Instead of taking more risk, increase savings

  • In the pursuit of reaching targeted amount, don’t take undue risk
  • The asset class allocation needs to be spread out i.e. exposure to mid-caps and small-caps

I am 45 years old and I am investing through SIPs in the following funds since July 2017: 3,000 each in ABSL Tax Relief’96 (ELSS), Motilal Oswal Long Term Equity (ELSS), ABSL Equity Advantage, ABSL Frontline Equity, Mirae Asset India Equity and Kotak Standard Multicap; 4,000 in HDFC Hybrid Equity; and 5,000 in Motilal Oswal Multicap 35. My goal is to build retirement corpus of at least 1.50 crore after investing for 12-13 years. Is my fund selection okay?

Sumeet Arora

Your current investments of 27,000 per month are spread across eight schemes. You have one large-cap, one large-and-mid-cap, three multi-caps, two ELSS funds and one hybrid equity fund. The number of schemes are on the higher side and should be pruned. The asset class allocation also needs to be spread out i.e. exposure to mid-caps and small-caps can also be considered if you have the required risk profile for higher degree of risk within the equity asset class. This is important as your current portfolio is only equity investments. At the same time, the investment horizon is long term which is a prerequisite for an equity portfolio.

Scheme selection: You need to change the large-and-mid-cap scheme. Instead of Aditya Birla Equity Advantage Fund, consider schemes like Mirae Asset Emerging Blue Chip and Invesco India Growth Opportunities Fund. You have good multi-cap funds but reduce the number of schemes from three to two. Likewise, reduce ELSS funds from two to one. You can add mid-caps; Axis Mid-cap and Franklin Prima Fund are good options. In the small-cap space, HDFC Small Cap and Franklin India Smaller Companies are consistent performers. However, this category carries a higher degree of risk within the equity category.

If you save at the current rate for the next 13 years, the principal accumulation will be 42.12 lakh. If the earning rate is taken at 13%, the corpus becomes 1.10 crore. At 15%, it reaches 1.30 crore.

But in the pursuit of reaching your targeted amount, don’t take undue risk. Instead try to increase your savings over a period of time as your income goes up.

Surya Bhatia is managing partner of Asset Managers. Queries and views at