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Take inflation into consideration when planning long-term goals

  • In terms of schemes, the funds in your portfolio are fine, with a good distribution across categories
  • For a tax-saving fund, you could go with Invesco India Tax Plan

I am 28 years old and I want to build a corpus of 1 crore in the next 20 years. My appetite for risk is moderate and I’ve a few systematic investment plans (SIPs). These include 5,000 in Axis Bluechip, 3,000 in ICICI Prudential Equity and Debt, 2,000 in Mirae Asset Emerging Bluechip and 2,000 in HDFC Small Cap. I plan to add another 2,000 every month. Should I add a tax saver scheme to my portfolio? Also,is my current portfolio good enough to meet my goal?

—P.P. Saikia

Investing 12,000 a month for 20 years will get you to your goal of 1 crore quite comfortably—even if we assume an 11% annualized return over this period. Adding another 2,000 would make it even more comfortable to reach your target. However, you need to consider the fact that 1 crore in 20 years would not be worth as much as it is worth today. Assuming a long-term inflation of 6% over this period, 1 crore then would be the equivalent of 31 lakh today. If you would really like to have the equivalent of 1 crore in today’s terms, you would need to aim for 3.2 crore in 20 years. And that would, in turn, mean that you would need to increase your SIP investments to 35,000 per month. My advice would be to invest as much as you can every month and increase the amount by 10-25% every year.

In terms of schemes, the funds in your portfolio are fine, with a good distribution across categories. You could add a tax-saving fund to the mix, especially if you can use the deduction from Section 80C. Else, you could add a mid-cap fund such as L&T Midcap or a small-cap fund such as Franklin India Smaller Companies. For a tax-saving fund, you could go with Invesco India Tax Plan.

Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.

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