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  • Category: Mutual Funds

    I want to know about mutual funds.


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    I am 24 years old and am from Pune. My monthly salary is 27000 as a Government servant. My NPS contribution is 2000 p/m.
    I have already invested in 5 SIP's this January and each of them is 1000Rs. My target is only get 25% interest annually. How much time I should invest this amount to get 10 lakh rupees? If there are any SIP changes then do suggest alternatives:
    1. Aditya Birla sun Life pure value fund-growth. 1000Rs P/M
    2. L&T India value fund-growth.1000Rs.P/M
    3. Mirae asset emerging bluechip fund regular-growth.1000Rs P/M
    4. IDFC Focused equity fund regular-growth.1000Rs.P/m
    5. Invesco India contra fund-growth.1000Rs.P/M
  • Answers

    2 Answers found.
  • I have to appreciate at your young age and early stages of job itself you have started well in saving and investment. Keep up that habit.
    As I am not aware of the details of your other mandatory expenses and deductions, I am not able to assume about the amount you can now spare for a comfortable long term commitment of investment.
    Please review and assess your taxable income. Utilise the permitted exemptions and investments to avoid tax.

    Now it is proper time to make an assessment and re adjust your tax exempted/rebate investments. If space is available after the NPS contribution, then I will suggest you invest in a Tax Saver ELSS MF. For this year you may go for lump sum . For future you can start a SIP, so that it will become a long term investment.

    You need not disturb the existing invests for the time being. However at least in a quarterly basis monitor them and see how they are faring. You may go for some more established and reputed fund houses in your further new investments.
    Regrading your wish to have 25% return annually, I think it may not be possible consistently, though it is not impossible. The previous historical performance or non-performance may not be happening in future .

    At present you do not have diversity in your portfolio. You need diversity and spread to reduce risks. So your future investments should have some other type of funds , that also from some established and reputed fund houses.
    I also suggest that you should plan your further long term commitments only after assessing your immediate future and short term life plans like marriage, family etc. You also need to have some buffer investment in bank deposits for your liquidity and emergency fund needs , where return is not the prime concern.

  • I have read your question. I am going to make specific observations in respect of your queries:-

    (a) You should immediately increase your NPS from present Rs. 2000/- p.m. to Rs. 4000/- p.m. It will immensely help you after retirement. Not only that, you should increase your NPS contribution every year with the increase in your salary.
    (b) I have noted your portfolio. All funds are equity funds. Among these two are thematic funds. Out of these two thematic funds, one is a contra fund. You have stated that you are ready to take risk, but excessive risk without proper return may not be good for the health of your portfolio.
    (c) My considered opinion is to close the underperforming thematic funds, i.e., L&T India value fund-growth and Invesco India contra fund-growth.
    (d) Instead of investing in these two funds, start investing in one good balanced fund through SIP. You can check the list of the good balanced funds from the websites of Value Research Online or Morningstar India. This step would help you to lower the high risk associated with your present portfolio.
    (e) Please remember that no mutual fund (however good it may be) can give 25% p.a. return uniformly for ten years. It is highly unrealistic. You can check the category-wise or individual fund-wise yearly, five-yearly or ten-yearly return data in the above-mentioned two websites. Even if you get 15% p.a. return from your investment for 10 years, that must be considered excellent. Don't fall in the trap of excessive return for a long period. That doesn't happen.
    (f) From my comments at Sub-para (e) above, calculate how much time is actually required to build a corpus of Rs. 10 lakh. Take realistic CAGR 10% -12% p.a.
    (g) I hope that you are investing in the direct mode of the schemes mentioned by you, rather than the regular mode. In direct mode, you will get additional return to the tune of 0.25% - 0.50% p.a.
    (h) For success, study hard and take your own decision. Don't fall into the trap of unscrupulous middlemen.

    Beware! I question everything and everybody.


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