I am 35. I intend to accumulate wealth for my retirement, children's education and marriage. I have not determined the amounts required for these goals. My investment time frame is 20 years. I also wish to buy a car in a year's time. Please take a look at my portfolio. I invested in mutual funds in lumpsum.
- Sandeep Chaudhary
For your mutual fund portfolio, overall savings and investments we have listed the points which we felt you need to work upon.
INSURANCE
If you have dependents (wife, children, parents), you need a higher life cover. Opt for a term insurance cover, it's the cheapest and purest form of life insurance. You have not mentioned if your employer provides for your family's medical insurance. If not, you will need a health cover.
GOALS
You need to put a time frame to your goals as well as determine the amount you would require for the same. You said you want to buy a car in a year's time, but how much would that cost and would you take a loan or make a downpayment?
TAX PLANNING
You are contributing towards the Public Provident Fund (PPF) and you may also be making a regular contribution towards the Employees Provident Fund (EPF). To add to it, you are paying a premium on your life insurance policies as well as servicing a home loan. Hence, we assume that you pretty much exhaust the investment limit under Section 80C. Plus, you own six equity-linked savings schemes (ELSS).
REGULAR SAVINGS
Your current systematic investment plans (SIPs) are just 7 per cent of your income. Is there any way you can increase this amount? For long-term goals, equity is the best investment avenue, so ensure that large part of your saving is in equity mutual funds. And do so via an SIP, regularly.
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FUND INVESTING MISTAKES
You invested in 3 new fund offerings (NFOs) and 9 funds that were just a couple of months in existence. It’s risky, stick to schemes with a track record.
Your portfolio holds 25 funds. As many as 19 contribute less than 5 per cent to the portfolio, which is pointless.
You have five thematic funds which account for 24.17 per cent of your holdings. Of these, three are infrastructure-based funds. This is too much of a clutter and a recipe for disaster if you focus on just one theme.
| Current Portfolio | |
| Fixed Return Investments | Amount (Rs) |
| 1-year Fixed Deposit | 50,000 |
| Funds | Allocation (%) |
| Kotak Opportunities | 15.97 |
| Fidelity Equity | 15.05 |
| Sundaram BNP Paribas Taxsaver | 10.4 |
| DSPBR T.I.G.E.R. Reg | 9.72 |
| Tata Infrastructure | 7.09 |
| Principal Personal Tax Saver | 5.28 |
| Reliance Equity Opportunities | 4.84 |
| Magnum COMMA | 3.57 |
| HDFC Taxsaver | 3.14 |
| Fidelity Tax Advantage | 2.56 |
| L&T Midcap | 2.54 |
| Franklin India Flexi Cap | 2.24 |
| Reliance Natural Resources Retail | 2.17 |
| Reliance Tax Saver | 1.96 |
| Franklin India Opportunities | 1.91 |
| Sundaram BNP Paribas SMILE Reg | 1.87 |
| Kotak Indo World Infrastructure | 1.62 |
| Magnum Taxgain | 1.16 |
| Reliance Long Term Equity | 1.11 |
| SBI Bluechip | 1.07 |
| Kotak 30 | 1.05 |
| HSBC Progressive Themes | 0.96 |
| ICICI Pru Eq & Der Wealth Optimiser Ret | 0.96 |
| BSL Top 100 | 0.94 |
| Fidelity India Growth | 0.83 |
You should not invest sporadically, as you have done in the past. Invest via an SIP which will force you to put your money aside, in a disciplined way.
A consolidated look at your funds shows that you have an exposure of 43 per cent in mid- and small-cap stocks. That is too risky.
You have no exposure to debt funds. The current exposure to debt is just 1.46 per cent of your portfolio. You have fixed return investments, but a debt fund will help you rebalance the portfolio.
Fund portfolio restructuring suggestions:
Three core funds: These funds should account for at least 60 per cent of your portfolio. Currently you invest via SIP in Fidelity Equity which you can continue . Consider IDFC Imperial Equity Plan A, DSPBR Top 100 Equity or Franklin India Bluechip, also.
One infrastructure fund: Do not keep three infrastructure schemes. Stick to DSPBR TIGER, since you invest in it.
One tax-saving fund: If needed to fulfil Section 80C obligation, go with, Fidelity Tax Advantage, Sundaram BNP Paribas Taxsaver or HDFC Taxsaver.
One mid-cap fund: Sundaram BNP Paribas SMILE is a good bet.
One debt fund: Consider Fortis Flexi Debt (Reg) or Canara Robeco Income.
Wait and watch: You invested in Kotak Opportunties, Kotak 30 and Reliance Equity Opportunities. These funds are fairly good performers. There is no need to offload them in a hurry unless you need the money.
Sell: Rest of the funds in your portfolio can be sold. Ensure that you have completed the mandatory three-year lock-in for ELSS. As far as other equity schemes are concerned, ensure that you have stayed invested for at least a year. In case of close-ended funds, you will have to wait till these funds turn open-ended so that you don't have to pay an exit load.