I am 23 years old and am single. I managed to save some money over the past couple of years and have recently invested Rs 1 lakh each in HDFC Prudence and HDFC Balanced.

Further, I have started investing though the SIP (systematic investment plan) mode from last month, wherein I have been parking Rs 5,000 every month in Tata Pure Equity and ICICI Prudential Focused Bluechip Equity. I will be investing in them for two years till June 2015.

Please let me know if I am on the right track with respect to my investments.

Divya Vishwanath You have got many things right about starting on an investment, including saving well, parking money in funds and starting SIPs and so on. There are some minor corrections that may, however, need to be done to your portfolio.

In volatile and correcting markets such as the one we are witnessing currently, it would have been advisable for you to refrain from lumpsum investment as it exposes the entire sum to risk. While investing at one go, a certain degree of timing is required, which may not be easy for you.

You have also invested in two balanced schemes from the same fund house. Our suggestion would be that you exit HDFC Prudence and invest in Tata Balanced instead. You can retain HDFC Balanced.

With respect to your SIP investments, you have a robust large-cap fund in ICICI Pru Focussed Bluechip Equity. Tata Pure Equity is a fund with a reasonable track record. You may consider splitting Rs 10,000 as follows: Park Rs 4,000 in ICICI Pru Focused Bluechip Equity, Rs 3,500 in UTI Opportunities and the remaining Rs 2,500 in Tata Pure Equity.

You have stated that you will be investing in these funds for only two years. This is a very short timeframe for equity investments. Indeed, if the market performance in 2008-13 is any indication, you should continue SIPs for 7-10 years for meaningful capital appreciation.

Please also note that you need to have specific goals and timelines in which you wish to achieve them, which will help you channelise your savings in the most appropriate way.

As your surplus increases, invest in debt instruments (FDs, RDs, PPF, etc.), gold and real estate. Take a term cover and a medical insurance policy so that you will be covered for any emergencies.

*** I am 27 years and working in a private sector bank. I want to invest Rs 2,000-3,000 through the SIP mode. In which fund, and for how long, should I invest to get the best of returns?

Priyanka Sengupta The ‘best’ of returns are achieved not by investing in a single scheme or instrument. Instead your objective must be to invest in a variety of investment avenues such as mutual funds, debt, real-estate and gold so that you have a balanced portfolio.

Investments directed towards specific goals would help decide where and how much you should invest commensurate with your appetite for risk.

The idea is that the corpuses you accumulate across different timeframes must be enough to fund all your goals.

Since you have just started investing, it may be good to start off with balanced schemes. Invest Rs 2,000-3,000 in Birla Sun Life 95. If you can take a little more risk, you can start investing in a large-cap fund such as Franklin India Bluechip.

*** My son is 30. For some reason, he has not done any serious financial planning, but would like to do in right earnest from now on. He can invest about Rs 6 lakh in various funds and about Rs 20,000 every month in SIPs. It would be nice if you can make some recommendations on investment options so that in the next 15 years he can save about Rs 75 lakh. His annual income is about Rs 10 lakh.

Swamy Starting at 30 is not that late, though if he had begun earlier it would have helped. Given the current markets and even otherwise, investing large sums of money directly on a one-time basis is not advisable. Such investments may experience significant erosion in value if the markets turn turtle. Instead, if your son invests every month, he would be able to average costs across market cycles. Timing markets is fraught with risks. So, our advice for your son would be to invest the Rs 6 lakh in a safe debt avenue such as fixed deposits or even NSC.

Coming to the SIP investments he wants to make, it is definitely a good idea. In 15 years there is high probability that he would be able to comfortably achieve inflation-beating returns.

His return expectations too appear to be on the lower side. If he invests Rs 20,000 every month for the next 15 years, in order for him to achieve a target of Rs 75 lakh, the annual returns needs to be only 9 per cent.

So, a relatively low to medium risk portfolio of funds should help him achieve those goals. He can split Rs 20,000 as follows: Rs 5,000 each in UTI Opportunities, Quantum Long Term Equity, Franklin India Bluechip and ICICI Pru Balanced. Please ask him to review his portfolio once every year and take corrective action, if necessary.

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