The Morningstar Investment Management team provides guidelines when it comes to your portfolio. Here are some basic pointers, before actual specifics.
- When it comes to portfolio construction, the asset allocation-based approach should be followed as it is one of the key determinants of the portfolio’s performance, in terms of risk and return. A suitable asset allocation is typically based investment horizon and risk appetite. Generally, longer the investment horizon and higher the risk appetite, higher would be the allocation to equity.
- Given the prevailing market scenario with regards to debt paper downgrades and defaults, we find it advisable to invest in Banking and PSU debt funds, as these have a mandate to invest at least 80% corpus in banks and PSUs, which are safer bets from a credit perspective.
- We strong believe that one should consult a financial adviser before investing.
I am 43 years old.
Since January 2019, I have been investing Rs 50,000/month in SIPs:
- Rs 15,000 (2 multi-cap)
- Rs 10,000 (1 aggressive hybrid fund)
- Rs 5,000 (small cap)
- Rs 5,000 (mid cap)
How much I would get when I am 57 years of age, assuming a return of 12% per annum?
Currently I have Rs 30 lakhs in my mutual fund portfolio (I may withdraw a huge amount for my son's overseas education), and Rs 25 lakhs in my provident fund.
- Ranganath R
What your asset allocation should be
Assume a moderately-aggressive risk profile given the long horizon and high allocation to fixed-income in the form of provident fund corpus, you may have an allocation of 70% to Equity and 30% to Fixed Income.
Equity can be distributed across large caps (55%), mid caps (10%) and small caps (5%).
Fixed Income can be distributed across accrual fixed income categories such as Banking PSU Funds, ST Income funds and Corporate Bond Funds having a high credit quality portfolio. As your goal approaches (last 3 years), the allocation should shift around 10% each year out of equity into fixed income.
Assumptions
- Overseas education corpus (as it’s not mentioned) = Rs 30 lakhs
- Time frame = 5 years
- Lumpsum corpus (mentioned in query) = Rs 30 lakhs
- Monthly SIP (mentioned in query) = Rs 50,000
- Asset allocation = As per suggestion mentioned above
- Growth of PF corpus = 7% p.a.
- Equity returns = 12% p.a.
- Fixed Income returns = 78% p.a.
As per what is mentioned, you would reach a corpus of about Rs 2.90 crore at the end of 14 years, after meeting the education goal. If invested entirely into equities, you would have accumulated Rs. 3.35 crore at end of 14 years.
I have to invest Rs 10,000/month in mutual funds through SIPs. How must I invest to get Rs 30 lakhs after 6 years?
- Kamal Arora
Assuming a conservative risk profile given the short horizon, you may have an allocation of 40% to Equity and 60% to Fixed Income. You can invest the equity exposure entirely into large caps and the fixed income allocation can be across accrual fixed income categories such as Banking PSU Funds, ST Income funds and Corporate Bond Funds. As your goal approaches (last 2 years), the allocation should shift around 10% each year out of equity into fixed income.
At the suggested asset allocation and assuming no other investments in place, you would need to invest about Rs 32,000 per month to be able to reach close to your goal of Rs 30 lakhs. Alternatively, you may have an SIP of Rs 26,000 per month and increase the SIP amount by 10% per annum to reach your goal. The corpus amount has been computed assuming equity market returns of 12% per annum and fixed income returns of 7% per annum.
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