I am 44. I plan to retire at 55 and would like to save around ₹2 crore towards retirement. I have already planned for and kept aside funds for my children’s education, marriage and our medical expenses.

I have been investing in some equity mutual funds for the past two years. I have been investing ₹10,000 monthly in each of these funds. My funds are Canara Robeco Emerging Equities, Franklin India High Growth Companies, Franklin India Prima Plus, ICICI Pru Value Discovery and SBI Magnum Midcap.

I have subscribed to the Growth options in all these funds.

I plan to add Birla Sun Life Frontline Equity from April onwards, where I will invest another ₹10,000 a month.

Please let me know if my choice of funds is good. Will it suffice to meet the goal, considering other expenses are taken care of? I can take high risk.

Raghu Venkateswaran

Thank you for providing us with the latest status of your portfolio, as it helps us evaluate your plan better. Though you have made a slightly late start on retirement planning, your investment goal of ₹2 crore is not out of reach.

You are wise to have chosen the growth plan in all your investments as that will ensure all your equity returns benefit from the power of compounding.

If we use conservative assumptions to calculate your retirement kitty, we find that your current investment plan could leave you with a corpus of about ₹1.7 crore at the age of 55.

We made two assumptions here. One, we assumed that you would like to stop your SIPs and shift your entire equity portfolio to safe bank deposits, two years before you retire. This is the prudent thing to do, as you would not want a stock market crash in your last working year to decimate your wealth.

Two, based on the current environment of low interest rates and low inflation, we assumed that multi-cap equity funds can fetch you a 12 per cent compounded annual return, and that mid-cap funds would earn a 14 per cent return over the next nine years.

To work out whether you can reach your investment goal of ₹2 crore, we first worked out the likely corpus you would accumulate through SIPs in the multi-cap funds.

Assuming SIPs of ₹10,000 each in four multi-cap funds, you would invest ₹43.2 lakh over the next nine years and accumulate a corpus value of ₹77.9 lakh, after factoring in returns.

Similarly, SIPs of ₹10,000 each in two mid-cap funds would lead you to invest ₹21.6 lakh to get to a corpus of ₹43.3 lakh in nine years.

Making similar return assumptions on your present portfolio, its current value of ₹9.54 lakh can grow to ₹28.6 lakh at the end of nine years. This will take you to a total equity portfolio of ₹1.5 crore by the time you are 53.

If you redeem your funds in phases at that time and shift to a bank fixed deposit earning 7 per cent, it will leave you with ₹1.7 crore by the time you are 55.

This is still short of your target. To make up the gap, you can either take on more risk in your choice of funds, increase your SIP over the years or push back your retirement by a couple of years.

Coming to your choice of funds, you can select Franklin India High Growth, ICICI Pru Value Discovery and Birla Sun Life Frontline Equity for your multi-cap/large-cap choices.

Please choose either Franklin India Prima Plus or High Growth, but preferably avoid holding both, in order to diversify across AMCs. Canara Robeco Emerging Equities and SBI Midcap Fund lean towards small-cap stocks rather than mid- or large-caps.

They can improve your returns, but can also be quite volatile and will need close monitoring over slippage in performance.

You can consider adding HDFC Midcap Opportunities or Mirae Asset Emerging Bluechip as your sixth investment option. Do review this portfolio half-yearly to weed out any fund that trails its benchmark for two years running.

Send your queries to mf@thehindu.co.in

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