BackModify mutual fund portfolio based on needs
When investing for a long-term goal, there are three things you need to take into account
PremiumI am a 30-year-old, moderately aggressive investor. For my retirement portfolio, I have been investing for the past six months or so in these funds: Kotak Standard Multicap fund ( ₹5,000), Parag Parikh Long Term Equity fund ( ₹4,000), ICICI Prudential Balanced Advantage fund ( ₹4,000), Axis Midcap fund ( ₹3,000) and Axis Small Cap Fund ( ₹1,000). My goal is to generate ₹2.5 crore in 20 years. Please advise.
—Kishan
When investing for a long-term goal, there are three things you need to take into account.
First, check if you have got the investment arithmetic right. That involves three parameters—your target corpus ( ₹2.5 crore), your time frame (20 years) and assumption about your portfolio returns. The usual long-term returns assumption is about 12% (compounded annually). However, as the Indian economy matures over the next 20 years, it would be better to get more realistic about this number and make a toned-down assumption of, say, 10%.
Applying these parameters to your situation, I can see that you need to be saving and investing ₹35,000 a month over the 20-year period. At this time, you are investing about half of that ( ₹17,000).
So, my first recommendation would be to try and increase your systematic investment plan (SIP) amount over the course of the initial few years so that you can get closer to your target corpus.
The second thing would be the quality of your portfolio. In this regard, I can see that you are doing reasonably well. You have about 50% of your portfolio in diversified funds that provide broad (including international) exposure and about 25% in small- and mid-cap funds. The remaining money goes to a good balanced fund that provides some debt exposure. This is a reasonable allocation and the fund choices are fine. If you were to bring in more money into this portfolio, please add an index fund (such as Nifty Next 50 fund). You can also add to your allocation on the balanced and diversified funds.
The third thing is to understand that this portfolio is what you start with. Over the course of 20 years, you would need to modify this portfolio based on the funds’ performance consistency and suitability to your investment needs. Hence, review your portfolio annually.
Srikanth Meenakshi is co-founder, PrimeInvestor.in.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
