Photo: iStock
Photo: iStock

Long-term portfolio should depend on age, time frame and risk profile

  • My advice to you would be to accumulate 6 lakh in secure savings and keep it aside before you consider moving to moderately high-risk options
  • From an asset allocation perspective, I would recommend a 40:60 allocation between equity and debt

I have about 2 lakh in three equity funds. I have stopped the SIPs (systematic investment plans) now. I have another 1 lakh in SBI Liquid Growth Direct. Also, I want to start investing 40,000 a month in funds. I need about 6 lakh by next year. I have a moderately high-risk profile. Please advise.

—Ojas

You require 6 lakh in a year’s time. Currently, you have 2 lakh in existing investments and another 1 lakh in a liquid fund. On top of this, you are planning to save 40,000 a month. My advice to you would be to accumulate 6 lakh in secure savings and keep it aside before you consider moving to moderately high-risk options. This is because one year is too short a time frame to take any risk. So, keeping it safe in short-term debt instruments (like savings account, fixed deposits or liquid funds) would be prudent. You should move your current equity investments to liquid funds in the respective fund houses, leave the SBI liquid fund where it is, and invest 40,000 a month for seven to eight months either in a liquid fund or an ultra short-term fund (like a Kotak Savings fund or L&T Ultra Short Term fund). Once you have ensured that you have met the need for 6 lakh in a year, you can start investing in a riskier portfolio for the longer term. Such a portfolio can take diversified risks in the form of different types of equity funds and some debt funds, the blend of which can be determined by factors such as age, the time frame of your investments, and your risk profile.

We have around 70 lakh in fixed deposits and liquid cash that we want to invest to buy a flat three years later. Can you advise the best asset allocation mix and funds?

—Kirti Krishnan

For a medium-risk appetite and a three-year time horizon, your investment portfolio cannot afford to be too adventurous. From an asset allocation perspective, I would recommend a 40:60 allocation between equity and debt. You may want to keep 50% of your debt portfolio—that is 30% of your overall portfolio—in fixed deposits. The remaining 50% can be invested in liquid and short-term funds (since your investment time frame is three years, you can reap some tax benefits for your long-term gains by virtue of indexing your cost of investment). The equity portion (40% of your overall portfolio) can go to a mix of three to four funds in the large- and multi-cap spaces. Funds such as Reliance Large Cap fund, Invesco India Growth Opportunities fund and Principal Multi-cap Growth fund will fit the bill nicely.

Srikanth Meenakshi is co-founder and former chief operating officer, FundsIndia.com. Queries and views at mintmoney@livemint.com

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