Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 16, 2018

PO31_dollar bag

I am 23 and I started investing in mutual funds from August this year. I have five SIPs of ₹2,500 each in Birla Frontline Equity, Birla Dynamic Bond, ICICI Value Discovery, Mirae Emerging Bluechip and DSP Micro Cap. My goal is to accumulate ₹5 crore at the end of 15 years. Are my fund choices suitable for this purpose or do I need to alter them?

Saurabh Sahu

If you invest ₹12,500 each month for 15 years, and your investments earn a reasonable compounded annual return of 12 per cent during this period, you will end up with a corpus of ₹63.07 lakh at the end of 15 years. Even if we push up the return expectations to a higher 15 per cent per annum, the expected corpus grows only to ₹84.6 lakh. Of course, you may be able to save a bit more as your surplus increases or you could earn higher returns, considering your investments lean towards multi-cap and mid-cap funds. But your goal of ₹5 crore may seem daunting even then.

A compounded return of 12-15 per cent is what we normally take into account for long-term investments. At this expected rate of return, you would need to invest ₹75,000 to ₹1 lakh a month for 15 years to reach the ₹5 crore target.

Whether you will have so much to spare every month at 23, when you might have just begun your career is a question. Hence, rather than being very ambitious, you can focus on saving as much as you can to partly meet any financial goals that you want to achieve at the end 15 years as also for longer-term goals such as your retirement.

Coming to the funds, since that you have aggressive goals, you can do away with the debt fund – Birla Dynamic Bond. You can instead choose Franklin High Growth companies, which is a multi-cap fund like ICICI Value Discovery. Its ‘growth’ strategy complements the ‘value’ strategy followed by the Discovery fund very well. This apart, you can retain the rest of the funds as they are good performers. This spread will leave you with an allocation of 20 per cent to a large-cap oriented fund (Birla Frontline Equity) and 40 per cent each in multi-cap and mid-cap funds.

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Published on October 30, 2016

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