Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 20, 2018


I am 31. Since March 2015, I have been investing in these two funds through SIPs for my retirement at 60: Reliance Retirement Fund - Wealth Creation scheme - ₹3,000; Tata Retirement Savings Fund - Progressive plan - ₹2,500.

To achieve my retirement goal, I am expecting a minimum 15 per cent compounded annual return on these funds. Are these choices good enough or should I change course?

Vadivel Murugan M

If you invest ₹5,500 per month for 30 years and your investments in these funds earn a 15 per cent compounded annual return, you will have a corpus of about ₹3.85 crore when you turn 60.

Although a bit on the higher side, a 15 per cent return expectation is not unreasonable as both the schemes that you have opted for invest predominantly in equities.

While the wealth creation scheme from Reliance has a mandate to invest at least 65 per cent in equities, the progressive plan under Tata Retirement Savings pegs minimum equity investment at a higher 85 per cent.

This is unlike other retirement funds in the market such as UTI Retirement Benefit and Franklin Pension Fund, which are debt-oriented hybrid funds.

You may have to bring down your return expectation if, over the years, you switch to more conservative options (which have higher exposure to debt) available under the funds you are investing in. Of course, you can also step up investments as your surplus increases to make up for it.

As to whether these choices are good enough, it is difficult to say right now as these funds are relatively new. The Tata Fund was launched in 2011 and has earned a 12 per cent return since inception. The Reliance fund was launched only about a year ago. Whatever be it, these funds have a lock-in of three to five years and since you have begun your SIP investments only in March 2015 you need to wait it out.

Since you are young and show appetite for risk by choosing the equity-oriented options under these retirement funds, you can supplement the savings for your silver years by investing in plain vanilla diversified equity funds too. There are several diversified equity funds with a long track record of consistent returns.

Alternatively, you could consider the NPS, choosing how you want to spread your investments between equity (maximum 50 per cent) and debt, depending on your risk appetite. Additional tax deduction of ₹50,000 is available for investment in NPS over and above the 80C deduction limit of ₹1.5 lakh.

I am 62 and retired on superannuation a year ago. I invested ₹1 lakh each in the following funds (with dividend payment option) during January-February 2015: BSL Frontline Equity, Franklin High Growth, Axis Triple Advantage, Kotak Select Focus, Reliance Equity Opportunities and Tata Balanced. I am a moderate risk taker and can wait up to three years. Are these fund choices good enough?

R Ganesan

Most of the funds that you have chosen will make the cut to be part of the portfolio of a long-term investor.

But whether these funds are good choices for you is questionable. Since you have retired, it is not a great idea to park money predominantly in diversified equity mutual funds and look for regular income in the form of dividends.

All mutual funds are under no obligation to pay dividends regularly. Moreover, you say that you have a moderate risk appetite and can wait only up to three years. But this time horizon is too short for equity investments and it substantially pegs up the risk.

If you can extend your investments for longer, say, 5-7 years, you can continue holding these funds. This is assuming you have enough emergency funds, adequate investments in debt options such as fixed deposits and post office schemes for regular income and medical cover.

Published on February 28, 2016

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