I am 26 years old and work for a private company. I have been investing in mutual funds through the SIP (systematic investment plan) mode for the past one year.

My investments of Rs 2,000 each are made in the following funds:  HDFC Equity, Franklin India Bluechip, SBI Emerging Businesses and IDFC Premier Equity. I wish to continue my investment through the SIP route for 15-20 years. I also wish to invest Rs 2,000 more in FT India Feeder - Franklin US Opportunities fund to diversify my portfolio. One of my goals is to accumulate Rs 30 lakh over 10 years to construct a new house. Please let me know if any changes need to be made to my portfolio.

Aathira

You have got right most of the ingredients that go into building a corpus over the long term. Starting early, earmarking a reasonable sum of money every month, maintaining a long-term investment horizon and a defined goal are characteristics of a disciplined approach. But you may have to stretch the timeline of your goal by a year to 11 years instead of 10. Here is why:

If you invest Rs 10,000 every month (including the Rs 2,000 that you want to additionally invest) and the annual returns are 14 per cent, you can accumulate Rs 30 lakh in a little under 11 years. Generating 14 per cent over 10 years is not too easy, but it is not very daunting either.

As with your current portfolio, a combination of large- and mid-cap funds should be able to get you there. Coming to the schemes that you own, some modification may be in order.

HDFC Equity and Franklin India Bluechip have an excellent long-term track record, but have not delivered as well in the last couple of years. You should consider investing in ICICI Pru Top 100 and Birla Sun Life Frontline Equity instead and park Rs 2,000 in each of these.

You can retain IDFC Premier Equity. The other mid-cap fund that you own — SBI Emerging Businesses — has lagged in the past one year. You can consider switching from this scheme to HDFC Midcap Opportunities.

You can invest in the FT India Feeder – Franklin US Opportunities Fund, as it would give your portfolio an international flavour as well. But do note that investing overseas will involve taking currency risks. If the dollar-rupee movement is not favourable, you may see the value of your investments eroded.

If you are comfortable with betting on the US market and can digest some risk, opt for the fund. If not, stick to domestic funds and distribute the Rs 2,000 across the four funds suggested earlier.

We hope you are also investing in debt options, such as PPF, NSC, tax-free bonds and RDs. As your surplus increases, try to also invest in gold ETFs and, if possible, real estate so that you are able to create a balanced portfolio.

Monitor the schemes in your portfolio regularly and take corrective actions, when necessary, after reviewing their performance. If you reach your target ahead of time, book profits or sell units entirely and move over to safer debt investments.

*** I am 27 years old and work in an insurance company. My investments in mutual funds from September 2011 have been in the following schemes: Rs 5,000 each in ICICI Prudential Focused Blue Chip, HDFC Equity, Reliance Banking Fund. Please let me know if I should continue with these funds or move to other schemes.

Prasun Pallav

It is good that you are taking the mutual fund investment route reasonably early in your career. But having said that, your portfolio does need some alteration.

First of all, it is not clear why you chose to invest in a banking fund. Investing in any sector/thematic fund is fraught with risks and requires you to constantly monitor the movement in these segments closely and take decisive calls.

They are not suitable for achieving long-term goals. A diversified fund will invest more in a sector or theme when it is necessary and there is sufficient potential for upside.

So, avoid sector funds. Stop further SIPs in Reliance Banking and exit the units that you hold when the markets rally. Also, stop additional investment in HDFC Equity, as it has been lagging behind over the past couple of years.

Now, split Rs 15,000 as follows: Continue investing Rs 5,000 in ICICI Pru Focused Bluechip. Park Rs 4,000 each in Canara Robeco Equity Diversified and UTI Opportunities. Invest the balance Rs 2,000 in IDFC Premier Equity.

Your portfolio would then have a blend of large-, multi- and mid-cap funds, which would be suitable for long-term wealth creation. If you can take more risks, you can opt for one more mid-cap fund, such as HDFC Mid-cap Opportunities or ICICI Pru Discovery.

It is presumed that you have made reasonable allocations to debt investments before plunging into equity mutual funds. Review your portfolio once every year to take corrective action and to rebalance.

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