I am 40 years old and I have about ₹50 lakh in my savings account which I recently withdrew after losing money in the recent debt fund debacle. In addition, I have ₹10 lakh in Birla Sun Life Equity fund, ICICI Prudential Value Discovery fund and Sundaram Mutual Midcap fund. I still believe in long-term investment and don’t need the money for the next 10 years. Could you suggest some trustworthy debt funds or reliable long-term mutual funds?
The recent debacle in the world of debt funds was a painful one to go through, especially for investors who put money in such funds with the presumption of low risk and preservation of capital. Now that you have taken out your money, you can plan how you would like to grow it for your future. The good thing is that you have identified a time frame during which you will not require this money. This is crucial as you now don’t have to worry about the volatility this investment will go through during this tenure. Given your age and time horizon, I would recommend an asset allocation that apportions 60% of your investment to equity and the remaining 40% to debt. You can keep your current portfolio as it is, and plan for a new one separately. With respect to your debt fund portfolio, stick to short- and ultra-short fund categories. You can invest ₹20 lakh (40% of ₹50 lakh) right away (in a single shot) in funds such as Canara Robeco Savings fund, SBI Magnum Low Duration fund, Kotak Savings fund and DSP Liquidity fund. The remaining 60% will go to equity funds, but that can happen in a systematic fashion. You can have a portfolio of a blend of equity funds such as Mirae Asset Large Cap fund, Invesco India Growth Opportunities fund, Kotak Standard Multicap fund and Franklin India Smaller Companies fund. However, you should invest ₹7.5 lakh each in liquid funds of each of these fund houses and set up systematic transfer plans (STPs) to their respective equity funds over a period of 12 months (a monthly transfer of ₹62,500). At the end of 12 months, you will have the desired 60:40 allocation that you can leave untouched for the next 10 years.
Srikanth Meenakshi is co-founder and former COO, FundsIndia.com. Queries and views at firstname.lastname@example.org