I am 25 years old. I will invest Rs1,000 each in HDFC Top 200, DSP BlackRock Small and Mid-cap, Reliance RSF Equity, Sundaram SMILE, HDFC Tax Saver and Canara Robeco Tax Saver every month for five years. This portfolio is one-and-a-half years old. Does it need any changes?
You have a 100% equity portfolio within which your category allocations are: 50% in large- and mid-cap funds (the tax funds), about 35% in small- and mid-cap funds, and the remaining 15% in multi-cap funds. This would qualify as an aggressive portfolio since its overall mid-cap allocation is on the higher side. One change you can consider making is to replace one of your small- and mid-cap funds with a fund in the pure large-cap category, such as DSP BlackRock Top 100 or Franklin India Bluechip.
Also, you have indicated that this is a portfolio for the next five years. Please note that after April 2012, the tax-saving funds don’t carry any 80C benefits and would become regular diversified equity funds. In that situation, you may need to switch your subsequent SIP investments to other high performing funds.
I am 35 years old and earn Rs40,000 per month. I plan to start a systematic investment plan (SIP) for 10 years with a target corpus of Rs25 lakh. How much should I invest per month to achieve the same?
You need to invest about Rs10,000 per month to achieve this target, assuming a 14% long-term return. To achieve this return by taking as little risk as possible, you could look at a balanced portfolio that invests in both equity and debt instruments. A mutual fund (MF) portfolio made of broadly diversified equity funds and equity-oriented hybrid funds (which also invest in debt) would suit well. For example, you could invest 60% in diversified equity funds, such as HDFC Equity and Quantum Long Term Equity, and 40% in hybrid funds, such as HDFC Prudence and Birla Sun Life 95.
I retired this year and want to invest in a tax-saving scheme through SIP. Suggest funds and the investment horizon.
MF schemes (equity-linked saving schemes, or ELSS) will not be available as a tax-saving option after fiscal 2012. The Direct Taxes Code (DTC), which will come into effect from April 2012, does not have ELSS funds in the list of 80C deductions. However, investments made in these funds during this fiscal will continue to get tax benefits.
So, if you want to invest in these funds, you have 10 months left to do so. You will be required to stay invested for three years (lock-in period) after which you can redeem your investment and gains tax-free. Recommended funds are Fidelity Tax Advantage and Religare Tax Plan.
Srikanth Meenakshi, Founder and director, FundsIndia.com
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