Home / Money / Personal Finance /  Current returns from equity funds do not guarantee future performance

I invested in an equity-linked savings scheme (ELSS) three years ago, which has returned around 13%. I wish to start investing in mutual funds more proactively. I can liquidate a few deposits worth 10 lakh and can invest 40,000 per month. Please suggest suitable schemes for lump sum and SIP (systematic investment plan) investments.

—Anuj Adlakha

For many people, ELSS is the gateway funds to mutual fund investing, and it’s no surprise that you have taken that path as well. However, please be aware that the 13% return you got from your ELSS investment is not in any way guaranteed or predictive of returns that you are likely to get from your mutual fund portfolio in the future. Markets are volatile in the short term and you’ll need to stay invested to reap the benefits of equity investing.

If you are investing for the long term—say, for your retirement in 20 or 25 years—you can take risks with how you invest (provided you can stay invested through market volatility) and choose equity.

However, if it is a short- to medium-term investment, you would need to be more cautious and take lower exposure to equity. This holds good for both lump sum investment and SIPs. For example, if you are investing with a three-five-year time frame (similar to your ELSS investment), I would recommend placing the 10 lakh in a conservative portfolio with 60% in debt funds and 40% in equity funds. You should do the same for your SIP investments as well when investing for this time frame.

This also takes into consideration the fact that you are just getting started into mutual fund investing. You can choose from Mint 50’s curated list of funds (find the list at bit.ly/3a7tR25).

Currently, my net worth is around 5 lakh. I invest 3,000 each in Canara Robeco Emerging Equities, Aditya Birla Sun Life Frontline Equity, Kotak Emerging Equity, Mirae Asset Midcap Fund, SBI Magnum Multicap Fund and Kotak Standard Multicap Fund. I am 36 years old and planning to invest aggressively ahead too to build a corpus of 1 crore by around 2028. am I on the right track?

—Sankalp Jain

Your fund choices are fine, keeping in mind your aggressive intent and the time frame. You are investing 18,000 in an aggressive all-equity portfolio. You also have 5 lakh invested, I would presume, in an aggressive portfolio. Assuming you have nine years to go (until the end of 2028), your total investment will be around 25 lakh. Even an aggressive long-term return assumption of 12% will get you close to 50 lakh in this period. To accumulate 1 crore, you will need to increase your monthly investment to around 45,000. If you do so, and if you maintain a similarly aggressive portfolio and the markets return well over this period, you have a good chance of reaching the target.

Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at mintmoney@livemint.com

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