BackDon’t take much risk if your investment horizon is too short
When starting with your investments begin with SIPs and gradually increase exposure to debt.
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I am 36 years old and have systematic investment plans (SIPs) of ₹ 2,000 per month in HDFC Top 200, HDFC Prudence, Reliance Banking Fund, Reliance Growth Fund and DSP BlackRock Equity Fund. I want to stay invested for at least 15 years. I plan to invest another ₹ 10,000 through SIPs. Please advise.
—Shyam
Currently, you are investing in two multi-cap funds, a large- and mid-cap fund, a balanced fund, and a thematic fund (banking). It is a portfolio that is aggressively themed with funds that have traditionally taken risky bets in the market. The only moderate scheme is the balanced fund. However, it is in keeping with your long-term horizon of 15 years, which gives you the ability to take risky positions.
Regarding the schemes, the fact that there are two multi-cap funds gives us an opportunity to make some changes. There are two directions you can take in this regard. If you are comfortable with the portfolio’s aggressive stance, then you can replace one of the multi-cap funds with a small- and mid-cap fund such as DSP BlackRock Small and Mid-cap fund or HDFC Mid-cap Opportunities fund. If you are not comfortable with the assessment that you have an aggressive portfolio, you can moderate the risk by choosing a large-cap fund such as DSP BlackRock Top 100 or ICICI Prudential Focused Bluechip fund.
I want to buy a car for 6 lakh after three years and want ₹ 3 lakh after two years for higher studies. How do I save and which funds should I look at?
---Santosh
You will need to start investing ₹ 25,000 per month to meet your twin goals. In the first two years, you will need to have SIPs for ₹ 11,000 for your two-year goal and ₹ 14,000 for your three-year goal. These figures are based on a rather modest 10% return rate per year. The reason for the conservative assumption is that given the short time frame, you cannot take too much risk. Your portfolios will need to be debt-focused and subject to annual changes.
Let’s take the two-year goal first. You can take a little bit of risk in the first year, but not much in the second year. Hence, you can go for a debt-oriented hybrid plan such as Reliance MIP in the first year. You can then switch to an all-debt scheme such as Templeton India Short-term Income plan for the remaining year. Such a plan will optimize the return potential for this portfolio. For your three-year goal, you can follow a similar plan for the final two years. For the first year, you can take a little more risk in the form of an equity-oriented hybrid fund such as HDFC Balanced fund or DSP BlackRock Balanced fund.
Essentially, in either case, you would be shifting to all-debt funds as you get closer to your need, but take measured risks when you have at least a year or two away from when you need the money out.
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