I am 39 and I want to build a retirement corpus which I will require after 15-20 years. I am currently investing ₹15,000 every week in ICICI Prudential Multicap Fund, ₹15,000 every week in Invesco Midcap Fund and ₹15,000 every week in Tata small cap fund. The other goal is my six-year-old daughter’s education. I have time to save till she turns 22. For this, I am already investing ₹10,000 every week in Axis Small Cap Fund and ₹10,000 every week in SBI Banking and Financial services fund. Will I be able to meet my goals?
You are investing impressive sums of moneys for reaching your financial goals. Although you have not indicated the amount that you require for each of your goals (retirement and daughter’s education), you can rest assured that you will have sizeable corpuses for each of your goals over the tenures you have mentioned. For retirement, you are investing ₹1.8 lakh a month ( ₹45,000 per week), which in 15 years will grow to more than ₹9 crore. For your daughter’s education, your investment of ₹80,000 a month will grow to more than ₹4.5 crore in 16 years (both figures assuming an average annualized returns of 12% over the respective terms). Also, it is good that you are investing separately for each of your goals with specific timelines. This is an aspect that many investors ignore at their own peril.
Coming to the funds you have chosen, you have two very aggressive portfolios. In the first portfolio, you have more than two-thirds of your money going to small- and mid-cap segments of the market. In the second portfolio, you have half your money going to a theme fund. Such choices load your portfolios with an amount of risk that could impact you adversely at the time of realization of the funds. My suggestion would be to moderate the risks in both portfolios by adding large-cap funds and some low-risk debt funds. In your retirement portfolio, you can replace the multi-cap fund with a large-cap fund from the same fund house (ICICI Prudential Bluechip). You can also get some extra diversification by adding Aditya Birla Sun Life Equity into your mix (as a fourth fund) by lowering the allocation to the other two funds. You can moderate the risk further by adding a short duration debt fund such as SBI Short Term. In the second portfolio, you can lower the allocation to the thematic fund and add in HDFC Top 100 fund, and do the same with the small-cap fund by bringing in a diversified fund such as Mirae Asset Emerging Bluechip. Such diversifications will give you broader exposure to the market and also lower your risks by spreading out your investments across funds and fund houses.
Srikanth Meenakshi co-founder, FundsIndia.com, (he is no longer with the firm). Queries and views at email@example.com