Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on March 23, 2014

I am 24 and wish to invest in mutual funds through the SIP route. I wish to accumulate ₹50 lakh in 10 years. I plan to invest ₹5,000 in ICICI Pru Dynamic Plan and ₹3,000 each in UTI Equity, ICICI Pru Balanced Advantage, HDFC Mid-Cap Opportunities and Franklin India Smaller Companies.

- NL Rao

Having a definite target, a long-term horizon and systematic investments are all good. But you may need to temper your return expectations or increase your investment horizon by another 1.5 years. To explain, if you invest ₹17,000 every month for 10 years, to reach ₹50 lakh over this time, the annual returns must be over 16 per cent.

This may not be easy to achieve. The blue-chip indices have delivered about 14.5 per cent returns over the past 10 years, which included a spectacular bull run in 2004-07. Given the volatile markets over the past few years, a 12 per cent expectation may be more appropriate. With this level of returns, you will be able to accumulate ₹50 lakh in 11.5 years. If you want it in 10 years, step up investments.

Though most schemes you have choosen have proven track records, . avoid ICICI Pru Balanced Advantage as you do not require a hybrid scheme, given your long investment horizon. Besides, you already have a fund from the same fund house.

Split ₹17,000 as follows: Invest ₹4,000 in ICICI Pru Dynamic and ₹3,500 in UTI Equity. Add Birla Sun Life Frontline Equity and invest ₹3,500 in it. These three will give you a strong large-cap orientation, with some mid-caps thrown in. Invest ₹3,000 each in HDFC Midcap Opportunities and Franklin India Smaller Companies, two high-quality mid-cap schemes. If you do want a balanced fund, drop Birla Sun Life Frontline Equity and add Tata Balanced instead. Monitor your portfolio regularly. If you reach your target ahead of time, book profits.

I am 62. I have invested sufficiently in fixed deposits, tax-free bonds and fixed assets, but not in equities. I want to build a corpus of ₹80-90 lakh through mutual funds in 8-10 years.

I plan to invest in the following every month: ICICI Prudential Top 100 - ₹5,000; Franklin India Bluechip - ₹5,000; Birla Sun Life Frontline Equity - ₹5,000; Reliance Equity Opportunities - ₹5,000; SBI Emerging Businesses - ₹5,000; SBI FMCG - ₹5,000 and Reliance Growth - ₹2,000. Is the time right for equity investments as markets are at their highs?

M Kannappan

It is surprising to note that you wish to make investments in equity schemes at 62. Given that the ₹32,000 you wish to invest every month is a fairly large sum, it is assumed that you do not need this cash and that there are alternate sources of income for your monthly expenses. It is also assumed that you have covered dependent(s) and yourself with a medical policy.

Taking up your second question, it is always a challenge to assess the markets and conclude that ‘this’ is the right time . The markets, despite touching new highs, have hardly gone anywhere in the last six years. Many wealth managers though suggest this is the right time to start building an equity portfolio.

. At ₹32,000 every month for 10 years, if the annual returns are 12 per cent, you will accumulate ₹73 lakh. You can bridge the gap with your debt investments or increase the time horizon. The first option is advised here, given your age. But the schemes need changes. Reliance Growth has been underperforming for the several years. SBI FMCG is a sector fund. SBI Emerging Businesses is a mid-cap fund. Both are risky for you, though the schemes have done well. Franklin Bluechip has been lackadaisical in recent times.

Reliance Equity Opportunities has a strong mid-cap bias and may again be risky for you. We suggest a relatively lower risk portfolio with a large-cap bias .So invest ₹7,000 each in ICICI Pru Top 100, UTI Opportunities, and Quantum Long Term Equity.

Park ₹4,000 each in Birla Sun Life Frontline Equity and Franklin India Prima Plus. Invest the balance ₹3,000 in HDFC Balanced.

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Published on March 23, 2014

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