I am 35, salaried and have been investing in mutual funds through SIPs since the last five years. I want to create a good corpus for the next 12-15 years. I invest in the following funds: ICICI Pru Focused Bluechip Equity – ₹3,000; ICICI Pru Discovery - ₹1,000; Mirae Asset Emerging Bluechip - ₹1,000. Apart from this, I invest ₹6,000 a month in PPF for tax-saving purposes as well as to balance out my equity exposure with debt. I want to invest another ₹5,000 a month through SIPs.

Sumant K Das

You have done well to start investing early in your working life. Though you have two funds from the same fund house (ICICI Prudential Mutual Fund), your fund choices are also commendable, offering a motley mix of different styles of investment. ICICI Prudential Focused Bluechip fund focuses purely on large-cap stocks, while ICICI Pru Discovery is a multi-cap fund and Mirae Emerging Bluechip, a mid-cap fund. Again, the Pru Discovery fund follows value investing strategy while the other two are growth-oriented funds. You can continue with your investments in these funds as apart from adding variety, they sport a good track record and are dependable and consistent performers. Further, for a total of ₹10,000 that you want to invest now (including the additional ₹5,000), you need not look at new funds. You can spread your investments across these three funds in the following manner: ICICI Pru Focused Bluechip – ₹5,000; ICICI Pru Discovery – ₹2,500 and Mirae Asset Emerging Bluechip – ₹2,500. With 50 per cent of your monthly savings in safer large-cap stocks, this allocation will suit a moderate risk appetite. Since you have a 12-15-year horizon, you can add more funds as your surplus increases as equity investments are the best option to get inflation-beating returns over the long term.

I am currently holding an SIP portfolio of ₹2,000 in Franklin India Prima Plus, ₹1,000 in SBI Blue Chip fund and ₹2,000 in Kotak World Gold fund. I would like to invest another ₹3,000. The tenure for the above is three years whereas for the Kotak fund, it remains at six months.

Shona Merin Jacob

A tenure of three years is not long enough for equity market-linked products such as mutual fund investments. A horizon of at least five years is considered more ideal. It not only pegs down the risk of capital erosion or under-performance but also gives enough room to generate inflation-beating returns. Moreover, international funds such as the Kotak World Gold fund are treated as debt funds for tax purposes. You need to be invested for a minimum of three years to get the benefit of long-term capital gains (20 per cent tax with indexation) on sale of units.

While Franklin Prima Plus and SBI Bluechip are definitely top choices among diversified equity funds, it is not clear why you have chosen the World Gold Fund and that too for a short period of six months. This is a fund-of-funds investing in the Falcon Gold Equity fund, which in turn invests in international securities of gold production, processing and marketing companies. Although this fund sports a mouth watering one-year return of 84 per cent, its three- and five-year returns are a pale 4 per cent and (minus) -7.8 per cent respectively. If your intention is to only benefit from the movement in gold prices, you can consider SIPs in gold funds which track the price of gold directly. However, remember that this investment will again be treated as a debt fund for tax purposes.

As far as the additional ₹3,000 goes, you can spread it across Franklin Prima Plus and SBI Bluechip itself. Put in ₹2,000 in SBI Bluechip and ₹1,000 in Franklin Prima Plus.

Send your queries to mf@thehindu.co.in

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