I want to create a ₹25-lakh corpus over 10 years for my grandchildren (eight and nine). I propose to invest in the following: HDFC Balanced – ₹5,000, HDFC Midcap Opportunities – ₹4,000, Franklin Prima Plus – ₹5,000, Franklin Smaller Companies – ₹2,000, Reliance Small Cap – ₹2,000. I want to invest for five years and encash in the 10th year. Kindly advise me on the choices.

Vasant Sali

It is good that you want to invest for your grandchildren. The corpus you accumulate 10 years later will come in handy for their higher education when they turn 18. If you invest ₹18,000 every month for five years and your funds earn 12 per cent compounded annual return, you will accumulate roughly about ₹15 lakh at the end of five years. In the last five years, markets have returned much more, with top diversified funds fetching 15-20 per cent returns.

Your choice of funds can be less aggressive since you want to invest through SIPs for only five years.

You can invest ₹5,000 each in ICICI Pru Focused Bluechip Equity, UTI Equity and Birla Sun Life Top 100, three large-cap funds with a good track record. The remaining ₹3,000 can be invested in Franklin Prima, a low-risk, mid-cap, fund.

At the end of five years, you can let the accumulated corpus float for one more year to avoid short-term capital gains tax for the last year’s monthly SIPs. You can then withdraw the entire sum and move it to top-earning fixed deposits.

Else, if you feel the corpus may fall short of the 10-year goal of ₹25 lakh, remain invested for another three years after the five-year SIPs end; alternately, you can continue the SIPs for another two-three years if you have the surplus.

As you near your goal, move to fixed deposits to lock-in on the gains. You could also consider shifting to debt funds after the sixth year if your risk appetite wanes a bit by then. Invest in dynamic bond funds such as Birla Sun Life Dynamic Bond or UTI Dynamic Bond for three years, before moving the lumpsum to fixed deposits, closer to your goal.

Don’t forget to review the performance of your funds periodically and make changes to your portfolio.

I am 34. I have a daughter aged four-and-a-half and a son who is two. I have been investing ₹1,000 per month in HDFC Equity and HDFC Top 200 for the last two years and also ₹1,000 each in HDFC Midcap Opportunities and HDFC Prudence in the last four months.

I want to invest ₹20,000 in equity related mutual funds for a longer period for capital appreciation and also for my retirement and higher studies and marriage of my children. I can also continue the above mentioned SIPs for a longer period.

Bulan Dey

All four funds you hold are from the same fund house. This will deny you the benefits of various investing styles that can come about if you spread your investments across multiple players.

Secondly, both HDFC Equity and HDFC Top 200 have considerable overlap in their respective portfolios, leading to duplication of investments. Besides, since you don’t have near-term commitments, you don’t need a balanced fund (HDFC Prudence) in your portfolio. You can split ₹24,000 across six funds. Invest ₹5,000 each in HDFC Equity and UTI Equity, two large-cap oriented funds, ₹8,000 can be split equally between Franklin Flexicap and Mirae Asset India Opportunities, two top-performing multi-cap funds.

In the mid-cap space, you can retain HDFC Mid-Cap Opportunities. Step up your investment here to ₹3,000 per month. The remaining ₹3,000 can be put in Canara Robeco Emerging Equities.

Send your queries to mf@thehindu.co.in

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