Increasing your savings along with a rise in income helps meet goals
The funds which can be invested for the long-term should be allocated to public provident fund and MFs
I am 30 years old and planning to get married after two years. My annual income is about ₹7.2 lakh and my house rent is around ₹1.15 lakh per year. How much should I invest and in what forms (SIP, FD, PPF etc.) to create a portfolio which would give me better returns?
—Name withheld on request
You need to do cash flow planning to determine the saving potential. Inflows being fixed in the form of salary, it is the cash outflows which need to be planned to know how much can be saved. The next two years before you get married, the potential to save is high, so maximize the savings rate. At the same time, you may need funds for your own marriage hence investment planning needs to be done accordingly. That being the case, the investment for marriage corpus needs to be done for short-term and hence SIP in short-term debt mutual funds can be a good option. The funds which could be invested for long term can be invested in Public Provident Fund (PPF) and SIP in equity-based mutual funds. The equity portfolio can be invested across large-cap, multi-cap and mid-cap funds. You also need to create an emergency fund which again can be done in ultra short-term debt mutual funds. This corpus can be maintained equal to 4-6 months of your salary.
I am 45 years old and investing ₹3,000 each through SIPs in ABSL Tax Relief’96, Motilal Oswal Long Term Equity, ABSL Equity Advantage, ABSL Frontline Equity, Mirae Asset India Equity and Kotak Standard Multicap; ₹4,000 in HDFC Hybrid Equity and ₹5,000 in Motilal Oswal Multicap 35. My goal is to build a corpus for retirement and I want to accumulate at least ₹1.50 crore. Are these funds good or should I switch to others? Please advise.
You currently have monthly investments of ₹27,000 in eight mutual fund schemes. The schemes are spread across hybrid, large-cap, large-and-mid-cap, two ELSS funds and three multi-cap funds. While the fund selection is good and the portfolio is also diversified, the exposure in ELSS as well as multi-cap funds can be reduced by a fund each. You can add a mid-cap/small-cap fund to the portfolio to complete the diversification.
Funds like L&T Midcap, SBI Small cap, HDFC Small cap are good options. The portfolio should be reviewed every quarter. In case of under-performance for a sustained period, you can consider changing the fund within the same category.
As the investment horizon is long term for retirement, you can continue your investments in equity over the period. If ₹27,000 is saved per month for 13 years, the principal corpus will be ₹42.12 lakh, and assuming earning at 13%, the total corpus will be ₹1.1 crore. At 15%, it becomes ₹1.30 crore. It is prudent if you don’t consider a very aggressive number.
Instead you can increase your savings every year along with increase in income to ensure that you are able to achieve your desired number.
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Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org
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