I want to invest Rs 40,000 in mutual funds (MFs). I invest in ICICI Dynamic Growth through a systematic investment plan (SIP) but now I wish to invest a lump sum. Considering minimum risk appetite, suggest a few schemes in which I can invest.
An individual’s risk appetite is only one of the two factors to consider when determining the kind of schemes to invest in. The other factor is the time frame for investment. Even for an investor with minimum risk appetite, if the time frame is more than, say, three years, a certain amount of equity exposure can be confidently taken in the portfolio. But if the time frame is less than a year, debt funds are the only choice.
You can consider the following thumb rule to make the decision: if your investment horizon is less than a year, consider only short-term debt funds. If it is between one and three years, consider debt-oriented hybrid funds such as Reliance MIP or Canara Robeco MIP. For periods greater than three years, you can go for equity-oriented hybrid funds such as HDFC Prudence or Birla Sunlife ’95.
I am 56 and have taken voluntary retirement. I got retirement benefits of about Rs 25 lakh and will get a monthly pension of about Rs 20,000. I have two daughters. I want to set aside some funds for my younger daughter’s further studies and marriage of both the daughters. I want to invest the balance in MFs for three-five years (returns expected: 15-20% per annum) and monthly income schemes. I also want to invest part of my pension in an SIP. Please advise.
You have three specific goals (two marriages and a higher education); you also require general retirement savings. The three specific goals are likely to be in the short-, medium-, and long-term time horizons.
For the short-term goal (second daughter’s education), you can keep some money in a bank deposit product of six-nine months duration. You can invest in MFs for the other two goals assuming you have at least three years of investing time. You should maintain and track two different portfolios for these two goals with a target corpus for each. You can keep a conservative portfolio for your shorter-term goal (a mixture of debt and equity-oriented hybrid funds) and a slightly more aggressive portfolio for your longer term goal (some large-cap funds and equity-oriented hybrid funds).
For the SIP from your own pension income, your return expectations are quite aggressive, especially given the relatively short time frame you are considering. You can go for a broad-based multi-cap fund such as HDFC Equity or Quantum Long-term Equity and hope that the equity markets will recover and perform well over the next few years.
Queries and views at firstname.lastname@example.org