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Photo: iStock

Closed-end mutual funds are almost always new fund offers, which do not have prior track record

Closed-end funds are almost always new fund offers (NFOs) that do not have prior track record, except for the fund house or the fund manager

I am 45 and am going to invest Rs5,000-7,000 a month by SIP. I want to invest for the long term, minimum 10 years. Should I go for closed-end or open-ended funds? I want to choose existing funds that are giving good performance. Should I go for 50% equity and 50% debt?

—Pranabes Hazra

Given that you are seeking to invest in existing funds that are giving good performance, your natural choice should be to go with open-ended funds. Closed-end funds are almost always new fund offers (NFOs) that do not have prior track record, except for the fund house or the fund manager. Also, considering your age and that you are an early investor in mutual funds, you should definitely stick with proven open-ended funds. However, given the time frame of your investments, you could take a bit more risk than 50% in equities. I would suggest that you go for balanced funds, which invest about 65-70% in equities and the rest in debt. These funds also manage the allocation dynamically, according to market conditions. Investing in two balanced funds equally would be a good portfolio for you. Aditya Birla Sunlife Balanced 95 fund and ICICI Prudential Balanced fund would make good choices.

I want to invest Rs1,000 each in two SIPs. Please suggest which SIPs would be good. I want one in safe fund and one in risky fund. The objective is to fund my daughter’s higher studies.


You can start your SIP investments in a balanced fund and a broadly diversified equity fund. Overall, this would be an aggressive portfolio, but that would be in keeping with the long-term nature of your investment. For a balanced fund, you can go with ICICI Prudential Balanced fund and for the diversified fund, you can choose Franklin India Prima Plus fund. One thing to note, however, is that you should try to increase the amount of money you are investing through the years. With Rs2,000, even if you invest for the next 15 years, your ultimate corpus would be about Rs11 lakh and that is unlikely to be sufficient to fund higher studies fully.

My wife (28) and I (30) work in private sector. I have been investing in ICICI Prudential mutual fund from last 5 years via SIP and it is working fine. I have also invested in Axis long term equity fund (lump sum of Rs30,000), Reliance Growth Fund (lump sum of Rs10,000) and HDFC Balance fund (lump sum of Rs10,000). I need healthy amount in 5, 10 and 15 years interval for child growth and education purpose. Please suggest suitable funds.

—Mahadev Sawant

Without knowing the amount of your monthly SIP investments, it is hard to predict if you would have ‘healthy’ amounts in different time-frames. The lump sum investments that you have made as of now total Rs50,000, and they could grow to Rs2 lakh in 15 years, which, considering inflation, would not amount to much. So, a lot depends on how much you are investing in your SIP. Considering that you have indicated that you are investing in only one fund, my fear is that you are investing a few thousand rupees at best in your SIP. If that is the case, you would need to increase it significantly to get to point where they will contribute nicely for your life goals.

The right approach would be to have a portfolio of a handful of funds for your monthly SIP investments. If you are investing for a 5-year time frame, a portfolio of funds for Rs10,000 a month consisting of Aditya Birla Sun life frontline equity fund, Kotak Select Focus fund, HDFC Balanced fund, and UTI short term income fund (a debt fund) in equal proportions (Rs2,500 each) would make a good, balanced portfolio. After 5 years, you can withdraw from this portfolio while continuing your monthly investments until time comes for the next requirement, and so on.

I am 49 and earn Rs1 lakh per month. I have a 2-year-old son. I started investing in six mutual funds of Rs10,000 via SIP in ABSL Top 100, Kotak Select Focus, L&T Emerging Business, Mirae Asset Emerging Bluechip, Motilal Most Focused 35, SBI Magnum multi cap. I have been investing in them for the last 5 months. My monthly expenses are Rs40,000. Will this be okay for retirement and education of my son?

—Venkat Krishnan

I have made some assumptions regarding your situation to perform some calculations. I have assumed that you would seek to retire at the age of 60 and that you would seek to continue your current lifestyle (at the current expense level). Also, regarding your son’s education, I have assumed that he would need about Rs6 lakh a year (in current value of money) at the time of his higher education for a period of 4 years, and that this would start when he turns 17 (in 15 years). Based on these assumptions, you would need about Rs1.2 crore of retirement corpus in 11 years and your son would need a corpus of Rs60 lakh in 15 years (his annual need would have inflated to about Rs14 lakh, assuming a conservative inflation rate of 6% in education costs). Since you would not be having an active income post retirement, it means that you need to generate these corpuses in the next 11 years (a little less probably, accommodating for the growth of corpus in the 4 years remaining for your son’s education). Doing the math, the monthly investment requirement (assuming a 12% annual return from your investments) works out to a little more than Rs70,000. And that is close enough to your current investment level of Rs60,000. I would suggest that within a year or two, you increase your investment every month by Rs10,000 or Rs20,000 so that you can reach your goals comfortably.

Srikanth Meenakshi is co-founder and chief operating officer,

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