I am 43 and my goals are the education of my kids, their marriage and my retirement. I want to invest ₹45,000 per month through SIPs. I have an investment horizon of 12-15 years and I can take moderate to high risk. What will be a good mix of funds for a long-term portfolio?

Anand

If you put in ₹45,000 a month and your investments earn a reasonable 12 per cent annualised return, you will get a corpus of ₹1.45-₹2.27 crore at the end of the 12-15 years. Of course, considering your willingness to take high risk, you may get a bigger corpus of ₹1.81-3 crore if we peg up the return expectation to 15 per cent. But given your age, we would not recommend a high risk portfolio. Secondly, since you have multiple goals, it is best to make additional lumpsum/SIP investments whenever you get more surplus in your hands. This is because while the projected corpus may seem big now, the value of money 12-15 years down the line will not be the same as it is today.

Coming to the funds, you could spread ₹45,000 as follows: ₹7,000 each per month in Franklin Prima Plus, Kotak Select Focus, UTI Equity and Birla Sun Life Top 100. Invest ₹6,000 each in HDFC Mid-cap Opportunities and L&T Value. The remaining ₹5,000 can be invested in SBI Magnum Balanced.

This split will lead you to investing about 70 per cent of your money in safer large-cap and balanced funds.

Monitor the funds periodically and replace consistent underperformers. We hope you have spread your risk by investing in debt instruments, such as PPF, fixed deposits, etc. If not, you can invest your future surpluses in debt instead of putting all your eggs into the equity basket.

I am 25 and a first-time investor. I’m planning to start a SIP in HDFC Balanced for ₹5,000. My aim is to build wealth over the long term. Is a balanced fund good enough or should I increase equity exposure by buying into large-cap or multi-cap funds? I’m already investing in PPF for tax savings under 80C.

Karthick

It is good that you are making an early start towards building wealth for the long term. How you want to spread your investments across different categories of mutual funds depends on your risk appetite. If you are nervous about the markets and want to play it a bit safe when testing the waters, you can stick to an equity-oriented balanced fund, such as HDFC Balanced. These funds have a mandate to invest a minimum of 65 per cent of their portfolio in equities and the remaining in debt instruments. They contain losses well in falling markets.

But if you feel you are very young and don’t have any immediate needs for the money that you invest, you can take higher risk and invest in diversified equity funds.

We suggest you split ₹5,000 equally. Invest ₹2,500 in ICICI Pru Focused Bluechip Equity, a diversified equity fund that invests purely in large-cap stocks. The remaining ₹2,500 can be invested in HDFC Balanced. As you get used to the ups and downs of the markets and as your investible surplus increases, you can move to mid-cap and multi-cap funds.

I am looking for best returns over the long term and want to invest through SIPs in — SBI Midcap, SBI Blue Chip, BNP Paribas Equity, Reliance Small Cap and Motilal Oswal MOSt Focused Midcap 30 Fund. Are my choices good enough?

Mohammed Rafi

You have done well to zero in on SBI Bluechip and BNP Paribas Equity, which are among the top-performing large-cap-oriented funds over one, three and five-year periods. As far as the small and mid-cap funds go, there are a few observations to be made. One, although the MOSt Midcap 30 fund is among the top-performers in the last one year, it is a relatively new fund launched only in February 2014. It thus has a limited track record and is yet to go through a full market cycle. With valuations of small-cap stocks zooming in the last two years, Reliance Small cap too is a high-risk bet, unless you have the willingness to stomach that risk. While SBI Midcap has been a good performer, you already have one SBI fund in your portfolio. You can choose Mirae Asset Emerging Bluechip or ICICI Pru Value Discovery in the mid-cap space instead.

Send your queries to mf@thehindu.co.in

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