Increase SIP money in a methodical manner instead of making quick changes

The long-term story for the Indian economy is strong, positive and growth-oriented. An investor should try to capitalise on these by staying disciplined and making regular systematic investments


Photo: iStockPhoto
Photo: iStockPhoto

I am 29 and unmarried right now, and my goal is to have a corpus of Rs3 crore by the age of 50. I have been investing Rs10,000 per month for the last 1 year via a systematic investment plan (SIP). This month, I invested Rs25,000 each in lump sum SIP. With 2016 coming to a close and foreign exchange reserves at an all time high, should I invest more in lump sum by year end or keep increasing SIP per month?

—Ranobir Dey

To get to a corpus of Rs3 crore in 21 years from now, you would need to save and invest approximately Rs 30,000 per month (assuming a long-term compounded annual growth rate, or CAGR, of 12%). It is good that you have started off with an SIP of Rs 10,000. Your goal now should be to strive to increase this amount to Rs30,000 in a methodical fashion. There would neither be a need or any point in making occasional lump-sum investments to try and time the market, or be influenced by news and data such as the foreign exchange reserves.

The long-term story for the Indian economy is strong, positive, and growth-oriented. An investor should try to capitalise on these by staying disciplined and making regular systematic investments. Try to find sustainable ways to increase your SIPs to get them up to Rs30,000. Over the next few years, you may get married and that would bring additional goals and ambitions that you would need to be approached similarly.

I am 35 and my salary is Rs51,750, of which I invest Rs25,500 in SIPs. My investments are: Rs5,000 in HDFC Prudence Fund; Rs10,000 in Reliance Growth Fund; Rs5,000 in Birla Sun Life Frontline Equity Fund; and Rs5,500 in Birla Sun Life Tax Relief 96 Fund. I want at least Rs2 crore at my retirement. I have an 8-year-old son and I want at least Rs50 lakh for his studies and Rs25 lakh for his wedding. Kindly advise if my investments are in line with my goals or some changes are needed.

—Jigar Parekh

You have three identified goals, with a specific corpus for each with a specific time-frame.

Your son’s education would probably come first, within the next 9 years. Your retirement and the son’s marriage needs will materialise about 10 or so years after that.

Rough calculations using a long-term returns expectation of 12% CAGR indicates that you would need to save and invest Rs25,000 per month for your son’s education, about Rs3,000 per month for your son’s marriage, and Rs12,000 per month for your own retirement.

These total to Rs40,000 a month, which is not too far away from the Rs 25,000 you are investing in SIP today. If you can, over the next few years, stretch to reach this number, you will be well on your way. However, it would also be imperative for you to structure your investments in a way that you can segregate them by the goals they are invested for. You should create three separate portfolios, title them each with their goal, place specific funds in each of them and monitor and manage them separately.

The funds that you are investing in are good funds (although there are better multi-cap funds such as Franklin India Prima Plus that you can consider).

Make sure that you invest sufficiently and nurture your investments through the periods of investment tenures.

I am 31 and working in the private sector. My salary is Rs45,000 per month. At present I invest Rs5,000 per month in a recurring deposit (RD) and Rs12,000 per annum in an insurance policy. I want to generate around Rs 2.5 lakh in next 6 years for purchasing a house. Now I want to invest Rs15,000 per month. How do you suggest I invest this money in mutual funds for the future house and Public Provident Fund (PPF) for retirement investment? Also, please suggest a tax-saving plan.

—Kiran Shampi

The goal of generating Rs2.5 lakh can be achieved quite easily in the time frame that you are suggesting. You would simply need to invest about Rs 2,500 every month in a fund such as HDFC Balanced Fund to get there in that time, without taking much risk.

However, as you have Rs15,000 to invest, I would recommend that you put away the rest of the money for your retirement or other future financial needs. A diversified portfolio of mutual funds would be your best bet for such a long-term investment.

Invest Rs7,500 in Birla Sun Life Frontline Equity Fund and splitting the remaining money between Mirae Asset India Opportunities fund and ICICI Prudential Value Discovery fund would make a good long-term portfolio.

For tax-saving investments, consider Axis Long term Equity fund. You may also look at Mint’s curated list of 50 funds: http://mintne.ws/2ax8SYA.

Srikanth Meenakshi, co-founder and COO, FundsIndia.com.

Queries and views at mintmoney@livemint.com.

READ MORE