Your fund portfolio

I am 20 and have been investing ₹2,000 in Canara Robeco Equity Diversified through systematic investment plan (SIP) mode from January 2014. If I keep investing the same amount till I turn 60, what will be the corpus I build up?

Vivek Jadhav

It is good that you have started investing so early, which ensures that you gain from the benefits of compounding over a very long timeframe. You must note, however, that mutual funds are market-linked products. So there is no assurance of returns. For instance, if you invest ₹2,000 every month in a fund and are able to generate annual returns of 12 per cent, then after 40 years, you would be able to accumulate a corpus of nearly ₹2.4 crore.

But over the long term, quality equity funds have convincingly outpaced benchmarks and inflation and delivered substantial capital appreciation. So mutual funds are important vehicles for wealth creation over the long term.

Canara Robeco Equity Diversified has delivered reasonable returns but is not among the best. You can consider switching to a proven fund such as Birla Sun Life Top 100, which invests in a blend of stocks, though it essentially sports a large-cap tilt.

As your surplus increases, you can consider adding more funds. The capital gains from equity funds held for more than a year are tax-free.

I am 29 and have been investing ₹25,000 in mutual funds every month as follows: ₹4,000 in ICICI Pru Focused Bluechip, ICICI Pru Value Discovery, ₹3,000 each in Birla Sun Life Frontline Equity, HDFC Balanced, Franklin India Smaller Companies and UTI MNC and ₹5,000 in Quantum Long Term Equity. Are my choices appropriate?

I wish to invest another ₹10,000. Is this the right time to invest such an amount? Where do I deploy it? I have also been investing in PPF and gold ETF. I have taken term and health plans.

Shilpa A Singh

You have got the basic part of financial planning right. By investing regularly in funds and also diversifying into debt and gold, you have set yourself on the path of creating a balanced portfolio. Taking health and term covers further shields your corpus from erosion due to any unforeseen events. Just to complete the pretty picture, ensure that you have at least six months’ expenses in a savings account.

Coming to your portfolio, reallocate sums as follows: Invest ₹6,000 each in ICICI Pru Focused Bluechip, Birla Sun Life Frontline Equity and Quantum Long Term Equity. These are predominantly large-cap funds with proven long-term records.

Although multiple funds from the same house are not recommended, an exception can be made in the case of ICICI Pru Value Discovery, an excellent mid-cap fund. Invest ₹3,500 in it. The balance ₹3,500 can be parked in Franklin India Smaller Companies. Since you are investing for the long term, a theme fund may not be necessary. You can stop further SIPs in UTI MNC. Also, assuming that you are investing for the long term and also due to the fact that you have exposure to debt through PPF, you can stop further investments in HDFC Balanced, though it has delivered quite well over the long term.

Now, you have another ₹10,000 to invest. To answer your query on timing, there is no right time to invest in the case of systematic investments. Only in the case of putting in lumpsums, or while investing in risky sector or theme-based funds is timing important. With an economic recovery slowly under way and with interest rates likely to come down over the next one year, expectations are that the markets may head higher.

You can add UTI Equity, in which you can invest ₹6,000. The balance ₹4,000 can be parked in Reliance Equity Opportunities.

Review the funds in your portfolio once every year and take corrective action, if necessary, and rebalance. Since you are making reasonably large monthly investments in funds, it is hoped that you will continue to allocate money to PPF and other debt instruments. Try to also invest in real estate over the long term, so that you have a balanced portfolio.

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