I am 46 years old and am due to retire in 14 years. I work in a state-run organization. I have been investing Rs4,000 per month in HDFC Top 200 and HDFC Equity since the last two years and Rs4,000 in Sundaram BNP Paribas Sundaram Mid Cap since the last one year. What will be my corpus after 14 years if I continue the investments? Are these investments sound or should I modify them?
You are on the right track. You should have investment baskets meant for the long term. And in these long term baskets, you can take higher risk and hence equity exposure.
To answer your question on your corpus after 14 years, there will be one variable factor—the rate of return these regular monthly investments will be generating over this period. There are two ways to arrive at this magical number. One reasonable and a moderate way to ascertain is to consider return that is 2-3% higher than the inflation rate. Now considering the average inflation is 9%, the annualized return your portfolio will generate will be around 12%. Now the fixed factors are savings of Rs8,000 per month over 14 years, which means a principal investment of Rs13.44 lakh. Based on this and an annualized return of 12%, the corpus at the end of 14 years stands at Rs34.83 lakh, a net gain of Rs21.39 lakh.
In case you believe this return is conservative, you can pick another alternative, which is more aggressive—consider a return double than that of the country’s gross domestic product and this in your case means a return of 15-16%. All other factors remaining the same and an annualized return of 15%, the corpus at the end of 14 years stands at Rs66.88 lakh, a gain of Rs31.27 lakh.
To give you a different perspective, a return of 12% will double your money in six years. At 15%, the same thing happens in less than five years.
Coming to your schemes, all three funds in your portfolio are good performers. HDFC schemes have been consistent performers and you can consider holding them. Sundaram Select Mid Cap also has done well but has been patchy during the last few quarters. As your period of holding is long, you need to evaluate the performance of your funds regularly but don’t change the funds if it lacks performance for around two quarters. Also, try to understand the reason of its nonperformance. Keep checking underperforming schemes actively and only if they are not performing continuously, consider changing them.
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