Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 20, 2018 Published on May 15, 2016


I have two children and for their higher education in about eight to nine years from now, I plan to invest about ₹40,000 a month. I am willing to take moderate risk. Considering my horizon, should I invest in a large-cap fund? I am not comfortable starting a SIP only in a single fund. How should I split my SIPs for this purpose?  

Goldstein

A SIP of ₹40,000 a month for eight to nine years will fetch ₹64-78 lakh, assuming a reasonable 12 per cent compounded annual return on your investment. Like you feel, it is a bad idea to restrict yourself to one fund for the entire ₹40,000. Diversification is a must to bring down the risk levels; more so, in your case where you feel you can take only moderate risks. Split the ₹40,000 as follows: Invest ₹7,500 each in SBI Magnum Equity, Birla Sun Life Frontline Equity, Kotak Select Focus and BNP Paribas Equity. While the first is a pure large-cap fund, the other three are large-cap oriented funds which take some exposure to mid-caps as well. The remaining ₹10,000 can be equally spread between Tata Balanced and L&T Prudence. These are equity-oriented balanced funds which invest up to 35 per cent in debt instruments and the remaining in equities.

We are suggesting all funds on the equity side since you have an eight-nine-year timeframe. Though not very high, this is reasonably enough time for the funds to go through a market cycle. It also gives enough time to weed out underperforming funds, if any, replace them with better ones and gain from it. This portfolio will sit well with your moderate risk taking ability as well.

I am a pensioner and want to save the maximum amount of ₹1.5 lakh under Sec 80C and avail tax benefits. Please suggest three or four best mutual funds suitable for my purpose.

Vani Anne

For pensioners, we normally advise options that preserve capital and give reasonable returns, rather than those that are a high risk-high return proposition, such as equity mutual funds. If you don’t have enough investments in safer debt instruments, such as fixed deposits, etc., it will be prudent to put in the ₹1.5 lakh in either tax-saving fixed deposits or Post Office Senior Citizens Savings Scheme (SCSS). Invest in equity-linked savings schemes only if you have enough savings to fall back upon and only if you have a high risk appetite.

Even then, you can diversify your 80C investments by putting in only some portion of the ₹1.5 lakh in equity-linked savings schemes and the remaining in tax-saving deposits or SCSS. Choose Franklin Taxshield and DSPBR Tax saver for this purpose.

I am presently investing ₹3,000 in Axis Long-term Equity Fund and ₹2,000 each in ICICI Pru Focused Bluechip, Mirae Emerging Bluechip and HDFC Midcap Opportunities. I want to invest another ₹2,000 in Franklin India Smaller Companies. I can take high risk. Please advise me regarding my portfolio.

Sandeep Kumar Patel

All your current investments are in funds with good track record. You can continue the same. Regarding the fresh ₹2,000 you want to invest, since you already have two mid-cap funds, you can invest in Franklin Flexicap which is a multi-cap fund. This will give you a well-rounded portfolio across market capitalisations.

I am 25 and wish to invest ₹2,000 through SIPs. I have a horizon of three to four years with moderate to high risk appetite. Please suggest funds in the small and mid-cap space.

Kishore

Since small and mid-cap stocks have moved up steeply in the last two years, it is not advisable to start your first investment in small and mid-cap funds, and that too with a horizon of only three to four years. Make a beginning in UTI Equity, a large-cap oriented fund which also takes a bit of exposure to mid-caps. Also, a horizon of over five years is desirable to peg down the risks.

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