I am 31 years old. I have systematic investment plans (SIPs) in Reliance Regular Savings Equity (Rs 10,000) Reliance Growth (Rs 5,000), Reliance Infrastructure (Rs 2,500) and HDFC Multi-cap Premier (Rs 3,800). I want to continue my SIPs until 2020. My aim is to build a corpus of Rs 1 crore by 2020. Is it an achievable target? Do you recommend any changes in my portfolio?
You are currently investing Rs 21,300 a month in an aggressive all-equity portfolio. If you continue this for the next 10 years, assuming a 13% per annum long-term market return, you will get more than half-way to your target of Rs 1 crore. You can increase the probability of reaching the target in that time frame by increasing your monthly investment to about Rs40,000. Alternately, you can add five more years to your investment time frame. Your portfolio is anchored on Reliance Regular Savings Equity fund, which is a solid long-term performer. Reliance Growth Fund is labelled as a small- and mid-cap fund, but it has 45% of its portfolio in large-cap stocks. So it should be considered a multi-cap fund, too. Overall, you have three multi-cap funds and one infrastructure fund. But you should consider having two multi-cap funds (making up about 70-80% of your portfolio) and two small/mid-cap funds for the remaining. You can consider Quantum Long-term Equity fund as the multi-cap alternative, and HDFC Midcap Opportunities and IDFC Premier Equity Plan for the small/mid-cap segments.
I am 41 years old and want to invest a lump sum of Rs 35,000 in mutual funds (MFs). I can take risk with this money because this is my extra saving. How should I invest it and which funds should I look at?
You have indicated that you can take risk on your money. However, the term “risk” is an overloaded term and could imply several possibilities. For some, it could imply that they can accept a certain erosion to the capital invested; for others, it could mean that they can accept “less” returns, but not capital erosion. For still others, it could mean that they can treat this as “play money”, meaning that they don’t care even if all the money is lost. Since you have asked for an MF portfolio, where there is some possibility of capital erosion but very less possibility of complete capital loss, let’s assume that you belong to the first category where you can handle some temporary loss of capital. In that case, you can go for an equity-oriented hybrid scheme such as ICICI Prudential Dynamic or HDFC Prudence. You can also park a portion of the money in a slightly aggressive scheme such as DSP BlackRock Top 100 and HDFC Top 200. A small portion (say, Rs 5,000) can also be placed in a more risky fund such as HDFC Midcap Opportunities.
Srikanth Meenakshi, Founder and director, FundsIndia.com
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