Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on August 10, 2014

I have been investing in mutual funds for the past two years with ₹2,000 each in ICICI Pru Focused Bluechip and IDFC Premier Equity every month.

In Axis Long Term Equity, I park ₹1,500 for tax-saving purposes.

I can invest an additional ₹2,000. In 10 years, I would like to accumulate ₹10 lakh.

Please advise on where to invest the additional amount.

Do I need to invest in gold to diversify my portfolio?

- Visweswaran

You have very low return expectations from your investments. With the additional ₹2,000 that you wish to invest, you will park ₹7,500 every month.

If you invest this amount every month for 10 years, you will need to generate a return of less than 3 per cent annually, which you can do so by just parking the sum in a savings bank account!

But you must invest in mutual funds as quality schemes are expected to beat inflation convincingly over the long term of 7-10 years and deliver reasonable returns.

Now split ₹7,500 as follows: Invest ₹3,000 each in ICICI Pru Focused Bluechip and HDFC Midcap Opportunities. You can continue with your investments in Axis Long Term Equity.

But note that as it is a tax-saving fund, each instalment made will be locked in for three years.

Stop further SIPs in IDFC Premier Equity as the scheme has been underperforming top peers significantly over the past couple of years.

Review the performance of your portfolio and take corrective action, when necessary. You can invest in gold, but it must at best be considered as a hedge against inflation, accounting for no more than 5-10 per cent of your portfolio.

Try to also invest in debt instruments such as PPF, NSC and FDs so that you have a balanced portfolio.

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Published on August 10, 2014

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