My wife and I have eight goals like education, child’s wedding, retirement, emergency corpus and perpetual travel amounting to investments of around ₹1 lakh per month. Should we build a basket of mutual funds consisting of debt, equity and multi-caps for each goal or should we just choose one fund for one goal. Also, how can we track individual goals over time?
With several goals to plan for, it is definitely important for you to approach your investments in a planned manner so that you can track how you are progressing towards your targets. Every goal has a time frame associated with it. Some of these time frames (like for education) are definite, while others are more fluid. Nevertheless, the time frame should primarily determine the constituents for specific goals.
Every such portfolio should be diversified and appropriately balanced to suit its needs. For example, a very long-term portfolio (like a retirement portfolio) could be an all-equity portfolio that could weather market storms during its investment tenure and give handsome returns. Shorter term goals such as travel or emergency corpus would have very little, if any, of equity in it.
Fixed time-horizon goals such as education should be closely monitored and safeguarded as the time of utilization draws near.
Thus, each portfolio requires attention—both in terms of how they are designed, monitored and acted upon in different times. Doing this once or twice a year should suffice.
In terms of tracking, using a platform definitely helps as it provides up-to-date net asset value and returns information. However, with a little effort and with the use of consolidated account statements, one can have a tailored spreadsheet monitoring solution that will show you an accurate picture of where you are.
I invest ₹5,500 via systematic investment plans (SIPs) in Axis Long Term Equity Growth, Mirae Asset Tax Saver, Parag Parikh Long Term Equity Growth, Franklin India Feeder US Opportunities and Axis Small Cap. I want to invest for 20 years and will increase SIPs every year by 5-10%. I also plan to add extra money to the SIPs. My goal is to accumulate ₹1 crore. Will I be able to achieve my goal?
Your investments are fine. However, over the time frame you mentioned, it would be good to tone down your return expectations to 9-10%. In that case, you will need to increase savings by 13-14% every year. Also, you have not mentioned any debt holding. We hope you do hold traditional deposit options or debt funds. If you don’t, ensure you hold an asset allocated portfolio. As your corpus grows, you need some stability to your equity-heavy portfolio and that can only come from debt and a small proportion of gold if you like that as a diversifier.
Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at firstname.lastname@example.org