I am 28 years old, married and earn Rs.50,000 per month. As of now, I invest Rs.35,000 in a money-back policy. After three years, I plan to build a house and accordingly want to invest for that period. I can do an investment of Rs.10,000 per month. Can you suggest some good mid-cap, small-cap funds for me?
You have indicated that you are investing in a money-back policy to the tune of Rs.35,000 a year. Check and ensure that you are getting adequate life cover for the money you are paying. Considering the fact that you are married and given your income, it would be appropriate to have a life cover of about Rs.50 lakh. If your current policy does not provide that much, consider getting a term plan.
You have said that you plan to invest for three years at Rs.10,000 a month. This time frame is too short for investing in a risky asset category such as small- and mid-cap funds. I would recommend that you go for moderately risky categories such as balanced and large-cap funds. If you invest Rs.4,000 each in HDFC Balanced and Birla Sun Life ’95 funds and the remaining Rs.2,000 in Franklin India Bluechip, that would make for a portfolio that would suit your situation better.
I am 28 years old and I want to invest in equity, debt and commodities. My father suggested that I should buy mutual funds (MFs) instead of trading directly in stocks. Is it possible to have a mix of all three in MFs? Also, as a beginner, what should the ratio of my portfolio be?
You should heed your father’s words. It is possible to invest in equities, debt and commodities using MFs. While the offerings related to equities and debt are very robust in the MF world, the offerings for commodities are a bit slim. The biggest commodity offering is gold. Beyond this, there are a few schemes such as SBI Magnum Comma that invest in companies engaged in commodity business and a few schemes that invest in the international commodity markets.
As a beginning investor, it would be prudent for you to stick to equities, debt and some gold. There are schemes that offer each of these individually as well as schemes that offer two (equity and debt or debt and gold) or all three as a mix.
The ratio of these asset types in your portfolio would depend on the investment time frame. If you are investing for a time frame of about three years or so, for example, go light on equities and heavy on debt with some exposure to gold. So 30% equity, 60% debt and 10% gold allocation would be safe in this situation. But if you are investing for, say 10-15 years, you must have an equity-heavy portfolio. In this case, 80% equities and 10% each in debt and gold would be suitable. Choosing good, consistently well-performing funds would be as important as getting your asset allocation right. The Mint50 list of funds can be your guide with respect to selecting funds.
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Srikanth Meenakshi is founder and director, FundsIndia.com