Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 12, 2018


I am 51 and a Central government employee. I started investing through SIPs, six months ago, in the following funds, after putting away ₹21,000 in PF: L&T Emerging Businesses - ₹11,000; L&T India Value -₹5,000; Tata Equity P/E - ₹5,000 ; ICICI Top 100 - ₹3,000; ICICI Dynamic Bond - ₹3,000; ICICI Pru Banking and Finance Services - ₹5,000 ; Franklin High Growth Companies - ₹1,500; Franklin Smaller Companies - ₹1,500 and Franklin Prima Plus- ₹1,500.

Is my fund selection proper ? Kindly advise.

Joseph KA

Considering your age, you can bring down the risk quotient by avoiding putting a big chunk of your money in mid- and small cap funds as also sector funds.

The risk is further pegged up in your case since you have entered the market quite late into the current rally that started end-2013. Currently, almost half your portfolio is invested in high-risk mid/small-cap funds (L&T Emerging Businesses, Franklin Smaller Companies) and sector funds (Pru Banking and Financial Services).

Sixty per cent of this is in one fund alone, L&T Emerging Businesses. This fund is relatively new. It is yet to go through a full market cycle. Stop SIPs here.

You can stop SIPs in ICICI Pru Banking and Financial Services, a sectoral fund as well.

Invest as follows: ₹5,000 each in ICICI Pru Top 100, Franklin Prima Plus, Birla Sun Life Frontline Equity and SBI Bluechip. You can continue with ₹3,000 in ICICI Pru Dynamic Bond. The remaining ₹13,500 can be invested as ₹4,500 each in multi-cap funds such as Franklin High Growth, L&T Value and Tata Equity PE.

This way, you will invest about 60-65 per cent of your monthly sums in large-cap funds and the rest in multi-cap funds.

Note that since you have been investing only for the last six months, any switches/redemptions will be subject to short-term capital gains tax.

Besides, most funds have an exit load, too, if you redeem within one year. But this may be a small price to pay to ensure that your long-term returns don’t turn out to be sub-par.

Since you will probably be retiring in nine years’ time, the corpus from these funds at that time can be invested elsewhere to supplement your monthly income needs.

We are recommending a majority of the holdings in pure equity funds because you have other debt investments such as your PF money and also pension. This gives you breathing space of about 1-2 years in case the funds don’t generate the desired returns at the time of your retirement.

I am 32 and am currently investing ₹7,500 per month through SIPs in HDFC Midcap Opportunities and Franklin India Smaller Companies Fund. I commenced the SIPs in June 2015.

My plan is to retire at 60 years with ₹10 crore. I can invest another ₹30,000 per month in mutual funds.

Please advise which funds I can invest in to reach my goal.

Jyothi

As per your plan, you have 28 years to go for your retirement. Along with the current ₹7,500 that you are putting in, you have an investible surplus of ₹37,500 currently.

If you invest this amount through SIPs for the next 28 years and earn a reasonable annual return of 12 per cent, you will end up with a corpus of ₹10.34 crore for your retirement.

Since you have been investing some sums for almost two years now, the corpus could be even higher.

Coming to your fund choices, you are currently investing in two funds in the mid- and small-cap space, which has been the market favourite since the 2013/2014 rally. These funds generally carry a higher risk profile than large-cap/multi-cap funds. While both are good performers and you can retain them, you can add large-cap/multi-cap funds.

Divide ₹37,500 as follows: Invest ₹5,500 each in Birla Sun Life Frontline Equity, Quantum Long-Term Equity, SBI Bluechip and Reliance Top 200. Put in ₹4,000 each in Kotak Select Focus and L&T India Value. These are multi-cap funds.

The remaining ₹7,500 can continue to be invested in HDFC Mid-cap Opportunities and Franklin Smaller Companies.

Send your queries to mf@thehindu.co.in



Published on June 11, 2017

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