Your fund portfolio

I am 28 years old. Over the past one year, I have been investing ₹13,000 every month through SIP for retirement purpose in the following mutual funds: ₹4,000 in Parag Parikh Long Term Equity, ₹3,000 in Axis Focused 25, ₹4,000 in L&T Midcap and ₹2,000 in SBI Small Cap.

My tax investments are already taken care of through PPF and life insurance premium. Also, I put the rest of my monthly savings of about ₹25,000 every month in fixed deposits (all have one-year maturity after which they get renewed) to keep my investments safe. I have built a corpus of ₹8 lakh in bank over the past four years (which I want to use for my wedding in future). For my future monthly savings of ₹25,000, I want to move away from FD to some safer debt funds. Please give me some options. Also, please comment on my mutual fund portfolio. Should I increase the investments in it?

Akshara Prasad

First of all, you have done a great job by developing the saving habit very early on in your career. You have managed to save a considerable sum of money, deploy some of it in the markets and diversify across instruments as well. If you continue in this vein, you are bound to accumulate a healthy corpus and meet all your goals comfortably.

You must segregate your goals as short- and long-term ones. If you foresee your wedding happening in the next 2-3 years, you must accumulate for this goal through debt instruments. You can also consider liquid and ultra-short-duration funds.

For the ₹25,000 surplus, consider investing ₹10,000 each in ABSL Liquid and Franklin India Ultra Short Bond funds. These schemes have given 6-7 per cent returns over the past one year. The remaining ₹5,000 can be parked in a recurring deposit or in a savings account with sweep facility.

Once you feel you have accumulated enough for your wedding, you can redirect your investments to equity mutual funds. Have goals such as retirement, down payment for a house that you would live in, and so on. You have chosen a set of quality schemes with good track records for your MF portfolio. You can continue investing in them. For deploying the surplus after you save for the wedding, you can consider Invesco India Contra and ICICI Pru Value Discovery for the long term.

I have been investing through the SIP route in SBI Bluechip and ABSL Hybrid ’95. Can I continue in these schemes? I want to invest a lump sum of ₹25,000-50,000 for 5-7 years. Please help choose a quality, safe, moderate-risk and high-return scheme.

Pavan

You can stop the SIPs in both the schemes you are investing in as they have underperformed peers over the past couple of years. You can consider SIPs in Axis Bluechip and HDFC Hybrid Equity.

Regarding lump-sum investments, you need to be clear on a few factors regarding risks associated with funds. A fund can rarely deliver on all four of your requirements of safety, quality, low risk and high returns. While chasing higher returns, funds will mostly need to take higher risks. And no market-linked product can be safe in the absolute sense. It would also not be a great idea to invest a lump sum in funds, as doing so would require you to time the markets. Besides, the entire amount would be exposed to market gyrations.

Therefore, split the lump sum into 2-3 parts and invest at different times when markets correct by, say, 5 per cent or more. For a 5-7 year horizon, you can consider L&T India Value.

Send your queries to mf@thehindu.co.in

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