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  • Category: Mutual Funds

    Want build a reasonable Mutual Fund Portfolio over next 16 years


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    I am 44 year guy. I want to invest in Mutual Fund schemes every month for next 16 years.
    I have selected following funds and want to invest equal amount every month.
    This is to take care of my Retirement after I reach 60.
    1. HDFC Top 100 Fund (G)
    2. Mirae Asset Emerging Bluechip Fund (G)
    3. Kotak Standard Multicap Fund - Regular Plan (G)
    4. HDFC Mid-Cap Opportunities Fund (G)
    5. HDFC Small Cap Fund (G)
    6. Invesco India Contra Fund (G)
    7. Mirae Asset Hybrid-Equity Fund - Regular Plan (G)
    Seek your opinion on the funds selected my me.
    Kindly suggest alternative funds in case you disagree with any of my selection
  • Answers

    6 Answers found.
  • Note: I am not a SEBI approved advisor so the below suggestion is based on my personal experience and knowledge. If you are at all confused, it is best to consult a qualified advisor.

    As any Mutual Fund Advisor will tell you, 7 funds are way too much for diversification. Also, you should have a balanced portfolio of equity and debt according to your age and not just equity. The debt part can be in PPF too. Divide your equity and debt part in this way and keep moving more money into debt as you age:
    Equity (100 - your age)
    Debt - Your age

    Your current allocation is quite risky at your age.
    Choose a set of funds divided into the following categories:
    1. Liquid fund - Keep 6 months of salary in it as an emergency corpus only to be utilized in emergencies like medical or job loss.
    2. ELSS - This will help you both save taxes as well as can play the role of a multi-cap fund. (40%)
    3. Large-cap - Choose 1 large-cap fund (35%)
    4. Mid-cap - Choose 1 mid-cap fund (25)
    5. Small-cap - You can skip this otherwise invest very little in it since they are very risky. This portion should come out of your mid-cap allocation.
    You can also go a for a fund which invests in a combination of small and mid cap instead of individual mid or small cap fund.
    Don't go for thematic funds unless you really understand the risk. Also, I see you have opted for Regular funds. Since you are asking here, I am assuming you don't have an advisor. In that case, you should go for Direct funds instead of Regular funds and save something between 1%-2% on your investment. Your list of selected Mutual fund plans look good but invest as per the allocation above and don't diversify too much or take too much risk at your age.

  • Mutual funds are a good option for long time investment and adequate returns to the investor. Equity oriented MF are a high risk area and those who are in the age group of 50 and above should reduce this in their investment gradually from 60% to 10-20% only.

    Though you have selected quite a good number of scheme from the MF plans available today but it requires some restructuring.

    Your present age is 44 so you can take some equity risk for a few years and after that gradually increase your investment to debt side.

    Presently from my experience I can suggest you that you put some money in the schemes at Sl No. 1 and 3 of your query and in the rest you can put some little amount just to see their performance yourself in the coming times to gain more experience for investing. In fact in place of these (Sl No. 2, 4, 5, 6 & 7), I will prefer to go for a few out of the lot - HDFC Balanced Fund (G), DSP Blackrock Balanced Fund, Aditya Birla Sun Life Balanced 95 and L&T India Prudence Fund – Direct.

    At the second half of our life it is better to stick to balanced funds rather equity ones.

    Please do not put all the eggs in one basket. Investment is to be made on judicious principles of division of investible funds.

    In my opinion and experience the total investment of investible funds should be made in the following fashion though time to time changes from one to another might be necessitated also:

    Bank/ Post Office/ PPF deposits/ Govt bonds - 40-50%
    Equity Shares - 10-20%
    Mutual Funds - 30-40%

    For lower age group the percentage of equity and mutual funds will increase but for the older age group especially above 60 these may further reduce from the figures shown above.

    Knowledge is power.

  • For your age, you should prefer a balanced way of investing. In this, the best part is around 40% of your investment will be in debt fund. It will give you good tax-free returns. For this, you can consider the following
    1. IDFC Tax advantage equity fund which is ranked as one of the high performing ELSS funds.
    The debt fund in Stable Wealth lends stability to the portfolio.
    2. The Franklin India Short Term Income Fund. It is also a consistent performer, generating nearly double-digit SIP returns in the past five years. That makes it a better option than bank deposits and other fixed-income instruments.
    The remaining 60% can be in equity.
    You can invest 10% of the above in small cap, 25% in mid-cap and the remaining 65% in large-cap equity.
    If you want to go for a more safe portfolio you can go up to 60% in debt funds and the remaining 40% in equities and the equities ratios can be as mentioned above.
    The following can be considered.
    1.The Baroda Pioneer Short-term Bond Fund
    2 The Franklin India Low Duration Fund The hybrid scheme in the portfolio,
    3. ICICI Prudential Child Care Plan
    4. The ELSS fund,
    5. Aditya Birla Sun Life

    drrao
    always confident

  • You have chosen all good funds. However, considering your age and present market movement and without considering your risk-taking capability (you have not mentioned), I can give the following advice:-

    1. Shift your investment in HDFC Small Cap fund to the Bluechip Fund or to the Hybrid Fund where you are presently investing.
    2. Stop investing in the Contra Fund. It is riskier and the future is uncertain. Instead invest more in Bluechip Fund or Hybrid Fund.
    3. Include a long-term debt fund and liquid fund in your portfolio, if not already done. When you will cross 58, then slowly and steadily shift your accumulated wealth in equity funds to the debt fund and to the liquid fund.
    4. Increase your SIP gradually with the increase in salary.
    5. You still have sixteen years before your retirement. Consider investing in NPS also which will give you tax benefit under Section 80 CCD of the Income Tax Act and investing under very professional and responsible fund managers.

    Beware! I question everything and everybody.

  • It appears that you have chosen the the right amount of portfolios and keeping yourself invested in such portfolios will yield a higher growth in the upcoming time but at the same time. I would advise you to include some of the portfolios so as to reap overhaul benifits -
    1) Investment in the SIP plan is to be stepped up with the growth of your income especially in balanced and debt fund. Not necessarily, the investment basket is the same always. Devide it into several components of different plans and watch the performance of such allocations periodically. In case, you need some modification, you may meet some reputed advisor having enough exposure in the share market.
    2) Never ignore the option giving you benifit in terms of income - tax savings such as NPS though apparently it does not look attractive at the first outset but computing the gain by way of saving the tax in each year, net gain is the handsome amount.
    3) In case, you do have small kids, you may invest in ICICI prudential child care plan just to take up their future needs.
    4) Keep a watch on the market trend and if you could see a better performance in respect of equity portfolio, its size may be enhanced depending upon the market performance but it needs a close watch just to avoid the erosion of capitals. You may approach the financial - advisor in this regard so as to get handsome return.

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    1) You haven't included the amount which is of paramount importance here, for eg you can have 7 schemes out of which you may invest 500 in 6 of them and 3k in the remaining which makes your portfolio topsy turvy.

    2) You have mentioned a large & mid cap, small cap, mid cap and a contra fund. This will drain your portfolio, let me explain. The large & mid cap has a mandate of 35 % in mid caps and mid cap schemes has 65 % in mid caps, you need to analyze this extremely carefully.

    3) Considering your age, have you considered when you will transfer your equity schemes to debt schemes when you reach closer to your goal ? Equity schemes at 58 with such a heavy concentration is not advisable.

    4) You have not mentioned the number of dependents, especially children if any. You need to figure out whether your children inherit debt or wealth ?

    Have a look at the attached file explaining how failing to plan efficiently affects your future

    What-are-your-children-inheriting.pdf

    Delete Attachment


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