I want to invest for building a house. My plan is to get ₹45 lakh after 10 years through SIPs. I recently started investing ₹1,500 per month each in HDFC Midcap Opportunities, ICICI Pru Midcap and Sundaram Mid Cap funds. Please guide me on the choice of funds. Also, should I go for SIP or lumpsum investments?

Suraj

There are two concerns about the way in which you have begun your investments towards this goal. One, even assuming your investments will earn a high compounded annual return of 15 per cent, you need to invest at least ₹16,000 per month in systematic plans.

If you pare your return expectations to 12 per cent, then the monthly investment required goes up to around ₹19,500. Your current investment of ₹1,500 per month in each of the three funds mentioned falls well short.

Secondly, your choice of funds may also need a rethink. Your portfolio has only mid-cap funds, which is a high-risk high-return proposition. You can, instead, balance out the risks by choosing to invest in a combination of funds across market caps.

Retain HDFC Midcap Opportunities. Replace ICICI Pru Midcap with ICICI Pru Value Discovery, a mid-cap fund which tempers risks by taking valuation-based calls and which will work well over the long term. Since you already have a couple of mid-cap funds in your portfolio, move over from Sundaram Select Midcap to Mirae Asset India Opportunities, a multi-cap fund with an excellent track record.

Keep increasing your investments in these funds as and when your surplus increases. Regarding SIP vs lumpsum investments, the main advantage of SIP is that it ensures disciplined saving and regular investing.

I’m investing in the following funds through the systematic route for the past three years – HDFC Long-term Advantage, Franklin India Tax Shield, HDFC Top 200 and Sundaram Select Midcap. Should I continue investing in them for long-term needs? Also, suggest one more tax saver fund and two other funds.

Vinoth Kumar

For young earners and mid-career professionals, ELSS funds is one of the best ways to both save tax under Sec 80C as well as earn inflation-beating returns over the long term. You have done well to choose Franklin Taxshield and HDFC Long-Term Advantage, both top-quartile performers.

Remember, though, that tax-saving funds have a lock-in of three years and in case of SIPs, every SIP is locked in for three years. Another ELSS fund may not be necessary. You can, instead, consider investing in PPF for Sec 80 C purposes, if you have not done so yet.

Coming to diversified equity funds, you can continue with HDFC Top 200. You can perhaps choose Religare Small and Midcap instead of Sundaram Mid-cap. Additional investments can be made in Reliance Equity Opportunities, a good multi-cap performer, and ICICI Pru Dynamic, a dependable defensive bet.

For the past one year I have been investing ₹3,000 each in ICICI Pru Focussed Bluechip, IDFC Premier Equity, Birla Sun Life Equity, Quantum Long Term Equity, Reliance Regular Saving Equity and Tata Equity Opportunities through SIP mode.

I am 29 and looking for a long-term investment of about 10 years. Should I continue investing in these funds? Further, I want to invest ₹3,000 monthly ELSS for tax benefit. Please suggest schemes.

Padmanabha Hegde

Including the ELSS fund, if you invest ₹21,000 monthly for 10 years and your investments earn a 12 per cent compounded annual return, you will get a corpus of ₹48.31 lakh at the end of the investment period.

You can split the ₹21,000 as follows: Continue with ICICI Focused Bluechip and Quantum Long-Term Equity and park ₹4,500 in each of these funds. Stop investments in IDFC Premier Equity, Reliance Regular Savings and Tata Equity Opportunities.

Instead, invest ₹4,500 each in Franklin Smaller Companies, a top-of-the-chart mid-cap fund, and Reliance Equity Opportunities. For tax-saving purposes, you can invest ₹3,000 in Axis Long-term Equity, but note that SIP investments are locked in for three years.

comment COMMENT NOW