Ask Mint Money | You must regularly review your long-term investment portfolio

I am a 32-year-old single woman. I want to start systematic investment plans (SIPs) in mutual funds (MFs) to build a corpus of Rs 5 crore by the time I am 55. I can put Rs 25,000 per month. Please suggest some funds.

—Vandana Singh

Before we get into the details regarding your portfolio and schemes, let’s get the arithmetic about your target and time-frame out of the way. You want a corpus of Rs 5 crore in 23 years. Assuming inflation at 7-8% over the term, the money would be the equivalent of Rs 1 crore today. To reach the target in this time frame, you would need to invest close to Rs 40,000 a month. If you invest Rs 25,000 a month instead, you would fall short, but still reach a decent Rs 3.7 crore (assuming a 12% long-term annual return). What you could do is start with Rs 25,000 a month and increase the amount every year or two.

Regarding your portfolio, keep in mind that it would be over a significantly long period of time. Any portfolio that we put together now would only be a starter, so you will have to keep reviewing your portfolio regularly.

You can start with a well-diversified portfolio of five funds. About 40% of it can be split between two large-cap funds such as Franklin India Bluechip and ICICI Prudential Focused Bluechip. A fifth can be placed in a broad-market fund such as Quantum Long-Term Equity Fund. The remaining 40% can be invested in aggressive funds such as IDFC Premier Equity Fund and DSP BlackRock Small and Mid-Cap Fund, which invest in smaller companies.

I recently inherited Rs 25 lakh from a family member. I want to put this fund in MFs and want to at least double the amount in 10 years. Is that possible?

—Divyansh

To double your money in 10 years, you are looking for a relatively modest annual return of 7.2%. Even assuming that you are looking to double it on an after-tax basis, the rate of return that you need would be around 10% per year. Achieving this should be possible without taking much risk. However, given the time frame of your investment, it would be smart to have some money in the equity market as well to potentially yield a higher return. A 75:25 ratio between debt and equity will mean that you could reach your goal of doubling the money without taking too much risk and with a potential upside. You could invest half the money in income-oriented debt funds such as Birla Sun Life Dynamic Bond Fund and SBI Dynamic Bond Fund. Short-term debt funds like UTI Short Term Income fund and Canara Robeco Short Term Income Fund can be used for another 25% of your portfolio and the remaining 25% can be invested in large-cap funds such as DSP BlackRock Top 100 and Franklin India Index NSE Nifty.

While debt fund investments can be made right away, it would be better to spread out the equity fund investments through SIPs.

Srikanth Meenakshi is founder and director, FundsIndia.com.

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