Your fund portfolio

I am 42 years old and plan to invest ₹10,000 per month in mutual funds. I am new to investing and unable to choose suitable funds. Can you please suggest some schemes that I can invest in?

Suresh

Although you are a tad late in starting MF investments, you still have time for saving towards long-term goals such as retirement. You must ideally have specific goals and save towards them. As you are new to investing, you can start with schemes with a large-cap bias and equity-oriented hybrid funds. These categories carry low or modest risks.

Invest ₹4,000 each in Axis Bluechip and Invesco India Contra — thesehave a strong large-cap bias. Park the remaining ₹2,000 in HDFC Hybrid Equity, a balanced scheme. As you get more comfortable with investing in MFs and as your surplus increases, you can consider adding other categories — mid-cap, multi-cap, etc.

Review the performance of the funds in your portfolio periodically, say, once a year, to sell or stop further investments in consistent underperformers. If you reach your targeted corpus ahead of time, book profits or sell units and move the proceeds to safer debt instruments.

Please help me finalise the funds and amounts to start saving towards the following goals. I can invest ₹25,000 per month. Goals: two sons’ graduation and PG education (elder one is seven years old now and the younger is six); and my retirement (I am 35 now).

N Balaji

Since your sons will be going for higher education within a year of each other, you will need to invest almost similar amounts for both of them.

Also, given that the college studies goals are 10-11 years away and your retirement (assumed to be at 60) is 25 years down the line, you will need to give greater priority to generating a large corpus for your sons’ education. So, you will have to invest much more for education now compared with what you would for your retirement.

Set aside ₹20,000 for your sons’ education every month. You can consider investing ₹4,000 each in Invesco India Contra, Tata Equity P/E and Axis Bluechip — a combination of large-cap and value-oriented funds. Invest ₹4,000 each in L&T Midcap and HDFC Mid-Cap Opportunities. If you want relatively lower risks, you can replace one of the two mid-cap funds with Mirae Asset India Equity, a multi-cap scheme that invests a large portion of its portfolio in bluechip names.

A year or so before the start of their college education, sell the units and invest the realised amounts in FDs. If the monthly ₹20,000 investments earn 12 per cent annually over 10 years, you will be able to accumulate around ₹46.5 lakh.

You will have to make your own assessment as to whether this amount would be enough for both your sons’ graduation as well as PG studies 10-12 years down the line, especially as education costs tend to rise much faster than general inflation levels. You can step up the investments as your surplus increases, in order to bolster your corpus. Education loans can be taken to bridge any shortfall.

As regards your retirement, you can start with the remaining ₹5,000. If you retire at 60, you will have a very long horizon till then for investing and accumulating a sufficient amount. You can invest ₹2,500 each in Reliance Small Cap and Mirae Asset Emerging Bluechip . We suggest these as you can take reasonable risks for long-term goals. But if you can’t take higher risks, invest in Kotak Standard Multcap, which has a large-cap bias, instead of Reliance Small Cap.

You will have to increase investments periodically as and when your salary increases. After your sons’ education goals are accomplished, you can further step up investments for your retirement.

Send your queries to mf@thehindu.co.in

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