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If the goal 5 years away, don’t take too much risk with your money

A combination of hybrid funds and large-cap funds will get you to your mid-term goals comfortably

I am 24 and I work in an information technology company. I plan to get married in the next 5 years, for which I want to save Rs10-15 lakh. I can save up to Rs15,000 per month now. Please suggest some schemes to invest in. I want the returns to be tax exempt.

—Aanya Dange

If you invest Rs15,000 every month for the next 5 years, there is a very good chance that you will have a corpus that would be in excess of Rs10 lakh. Even assuming an annualized 10% return, you could have about Rs12 lakh in this period. Hence, I would recommend that you not take too much risk with your portfolio. A combination of hybrid funds and large-cap funds will get you there safely. I would recommend a monthly systematic investment plan (SIP) portfolio with four funds: a large-cap fund such as Franklin India Bluechip for Rs4,000, a couple of balanced funds like HDFC Balanced and Birla Sun life Balanced ’95 for Rs3,000 each, and a short-term debt fund such as HDFC Regular Savings for Rs5,000. Such a balanced portfolio with measured risk quotient would see you through your investment horizon safely.

I wish to generate Rs1 lakh in next 9 months. Considering the time-frame, I think it is wise to invest in debt funds. How much money should I put in an SIP in order to generate this amount. Kindly suggest appropriate funds. I can save Rs6,000 a month.

—Shyam Randhava

Given the very short time frame that you have to reach your target, it would practically be impossible to invest your way towards it. For one, debt fund returns are on the decline these days due to relatively low interest rate situation. Also, for a short time frame, you will have to bear the full tax burden on your returns since you will not get any beneficial tax treatment like indexation when you invest for a period that is less than 3 years. Considering these factors, you can at best hope for a net (post-tax) return of about 5-6% from your debt fund investment. Hence, it would be very difficult, if not impossible, to generate this from a saving of Rs6,000 per month. You would need to invest about Rs10,000 a month to be confident of reaching your target. If you can invest only Rs6,000, you can still do so, but you should be prepared to bridge the gap at the end of 9 months with alternate sources of funds. You can invest in short-term debt funds such as UTI Short-term Income and ICICI Prudential Short-term Income funds.

I retired from a PSU organisation 6 months ago and have about 20 lakh in my kitty. I wish to generate an income stream using a systematic withdrawal plan. My monthly expenses are about 0,000, and the pension meets a very small part of it. Can you suggest some plans? If 0 lakh is a very small corpus, I can liquidate my real estate holdings, which can fetch me another 0 lakh.

—Ashish Yadav

With monthly expenses of Rs40,000, you are looking at an annual requirement of Rs4.8 lakh. The corpus of Rs20 lakh would, even if invested in market-linked instruments, last you only about 5-6 years and that is not taking inflation into account. Post that, you would need to dip into your other savings and sources of income such as your real estate. My recommendation at this time would be to supplement your pension right now with a source of income through a post-retirement employment. That way, you would be able to postpone dipping into your retirement corpus for a few more years.

In terms of planning your investments in your retirement years, you can employ a simple process. Any money you would need for the next 3 years should be kept in very low-risk instruments such as fixed deposits or money market funds. For example, at this time, you would need to set away about Rs12-15 lakh for this purpose from your corpus. The remaining amount, after this set-aside, can be invested in a balanced fund or such relatively low-risk market-linked instrument. And as you approach the end of your secure money, you can start moving your risk money into secure options. You can keep repeating this process moving forward with annual asset reallocation plan, and have a well-planned retired life.

I am 31 and earn Rs70,000 a month. I can save about Rs30,000. A friend is suggesting that I invest in the infrastructure theme with a 5-year horizon. Can you suggest some good schemes? What is the average return I can expect?

—Nilim Sharma

You can invest in an infrastructure-themed fund as your friend suggests, but you should limit your exposure to such funds in your portfolio. That is to say, you should definitely not invest all the Rs30,000 every month in such funds. You can invest, say, Rs3,000 to Rs5,000 and invest the remaining amount in a broader range of funds that would cover the market in a diversified manner. For example, a portfolio consisting of Birla Sun life Frontline Equity, Franklin India Prima Plus, HDFC Mid-cap Opportunities, and Mirae Asset Emerging Blue-chip funds; along with an infrastructure-themed fund would make a well-diversified portfolio. You can also add some debt funds to this portfolio to give it balance and reduce risk. Such a portfolio has the potential to return about 12-15% annually subject to market fluctuations.

Srikanth Meenakshi is co-founder and COO, FundsIndia.com.

Queries and views at mintmoney@livemint.com

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