Markets
BSE See NSE See 39,046.34
85.55 (0.22%)
collapse Related Readings collapse

Porfolio advice - Build a broader portfolio

| 6/20/2011 6:56 PM Monday

I am currently investing only in fixed deposits and government savings schemes such as PPF and NSC. I now wish to allocate a fixed amount of Rs 10000 per month in mutual funds through an SIP. Can you please guide me as to the schemes that I could look out for. I am currently 38 years old and would like to plan for my sons education in future through this corpus development.
Prashant Wale

Yes, the idea is no doubt good. Since all your present savings are in debt oriented schemes, your proposed SIP can be in equity funds. A mix of assets will be helpful in obtaining diversification and when equity is included, increase the chance of a higher return on the portfolio. The long term gains on the Sensex have been pretty good. A few well and actively managed equity funds are presented for comparison with the index. As you can observe they have all out-performed the market index and are hence a good option as compared to an index fund. More importantly they are a great means to earn more than inflation and beat it!  Since you want to save for your son’s education, these are good options if there a still a few years to go.

Inflation will have to be targeted while saving for this. With a 10% annual rate of inflation assumed, a degree that could cost Rs 10 lacs at present is likely to cost in the range of Rs 26 lacs 10 years down the line. So this becomes your target to save. If one is able to earn a 15% compounded return for the next 10 years, your SIP of Rs 10,000 should do the trick and accumulate to a similar sum!

An SIP enables monthly savings as a habit; and it also results in a regular averaging of the markets by virtue of purchases being made over a period of time and across market conditions. Since equity markets are volatile, that is, some-times up and sometimes down, the monthly SIP is a good way of buying units at all levels and averaging your price. This is a simple way to beat the markets and be a winner. But be sure to keep the following in mind and agree with, for now and forever:
  • Market levels cannot be predicted for the short term but the broad direction can be perceived for the long term.
  • Long term market gains can be estimated to be about 1.5x  the country’s long term real GDP growth rate.
  • The ride will not be smooth, that I can guarantee! You are quite likely to experience losses on your investment value in the first three years of SIPs. That is the nature of the market and one should not give up in the downturn.
  • History tell us that there is a probability that you could experience losses anywhere in the region of 15% in a three year period. That is why longer horizons are required for equity investing.
  • The beauty of an SIP can be experienced only if you continue buying when markets fall, because that is when you are going to be buying what you want at lower prices and getting the benefit of appreciation when the markets eventually recover.
  • Do not have too many funds. For an SIP of Rs 10,000, one or two funds are sufficient, if chosen well.
  • Have Faith.

 

Find More Articles on: Personal Finance, Tax Expert, DSIJ Magazine, Financial Guidance, Mutual Funds

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

MIDHANI and HAL partner to develop bio implants

Geyatee Deshpande / Article rating: 5.0

Mishra Dhatu Nigam Limited (MIDHANI) signs an MoU with Hindustan Antibiotics Limited (HAL). This MoU will provide synergy for quality manufacturing of MIDHANI’s Bio-medical Implants and get access to the pan-India distribution of HAL. This partnership is aimed to gain advantage from the strengths of both the companies and benefit users of Bio-medical products in India.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.