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
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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.
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.
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, FundsIndia.com.
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