Invest through SIPs so that you can average out your cost of entry in the market

Even if you have a large amount available to invest immediately, do not invest it in one go. Take the systematic investment plan and stagger the investment

We are a 35-year-old couple with dual income and no kids. We have around Rs55 lakh in fixed deposits and liquid cash that we want to invest with the purpose of purchasing a flat 5 years later. Can you advise the best asset allocation mix and specific funds or instruments where we should invest? Our risk appetite is medium to high.


Although you are young and suggest that you have a medium to high risk appetite, given the time-frame of your investment, you would need to be pretty cautious with how you construct your investment portfolio. I would advise a 50:50 equity:debt allocation for your portfolio, with part of the debt coming from a balanced fund (equity-oriented hybrid fund). In such an allocation, you would invest 40% in a balanced fund, 20% in a diversified (multi-cap) fund, and the remaining 40% in debt funds. Overall, this would translate, roughly, to a 50:50 portfolio. Also, please do not invest all your money in one single go. Please invest systematically over the next 12 to 15 months so that you would average out your cost of entry in the market, something you should do especially in a market like the one we are having presently. As far as funds go, you can go with ICICI Prudential Balanced fund for the hybrid fund; Franklin India Prima Plus fund for the diversified choice; and HDFC Regular Savings fund for the debt allocation.

I am 36 years old and my wife is 32. We stay in Delhi and have collective monthly income of Rs1.10 lakh. This is in-hand post-deduction at company level. We have a monthly expense of Rs25,000 (on all the needs).This is low because of support of parents. We also pay premium of around Rs80,000 every year for five life insurance policies. Apart from this, we put Rs1.5 lakh each in PPF every year. I also have around Rs30,000 invested in share market. Since few months I am being suggested by some friends and relatives to go for systematic investment plans (SIPs) and mutual funds. I do not know much about these; hence, I am not confident if I should do so. This lack of confidence is also due the volatile nature of my job. It would be great if can guide me.

—Deepanshu Anand

You are in a great position to start investing in mutual funds for securing your long-term financial future. With support from family and a low monthly expense from your own earnings, the risks of investing in the market are quite low for you. To further mitigate any risk perception, you should first create an emergency fund that will take care of your expenses if something should happen with your job. An amount of about Rs2 lakh would suffice for you given your requirements. Another risk that you should take care of is life risk.

I see that you are investing Rs80,000 a year in 5 insurance policies. These are too many to hold, and I doubt if all of them put together provide sufficient sum assured if something should go wrong. You should consider getting a term policy with a sum assured of at least Rs1 crore to protect your family.

Once these are out of the way, you can confidently invest your monthly savings systematically in mutual funds. If you feel hesitant, you can start with a portion—say 10,000—of your substantial monthly saving of 5,000 and invest it in a balanced fund such as HDFC Balanced fund every month. However, you should note that the sooner you increase this amount and invest in a balanced portfolio of about four or five funds, the better it would be for your future. If you can up your investment to 0,000 per month and invest till you turn 50, your investment kitty could grow to more than crore (assuming an average long-term compound annual growth rate (CAGR) of 12%). Given the fact that you have family support as well as the fact that you are both working, the risk to start investing is minimal. And if you can take care of an emergency fund and get adequate life insurance, you will be set up very nicely for a prosperous investment portfolio.

I have recently started investing in BSL Frontline Equity Fund, Franklin India Smaller Companies fund and Franklin India Low Duration Fund Direct Growth. Can you advise me if these are good funds and also suggest to me a good flexi-cap fund.

—Davinder Singh Kohli

You are presently investing in a large-cap, mid-cap and small-cap fund, and a short-term debt fund. All these funds are excellent funds with good track record of market-beating performance, and you can continue investing in these (assuming you are investing in this as an SIP portfolio). A flexi-cap fund would be a good addition to this portfolio since in such a fund, the fund manager would make the decision as to which part of the market to invest in and when. Such funds have the freedom to invest in any segment of the market and it is up to the fund manager to ensure that the right allocation is made in appropriate market conditions. A fund such as Kotak Select Focus fund, a good performer among multi-cap funds, would be a good fit for your portfolio.

Srikanth Meenakshi is co-founder and chief operating officer,

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