Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on April 06, 2014

I am 45. I have been investing ₹1,500 every month in a unit-linked plan for the past five years. How do I plan for my retirement? Please suggest some good mutual funds for long-term investment as well as pension plans. I can invest ₹15,000 a month.

- GM Ather

Unit-linked plans are not ideal to achieve financial goals. Despite some reduction in charges in recent times after the insurance regulator’s diktat, they are still not attractive as investment vehicles. Stop investments in the ULIP after the minimum lock-in period and exit, if possible. Mutual funds are more reliable to achieve long-term goals.

Since you have 15 years to go before retirement, you can opt for a portfolio with medium risk, with exposure to predominantly large-cap-oriented schemes. We recommend thus because you are new to mutual funds and saving for retirement is a non-negotiable goal where taking too many risks is unwarranted.

Split ₹15,000 as follows: Park ₹4,500 each in ICICI Pru Focused Bluechip and Quantum Long Term Equity. Invest ₹3,000 each in UTI Opportunities and Franklin India Prima Plus. All these schemes have proven long-term track records of delivering market-beating returns.

The National Pension System (NPS) is also an option you should consider for your retirement needs as it is a low-cost product and offers good options to invest across equity, Government securities and corporate debt. Invest in it regularly as and when your surplus grows.

It is assumed that you have made sufficient investments in debt (FDs, RDs, PPF and NSC). Review the performance of the schemes in your portfolio once a year and take corrective action, if necessary. It would be a good idea to have a target corpus in mind and book profits or sell units if you reach your goal ahead of time.

I have been investing ₹1,000 in HDFC Top 200 and ₹1,500 in Reliance Gold Savings through the SIP mode for the past two-three years. I want to invest ₹4,000 more every month. Please suggest funds where I can invest in and also comment on my existing holdings. My investment horizon is 12-15 years.

Atul Verma

Your portfolio does not indicate any focus as you have invested in a large-cap fund and a gold fund, with a higher weightage to the latter. Gold can, at best, be a hedge against inflation and must not account for more than 10 per cent of your portfolio.

HDFC Top 200 does have an excellent long-term track record. But in recent years, its performance has not been in line with top peers. Stop further SIPs in the scheme. You can continue to invest in Reliance Gold Savings but restrict the amount to ₹500.

Now, invest the balance ₹6,000 (including the additional ₹4,000 that you wish to invest every month) as follows:

Put ₹3,000 each in ICICI Pru Top 100 and UTI Equity. These two are predominantly large-cap funds with proven track record of outperformance.

I am 31 and work in a Government department. I can invest ₹2 lakh in mutual funds for a period of more than three years. Please suggest three-four schemes in which I can invest to generate good returns.

Dayananda A

While it is a good move on your part to invest in mutual funds, the purpose seems unclear. Investing a lumpsum is generally not recommended as it requires timing the market to some degree. Any correction puts your entire amount at risk. A systematic investment may be a better choice for retail investors looking to save for the long term.

A period of a little over three years may not be sufficient to generate meaningful, inflation-beating returns. Increasing the timeline to five-ten years gives you a better chance to do so by investing in equity schemes. If the money is needed in three years for a ‘non-negotiable’ goal, parking the amount in fixed deposits is appropriate.

If you need the amount in, say, four years, opt for balanced funds and debt schemes. Split the amount across schemes. Park ₹70,000 each in ICICI Pru Balanced and HDFC Balanced. Invest the remaining ₹60,000 in Birla Sun Life Dynamic Bond.

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Published on April 06, 2014

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