top 200 - Rs 1.80 lakh, HDFC Equity Rs 40,000, Reliance Equity Opportunities Rs 40,000, DSPBR Top 100 Equity Rs 43,000, Sundaram Tax Saver Rs 40,000.

At present I have running SIPs in Quantum Long Term Equity, UTI Dividend Yield and IDFC Premier Equity of Rs 2,000, Rs 1,000 and and Rs 2,000, respectively.

I will be in need of money after five years. I am expecting Rs 10 lakh. Is the target feasible?

Brij Lal Dhiman

The funds that you hold in your portfolio are all fairly good, with a proven track record of delivering returns over the long-term. You may have gone slightly overweight on HDFC Top 200, but that's no cause for worry as it has a solid performance report over the years.

You can exit the tax saving fund if you have completed the lock-in. Switch to HDFC Balanced instead.

Given your age, we hope you have made sufficient allocations to debt as well.

In five years' time, you can manage a Rs 10-lakh corpus, if your lump-sum and SIPs earn 12 per cent per annum. Book profits in case you make abnormal gains in any year ahead of your proposed timeline.

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