Increase MF investments in line with rise in income level

Retirement is a potentially long period, and you can consume from your corpus in a periodic manner. So, it’s not like you need to necessarily achieve a target amount on the date of your retirement


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I am 33 years old and want to start building a retirement corpus. Which mutual funds (MFs) should I invest in for this and what should my investment plan be with these?

—Punit Gupta

As a young person, you are well situated to start an aggressive investment plan, with higher allocation to equity, that will result in a handsome retirement corpus. You can continue such a portfolio until you get within 5-7 years of your scheduled retirement and then reallocate to reduce the equity allocation step by step. As of now, funds such as Franklin India Blue Chip, ICICI Prudential Value Discovery fund, and Mirae Asset Emerging Blue Chip fund should be in your portfolio, providing a wide and diversified coverage of the equity market.

You would need to remember two important things. One, you don’t need the retirement corpus soon, so apart from an annual review of funds to weed out funds that are performing poorly, you should persist with your portfolio and continue your investments regardless of what the market is doing. The only change to the regular investing that you should do would be to increase the quantum of the investment amount periodically to keep with your raising income level.

Second, you should realise that even at the time of retirement, you do not need the money in one go. Retirement is a potentially long period, and you can consume from your corpus in a periodic manner. So, it’s not like you need to necessarily achieve a target amount on the date of your retirement. So, in summary, keep investing regularly regardless of market conditions and allow the power of compounding and price averaging to work its magic for your post-retirement life.

I am 50 and want to invest Rs.15 lakh in MFs to get maximum returns before I retire. Please suggest some good funds. I own a house and have money in Public Provident Fund (PPF) and insurance.

—Ashraf Hussain

When constructing an MF portfolio, a few factors to consider are a person’s age, their risk tolerance, the time frame of investment, and the other assets they hold. Depending on these factors, the equity to debt ratio in a portfolio can be worked out. You are 50, which suggests a conservative approach. But all the other factors suggest otherwise—a time frame of 10 years is good for equity investment, the fact that you are seeking maximum returns suggests a risk-seeking approach, and you are well covered in terms of debt (in the form of PPF) suggesting we can go for equities in the portfolio. So, I would boldly suggest that you go for an 80% equity portfolio. You can invest 40% in a balanced fund (say, Tata Balanced fund), 30% in Franklin India Prima fund, 20% in BNP Paribas Midcap fund, and 10% in a short-term debt fund such as HDFC Short Term fund. Along with the debt component in the balanced fund, the overall ratio will work out to 80:20 between equity and debt in this portfolio.

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