Your Fund Portfolio

Mira Das

We are assuming that you have just started your investments. It is appreciable that you have clearly demarcated your goals and your savings plan for each of them. For your retirement, if you need ₹1.8 crore when you turn 58, the monthly SIP amount required works out to ₹5,021, assuming a 12 per cent annual return on the investment.

Although you are saving only ₹4,500 through SIPs as against the required ₹5,021, your investments could earn more than the estimated 12 per cent CAGR (compounded annual growth rate) and fetch you a bigger corpus. Both the funds that you have chosen to invest in for this goal — SBI Small Cap and Mirae Asset Emerging Bluechip — have good exposure to mid-/small-cap stocks that have the potential to earn higher returns than large-cap stocks over the long term. These choices are also in line with your moderate-to-high risk appetite.

Beyond this, your NPS (National Pension System) investment of ₹5,000 a month should come in handy. It is difficult to predict the return on the NPS investment, considering there are several allocation options and means to switch from one choice to another during the investment period. However, this additional investment will also help bring additional corpus if you feel ₹1.8 crore may not be enough.

Moving to your next goal, to obtain a corpus of ₹1 crore after 23 years, you will have to save a minimum of ₹6,789 a month, assuming a 12 per cent annual return. You are currently saving only ₹4,000 towards this goal. While your investments could fetch more than the assumed returns needed to meet this goal, you can double the investment in Axis Bluechip to ₹4,000 a month. Raise your allocation to DSP Midcap and SBI Focused Equity to ₹1,500 a month.

As far as the allocation towards miscellaneous expenses go, assuming the same 12 per cent returns, you will need to do SIPs of ₹5,712 a month to reach ₹50 lakh 19 years later. While you are currently doing SIPs of only ₹2,000, your investment of ₹2,000 a month in the Public Provident Fund (PPF) towards this goal, could help fill the gap to an extent. Considering that the saving is not specifically towards a particular expense, it is not clear if the corpus and the timeline are flexible. Kindly keep in mind the lock-in period of three years for every SIP in tax-saving schemes and 15 years for PPF when planning withdrawals.

For your household maintenance fund, Axis Ultra Short Term Fund is relatively new and is yet to prove its mettle. You need to watch its performance closely. Apart from ultra-short term funds, overnight funds, liquid funds and money-market funds are a few categories you can consider. While these are low- risk options, they do not provide a safety net against capital erosion. Also, any withdrawal within three years of investment will attract short-term capital gains tax.

Sweeping the excess balance from your savings account into a fixed deposit which earns higher interest is another option to save towards household expenses. It brings down the risk associated with debt funds and, at the same time, provides liquidity. Overall, you are investing in funds from SBI and Axis MF. You could diversify into other fund houses if you intend to change your options, depending on the performance of your holdings.

Send your queries to mf@thehindu.co.in