iStockI am 30 years old. I want to build a retirement corpus of Rs 8 crore in another 30 years. My risk level is aggressive. I am starting with a monthly SIP of Rs 50,000 and with a plan to increase my SIP amount to 5% every year.
Multi cap funds:
Aditya Birla Sun Life Equity Fund - Direct Plan: Rs 7,500
Kotak Standard Multicap Fund - Direct Plan: Rs 7,500
Parag Parikh Long Term Equity Fund - Direct Plan: Rs 5,000
Large Cap fund: Axis Bluechip Fund -Direct Plan, Growth Rs 5,000
Contra Fund: Invesco India Contra Fund - Direct Plan – Growth: Rs 5,000
Retirement fund: Tata Retirement Savings Fund - Direct Plan - Progressive Plan – Rs 5,000
Small cap fund: SBI Small Cap Fund - Direct Plan: Rs 5,000
Large & mid cap fund: Canara Robeco Emerging Equities - Direct Plan: Rs 5,000
Funds of Funds:
ICICI Prudential US Bluechip Equity Fund: Rs 5,000
Franklin India Feeder - Franklin U.S. Opportunities Fund: Rs 5,000
Please suggest me if my portfolio will help in achieving my goal.
-Manoj Prabhakar
A few quick observations. One, your your mutual fund portfolio is not in line with your stated aggressive risk profile. Also, your portfolio lacks focus. Half of your portfolio is invested in multi cap schemes and large cap schemes. The other half is spread across categories like contra/value, retirement, small cap, large & mid cap, and overseas funds. It is not possible us to guess your thought process behind the selection of these categories as they have different risk-reward profile. Probably, that is why it came across as a portfolio without a focus.
A word of caution, it may not be a great strategy to have 50% of your portfolio in diverse categories. Most of your investments must be in your core portfolio; you can diversify to reduce the overall risk in your portfolio, but it should be a small part of your total portfolio. Remember when you invest across different equity mutual fund categories, it might increase or decrease the total risk in the portfolio. Based on that your total return potential would also go up or fall.
Please consult a mutual fund advisor if you are not clear about goal-based investing and creating a diversified mutual fund portfolio. If you have the resources, you can also consult a financial planner, who would help you to put together your life goals and how to achieve them.
Assuming an annual return of 12%, you would be able to create your target corpus by investing half of your current monthly investment. However, it is not clear whether you have taken a realistic target, or you have picked a random nice round figure. You should always remember that nice round figures will not help you to retire comfortably. Unless you do a proper calculation – take current living cost, provide for annual inflation, and include final taxes – you would find that your corpus is not large enough to ensure a comfortable retired life.
For more, read: Why Rs 1 crore will not ensure a rich retired life
Multi cap funds:
Aditya Birla Sun Life Equity Fund - Direct Plan: Rs 7,500
Kotak Standard Multicap Fund - Direct Plan: Rs 7,500
Parag Parikh Long Term Equity Fund - Direct Plan: Rs 5,000
Large Cap fund: Axis Bluechip Fund -Direct Plan, Growth Rs 5,000
Contra Fund: Invesco India Contra Fund - Direct Plan – Growth: Rs 5,000
Retirement fund: Tata Retirement Savings Fund - Direct Plan - Progressive Plan – Rs 5,000
Small cap fund: SBI Small Cap Fund - Direct Plan: Rs 5,000
Large & mid cap fund: Canara Robeco Emerging Equities - Direct Plan: Rs 5,000
Funds of Funds:
ICICI Prudential US Bluechip Equity Fund: Rs 5,000
Franklin India Feeder - Franklin U.S. Opportunities Fund: Rs 5,000
Please suggest me if my portfolio will help in achieving my goal.
-Manoj Prabhakar
A few quick observations. One, your your mutual fund portfolio is not in line with your stated aggressive risk profile. Also, your portfolio lacks focus. Half of your portfolio is invested in multi cap schemes and large cap schemes. The other half is spread across categories like contra/value, retirement, small cap, large & mid cap, and overseas funds. It is not possible us to guess your thought process behind the selection of these categories as they have different risk-reward profile. Probably, that is why it came across as a portfolio without a focus.
A word of caution, it may not be a great strategy to have 50% of your portfolio in diverse categories. Most of your investments must be in your core portfolio; you can diversify to reduce the overall risk in your portfolio, but it should be a small part of your total portfolio. Remember when you invest across different equity mutual fund categories, it might increase or decrease the total risk in the portfolio. Based on that your total return potential would also go up or fall.
Please consult a mutual fund advisor if you are not clear about goal-based investing and creating a diversified mutual fund portfolio. If you have the resources, you can also consult a financial planner, who would help you to put together your life goals and how to achieve them.
Assuming an annual return of 12%, you would be able to create your target corpus by investing half of your current monthly investment. However, it is not clear whether you have taken a realistic target, or you have picked a random nice round figure. You should always remember that nice round figures will not help you to retire comfortably. Unless you do a proper calculation – take current living cost, provide for annual inflation, and include final taxes – you would find that your corpus is not large enough to ensure a comfortable retired life.
For more, read: Why Rs 1 crore will not ensure a rich retired life
( Originally published on Jul 13, 2020 )
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