Link your savings to a financial goal :: Business Line

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Deciding on your goal will help you choose appropriate investment avenues.

I am 32 years and am investing in the following funds in the form of SIPs for the long term.

In Franklin India Bluechip, Fidelity Equity and ICICI Pru Discovery, I invest Rs 2,000 each.

Also, in HDFC Midcap Opportunities, Birla Sun Life Dividend Yield Plus and Canara Robeco Infrastructure, I am investing Rs 1,000 each.

I don't need the funds for another 18 to 20 years. I have stopped my SIP with Fidelity Equity Fund with effect from next month. As I had a bad experience with L&T MF (which has taken over Fidelity), I don't want my SIP to be continued with them.

Additionally, I also want to invest Rs 3,000.

Where should I invest Rs 5,000 (Rs 2,000 from Fidelity Equity and the additional Rs 3,000)?

Please suggest changes, if any, needed in this portfolio to maximise returns with “Medium - High” risk.

Harish It is nice to note that you have given yourself a fairly long time horizon for investments and have also started early. But it is always a good idea to link savings to a financial goal.

An estimate of the desired corpus levels too, is welcome. These would help decide on the amount of saving required and the appropriate investment avenues.

You are investing Rs 9,000 currently. It may not be a good idea to spread this amount across too many funds, which is what you have done.

Though most funds in your portfolio have a sound track record, it can do with some rebalancing.

You can exit Canara Robeco Infrastructure, though it has a good performance history, sector funds can be risky and require market timing and close monitoring.

Since you have a couple of mid-cap funds, Birla Sun Life Dividend Yield Plus, which has a mid-cap bias, may increase the risk profile of your portfolio and also lead to duplication. The fund has a healthy track record, though.

So, with the Rs 9,000 that you currently have every month and the additional Rs 3,000, you can rebalance your portfolio as follows:

Invest Rs 4,000 each in Franklin India Bluechip and Quantum Long-term Equity, which will give you large-cap and multi-cap exposure, respectively. Continue investing Rs 2,000 in ICICI Pru Discovery and an equal amount in HDFC Mid-cap Opportunities.

Review the funds periodically to weed out underperformers and to rebalance to reflect your risk appetite.

***I invested Rs 70,000 in equity linked savings schemes (tax saving) in 2008. I have Rs 40,000 in Franklin Templeton's ELSS, and Rs 15,000 each in Birla and Tata tax saving funds.

Should I retain these ELSS funds till maturity or switch to any other funds?

I am 44 years old and willing to take high risk for high returns.

Bhanu Murty The question that you have asked is an open-ended one. You have just stated the names of the fund houses and not that of the schemes.

A fund house can have more than one tax saving fund, with varying track records.

For instance, while Franklin Templeton has only one tax-saving fund – Franklin India Tax Shield. Tata and Birla Sun Life have two such funds.

Unless you say which of these you have invested in, it would be very difficult to comment on the portfolio.

It is also not known if the investment in these ELSS funds is your only investment.

But a couple of suggestions can be given.

You have stated that you invested in these funds in 2008. These tax saving funds have a three year lock-in period.

So, going by what you have said, you are free to redeem them as and when you want.

Tax saving funds are primarily for that very purpose — tax saving. Additionally they generally provide returns that are better than all debt investments, provided there has been no major market turmoil.

As you have stated that you can take high risk for high return, you can consider shifting these funds to good diversified equity funds to achieve that purpose.

You can consider a blend of multi-cap and mid-cap funds, given your risk profile. HDFC Equity, UTI Opportunities, Quantum Long Term Equity and IDFC Premier Equity can be the options, if you do not hold any of these funds.

The first three are multi-cap funds which invest across market capitalisations while the last one is a mid-cap fund. Based on your risk appetite you can invest up to 20 per cent of your savings in the mid-cap fund. Use the SIP mode to invest every month.

You can expect 12-15 per cent in diversified funds over a five-year period and up to 20 per cent in mid-cap fund.

Even a high risk fund may not deliver high returns if the markets remain volatile for, say, three out of the five years you invest. Hence, it is best to keep return expectations moderate.