Mutual fund investment: Never take undue risk to achieve your target
Surya Bhatia, managing partner of Asset Managers, answers query on mutual fund investment.
I am 38 years old and my monthly salary is ₹58,000. I’ve the following SIPs: ABSL Frontline Equity Fund Regular Growth (₹1,000), ICICI Value Discovery Fund Regular Growth (₹1,000), ICICI Bharat 22 Fund (₹25,000 lump sum); SBI Small Cap fund (Direct) G (₹2,000). How is my choice of funds? I plan to start a new SIP of ₹1,000 either in Mirae Asset Emerging Bluechip fund(Direct) G or Canara Robeco Emerging Equities (Direct) G. Which should I choose? I also want to start an SIP of ₹1,000 in a midcap fund. Is L&T Midcap fund good? Is my allocation good? I want to create a corpus of ₹1 crore by 2034.
The current portfolio composition is of four funds spread across two large-cap funds one being an exchange-traded fund, one being a value strategy fund and another being a small-cap fund. The SIP is happening in three funds for ₹4,000. And with the addition of large-and-mid-cap as well as mid-cap category, you have the allocation in order.
Between the two funds proposed in the large-and-mid-cap category—Mirae Asset Emerging Blue Chip and Canara Robeco Emerging Equity—there is not too much to choose as far as performance is concerned but you may find Mirae Asset Emerging Blue Chip a shade more consistent. Further, the next ₹1,000 to be added in mid-cap funds can be done in L&T Midcap fund which is a good option. This will total your SIP book to ₹6,000 per month which you can then try to increase as and when your income permits or whenever there is increase in your salary income.
Also, going forward, you may also merge the two large-cap funds in your portfolio in one fund as it is good to have a couple of mid-cap funds in the portfolio for diversification versus having two large-cap funds.
The principal corpus, if saved for 16 years, becomes ₹11.52 lakh and if we assume the annual earning rate at 15%, the accumulated corpus value is ₹47.9 lakh. If your target is to cross ₹1 crore, then you need to surely increase the monthly savings aggressively. It is recommended that you try to increase the savings at today’s cost of your living and also don’t end up taking undue risk to achieve your target.
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Surya Bhatia is managing partner of Asset Managers. Queries and views at email@example.com