I have been investing ₹5,000 per month in the following ELSS (equity linked saving schemes) funds since January 2017.

Aditya Birla SL Tax Relief 96

DSP Blackrock Tax saver

Franklin Templeton Tax Shield

Shall I continue investing in all three funds or should I park amounts in only one ELSS scheme?

- Vinoth Kumar

Most investors in mutual funds tend to start with tax-saving schemes before venturing into other avenues.

But three ELSS funds may be too many for your portfolio. You need to have just one or at the most two schemes for tax purposes. For one, there are many other avenues competing for investments under Section 80C. Five-year deposits, employee provident fund, principal of home loan, public provident fund, insurance plans are some of the options that crowd out your tax deduction limit of ₹1.5 lakh.

Please also note that each instalment in an ELSS fund is locked in for three years.

Coming to your portfolio, you can retain Aditya Birla SL Tax Relief 96, as it has done extremely well over the last five years. It has remained in the top-quartile of funds in its category over this period. You can continue to park ₹5,000 in it. If you don’t have too many other investments in the 80C category, you can invest ₹7,500 in the scheme.

DSPBR Tax Saver and Franklin Taxshield are reasonably good funds, though their returns are lower compared to what Aditya Birla SL Tax Relief 96 delivered over the last five years. You can, therefore, stop SIPs in those two funds.

Depending on how much you invest in the ELSS fund, you will have a balance of ₹10,000 or ₹7,500 after stopping the two SIPs.

You can start investments in Mirae Asset India Equity, a large-cap fund with a robust track record and park ₹5,000 in it.

For the remaining ₹2,500 or ₹5,000, you can consider investments in HDFC Balanced.

Relatively moderate-risk investments have been suggested as you are fairly new to mutual fund investments.

Over the years, when you gain comfort with mutual fund investments and as surplus increases, you can consider adding more schemes to your portfolio.

I received ₹4 lakh as my share of a property. I am interested in saving in mutual funds for a period of three to five years. Please suggest good mutual funds which would help me meet my marriage and house construction needs. I can take moderate risks.

- Ram Prasad

It is good to note that you want to save through mutual funds for specific goals. But your time horizon does not appear to be sufficiently long. Equity investments typically play out well over the long term of 10-15 years. Not that gains can’t be made over shorter timeframes, but given that volatility could be heavy in the medium term, there is greater uncertainty in achieving any target.

Given that both are fairly important goals, you would be better off taking a safe approach.

Therefore, of the ₹4 lakh that you have, you must set aside at least ₹2 lakh in fixed deposits or other safe avenues.

The rest can be parked in balanced funds, so that you generate reasonable returns with low to modest risks.

You can invest Rs 1 lakh each in HDFC Balanced and ICICI Pru Balanced. Also, you must stagger your investments without pumping in the entire amount in one shot.

For example, for every market correction of, say, 5 per cent, you can invest half or a quarter of the amount.

Over a one-year period, you can spread the entire investment. Thus, you will be able to ride out volatility and average costs.

You must keep your return expectations modest though.

comment COMMENT NOW