Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on March 10, 2019 Published on March 10, 2019

I am a retired person aged 59 years. I invest ₹25,000 per month in the following MFs: ABSL Pure Value, ABSL Hybrid ’95, Franklin Prima, HDFC Top 100 — ₹5,000 each; L&T Value and L&T Midcap — ₹2,500 each. My investment horizon is 5-7 years.

Henry Mohandas

Barring ABSL Equity Hybrid ’95, your fund choices veer towards the moderate- to high-risk category. Your investment horizon of 5-7 years, while not short, is not too long either. This pegs up the risk a bit more. Considering your age and the fact the you are a retired person, we hope that you have other sources of income to support your regular needs and also have enough investments in debt instruments such as Senior Citizen Savings Scheme, PM Vaya Vandana Yojana, FDs, debt MFs, etc. You can continue investing in equity funds if you don’t have any specific financial goal to be met 5-7 years down the line. That way, you can extend the horizon to recover from an underperformance in any of the funds.

As far as the funds go, rejig your portfolio as follows. Invest ₹5,000 each in HDFC Top 100, ABSL Equity Hybrid ’95, Reliance Large Cap and L&T Value. The remaining ₹5,000 can be equally divided between Franklin Prima and L&T Midcap. This way, you will be investing ₹15,000 — 60 per cent of your portfolio — in lower-risk large-cap and equity hybrid funds, and the remaining in higher-risk multi- and mid-cap funds.

I earn ₹30,000 a month at present. I am planning to invest for my two children.

One is four years old and the other five months. Please suggest some long-term investment options.

Peddinti Srinivas Rao

It is good that you are beginning to invest early in the life of your children for their future. Since your children are very young, you are comfortably placed to reap the benefit of investing in equities for their sake. Over longer time-frames of 10 years or more, equity has the power to deliver inflation-beating returns. You can take equity exposure through the mutual fund route. A 12 per cent annual return expectation can comfortably be assumed here.

HDFC Children’s Gift and ICICI Prudential Child Care - Gift Plan are two good children’s plans to invest in. These are aggressive hybrid funds, investing 65 per cent of the corpus in equities and the remaining in debt. They allow investments only in the name of a minor child and carry a lock-in period of five years or till the child attains majority (18 years), whichever is earlier.

If you have a daughter, you must also consider the Sukanya Samriddhi Yojana offered by the post office. Deposits can be made in the account each year for 15 years from the date of account opening, and the account will mature on completion of 21 years from the date of opening. For boys, you can invest in the Public Provident Fund (PPF). This account, too, runs for 15 years and can be extended in blocks of five years each, after that. Although the interest rates on these schemes are reset every quarter, deposits made in both are eligible for tax deduction under Section 80C of up to ₹1.5 lakh. The interest and maturity amount from the scheme are fully exempt.

The minimum investment in all these options are small. For both the recommended MFs, the minimum SIP investment is ₹100-500. The Sukanya Samriddhi scheme requires a minimum investment of ₹250 per annum, while the PPF requires ₹500 a year. You can start with a limited sum now and add more as your salary and investible surplus increases.

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Published on March 10, 2019
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