Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on August 24, 2014

I have been investing in UTI Retirement Benefit and Franklin Templeton Pension funds. I have since retired and I learn that further investments in the schemes are not allowed. Are there any other normal schemes that invest in a combination of debt and equity?

- R Arunachalam

Since you have retired, your focus should be on a steady income stream and safety of capital, with reasonable capital appreciation. You would have accumulated a corpus from your investments in UTI Retirement Benefit and Franklin Templeton Pension funds.

The easiest and safest option would be to use the corpus to buy an immediate annuity from a life insurer offering the maximum interest rate (with the option to add your spouse as a beneficiary for her lifetime).

But if you have a regular income source such as a pension already, you can invest a portion of the corpus in balanced funds.

Equity-oriented balanced funds invest 65 per cent of their assets in equities and the rest in debt. Debt-oriented balanced funds take higher exposure to debt, but are not tax efficient. You can consider HDFC Balanced and Tata Balanced if you can take a little risk. Alternately, you can look at HDFC MIP – Long Term and Birla Sun Life MIP II – Wealth 25 Plan from the debt-oriented hybrid funds.

I am 52 and can invest ₹5,000 per month for my son, 20, a college student. I can invest for 20 years. My son will continue to invest in case I am not able to. Which schemes can Iinvest in? What amount can I expect from this investment in 20 years?

- R Jeganathan

The investment time horizon you have set is fairly long. But you have not stated the goal for which you are saving. It is assumed that the investments are for general capital appreciation over a 20-year period.

Since equity funds are market-linked products, it would not be possible to predict the returns that they would deliver over such a long period of time. The best fund that has a track record of over 20 years has delivered over 19 per cent annually in this time frame. Of course, there is no certainty that these return levels would be replicated in the future. But if you invest ₹5,000 every month and are able to generate 12 per cent annually, then you would have a corpus of close to ₹50 lakh at the end of 20 years.

Given your long investment horizon, you can consider a combination of large-cap and mid-cap funds. Park ₹2,500 each in Mirae Asset India Opportunities and HDFC Midcap Opportunities. Both have delivered extremely well over the past four-five years.

I would like to invest for my two-year old daughter. My aim is long-term capital appreciation. I can invest ₹5,000 every month for at least 10 years. I have chosen the following funds: ICICI Pru Focused Bluechip, Mirae Asset India Opportunities, HDFC Mid-cap Opportunities and Franklin India Opportunities, mainly on account of their low NAV. Please give your suggestions on these schemes.

Syed Abuthahir

A fund’s NAV is not a reason to pick or reject a scheme. A fund’s NAV reflects the value of the underlying stocks (and cash/debt if any) on a per unit basis. The prospects of a fund depend on the sectors and stocks that it holds as well as its asset allocation process across market cycles.

So, a scheme’s unit purchased during its NFO at ₹10 is not cheaper or expensive when compared with a fund which has an NAV of ₹300. You must look at a fund’s track record across market cycles, its ability to participate in rallies and contain downsides during falls and in general the fund manager’s ability to take the right sector and stock calls a majority of the times.

Coming to your choice of funds, for ₹5,000 you do not need more than two schemes, as otherwise your portfolio would be spread too thin and would lose focus.

Invest ₹2,500 each in ICICI Pru Focused Bluechip and HDFC Midcap Opportunities. If you do not want to take any significant risks, you can opt for Mirae Asset India Opportunities instead of HDFC Midcap Opportunities, which is a predominantly large-cap scheme with some allocation to mid-caps. When your surplus increases, you can add more funds. Try also to invest in debt, gold and, later on, real estate.

Send your queries to >

Published on August 24, 2014

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor