I am a non-resident Indian (NRI) and have been investing regularly in mutual funds for the past five years. I am worried about my portfolio’s high allocation to the energy sector (21 per cent). And I am unable to change this. My portfolio lacks substantial debt exposure. As I plan to invest for a long time, I will wait for some recovery in the equity market before shifting to debt. Investments in mutual funds are the only source of my future income. Suggest the necessary changes.
-Sanjeev Suri
You are a very aggressive investor. This is apparent not only in your high equity exposure but also in the way you invest. You have done a lot of switching. Though at the time of making the switch, you might have been very impressed with the performance of schemes you selected, in the long run, this will not pay off. You need to pick a few good funds and stick to them. Consider moving only if there is a consistent underperformance.
FOCUS ON CORE FUNDS
Every investment strategy must focus on a few core holdings.
In your portfolio, Magnum Contra and HDFC Top 200 can be your core holdings, but certainly not the other two. Reliance Growth is a mid-cap fund and Reliance Diversified Power Sector Fund is a thematic fund.
DEBT HAS A ROLE TOO
Your portfolio has a miniscule debt allocation (4 per cent).We suggest a minimum 20 per cent debt allocation to balance the 80 per cent equity exposure.
BE SYSTEMATIC
It’s very important for a long-term investor to have a systematic investment approach. Not only does this enforce a discipline, but it also delivers good results since one is investing when the market is low and high. For instance, if you invest Rs 10,000 per month systematically for the next 16 years, you would end up with Rs 46 lakh (with an expected annual rate of return of 10 per cent).
STAY DIVERSIFIED
You are concerned about high allocation to one sector. But if you decide on a few core holdings and a few supporting funds, you will automatically achieve that goal. After all, you will be diversifying across funds from different fund houses and investment styles. Work on putting together your core portfolio. The rest will fall into place.
HOW TO ACHIEVE YOUR GOALS
The aim of your investment is to create a corpus for your child’s education and retirement.
| CHILD’S EDUCATION | |
| SIP Amount | Rs 20,000 |
| Future Value | Rs 9.18 lakh |
| Suggested Funds | SIP (Rs) |
| Kotak 30 | 10,000 |
| Franklin India Prima Plus | 10,000 |
The first and smaller corpus will be for child’s education which is 15 years down the road. If you save Rs 10,000 every month towards it, you will accumulate around Rs 45 lakh in this timeframe. Decide how much you would like to save towards your goal. Once you have a concrete figure in mind, you can pick up two equity funds for this purpose.
| RETIREMENT | |
| SIP Amount | Rs 60,000 |
| Future Value | Rs 7.5 crore |
| Suggested Funds | SIP (Rs) |
| HDFC Top 200 | 15,000 |
| DSPBR Top 100 | 15,000 |
| BNP Sundaram Select Focus | 12,500 |
| Tata Infrastructure | 5,000 |
| Kotak Flexi-Debt | 12,500 |
Your retirement corpus will obviously be much larger, and it also has a longer timeframe of 25 years. If you invest Rs 70,000 every month for the next 25 years, you will be sitting on a corpus of Rs 8.78 crore. This investment can be made in five funds. You can have two or three core funds, one debt fund and the remaining can be supporting funds.
The final corpus figures are based on two assumptions. The first is that the investments are made consistently every month over the timeframe mentioned. The second is an assumed compounded annual rate of return of 10 per cent.
