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Ask Mint Money | Type of MF portfolio should depend on the timeline of goals

Ask Mint Money | Type of MF portfolio should depend on the timeline of goals
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First Published: Sun, Jul 03 2011. 09 25 PM IST
Updated: Sun, Jul 03 2011. 09 25 PM IST
I am 26 years old and earn around Rs 60,000 per month. I plan to invest Rs 20,000 every month in systematic investment plans. I intend to build a corpus of Rs 50 lakh in 10 years so that I can buy a flat. Please suggest funds that can deliver annual returns of 15-18%.
-Partho Dey
If you invest Rs 20,000 per month for the next 10 years, you can surely achieve the required Rs 50 lakh corpus even if you assume a long-term return of 14%. You need to invest in a moderately aggressive portfolio that is well exposed to various segments of the equity market in order to achieve this. A model portfolio should have two large-cap-oriented funds such as ICICI Prudential Dynamic and DSP BlackRock Top 100 (Rs 5,000 each), two small- and mid-cap funds such as HDFC Mid-cap Opportunities and IDFC Premier Equity (Rs 3,000 each), and two balanced funds such as HDFC Prudence and Birla Sun Life 95 (Rs 2,000 each). This portfolio would be anchored on large-cap funds while having good exposure to aggressive options in the small- and mid-cap sector. It would also have exposure to the debt market in the form of the balanced funds.
I am 27 years old and earn a net salary of Rs 45,000 per month. My goals include going for higher studies in the next two years and getting married in another two years. I can spare Rs 15,000 every month to be invested in mutual funds. As of now, I have no exposure to mutual funds. Please suggest how should I build a good portfolio keeping my goals in mind.
-Nagesh
The method to be adopted for such situations is to first identify the actual amount of money you need for your financial goals and the individual timeline for each goal. Depending on these parameters, you can decide the amount of money to allocate regularly for building the corpus for each of the goals and the type of portfolio you need to build. While the amount will be decided by the corpus required, the type of portfolio can be decided by the timeline. The longer you have to reach your goal, the riskier the portfolio can be.
In your case, you have a two-year target and a four-year target. You can divide your savings (Rs 15,000) between the two depending on the relative sizes of corpuses the two objectives require. The portfolio for the two-year goal needs to be conservative—you can consider an even mix of debt-oriented and equity-oriented hybrid funds for this portfolio. Funds such as HDFC Prudence, DSP BlackRock Balanced, and Reliance MIP will serve you well here. For the four-year goal, you can consider a riskier portfolio. Large-cap funds such as ICICI Prudential Dynamic, HDFC Top 200 along with equity-oriented hybrid funds would constitute a good portfolio for this time frame.
Queries and views at mintmoney@livemint.com
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First Published: Sun, Jul 03 2011. 09 25 PM IST