I am 25 years old and want to start building a retirement and an emergency corpus. Which mutual funds (MFs) should I invest in for this and what should my investment plan be?
At such a young age, you have the luxury and flexibility to plan and put together a long-term aggressive portfolio for your retirement. However, ahead of that, you have the right idea to build an emergency fund that will help you when you need money in any unforeseen situation. Please build a corpus worth about six months of your salary for your emergency fund, and put them in liquid funds—both for safety and quick availability. Once you have done this, you can start investing all the remaining post-expenses savings in an SIP portfolio that is built for the long term. A five-fund portfolio with a large-cap fund, a couple of multi-cap funds, and two more of mid- or small-cap funds would make a good vehicle for your retirement. Please remember to do two things—one, review your portfolio to ensure that the fund choices are still good, and two, increase your SIP contribution as your pay scale increases over the years.
I am 30 and I want to build a corpus of ₹80,00,000 over the next 20 years. How much money should I invest in mutual funds and which schemes should I pick?
—Partha Sarthi Dutta
To build a corpus of ₹80 lakh in 20 years, you would need to save and invest about ₹9,000 a month during these years in an aggressive portfolio that would yield a CAGR of 12%. Note that assuming a long-term inflation average of 6%, ₹80 lakh in 20 years would be worth the same as about ₹25 lakh in today’s terms. Please factor that into your expectations about the future. For a portfolio, you can invest in a simple three-fund portfolio of equal parts in Franklin India Blue chip fund, Mirae Asset Emerging Bluechip fund, and UTI Equity fund.
Srikanth Meenakshi is co-founder and COO, FundsIndia.com.