I am 30 and earn ₹76,000 per month. I invest ₹12,000 per month in HDFC Prudence, Reliance Monthly Income Plan and HDFC Top 200. I would like to have a retirement corpus of ₹10 crore. I can invest up to ₹20,000 per month in SIPs. Considering I have a moderate risk appetite, which funds should I invest in? How much should I save per month to meet my retirement goal? How often should I rejig my MF portfolio? I also pay ₹25,000 for Kotak Assured Income Plan and ₹43,000 as LIC premium annually as tax saving investments (80C). Should I be investing in PPF rather than investing in LIC and Kotak premiums? I plan to buy a house in another two years.

Soumojoy Dutta

Assuming you want to retire at 60, if you invest ₹20,000 per month for 30 years and your investments earn a 12 per cent compounded annual return, you will get a corpus of about ₹7 crore. We have considered a return of 12 per cent, given your moderate risk appetite. As your earnings improve over the years, you can step up your investments to reach your goal of ₹10 crore. The gap may also be partly bridged if your investments earn more.

Coming to the fund choices, Monthly Income Plans are meant for people looking for periodic cash flow in the form of dividends from their investments. They invest predominantly in debt instruments to keep risks on the lower side. It is a sub-optimal choice for a 30-year-old looking to build his retirement portfolio. Besides, since you are young and are investing for the long term, you can also do away with the investment in HDFC Prudence, which is a balanced fund.

Spread the ₹20,000 as follows: Invest ₹5,000 each in HDFC Top 200, Birla Sun Life Frontline Equity and SBI Magnum Equity, three large-cap oriented funds with a solid track record. The remaining ₹5,000 can be divided equally between ICICI Pru Value Discovery and Franklin High Growth companies. We have kept in mind your moderate risk appetite by allocating 75 per cent of your investments to large-cap-oriented funds.

The funds we have suggested are the ones that have weathered market cycles of the past reasonably well. Regarding how often you should rejig your portfolio, it is best to let funds go through an entire market cycle of ups and downs from now on and gauge their performance relative to their category average and benchmark after that. If a fund does not beat its benchmark or category over at least a three-year period, it may warrant a re-look.

As far as your insurance choices go, it is always better to look at insurance not as a returns yielding investment but as a pure risk cover. If you are done with the lock-in (if any) in the current plans, you can exit them. Take a term cover, instead. Since you are looking to buy a house in the immediate future, term insurance will also help provide a cover for the EMI obligation, which wall fall on your dependants, in case anything happens to you. Since term insurance premiums are much smaller even for large covers, you can use your savings on this front to open a PPF account. Although PPF interest rates will be rejigged every quarter from April 1, 2016, onwards, it is still one of the best debt instruments to invest in, providing tax exemption on investment, interest and on maturity.

I want to invest ₹10,000 a month in mutual funds. I have a high risk appetite. Presently, I have SIPs of ₹2,000 each in SBI Pharma, UTI Equity and HDFC Top 200. Are these choices good? Please suggest other funds for the remaining ₹10,000.

Krishna Reddy

Thematic funds such as the SBI Pharma fund suit your high risk appetite. But these funds may go through prolonged spells of outperformance and underperformance, too. It is better you have a target return from the fund and exit when the going is good. Outside of SBI Pharma, split the ₹14,000 as follows: Invest ₹3,500 each in UTI Equity and HDFC Top 200 (large-cap oriented), L&T Value (multi-cap) and Mirae Emerging Opportunities (mid-cap).

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