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Business News/ Money / Personal Finance/  How do I explore mutual funds to meet my financial goals?
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How do I explore mutual funds to meet my financial goals?

One of the best ways to invest in equities is through mutual funds.

It is very important to invest in asset classes like equity to grow your savings. (iStock)Premium
It is very important to invest in asset classes like equity to grow your savings. (iStock)

I have investments in bank fixed deposits (FDs), insurance policies and post office schemes and want to explore mutual funds. How do I meet my financial goals that include building a corpus for my children’s education in 15 years and a retirement fund?

—Name withheld on request

It is very important to invest in asset classes like equity to grow your savings. One of the best ways to invest in equities is through mutual funds.

For your children’s education, we are assuming that you may need 1 crore at the end of 15 years. For the same, we think a monthly SIP (systematic investment plan) of 15,000 with an annual step-up of 5% would be appropriate, assuming a return of 10%.

For your goal of retirement, we are assuming that you may need 2 crore after 20 years. For the same, we think a monthly SIP of 16,000 with an annual step up of 5% would be appropriate assuming a return of 10%. (The assumed return of 10% is on the conservative side considering the historical returns.)

You must consider investing in schemes across different market caps. A majority of your SIPs should be in large- cap funds like Nifty 50 Index fund. Some allocation should be made to mid- and small-cap funds. You can reach your goals earlier if you increase the amount of your investments.

For diversification of your portfolio, we would suggest you to invest in debt instruments like debt mutual funds, corporate bonds and FDs which will give you consistent and predictable returns. This will help reduce the overall volatility of your portfolio.

We also advise you to maintain an emergency corpus equivalent to six months of your salary or income. This fund can be kept in liquid or ultra short mutual funds. Additionally, if you haven’t already, consider taking medical and life insurance to provide financial protection to your family in case of any unfortunate events.

Please note that these calculations are based on the assumptions and information provided. You may consult with a financial advisor for personalized advice.

I recently received a lump sum payment of 10 lakh from a nominee bank account after my father’s death. How should I go about investing this corpus?

—Name withheld on request

Considering we don’t have a full picture of the rest of your finances, we will need to take many assumptions to suggest a way to invest this corpus.

You can start monthly SIPs in equity mutual funds which will allow your capital to grow. Some part can be invested in instruments that will give fixed returns, like corporate bonds.

You can maintain an emergency corpus equivalent to six months of your salary or income. This fund can be kept in liquid or ultra short mutual funds. You may consult with a financial advisor and provide complete details of your financial position for correct advice.

Vijay Kuppa is CEO of InCred Money.

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Published: 26 Oct 2023, 11:47 PM IST
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