Ask ET Mutual Funds: Should I take an overdraft and invest in mutual funds?

I have investments in SBI Bluechip Fund (20 per cent), Birla Sun Life Top 100 Fund (15 per cent), HDFC Blanced Fund (20 per cent), Quantum Long Term Equity Fund (15 per cent), Mirae Asset Emerging Bluechip Fund (25 per cent), Axis Long Term Equity Fund (5 per cent). Is it a balanced portfolio? My goal is to stay invested for five to seven years and achieve better results than the banks. Also, does it make sense to take an overdraft by pledging some FDs in bank, keeping aside my liquid fund needs, and to invest the same in a balanced portfolio which could give a return of 12 per cent in long term. I would still be getting 9 per cent (12 per cent – 3 per cent bank interest) as compared to six per cent after TDS from banks. If I take an overdraft, I will be paying 2 per cent extra plus TDS than what I will be getting as return on FD.

--Amardeep Hora

Veena Malgonkar, Certified Financial Planner, KM Wealth Solutions, responds:

Your equity portfolio appears to be quite balanced with a combination of largecap, midcap, multicap and a balanced fund. So that is Ok. Further, you appear to have a debt allocation through your fixed deposits. Depending on your risk profile and term of investment, you need to finalize the asset allocation between debt and equity. You could change your equity allocation based on your investment horizon.

However, it is definitely not a good idea to take an overdraft for investing in mutual funds. There is no guarantee that you will earn 12 per cent returns. Markets can surprise you in any direction.

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