I am 27 years old and have investments in equity-linked savings scheme (ELSS) of ₹1 lakh. I have a lump sum of ₹5 lakh that I want to invest. I also want to start monthly systematic investment plan (SIP) investments of ₹15,000. My first goal is to build an emergency fund of ₹5 lakh from my lump sum. The second is to accumulate ₹15 lakh in the next five years. Please suggest suitable schemes for both goals.
Having an emergency corpus ensures security in unfortunate situations that are not covered by traditional insurance schemes. At your age, having a ₹5 lakh emergency fund will serve you well if you need to go for a spell of time without pay, or for other unforeseen family needs.
From an investment perspective, there are two objectives that need to be satisfied for such a corpus. One, the money should not be exposed to too much risk, and two, it should be available quickly when required. The mutual fund category that ticks both these boxes is a liquid fund. You can choose such funds from any major mutual fund company such as Axis Mutual Fund, Reliance Mutual Fund or HDFC Mutual Fund, and park your money there. Some of these funds also have a facility called “insta redemption", which allows you to use their app to get your money credited to your bank account in a matter of 30 minutes.
For your medium-term goal in five years, you would need to have a balanced portfolio that provides for some growth without taking too much risk. You are planning to invest ₹15,000 a month for this purpose, but calculation shows that you would need to save and invest close to ₹20,000 to get to your corpus within the time frame.
A portfolio with a large-cap fund (ICICI Pru Nifty Next 50) and two diversified funds (Mirae Asset Emerging Bluechip and Parag Parikh Long Term Equity Fund) can form 60% of your portfolio. The remaining amount can be invested in a couple of liquid funds to provide stability to your portfolio.
Srikanth Meenakshi co-founder, FundsIndia.com, (he is no longer with the firm). Queries and views at email@example.com