Fund Portfolio Query :: Business Line

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I had recently started investing in mutual funds through the systematic investment plan (SIP) route. I invest ₹2,000 each in Birla Sun Life 95 and HDFC Midcap Opportunities. Now, since the markets are at very high levels, should I continue with my investments, or should I wait for a correction? Please suggest schemes where I can generate more than 15 per cent returns. I am a short-term investor and will continue by SIPs for a maximum of two years.

- Sarat Srinivas.

If you make systematic investment every month, you should not be worried about market levels. When you buy units regularly, you will have the benefit of averaging costs across market cycles.

But this advice holds for long-term investors. You have stated that you can continue investments for a maximum of two years only. This is a very short period for you to be able to generate significant inflation-beating returns.

Just to illustrate the benefit of long-term investing, in the last 10 years, the bluechip indices delivered 16 per cent annual returns, while the best diversified equity schemes managed 20-25 per cent. So, it does take a long-term horizon to be able to significantly outperform benchmarks. You must review your investment philosophy and have specific long-term goals. Look to channel savings towards meeting them. Even then, there are no assured returns in any market-linked products. A longer tenure only gives you more time to make corrections to your portfolio in case the returns don’t match up to your expectation.

Coming to your funds, if you are still looking for a short-term horizon, consider retaining Birla Sun Life 95. Drop HDFC Midcap Opportunities and instead invest in HDFC Balanced. But even for such balanced funds, two years is a relatively short timeframe.

I am 30 and work for a bank. My salary is ₹40,000 and I receive ₹10,000 as allowances. I have been investing ₹10,000 every month in an RD (recurring deposit), which is set to run for 10 years. I invest in the PPF and also in an endowment plan. Now, I plan to invest ₹15,000 monthly in a mutual fund through the SIP mode for 3-10 years. Kindly suggest some good schemes.

- Vinay Hegde

You have sufficient exposure to debt in the form of the RD and also PPF. Consider exiting the endowment plan, after the minimum payment period is completed, as it is relatively expensive and may not provide sufficient returns. Take a term cover and also a medical insurance policy for your family and yourself.

You have given a time horizon of 3-10 years for your investments. It would be better to have a 7-10 year period instead, so that you get the benefits of compounding on your investments over the long term.

Split ₹15,000 as follows: invest ₹4,500 each in Axis Equity and Franklin India Prima Plus. These schemes invest predominantly in large-caps and have proven track records. Park ₹3,000 each in Mirae Asset India Opportunities and ICICI Pru Value Discovery. The former is a multi-cap scheme, while the latter is a top-quality mid-cap fund.

Review the schemes in your portfolio once every year and take corrective action, if necessary and rebalance.

Try to also invest in gold and real estate later on so that you have a balanced portfolio.

I have some investments in mutual funds. I am 55 years old now. Due to the good performance of many of these funds I am looking to book some profit in these funds. But I am not sure where I should be diverting the proceeds as debt funds do not generate even half the returns of equity schemes. Is it advisable to continue with the savings in the mutual funds?

- Manohar Pai

It is nice to note that you are sitting on decent profits on your investments. If you need the funds for any specific goal, you can book profits and move the proceeds to safe debt avenues. Yes, debt funds do not generate as much returns as equity schemes as the risk involved is much lower.

If you still have five years to retire, you can, if you have the risk appetite, remain invested for another 3-4 years and later move the proceeds to debt funds or deposits. Of course, any significant correction can hurt your corpus. So depending on your liquidity requirement and risk appetite you must take the call. Booking profits is desirable if any critical financial goal is due shortly or in the near future.