Ask Mint Money | For 3-year horizon, start with equity-oriented hybrid funds

Last month I started a systematic investment plan (SIP) from my online trading platform and clicked on IDFC Small- and Midcap Equity fund’s growth option. I wanted to invest in IDFC Premier Equity Plan A. Next day I received a confirmation email from IDFC Sterling Equity fund. Please tell me if these two plans are the same and if not how can I request to switch to IDFC Premier Equity Plan A?

-Mangesh

IDFC Sterling Equity fund is same as IDFC Small- and Mid-cap Equity fund—the scheme was renamed late last year. IDFC Premier Equity fund is a different fund. However, both the funds—Sterling and Premier—are managed by the same fund manager. IDFC Premier equity fund is the more conservative of the two with some exposure to the large-cap segment of the market as well.

You indicate that you started the SIP with an online platform. Some online platforms allow you to switch funds (at least within the same fund house) in the middle of a SIP. Verify if your platform allows you to do so. If not, you would need to stop the ongoing SIP and start a new one.

I want to go for my higher studies in the next three years. I can invest Rs 20,000 per month in mutual funds (MFs) that will give me decent returns. I have invested in HDFC Top 200. Please suggest funds that are good for the short-term.

-Kalpana

Having a clear timeline is very helpful for investment planning. For a three-year time-frame, you should start with a portfolio of equity-oriented hybrid funds such as HDFC Balanced and Birla Sun Life ’95. You can hold on to your investment in HDFC Top 200, but that is not a fund that is suited for a short-time horizon like three years. Your SIP portfolio should have a debt component to it and equity-oriented hybrid funds do a nice job of providing that balance for you.

You should invest in these funds for the next two years and for the final year of your investment, you should switch over completely to debt funds such as short-term debt funds (or better, you should make the choice of the type of debt funds two years from now). Investing in this manner will ensure that your portfolio will take only as much risk as it can take and not more. It will also ensure that the investments made in the last year of your portfolio are not subject to exit loads when you need to redeem them.

Srikanth Meenakshi is founder and director, FundsIndia.com.

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