I am a government servant with a monthly income of Rs 45,000. After meeting my monthly expenses, I have a surplus of Rs 35,000. I invest Rs 2,500 in an RD each month, which helps me pay the postal life premium at the end of every year. I invest Rs 3,000 per month in PPF. I am a member of NPS with a monthly amount of approximately Rs 8,000 allotted towards it, outside my takehome pay. I have recently started buying four shares of SBI on a monthly basis. I want to park some amount in mutual funds for about 15 years towards my chidlren’s studies. I also want to have Rs 1,000 per month as overheads in my saving account to meet unexpected expenditure. Also, is investment in Gold USP a good option?

Amit Mishra It is good to know that your life insurance and retirement needs are reasonably provided for through a postal life policy and ongoing investments in NPS and PPF. You can continue with your recurring deposits to meet your postal life insurance premium needs. Investment up to Rs 1 lakh in PPF each year is allowed. So, whenever you have some additional surplus, you can allot higher sums to your PPF account. Also, considering the burgeoning medical costs, do take a family floater health insurance policy from any reputed insurer, lest a medical emergency eat into all your savings and upset your other goals such as the education of your children.

Besides, your plan to put aside Rs 1,000 per month for unexpected expenditures seems too little. You must have at least six months’ worth of expenses in cash or other liquid instruments at all times.

You can start saving for you children’s education through the mutual fund route. You have not mentioned how much corpus you need and what level of risk you are willing to stomach. With your children requiring funds for their higher education only 15 years down the line and with your retirement needs also reasonably provided for, we assume you can afford to take reasonable risks. We also assume that you can allocate Rs 10,000 per month to systematic investment plans.

Start systematic plans of Rs 2,500 each month in ICICI Pru Focused Bluechip, Quantum Long-Term Equity, IDFC Premier Equity and HDFC Children’s Gift Fund - Investment Plan. This way, you will get a combination of large-, mid- and multi-cap equity funds and a balanced scheme in your portfolio.

Don’t forget to periodically monitor the performance of your funds. If you have achieved the required corpus ahead of time, move your investments to safer debt instruments. In any case, moving to safer avenues one year ahead of time is advised.

As far as your investment in shares of SBI each month is concerned, remember that taking concentrated exposure over a period of time to single stocks is a risky proposition, needing research, constant monitoring and action.

For your query on gold, Unit Systematic Plan in gold, recently started by Bullion India, allows you to regularly accumulate affordable quantities of this precious metal with investments beginning at as little as Rs 1,000 every month. On maturity, you can redeem your investment into physical units (coins) of gold. Investing in this scheme will be useful if you wish to accumulate physical gold to later convert it into jewellery. If you want to invest in gold to purely benefit from price appreciation, gold exchange-traded funds or gold mutual funds will serve your purpose better.

*** I have invested in the dividend options of Reliance Growth and SBI Magnum Contra since January 2007. I have also invested in Goldman Sachs CNX 500 Fund, Reliance RSF Equity and SBI Magnum Tax Gain. All these funds are not performing well. Please advise whether I should redeem and invest in better funds.

Sunil It is not clear what goals you are saving for, what your timelines to reach that goal are and whether you have invested lumpsum or have ongoing SIPs. Nevertheless, your choice of funds does not show much focus. At the outset, do not go in for dividend options unless you have a specific need for periodic cash flows. Fund houses are not mandated to pay dividends regularly, too. Besides, tax-saving funds are not the ideal vehicle for long-term wealth creation. In addition, investments in tax-saving funds have a three-year lock in. If you are doing SIPs in tax-saving funds, remember that each instalment is locked-in for three years.

All the funds you have chosen are only mediocre performers. You can rejig your portfolio and hold a maximum of three funds. Exit Goldman Sachs CNX 500, Magnum Contra and Magnum Tax Gain — the last one when the lock-in is over. If you do require a tax-saving fund, Franklin Tax Shield or ICICI Pru Tax Plan may be better options. If not, you could hold a diversified equity fund such as ICICI Pru Focused Bluechip Equity. Switch from Reliance Growth and Reliance RSF Equity to Reliance Equity Opportunities. If you have a higher risk appetite, you can add IDFC Premier Equity, a top-performing mid-cap fund, to your portfolio.

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

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