Your Fund Portfolio

I am 58 years old and a government employee. I wish to generate a ₹1-crore corpus in the next 10 years.

Kindly advise me about which mutual funds I should invest in and how I should allocate my money.

Meena Padwal

It is a little difficult to answer this question without knowing how much you can afford to invest and whether this will be in lumpsum form or through regular instalments (Systematic Investment Plan). But let us try here.

As a government employee who is to retire shortly, our assumption would be that you will get a monthly pension to take care of your living expenses, post-retirement.

We presume you are looking to accumulate ₹1 crore for some other purpose, other than meeting your monthly expenses after retirement.

If the above assumption is correct, you can sign on for SIPs in mutual funds in order to get to your goal of ₹1 crore.

Your choice of mutual funds will, however, depend on how much you can afford to invest each month.

So, here are the numbers. If your investments earn you a 15 per cent compounded return each year, an investment of ₹34,022 each month will get you to ₹1 crore in 10 years.

If they earn 12 per cent, you will have to make a higher investment of ₹44,575 a month in SIPs.

If they earn only 10 per cent, your monthly investment will have to be as high as ₹47,513. It is your affordability that will decide which kind of mutual fund product you must choose.

If you can manage only ₹34,000 a month, you will need to go in for pure equity funds so as to get to that 15 per cent return.

We would suggest making equal allocations to funds, such as Franklin India Prima Plus, SBI Bluechip, Birla Sun Life Frontline Equity and ICICI Pru Focussed Bluechip as these are conservative choices within the category.

If you can manage higher allocations of ₹44,575, balanced funds would be a much better fit for you, given your life stage and risk profile.

Here, funds such as Tata Balanced Fund, ICICI Pru Balanced Fund, Reliance Regular Savings Balanced Fund and HDFC Balanced are good choices.

Do note that because balanced funds invest in a mix of both stocks and bonds, usually in the 65-35 proportion, they carry lower risk and volatility compared with pure equity funds.

These should be your preferred option if you can afford to invest more.

If you have a lumpsum to invest, we would suggest that you park this money in a liquid fund and use systematic transfers to invest an equal sum each month in these equity SIPs. That will ensure that your returns don’t take a hit due to adverse timing.

Once you set up SIPs, do review your portfolio’s performance once every six months. Replace funds that lag benchmarks for two years running.

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