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Products that guarantee returns are, typically, conservative in nature

  • Switch to mutual fund SIPs for your long-term investing needs, and increase your monthly investment considerably to get to your target
  • For the allocation to small-cap, consider adding HDFC Small Cap Fund into the mix and splitting the allocation with the Reliance Small Cap Fund, which you already have

I want to invest 5,000 each month in SBI Life Retire Smart Fund for 16 years. It has already been two years since I made the first investment. Please advise whether I should move to another fund or change my investment in order to accumulate 4 crore in the next 16 years

—Name withheld on request

There are two issues with your question—one, the product that you are talking about (and investing in) is not a mutual fund product, but a unit-linked insurance product (Ulip). Also, it appears that this is a product that guarantees a certain amount of return to the investor, which implies that it is a very conservative investment vehicle.

Two, even if you were investing in a mutual fund, investing 5,000 a month for 16 years means you would be investing Rs9.6 lakh total. It is very improbable that this amount will turn to Rs4 crore in this period (it would mean an annualized return of more than 30% sustained for 16 years, which has never happened). Moreover, it is impossible for it to happen with this investment-cum- insurance product.

So, my advice to you would be to switch to mutual fund systematic investment plans (SIPs) for your long-term investing needs, and increase your monthly investment considerably to get to your target.

I am a 27-year-old bachelor and I want to accumulate Rs2 crore by the time I turn 50. I plan to use this money to travel the world. To this end, I am investing 65,000 in mutual funds through direct plans since 2015. Of this amount, 5,000 in Reliance Small Cap Fund, and 15,000 each in in Kotak Emerging Equity Scheme, Parag Parikh Long Term Equity Fund and Aditya Birla Sunlife Frontline Equity Fund. For debt, I save about 9,000 per month in my Provident Fund account and 2,000 each month in Public Provident Fund (PPF). Could you please evaluate my portfolio and suggest changes in my mutual fund investments, if necessary?

—Sanjay Kumar

It is not quite clear from your question whether your investments in mutual funds are ongoing SIPs or if they were one-time investments made four years ago. If they are SIPs, then you are very well-positioned to reach your goal of accumulating 2 crore long before you reach 50 years of age. You might even achieve it by the time you turn 40 years old.

However, if they were one-time investments made a few years ago, they would not be enough, just by themselves, for you to reach your goal, since this money would grow to only about 15 lakh in the given time frame of 23 more years.

If this is the case, then you should start an SIP for about 20,000 a month (or as much as you can invest) in a diversified, aggressive portfolio. From among the schemes you have selected for this purpose, you can continue investing in Parag Parikh and Aditya Birla Sunlife funds. You can consider replacing the Kotak Emerging Equity Fund with Kotak Standard Multicap Fund. For the allocation to small-cap, consider adding HDFC Small Cap Fund into the mix and splitting the allocation with the Reliance Small Cap Fund, which you already have.

Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.

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