Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on September 21, 2014

I am 57 and have retired from service. My saving of ₹40 lakh is parked in three debt funds.

I plan to invest ₹15 lakh in equity funds over the next five years.

For this purpose, I recently started SIPs of ₹5,000 each in the following funds: ICICI Pru Focused Bluechip, Mirae Asset India Opportunities, Franklin India Smaller Companies, Mirae Asset India Emerging Business and HDFC Balanced.

Is my plan a sound one?

Please also give your views on my choice of mutual funds.

Rajiv Chaturvedi

After retirement, you must accord top priority to the safety of investments and regularity of cash flows while choosing avenues for parking your money.

You have parked a very large sum of ₹40 lakh in debt funds. While they may deliver a little more than FDs, the safety aspect cannot be ignored.

A better approach is to invest ₹40 lakh in a safe bank FD, which pays interest on a monthly basis.

This interest amount can then be parked regularly in quality debt funds or monthly income plans so that you get higher returns compared with deposits.

Opting for the dividend option in monthly income plans with a proven track record would ensure regular cash flows, though the tax on dividends has risen after the recent Budget.

As for the second part of your question, it appears that you do have a pension or other regular income stream, going by your ability to invest monthly in mutual funds.

Here again, you are setting aside a substantial sum every month. It is not clear as to why you wish to invest in equity mutual funds.

It does make sense to set aside a small portion to invest in equity-related instruments so as to outpace inflation. But the proportion must be tempered by age and risk appetite.

If you have adequate cash flows and have set aside amounts for medical emergencies or have sufficient health cover, you can continue with your investments. We also assume you have adequate investments in avenues such as RDs and NSC.

You have two mid-cap funds, which raises your portfolio's risk profile. A large-cap intensive portfolio would be advisable. Invest ₹5,000 each in ICICI Pru Focused Bluechip, Birla Sun Life Top 100, Mirae Asset India Opportunities, HDFC Balanced and Franklin India Smaller Companies.

I am 40 and work for a bank. I want to start investing in mutual funds for a period of three years through the systematic investment plan (SIP) route.

My fund choices are: Reliance Small Cap, ICICI Pru Value Discovery and Franklin India Smaller Companies, in which I wish to park ₹2,000 each.

Apart from this, I would like to invest ₹1,000 every month in Reliance Tax Saver. Please give your opinion on my choice of funds.


Although a bit late in your career, you have, nonetheless, taken the right decision to invest in equity mutual funds.

But three years is too short a timeframe to bet on such schemes. You must have a 7-10 year timeframe to allow your investments to grow fruitfully and benefit from the power of compounding.

For shorter periods, say, three years, balanced funds would make a better choice.

Coming to your choice of funds, all of them are mid-cap schemes, which makes your portfolio risky.

Being a first-time investor in mutual funds, you must take exposure to these schemes only if you have a high risk appetite and also a fairly long investment horizon. You have also favoured recent chart toppers.

If you do not wish to look at large- or multi-cap schemes, you can continue with ICICI Pru Value Discovery and Franklin India Smaller Companies and park ₹3,000 in each of them.

These schemes have excellent track records over the last five-seven years.

Reliance Small Cap has done well in the last one year, but does not have a sufficiently long track record.

You can invest in Reliance Tax Saver for tax planning purposes.

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Published on September 21, 2014

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