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I am a Government employee and my gross monthly salary is around ₹25,000. I have been investing in the following avenues:
1. ₹3,000 in a recurring deposit, which has a maturity value of ₹37,740 in March 2014. I plan to invest in a fixed deposit with a value of ₹36,000. Now, I am unsure whether to continue the RD or invest that amount elsewhere
2. ₹1,000 in a gold scheme
3. Buying one gm physical gold coin
every month
4. I have ₹75,000 balance in PPF
I want to start investing in mutual funds through SIP (systematic investment plan) mode for better returns. My investment horizon is 10 years. Should I stop either of the gold investments and invest in MFs?
- Vikrant Bawkar
You have been a very conservative investor thus far, having invested only in fixed instruments and gold. It is good that you now wish to start investing in mutual funds. A horizon of 10 years would serve you well as equity mutual funds can potentially deliver superior inflation-beating returns over such a time frame. In general, build a balanced portfolio with investments in equity (including mutual funds), debt (FDs, RDs, PPF and NSC), gold, and if possible real estate.
Gold can, at best, be an inflation hedge and must not account for more than 10 per cent of your overall portfolio. Buying physical gold is advisable if you wish to convert those coins into jewellery later on for, say, a child’s marriage. Storing it safely, though, may be a challenge. The most appropriate way for you to buy gold would be to buy a gold saving mutual fund or through the ETF (exchange-traded fund).
You can invest systematically either in Goldman Sachs Gold BeES, an ETF with a reasonable track record, or Reliance Gold Saving and park ₹1,000 in it.
Continue investing in PPF. It is an excellent, tax-efficient debt product and can help you save for long-term goals. Invest ₹1,000 in it every month.
This would leave you with around ₹5,000 as surplus, as you would stop your RD investments. Invest ₹2,500 in ICICI Pru Focused Bluechip Equity, a large-cap fund that has performed extremely well over the past five years. Another quality fund where you can park the balance ₹2,500 would be UTI Opportunities, which also predominantly invests in large-cap stocks with a few mid-caps thrown in.
These two funds hold relatively moderate risk. As your surplus increases, you can add more schemes.
I work in a PSU bank, at a salary of ₹19,000. My investments through the SIP route are in:
1) HDFC Midcap Opportunities - ₹2,000 from March 2011
2) HDFC Top 200 - ₹1,000 from March 2011 and ₹1,500 from April 2012
3) Franklin India Bluechip - a sum of ₹1,000 from April 2012
My daughter is six months old. I wish to accumulate ₹15 lakh in 15 years for her higher studies. I can invest a further ₹4,000 every month. Please suggest schemes. I can increase my SIP amount every year.
- J Balakrishna
You have set a very realistic and achievable goal and have given yourself sufficiently long time to get there. For accumulating ₹15 lakh, you would need to invest ₹3,000 every month and the returns must be 12 per cent annually.
HDFC Children’s Gift - Investment Plan, a balanced fund that is specifically tailored for investments in the name of minors, for the long-term might be a good fit. It has performed extremely well and has been among the top few funds in terms of returns in the balanced category for many years now.
You should probably consider a mix of a large-cap fund and this balanced scheme. Invest ₹2,000 in Birla Sun Life Frontline Equity, a quality large-cap oriented fund with a proven track record. Park ₹1000 in HDFC Children’s Gift - Investment Plan. Coming to your existing funds, HDFC Top 200 and Franklin India Bluechip have been underperforming over the past year or so, though they have an excellent long-term track record. For now, you can stop further SIPs in these two schemes.
Split the balance ₹5,500 as follows: park ₹2,000 each in ICICI Pru Top 100 and Franklin India Flexicap. This would give you exposure to a large- and a multi-cap fund, respectively. But if you want lower risk, replace Franklin India Flexicap with Franklin India Prima Plus.
The balance ₹1,500 can be parked in HDFC Mid-cap Opportunities.
It is assumed that you have made sufficient investments in debt before embarking on equity schemes.
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