Your fund portfolio

I am 55 and work for a public sector undertaking. I will be retiring in 2020 and have been investing in the following funds through the SIP route:

Franklin India Pension Plan- ₹10,000; Reliance Equity Opportunities- ₹5,000; Franklin India High Growth Companies - ₹3,000; UTI Equity - ₹5,000; Reliance Small Cap - ₹2,000; Franklin India Smaller Companies - ₹2,500; HDFC Mid Cap Opportunities - ₹2,500 and ICICI Pru Focused Blue Chip Equity- ₹5,000.

While the first two have been in operation since August 2012, investments in the other six funds were started in October 2014. I would like to have your advice on my portfolio and would like to know if I should continue investments in the same schemes until 2020 and beyond.

Rajashekhar

Although you have started investing in mutual funds a bit late it is still a good avenue to build a corpus for the long term.

Of course, given your age and retirement five years from now, it is preferable to take relatively low or moderate risks to avoid corpus erosion at the time of retirement.

Most of the funds in your portfolio have strong track records of delivering across market cycles. But there are too many mid- and multi-cap schemes, which somewhat pegs up the risk level of your portfolio.

You can continue investing in Franklin India Pension Plan. Other than that, you are investing ₹25,000 across seven funds. Rebalance your portfolio as follows:

Invest ₹6,500 in ICICI Pru Focused Bluechip and UTI Equity for exposure to high-quality large-cap funds. You can retain investments in HDFC Midcap Opportunities and Franklin India Smaller Companies and park ₹4,000 in each of them. Stop further investments in Reliance Small Cap. The scheme has done exceptionally well over the past couple of years. But it may be risky to go with a small cap fund closer to your retirement.

Franklin India High Growth Companies has delivered top-notch returns over the past three years and is a quality multi-cap fund. You can invest ₹4,000 in it.

Since you already have a multi-cap scheme, you can stop further investments in Reliance Equity Opportunities, although it has a proven record. Normally, two schemes from the same house are not suggested. An exception is made here in the light of the track record of these schemes.

Review the schemes in your portfolio and take corrective action, when necessary.

In case you receive a regular pension that will take care of your expenses, continue investing even after retirement, albeit only in select large-cap or balanced schemes. If you do not receive a pension from your employer, you must sell units or book profits in the funds that you have invested in some six months before retirement and move the proceeds to safe debt avenues. Consider investing a portion of your corpus in monthly income plans later on.

I am 32 and plan to have a child this year. Which funds should I choose where I can park a lumpsum towards my child’s education?

Prasad

You have done well by planning ahead for your stated goal. However, it may not be the best idea to just invest one lumpsum for this goal. Given the time horizon, you can invest through monthly investments in mutual funs through the SIP route. Investing a single lumpsum would subject the entire amount to the vagaries of the market. Besides, you will not be able to average costs across market cycles.

Start systematic investments in ICICI Pru Focused Bluechip and Franklin India Prima Plus. These are high-quality schemes with proven performance records over different market cycles, besides being relatively safe due to their predominantly large-cap focus.

You can also save for the goal by opening a PPF account in your child’s name after he/she is born. If it is a girl child, the Sukanya Samridhi Scheme is a good avenue and allows partial withdrawal when your child turns 18. The lumpsum can be put as yearly instalments in these fixed income schemes.