I have been investing Rs 1,000 every month in HDFC Top 200 fund through the systematic investment plan (SIP) mode. Have I chosen the right fund? I want to invest for my children’s education. Should I opt for HDFC Children’s Gift fund? Is it wise to invest in a gilt scheme or recurring/term deposit for the goal?

Raman

You have not mentioned the time horizon or goal for which you are investing in HDFC Top 200. The scheme has not performed well enough over the past couple of years and has lagged peers. Of course, HDFC Top 200 does have an exceptional long-term track record over the past 10 years.

In the light of its recent underperformance, you can stop further SIPs in the fund. Switch to Birla Sun Life Frontline Equity, a large-cap oriented fund with an excellent long-term track record.

The investment avenues you can choose for your children’s education depends on how much time you have for the goals. Since good education is something you cannot compromise on, taking too much risk is not advisable. If it is three years or less, consider investing only in safe debt options, such as FDs/RDs.

In case the timeline is longer, say, five years, you can consider balanced funds; HDFC Children’s Gift Fund - Investment Plan, would be a good choice.

If the investment horizon is longer (more than seven years), then you can park money in equity funds (large- and multi-cap funds). Consider investing in ICICI Pru Focused Bluechip and Reliance Equity Opportunities.

Gilt schemes come with various maturity profiles: short-, medium- and long-term. You can consider investing a small portion of your surplus in gilt funds with a two-three-year horizon. You could put your money in Religare Invesco Gilt Short Duration.

*** I am 42 and work for a private company. I manage to generate a surplus of Rs 10,000 every month. I have been investing Rs 5,000 each in Birla Sun Life MNC and Birla Sun Life 95 since August this year via the SIP mode. I am planning to invest for seven years. Should I make any changes to my portfolio? My aim is to accumulate Rs 20 lakh.

Nandkumar Kulkarni

Though you have started investing in mutual funds a little late, it is still a very desirable move. Your surplus is also quite reasonable. However, the choice of funds is not suitable to achieve your goals within your timeline. You have chosen two schemes from the same fund house, denying the benefit from investing styles of different asset management companies. Again, by choosing a fund with an MNC mandate, you would be restricting the diversification of your portfolio. True, MNC stocks have been in fancy over the past few years. But in the light of rich valuations and with domestic stocks expected to revive, it may be difficult for MNC stocks to rally the way they have over the past few years. Hence, stop further SIPs in Birla Sun Life MNC.

Now, for Rs 10,000, you can consider investing in about four schemes to achieve your goals.

Switch over from Birla Sun Life MNC to Birla Sun Life Frontline Equity and invest Rs 3,000 in it. Reduce investment in Birla Sun Life 95 to Rs 1,000 every month. Invest Rs 3,000 each in ICICI Pru Focused Bluechip Equity and UTI Opportunities.

If you can take a little more risk, you can consider replacing UTI Opportunities with a mid-cap fund that has an excellent long-term track record, such as IDFC Premier Equity.

Coming to the second part of your question, accumulating Rs 20 lakh in seven years may not be easy. If you invest Rs 10,000 every month and the annual returns are 12 per cent, then you would take a little over nine years to accumulate Rs 20 lakh.

Either you need to increase the timeline or you need to invest more as and when your surplus is enhanced.

We assume that you have made allocations to other investment avenues, such as debt (FDs, RDs, PPF and NSC), gold and real estate. Review the performance of the schemes in your portfolio regularly and carry out suitable modifications and rebalance.

*** I want to invest in tax-saving mutual funds. Between Canara Robeco Equity Tax Saver and Axis Long Term Equity, which is the better scheme?

Surender Raja

Both are tax saving schemes with a fairly strong track record. Canara Robeco Equity Tax Saver has a longer track record while Axis Long Term Equity has been around for a little under four years now. While both schemes would fit your bill, Axis Long Term Equity has delivered extremely well over the past three years and its returns are higher than that returned by Canara Robeco Equity Tax Saver. So, invest in Axis Long Term Equity.

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