Photo: iStock
Photo: iStock

For your near-term needs, sell your debt funds so that the equity funds can get more time to grow

When you need money in 3 years, please use debt funds as your first choice for withdrawals so that you can give your equity fund investments more time to grow in the market

After meeting all my monthly expenses, I can set aside Rs20,000. Currently, I invest in an SIP of Rs2,500 in Mirae Assets Emerging Bluechip Fund. Scrips bought till date are: Aditya Birla Capital, Capital First Ltd, IDFC Bank Ltd and Steel Authority of India Limited. I need advice on how to deploy Rs20,000 every month, considering  I want 50% of benefits at end of 3 years and the rest after 5 years.

—Sanjay Shamnani

Considering the fact that both your investment time-frames are relatively short-term in nature, I don’t think you can take too much risk with your SIP portfolio. Also, the fact that you have quite a bit of market exposure via direct equity investments, tells me that you will have to tread a moderate risk path with your monthly investments.

Considering this factor, I would suggest that you go for a 50-50 equity to debt ratio with your Rs20,000 monthly amount. You are already investing 12.5% of your monthly amount in a large- and mid-cap fund. You can add a large-cap fund such as Franklin India Bluechip fund for Rs5,000, and a diversified fund such as Kotak Select Focus for Rs2,500. For the remaining Rs10,000, you should go for a couple of short-term debt funds—HDFC Regular Savings fund and UTI Short Term Income fund would be good alternatives for this purpose. When you need money in 3 years, please use your debt funds as your first choice for withdrawals so that you can give your equity fund investments more time to grow in the market. 

I am 28 years old. My wife and 8-month-old daughter are financially dependent on me. My goals are wealth creation (Rs2 crore) and children's education (Rs30 lakh) in 20 years. I started building a portfolio in December 2017.

In small-cap funds, I have invested in L&T Emerging Business fund and Reliance Smallcap fund . In large-cap funds: Kotak Select Focus Fund and SBI Bluechip fund. In balanced fund: L&T India Prudence Fund and DSP BR Balanced fund.

I also want to exit from an LIC money-back policy of Rs3 lakh cover, with a premium of Rs18,778 a year. I want to buy term insurance cover of Rs1 crore. Other than this, I have invested in Sukanya Samridhi.

—Azad Kalakoti

It is good that you have started planning for your family’s financial future at such a young age, especially considering that you’ve just had a new addition to your family. You are taking the right call with respect to exiting from a money-back policy which provides low cover and likely low investment returns. Moving to a term plan from a well-established insurance company is the right move to make.

To meet your twin financial objectives in 20 years, you need to be saving and investing Rs25,000 a month in two portfolios (one for Rs21,000 and another for Rs4,000, for the large and small corpus targets, respectively). Right now you are investing Rs20,000, which is a reasonable amount. Over the period of next 2-3 years, please make sure you increase this amount to Rs25,000 a month or more. Regarding your portfolio, you are investing in a 90:10 portfolio between equity and debt. You are investing 40% in small- and mid-cap funds, 30% in large-cap oriented funds, and the remaining in balanced funds that would invest across the market when it comes to equities. I would recommend a couple of changes to your portfolio. You can move from L&T Emerging Business fund to L&T India Value fund (a multi-cap fund with a mid-cap tilt). Also, you can increase your large-cap exposure by adding to your SBI Bluechip fund. You can move the allocation from the Reliance small-cap fund to this fund (increasing it to Rs5,000). Once you make these changes, you would have 45% in large-cap oriented funds, 25% in mid-cap funds, and the remaining 30% in balanced funds.

Srikanth Meenakshi is co-founder and chief operating officer,

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