Moderate risk investors with long-term goals can have 75% allocation to equity, and the rest to debt
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I am a moderate-risk investor with a long-term investment horizon of 15 years. Every month I invest Rs5,000 each by SIP in SBI Blue Chip Fund and SBI Magnum Multicap Fund. I want to increase my SIP amount to Rs25,000 a month. Which funds should I invest in?
You are presently investing in a 100% equity portfolio that is made of a large-cap fund and a diversified fund. Both the funds, although from the same fund house, are good and you can continue investing in them. However, now that you are planning to increase your systematic investment plan (SIP) allocation significantly, it is a good time to take a step back and look at your overall asset allocation.
As I see it, for a moderate risk investor with a long-term investment horizon, a 75% allocation to equity and the rest to debt would be a good allocation plan. Such a plan would give you good overall growth while containing the downside in bad years, should they occur.
For this asset allocation, considering your current funds, I would add three more funds—one in the mid-cap category, a balanced fund, and a debt fund—to your portfolio. For the mid-cap fund, you can go with Invesco India Mid-cap fund, and for the balanced fund you could go with HDFC Balanced fund. ICICI Prudential Short Term fund would be a good debt fund to go with. You can invest Rs5,000 each in these funds as well. That would bring your overall debt allocation to 25% (20% from the short-term debt fund and about 5% from the debt component of the balanced fund).
My monthly in-hand salary is Rs62,000 and household expenses are Rs20,000, plus dependent expenses of Rs10,000 and a home loan EMI of Rs11,000. I have been investing about Rs22,000 in mutual funds via SIPs for the past 3 years. All these are direct and growth plans: Rs2,000 each in ICICI Prudential Long-Term Equity; SBI BlueChip Fund-Equity; HDFC Top 200; HDFC Prudence; HDFC Mid-Cap Opportunity; and HDFC Taxsaver. And I invest Rs5,000 each in ICICI Prudential Focused Bluechip Equity Fund and ICICI Prudential Value Discovery Fund. Do I need to change any scheme? My goals are:
1. Rs8 lakh as downpayment for a house (this would be my second property) in 2 years.
2. Rs75 lakh for child’s education in 15 years.
3. Retirement after 25-30 years, the future cost of which is Rs2.5 crore.
Considering that you are investing in an overwhelmingly equity-heavy portfolio for the past 3 years, during which period the market in general and these funds in particular have done very well, you should have more than Rs10-12 lakh in your portfolio by now. Since you need Rs8 lakh in a couple of years, I would take that amount from your portfolio after 12 months from now and put it in safe keep (liquid funds or equivalent) so that it is available for your downpayment.
After that you can continue on with your SIPs, but with one small change. You should split your SIPs into two portfolios—one for Rs15,000 to take care of your child’s education in 15 years, and the remaining Rs7,000 to continue on for your retirement. After your child’s education needs are taken care of in 15 years, you can divert that SIP amount as well towards your retirement corpus and you will very likely have the Rs2.5 crore you need for this goal.
All the schemes in your portfolio are good with steady track records of investment performance, and you can continue with these.
Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.
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