I am investing 3,000 per month In L&T Infra (G), 3,000 per month in IDBI Nifty Junior fund (G), 2,000 per month in UTI Energy Fund (G), 1,000 per month in SBI PSU Fund (G), 1,000 per month in ICICI Discovery Fund (G) and 1,000 per month in Quantum Long Term Equity (G) for the last six months. I want 20-25 lakh in seven-eight years. I am an aggressive investor. Please advise.


To create a corpus of 20 lakh in eight years using the diversified mutual fund route, you would need to invest about 13,000 every month (assuming a 13% compounded annual growth rate or CAGR over the next eight years). You are currently investing 11,000. At this rate, you will reach your target in nine years.

Regarding schemes, your current investments are a bit scattered. A better portfolio would be as follows: systematic investment plans (SIPs) of 3,000 each in Quantum Long Term Equity Fund, ICICI Prudential Dynamic fund and HDFC Top 200 fund and an SIP of 2,000 in ICICI Prudential Discovery Fund. If you plan to add another 2,000 to your portfolio, you can also consider adding IDFC Premier Equity Fund into the mix.

I am 34 years old and plan to invest a lump sum of 50,000. I want maximum exposure to large-cap, followed by mid-cap and least small-cap. What are the best options among tax-saving mutual funds?

-Shailesh Sharma

Tax-saving mutual funds are broad market multi-cap mutual funds—they invest in companies of all sizes. However, typically, their exposure to large-cap stocks is the highest, followed by mid- and small-cap stocks, which is what you want. For example, the portfolio of highly recommended Fidelity Tax Advantage fund (as on 28 February 2011) is 70% in large-caps, 19% in mid-caps and 11% in small-cap stocks. In the case of Religare Tax Plan, another recommended fund, it is 61% in large-cap, 26% in mid-cap and 13% in small-cap stocks.

Is it better to invest in gold or equity mutual funds?

-Sharad Modi

Historically, equity market returns have outperformed gold. Gold has performed very well in the recent past but despite the spectacular rise, over the last 10 years, gold has returned about 17.3% CAGR. For the same period, the Nifty has returned 19% CAGR and HDFC Top 200, a top-rated fund, 30% CAGR. However, one can argue that the rise in gold prices has been a lot less volatile than the rise of the equity markets and say that gold is a “safer" investment avenue.

Both equity and gold should have a place in your portfolio, just as debt investments. In a long-term portfolio, equity funds should form the core, while gold and debt investments should be added for balance and stability.

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