Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on February 18, 2018 Published on February 18, 2018


I live in Kolkata and have a monthly income of ₹23,000, excluding yearly bonus of ₹62,000. After all expenses, I am able to save around ₹10,000 per month. I want to know the best possible way to invest the amount in MFs so that I shall be able to pursue MBA after three years, without having to worry about day-to-day expenses (like house rent, gas, electricity, etc) for two years. My family consists of my mother and myself. We have a moderate lifestyle and my mother has a monthly income of ₹20,000. I seek your guidance since this is the first time I am investing in MF.


The equity markets are at a high now and corrections and volatility in the near to medium term are likely. Since you have only a three-year horizon, it is best you stay clear of equity funds as the risk is quite high. You can, instead, consider income funds, which invest in a combination of government securities, certificates of deposits, corporate bonds and money market instruments.

Banking and PSU debt funds too are a good proposition as they invest in good-quality debt of entities such as banks and public sector undertakings and carry slightly lower risk than income funds. Income and banking and PSU funds generate interest income by holding the instruments till maturity or make profits by selling them in the debt market if the prices are attractive.

You can divide the ₹10,000 every month between HDFC Medium-Term Opportunities and ICICI Pru Banking and PSU Debt fund. Both these funds have generated compounded annual returns of about 8.5 per cent in the last three years.

Assuming a more conservative 7.5 per cent returns over the next three years, your monthly investment of ₹10,000 will lead to a corpus of about ₹4 lakh at the end of the period. You can then set up a systematic withdrawal plan (SWP) in both the funds to withdraw every month from the corpus. This can be used for your monthly expenses when you do your MBA. Note that when you withdraw from a debt fund after three years, you will be subject to a long-term capital gains tax of 20 per cent (with indexation benefit).

The sum withdrawn may or may not fully cover your monthly expenses. You can probably prepare to supplement your income through saving/investing your annual bonus. You can also take some help from your mother, assuming she will be working until then.

I am a working woman. I am 32. I am planning to start SIP of ₹5,000 from next month. I want to accumulate some money to buy property after five years. Which fund should I invest in? I am already investing in a SIP for ₹1,000 in Aditya Birla Top 100. Also, my son is one year old and I have opened a PPF account in his name. I invest ₹10,000 every month towards his education.

Monica Karve

Equity markets are at a high and the possibility of downside in the near to medium term is high. While five years is not too short a period to tide over this and generate good returns, it is not very comfortable either. If you have a high risk appetite, set up SIPs for ₹5,000 right now.

If you invest ₹5,000 in an equity fund and it generates 12 per cent return in the next five years, you will end up with a corpus of ₹4.1 lakh. You can use it to part-fund the down-payment for your property. If the returns are much lower or if you need a bigger sum, you can probably postpone your property purchase by one or two years.

Besides, you can also use your investment in Aditya Birla Sun Life Top 100 towards this purpose and add more sums over the next few years as your surplus increases. Divide the ₹5,000 equally between ICICI Pru Long-Term Equity, a large-cap oriented fund, and Franklin Flexi-cap, a multi-cap fund with a tilt towards large-caps. While the PPF is a good instrument for long-term savings as well as tax savings, do keep in mind that interest rates now are reset every quarter to align with market rates. Along with PPF, you can also use the mutual fund route to save for your child’s higher education by creating a separate portfolio for it.

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