Mutual Funds

Reduce equities as you grow older

K. VENKATASUBRAMANIAN | Updated on March 12, 2018

I have been investing in mutual funds via the SIP mode since January this year. My age is 57. I took voluntary retirement from a public sector bank in 2011. I have spread my investments in FDs, Shares and NSCs.

The schemes where I have invested are as follows: IDFC Premier Equity - Rs 2000; Franklin Flexi Cap- Rs 1500; Franklin Bluechip- Rs 1500; HDFC Balanced- Rs 2000. Are my investments on the right track? Please suggest changes, if any, which may have to be made.

S.Mohan

It is interesting to note that you have embarked in mutual funds so late in your life. You also invest in shares, which means that you are likely to have penchant for high-risk. Given your age, such high levels of exposure to equity (both directly and indirectly) may not desirable. Although some amount of equity is necessary to generate above-average returns, it must not account for more than 30-35 per cent of your portfolio. Regular cash flow and safety have to be given priority. You have also not stated the purpose of these investments. So it would be difficult to comment if your investments are on the ‘right’ track. Now, if your holdings in shares are in blue-chip, large-cap names from the Sensex or the Nifty you can retain a part of it. If you hold mid-cap shares, exit them in rallies as they tend to be quite volatile and can erode the value of your portfolio quickly. Since you invest in mutual funds, temper your appetite for direct equity.

If you get a pension, you can augment it by investing in monthly income plans. You can perhaps invest a portion of your FDs in those deposits where you get a monthly interest payout. Invest this interest amount in MIPs every month. Please note that though most MIPs make it a point to give dividends regularly, payouts would depend on market conditions and available surplus. You could consider HDFC MIP Long-Term, Reliance MIP, Canara Robeco MIP for your investments. Your portfolio needs minor modification. Stop investments in Franklin India Flexi Cap and switch to Fanklin India Bluechip and park Rs 3000 in it.

Frankln Flexi Cap is a multi-cap fund with significant mid-cap exposure. You already have investments in IDFC Premier Equity, a high quality mid-cap fund. Strengthen your portfolio by focusing more on large-caps. Retain IDFC Premier Equity and HDFC Balanced. Have a target in mind and book profits or even exit schemes when you reach your expected level of accumulation.

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I am 25 years old and earn Rs 13,000 per month. I have been investing Rs 1000 per month in PPF, Rs 5000 in the post office savings account. I wish to invest small amounts in mutual funds. Please suggest some schemes.

Sachi Shah

You have done well by investing regularly in PPF. But given your age, it’s rather surprising to see you park a handsome amount of Rs 5000 in a postal savings account. We suggest a rethink on this count. You can stick to maintaining a savings account with banks itself as a post office savings account serves no purpose for you. Your investments suggest that you are completely risk averse. Unless you are very particular about liquidity and would need the money regularly you can invest the amount elsewhere. Continue your investments in PPF. The other Rs 5000 that you invest regularly in postal account can be put to better use. Since you are new to mutual fund investments, consider balanced funds. As you gain more experience and your surplus increases, you can explore other options such as equity schemes. Invest Rs 1500 each every month in ICICI Pru Balanced and Birla Sun Life 95, two balanced schemes with a strong track record. You may also consider starting a recurring deposit with a bank for the remaining amount of Rs 2000. Else, considering you modest income, you can also leave it in the bank savings account to steadily build an emergency or contingency fund. Keep investing over the long-term of 7-10 years to generate inflation-beating returns.

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I am 28 years old and want to invest Rs 5000 every month in mutual funds.My time horizon is 8 years, over which time I wish to accumulate Rs 10 lakh. Please suggest some good schemes where I can invest and realize my goal.



Jayshri

It may be a tad challenging for you to reach your goal within 8 years. If you invest Rs 5000 every month and are able generate 13 per cent returns on it annually, you will be able to accumulate Rs 10 lakh only after 9 years. If you want to reach the goal within 8 years, you must be able to invest Rs 6000 per month. You have not stated your risk-appetite. For your portfolio to generate the kind of returns mentioned earlier, you will need to take reasonable risks. Given that you have just started off on mutual fund investments, we cannot suggest a high-risk portfolio. Invest Rs 2500 each in Franklin India Bluechip and Birla Sun Life Frontline Equity. If you can invest Rs 6000, split the amount equally between the funds mentioned earlier.

Published on September 14, 2013

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