Mutual Funds: Q&A

Value Research

Rs 15 LAKHS IN 5 YEARS
I want to build Rs 15 lakh in 5 years. How much should I invest and in which funds?
XIONZ8@INDIATIMES.COM

You will need a monthly investment of Rs 18,200 earning an annualised 12% returns or Rs 16,800 earning 15% returns to achieve your target of Rs 15 lakh in five years. You can build a portfolio made of large-cap funds such as DSPBR Top 100 Equity or Franklin India Bluechip, along with large- and mid-cap funds such as HDFC Top 200 or Fidelity India Growth to achieve the target.

WEALTH CREATION OVER LONG TERM
I am 34, working for the government of India and earning Rs 35,000 a month. I wish to invest Rs 15,000 every month to create longterm wealth through mutual funds. Please suggest funds to invest. RAJCIVILS@INDIATIMES.COM

If this is your first mutual fund investment, you are a late starter. Opting for a systematic investment plan in mutual funds is the best way to start investing to create wealth over the long term. You still have 26 years to go for retirement. We suggest you invest in a portfolio of five funds, with 70% allocation to equity. The funds are ICICI Prudential Dynamic (Large & Mid cap), HDFC Top 200 (Large & Mid cap), Fidelity Equity ( Large & Mid cap), Reliance Equity Opportunities (Multi Cap), and BNP Paribas Bond Regular (Debt: Income). You should have equal allocation across all the funds. As and when you can invest more, you should do so in these funds to make the most of the power of compounding.

CORE, SATELLITE HOLDINGS
I have SIPs of Rs 2,000 each in HDFC Top 200, Sundaram Select Midcap and ICICI Pru Discovery. I want to invest in three more funds from among HDFC Equity, Fidelity Equity, BSL Dividend Yield Plus and IDFC Premier Equity Fund A. Which one should I select?
DGIRIPRASAD@ESSAR.COM

Your current selection of HDFC Top 200, Sundaram Select Midcap and ICICI Prudential Discovery is made of good funds, but it has a midand small-cap tilt, which is risky. Likewise, though your selection of additional funds that you wish to invest in is good, they do not offer you diversity. Selecting more mid- and smallcap funds only adds to duplication, which does not help in wealth creation. We suggest you build a portfolio that is based on a core and satellite approach. This approach will provide the necessary stability and growth for long-term wealth creation. Ideally, you should look at investing 70% to 80% in core funds and the remaining in satellite funds. You can have 3-4 funds as core holdings comprising large-cap funds such as DSPBR Top 100 and Franklin India Bluechip, and large- and mid-cap funds such as HDFC Top 200 and Fidelity Equity, with the satellite component made up of mid- and small-cap, multi-cap and sectoral funds. This way, the investments have the ability to absorb shocks as well as the potential to earn higher returns over various market cycles. But sectoral funds should not have an allocation of more than 5% of your portfolio.

ADDITIONAL INVESTMENT
I am 35. I have SIP of Rs 12,000 in Reliance Growth, HDFC Taxsaver, HDFC Top 200 and DSPBR Top 100 Equity. I want to invest an additional Rs 2,000 per month. Please suggest the fund for additional investment.
SINGH_SINGH76@YAHOO.COM

You have selected good funds to form a portfolio that is well diversified. You should continue investing in these funds regularly and track the performance of these funds. You can make additional contributions to the existing funds instead of looking for a new fund. But if you must invest in another fund, you can consider a multi-cap fund to the existing list and invest in HDFC Equity or Quantum Long Term Equity.

Our expert guides you in matters relating to mutual funds. Email to etquerymf@indiatimes.com