Fundtalk

I am 29 years old with a take-home salary of Rs 50,000. My household expenses come to Rs 22,000. I pay Rs 6,000 towards medical and life insurance premium. I keep Rs 15,000 as bank savings and would like to start monthly SIPs with the balance of Rs 7,000. I am looking for long-term investment of 20 years and my target is Rs 60 lakh. Please suggest funds in which I should invest to meet my financial goal, keeping the number of funds to a maximum of five.

Kaushik Bhattacharjee

It is good to note that you have given yourself a long timeframe to achieve your goal.

But there are some observations that need to be made on the way you are apportioning your surplus to various financial products.

It may not be optimal to keep as much as Rs 15,000 in the bank's savings account every month, when it can be ploughed into productive avenues to generate better returns.

In case you are saving this amount for any contingency, do so until you build a comfortable corpus and reduce it. Any medical contingency may anyway be met by your health policy.

The target of Rs 60 lakh may not be too difficult to achieve in a 20-year time span.

So, if you invest Rs 7,000 in funds that deliver about 11 per cent annually, you would easily achieve the corpus. Chances are, a good portfolio will deliver more than the 11 per cent return you need.

While we do not know how you intend to use your Rs 60-lakh target, ensure that you have taken into account factors such as inflation to arrive at this sum. Discuss with a financial planner, if you are not sure. A goal like buying a home or retirement, for instance, may need a higher sum, 20 years hence.

Ensure that you build a corpus with a variety of financial products such as debt and gold (preferably through ETFs) based on your risk appetite and earnings.

Ideally you can have a 60:30:10 proportion invested in equity funds, debt and gold, respectively. You can reduce the equity portion as you age and increase debt investments.

We suggest that you add Rs 5,000 more (by cutting back on your savings account surplus) and invest Rs 12,000 monthly in SIPs. Even at a conservative 12 per cent annual returns, you would end up with a sum of about Rs 1.2 crore.

You can invest Rs 3,000 each in HDFC Top 200, IDFC Premier Equity, ICICI Pru Focussed Bluechip Equity and Fidelity Equity or Quantum Long-term equity.

These would provide you a blend of funds that invest in stocks across market capitalisation.

But if you can invest only Rs 7,000, consider just HDFC Top 200 and IDFC Premier Equity (Rs 2,500 each). The balance Rs 2,000 can be used to buy units of Fidelity Equity.

Review your portfolio at least once a year to ensure your equity, debt ratio is balanced.

* * * I am 34 years of age and investing Rs 5,000 a month in each of the following funds: HDFC TOP 200, Fidelity Equity Fund, IDFC Premier Equity. I would like to increase my SIP by another Rs 5,000 and would like to know which fund I should choose. I want to limit this SIP to only one fund.

Rajesh Kumar

Your choice of funds is quite good. These are funds that have delivered returns across market cycles and have proven to be steady performers.

You have stated that you want to add another fund where you would like to invest Rs 5,000. But before that, it is important for you to assess your risk appetite and set yourself a goal towards which you are investing.

While your choice of funds suggests that you have chosen the best performers, we are unable to assess your risk appetite.

Between HDFC Top 200, IDFC Premier Equity and Fidelity Equity, you have exposure to large-, mid- and multi-cap funds.

In case you have a very low risk appetite, you can consider HDFC Prudence, a balanced fund with an excellent track record.

If you can take on pure equities, you can consider large-cap funds such as ICICI Pru Focussed Bluechip or Franklin India Bluechip.

We assume that you have invested in other instruments such as debt and gold.

Please note that SIPs need to be run for long-periods of time, of at least 5-7 years, for you to have inflation beating returns.

COMMENT NOW