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Business News/ Money / Q&a/  Small-, mid-caps work over long term
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Small-, mid-caps work over long term

A portfolio that has equal distributions to ICICI Prudential Nifty Next 50, Mirae Asset India Equity fund and Parag Parikh Long term equity would be a good, aggressive long-term portfolio
  • Equity returns don’t happen in a smooth upward curve and there would be a lot of volatility on the way
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    (iStock)

    I am 26 and will start earning about 60,000 a month from June. I plan to invest at least 20,000 every month in mutual funds. I have already invested 1.1 lakh in SBI Bluechip Growth Fund and recently started systematic investment plans (SIPs) in L&T Midcap and Tata India Tax Saving Fund. All the SIPs are for 1,000 a month. Should I continue with these? Should I increase the SIP amounts?

    —Monil Shah

    At present, you are investing 2,000 every month in two funds, and 12,000 a year in a tax-saving fund, which I presume is for you to take advantage of your 80C deduction. Ensure that this is adequate for the deduction requirement.

    For the remaining amount, you can create a good, well-diversified portfolio of funds for the long term. A portfolio that has equal distributions to ICICI Prudential Nifty Next 50 fund, Mirae Asset India Equity fund, Franklin India Equity fund, and Parag Parikh Long term equity would be a good, aggressive long-term portfolio. Considering your age, and penchant for investing, such a portfolio will yield healthy returns over the long term.

    I am 22 and invest 500 each in SBI Small Cap, Reliance Small Cap, Mirae Asset Emerging Bluechip, L&T Mid Cap and SBI Bluechip. I also invested a lump sum of 5,000 in Mirae Asset India Equity. I have an investment horizon of 25-30 years and I intend to increase my investments periodically. Will I be able to accumulate a corpus of 4-5 crore.

    —Harshvardhan Saraf

    If we take your goal to be 4 crore in 30 years, you would need to invest around 13,000 (at 12% long-term portfolio return) every month to get there. So, as you indicate, you would definitely need to increase your SIP contribution over time. Right now you are investing 3,000 a month, and if you increase it every year and bring it up to 15,000 in 4-5 years, you would be able to reach your target. Your SIP portfolio has a small- and mid-cap flavour to it, which in itself is not a bad thing for a young person who is starting to invest. But keep in mind that equity returns don’t happen in a smooth upward curve and that there would be a lot of volatility on the way.

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

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    Published: 22 May 2019, 09:20 PM IST
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