Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on June 09, 2019 Published on June 09, 2019

I am 29 years old. I started investing in 2016, and have built a corpus of about ₹1 lakh. I have been investing in the following funds: Axis Long Term Equity (direct): ₹3,000, Aditya Birla Sun Life Tax Relief 96 (direct): ₹3,000, and UTI Nifty Next 50 Index: ₹2,000. My risk appetite will be high for the next five years and I would like to continue investing in these funds with an investment horizon of 20 years. I would like to build a corpus of ₹2 crore by the end of the 20 years. Kindly comment on my fund selection and suggest me the next course of action.

Kiran

Assuming your portfolio earns a compounded annual return of 12 per cent (which is a reasonable assumption for equity funds), you need to be investing at least ₹20,000 every month as of now to reach a corpus of ₹2 crore at the end of 20 years hence. Of course, you have been investing since 2016 and have built a certain corpus already. You can step up your investments as your earnings and disposable income improve. Your returns can also be higher than the assumed 12 per cent. But you may have to brace for a longer investment period to reach the target.

It is not clear as to which goal you are saving for. If it is a plan for early retirement — since you will only be 49 after 20 years and will have at least another 10 years of working life ahead of you — you can probably postpone it by a few years. You can use online calculators for further manipulations to arrive at a goal and an investment amount that is comfortable for you.

Coming to your funds, it is appreciable that you have chosen the ELSS route for your 80C investments as equity funds tend to give higher returns over the longer term than debt options. Both the schemes that you have chosen have a good long-term track record, and you can continue with the same.

Given the narrowing difference in returns between passively managed index funds and large-cap-oriented funds, index funds are beginning to get attractive. While there are other index funds based on the Nifty Next 50 Index that have a longer track record, you have invested in the relatively new UTI Nifty Next 50 Index. Keep an eye on its relative performance.

As your investible surplus increases, you can create a core portfolio of large-, mid-, small- and multi-cap funds, of which you don’t have any in your current portfolio. If you have a high risk appetite, you can invest about 30 per cent of your portfolio in multi-cap funds, 30 per cent in mid- and small-cap funds and 40 per cent in large-cap/index funds.

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