I am 30 and for the past year have been investing Rs 5,000 every month in Mirae Asset Tax Saver Fund and HDFC India Sensex Plan, Rs 500 in Invesco India Contra, Rs 2,500 in Kotak Flexi Cap, Rs 1,000 in SBI Bluechip Fund and Rs 5,000 in Parag Parikh Flexi Cap. I want to generate a corpus of Rs 5 crore in 25 years. Is this contribution enough?
Vidya Bala, Co-Founder, PrimeInvestor.in replies: The choice of mutual funds is fine. You could possibly shift from SBI Bluechip to the Sensex index fund. Given the long time frame, it is hard to assume anything more than a 10% return. If so, you will need almost twice the amount of SIP you are currently investing to get to your goal. You could increase it gradually. Also, unless you are considering PPF or EPF as part of this corpus, 20-30% in debt funds or traditional debt options is prudent to have, to reduce portfolio dips in corrections. Consider short term and corporate bond funds for this purpose.
I am 45 and have a 12-year-old daughter. I have been investing through SIPs of Rs 2,000 per month in
Frontline Equity Fund, HDFC Equity Fund and HDFC Top 100 Fund since 2018. I also invest Rs 6,000 per month in Sukanya Samriddhi. I have been depositing Rs 6,000 per month in my wife’s PPF account for the past 10 years, my daughter’s PPF account for six years and my own for the past 14 years. I want to create a corpus of Rs 1.5 crore for my daughter’s education and marriage and Rs 1.5 crore for my own retirement. Please suggest some mutual funds for 6-8 years.
Prableen Bajpai, Founder FinFix® Research & Analytics replies: Let’s assume you will need around Rs 80 lakh for your daughter’s education over the next 6-8 years. The amount contributed towards yours and your wife’s PPF can be used for education expenses. Together, the two accounts (your account with extension) will be able to generate roughly Rs 50 lakh over the next 5-6 years. In addition, your current SIPs of Rs 6,000 and partial withdrawal from Sukanya Samriddhi (if needed) will be able to cater to the remaining expenses. To cater to your retirement, you’ll need to increase your SIP contribution by around Rs 45,000 a month, assuming a compounded annual growth rate of 11% till you turn 58. The amount in your daughter’s PPF and Sukanya Samridhi will come in handy for her marriage expenses. This is a broader suggestion, and you can make changes based on your preference and risk appetite. There are two large cap funds and one flexi cap fund in your portfolio; continue with them since you’ll need these funds in next 6-7 years. However, the additional allocation for your retirement can be towards a Nifty 50 Index Fund, along with a mid-cap fund, a flexi-cap fund and a global fund. Do ensure that the sum of Rs 1.5 crore mentioned for retirement takes into account inflation over the years and taxation on monthly proceeds. You must have health and term insurance as well as a contingency fund.