Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on January 24, 2018


I am writing this on behalf of my daughter and son-in-law, both of whom are working in an IT company. Their combined monthly income is ₹70,000. Presently, they are investing in recurring deposits to the tune of ₹22,000 a month. They don’t have any other savings. Both are 25 years old. Please suggest any better option that is available to them, including saving for retirement.

S Muralidharan

The big advantage that your daughter and son-in-law have is that they are very young and are able to save a substantial sum every month. If they start now, they will be able to realise all their financial goals and have a large retirement kitty as well.

Before we go on to suggest alternatives, it is important that both of them immediately take term covers for themselves and also avail of separate medical insurance policies, even if their employers cover them.

Given their age, they need not invest more than ₹7,000 every month in recurring deposits. The balance can be put into mutual funds. Given that they are just starting off, it would be better to stick to large-caps and balanced schemes. It is also necessary to remain invested with a horizon of 10-15 years.

Split ₹15,000 as follows: invest ₹4,000 each in ICICI Pru Focused Bluechip and Franklin India Prima Plus. These are mainly large-cap funds with sound track records. Park ₹3,500 each in Mirae Asset India Opportunities and Tata Balanced. The former is a multi-cap scheme while the latter is a quality balanced fund. While mutual funds can be used to build a retirement kitty, the new pension system (NPS) too offers an attractive option.

As their surplus increases, they can add more schemes. Debt options, such as PPF and NSC, are also attractive for the long term. Over the years, a balanced portfolio needs to be built with investments in equity, debt, gold and, later on, real estate.

I am 30 years old. I have SIP (systematic investment plan) investment of ₹10,000 in Franklin India Prima. I wish to invest ₹5,000 each in two other mutual funds from the tax-saving and multi-cap categories. Kindly advise.

Deepak James

Franklin India Prima is a quality mid-cap scheme. But you are putting a very large sum in a single scheme. Instead, split ₹20,000 as follows: invest ₹5,000 in Franklin India Prima and ₹5,000 each in Axis Long Term Equity (a quality tax saving scheme) and L&T India Value, a proven multi-cap fund. The balance ₹5,000 can be invested based on your risk appetite. If you can take more risk, Mirae Asset Emerging Bluechip is a good mid-cap option. For a safer bet, Birla Sun Life Top 100 would be a better option as it invests mainly in large-caps.

I am in my thirties and had started investing in funds through the SIP route a few months ago. I have been investing ₹2,000 each in four funds. My investment will be for a minimum of five years and can be stretched to 15 years. The schemes are: DSP BlackRock Micro Cap, Franklin India Smaller Companies, ICICI Prudential Value Discovery, L&T Midcap.

Narasimha Rao

Though it may not be a wise idea to review your portfolio within a few months of starting investments, some modifications may be required in your case.

You have chosen four mid- and small-cap funds, which makes your portfolio prone to high risks. A balanced portfolio has funds across market caps. It would be preferable if you invest with a 10-15-year horizon.

Complete the minimum number of SIPs in the funds. Once you are done with that, you can stop SIPs in L&T Midcap and DSPBR Microcap. These two schemes have done well. But you already have two other quality names in Franklin India Smaller Companies and ICICI Prudential Value Discovery. Invest ₹2,000 in UTI Equity, a large-cap scheme, and another ₹2,000 in SBI Magnum Multiplier, a multi-cap fund.

Review the schemes of your portfolio once every year and take corrective action, if necessary, and rebalance.

Published on June 14, 2015

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