Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on November 23, 2014

I plan to invest in mutual funds through the SIP route in themes focused on media and entertainment, banking and financial services industries, for five-eight years. I expect to earn 20-25 per cent returns from these investments. Is my decision appropriate?

Ranganathan Palanisamy

For long-term investors, sector funds aren’t the ideal vehicle to achieve financial goals. Theme or sector-based schemes require you time your entry and exit carefully. It would also be very difficult to predict the fortunes of any sector over the long term. Although media and banking may do well when economic growth becomes strong, taking concentrated exposure in such schemes is very risky.

You must choose diversified funds which would, anyway, invest in all sectors with potential for growth over the long term. Also, for equity funds , there is no assurance of returns. In the last 10 years, bluechip indices have delivered over 16 per cent annually, while the best diversified funds have managed to give 20-24 per cent. If you can take higher risks, invest in mid-cap or aggressive multi-cap schemes.

I just landed my first job and want to start off on mutual fund investments. I wish to buy an apartment within three years, towards which I plan to make monthly investments of ₹5,000 through the SIP route. Which schemes should I look at? Is this the right way to go about saving for the down-payment?


You have taken the right step in starting investments very early in your career.

But you have set a rather ambitious target of wanting to buy an apartment within three years of getting your first job.

Three years is not long enough to save a sum large enough to make a down-payment. For example, if you would like to buy an apartment for ₹25 lakh, you will need to make a down-payment of ₹5 lakh. If you invest ₹5,000 every month in mutual funds for three years and manage to gain annual returns of 12 per cent, you will be able to accumulate only about ₹2.15 lakh.

Also, with a shorter time horizon, you will have to look at relatively lower risk funds from the balanced stables, which may imply lower returns when compared with more aggressive funds.

Then there is also the need to factor in possible escalation in real estate prices over the years.

So, you must consider achieving your goal in a timeframe of seven-ten years. During this time, your salary would increase as would your surplus and you may also be able to cover the increase in property prices if you give your funds more time to generate higher returns. Start making investments of ₹2,500 each in UTI Equity and Birla Sun Life Top 100. These are predominantly large-cap funds with a proven record.

I am 30 and want to invest in mutual funds to achieve my long-term financial goals — child’s education, her marriage and retirement. I can invest ₹15,000 every month. Please suggest the best funds to invest in.

Prashant Jagtap

Since you are young and all your goals are expected to be about 10-30 years away, you can afford to take reasonable risks in choosing the schemes in your portfolio.

Split ₹15,000 as follows: invest ₹4,500 each in ICICI Pru Top 100 and UTI Opportunities, both of which are large-cap schemes with strong track record. Park ₹3,000 each in HDFC Mid-cap Opportunities and Franklin India Smaller Companies. These mid-cap funds have an excellent performance score card over the past four-five years.

Two mid-cap funds are suggested here. If you want to take less risk, you can replace one of the above mid-cap schemes with Mirae Asset India Opportunities.

Review the performance of the schemes in your portfolio and carry out modifications, if necessary, once a year. Book profits or sell units if you reach your financial target ahead of time or a year before any goal and move the proceeds to safer debt options.

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Published on November 23, 2014

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