Financial Guidance
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I am a regular reader of this column. At the outset, let me thank you for giving valuable advice you provide to investors here.
I am 50 years old, have recently retired under VRS, and have an 8-year old son. I get a monthly pension and am investing a total of Rs 5000 in a monthly SIP that includes the following schemes:
- Templeton India Equity Income Fund (Growth) – Rs 1000
- Sundaram Select Midcap (Growth) – Rs 1000
- Reliance Regular Savings Fund Equity (Growth) – Rs 1000
- HDFC Prudence Fund – Rs 2000
Further, I have invested about Rs 1.5 lakh under various mutual fund schemes.
The purpose of these savings is to build a corpus for my son's education. Other than mutual funds, I have directly invested Rs 5 lakh in various stocks. My target is to have a sum of Rs 50 lakh after a period of 10 years.
Please let me know whether my portfolio is sufficient to fetch Rs 20 lakh in mutual funds after 10 years. Do I need to increase the SIP amount? Please suggest any changes to my portfolio as may be required.
- N N Kamath
Answer -
Your mutual funds portfolio is too diversified and aggressive with regard to asset allocation. Considering your age and the fact that you have taken voluntary retirement from your job, it would be desirable to have a more predictable portfolio.
To this end, I recommend that you add a debt component to your portfolio by revising your asset allocation to 60 per cent equity and 40 per cent debt. This will provide stability to the returns and will also provide a cushion for any capital erosion suffered by the equity component.
The number of funds that you are invested in makes your portfolio very difficult to manage. Also, over diversification can reduce the potential gains, as the losses in one fund will negate the profits made in another. The schemes recommended here along with the allocation to each fund will help you address these issues.
A word of caution here, that expecting you stock portfolio to grow to Rs 50 lakh in 10 years is a tall order. Hence, we recommend that you have a secondary source at hand.
| Recommended Portfolio |
| Amount (Rs) | Percentage |
| Large-Cap |
| ICICI Pru Focused Bluechip | 25000.00 | 16.67 |
| HDFC Top 200 | 20000.00 | 13.33 |
| Total | 45000.00 | 30.00 |
| Multi-Cap |
| UTI Dividend Yield | 25000.00 | 16.67 |
| Total | 25000.00 | 16.67 |
| Small and Mid-Cap |
| IDFC Premier Equity | 10000.00 | 6.67 |
| Total | 10000.00 | 6.67 |
| Debt |
| Templeton India Corporate Bond Opportunities Fund | 60000.00 | 40.00 |
| Total | 60000.00 | 40.00 |
| Gold |
| Kotak Gold Fund | 10000.00 | 6.67 |
| Total | 10000.00 | 6.67 |
| Grand Total | 150000.00 | 100.00 |
| Recommended SIPs |
| SIP Change | Amount (Rs) |
| ICICI Focused Bluechip Equity | 2250.00 |
| HDFC Top 200 Fund | 2250.00 |
| Templeton India Corporate Bond Opportunities Fund | 3000.00 |
| Total | 7500.00 |
This portfolio and the SIP recommendations, at an expected rate of return of 11.2 per cent p.a., should ideally grow your portfolio to Rs 20 lakh.
| Performance Of The Recommended Schemes | Returns (%) |
| 1 Month | 2 Months | 3 Months | 6 Months | 1 Year | 3 Years | 5 Years |
| HDFC Top 200(G) | 12.04 | 1.28 | 10.48 | 13.52 | 1.85 | 4.21 | 10.67 |
| ICICI Pru Focused Blue Chip Equity-Ret(G) | 8.25 | 0.58 | 6.4 | 9.68 | 5.45 | - | - |
| UTI Dividend Yield(G) | 8.17 | 2.95 | 7.54 | 10.23 | 3.35 | 5.45 | 12.64 |
| IDFC Premier Equity-A(G) | 6.02 | 6.04 | 8.71 | 6.59 | 4.73 | 3.05 | 17.25 |