I am 24 years old and want to invest Rs 3,000 per month through an SIP in at least two MFs. I am a first-time investor, so please advise me on appropriate funds. What checks should I run before investing?
Starting SIPs in MFs at such a young age is good for you. It is relatively easy to get started in this manner. For a beginning investor, a large-cap fund and an equity-oriented hybrid fund would be good places to start. You can get started with investing half of Rs 3,000 in a fund like DSP BlackRock Top 100 (large cap) and the rest in HDFC Prudence (equity-oriented hybrid). Investing in these funds will enable you to watch your real money move more or less in tandem with the markets. Once you are comfortable with this process of market-linked investing, you can expand your scope to other options. There is a wide array of criteria that can help you select schemes. Starting investors would be better off looking at three- and five-year performances of a fund, and how well the fund has been rated by independent agencies such as Value Research. Better yet, they can simply follow the Mint 50 list.
I am 30 years old and my monthly salary is Rs 35,000 and can save Rs 20,000 per month. I have invested about Rs 2 lakh in stocks over the past two years. The value of the portfolio has eroded and is at Rs 1.75 lakh now. Since the last four years, I have been investing in HDFC Tax Saver, Kotak Tax Saver, SBI Magnum Tax Gain, DSP BlackRock Tax Saver and Birla Sun Life Tax Relief 96 for tax benefits. I also have eight mutual funds (MF) in which I invested Rs 17,500. I don’t want to actively invest in the stock market. I also intend to stop the systematic investment plan (SIP) for two MFs. I will continue to invest in the remaining MFs for the next five years. My aim is to accumulate Rs 15 lakh in the next five years. Am I on the right track?
You have made the prudent choice to turn to MFs for investing in equity markets. For a working professional, choosing to invest directly in equities for a big portion of his portfolio is a risky choice due to lack of time and resources that direct equity investing demands.
You would need to invest about Rs 18,000 a month to reach the target of Rs 15 lakh in five years (assuming a conservative 12% per year medium-term return). Since you have not indicated the actual schemes you are holding, I cannot comment on your current portfolio. You can consider investing about 60% in well-diversified equity funds, about 20% in debt-oriented hybrid funds, and the remaining in either gold funds or pure debt funds. You can choose schemes from the Mint 50 list. Review your portfolio once a year to ensure that your schemes are still on the list.
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