I am 42 years old. Desired corpus: Rs 2-3 crore. Goals: Child education and marriage, and retirement. Could you please suggest some good fund options for the long term? Funds I invest Rs 5,000 in every month are: SBI Small Cap, Mirae Asset Bluechip, Invesco India Contra, Mirae Asset Large Cap, PGIM India Midcap.
If we consider your age of retirement to be 60, that gives you 18 years to plan for your investments. Even if you started late, you can still make the most of your time and build a comfortable savings cushion for your retirement.
You've already started with a Rs 25,000 monthly SIP which is not enough if you want to accumulate a corpus of Rs 3 crore in 18 years. You must start investing Rs 45,000 monthly SIP. Also, we recommend increasing the SIP by 10% each year. This is based on the assumption that equity returns will be 11%.
The funds that you have chosen are broadly well managed strategies with different mandates. However, a Large Cap fund must be a core holding. Large Cap funds invest in the top 100 listed companies which are likely to be leaders in their respective businesses. These funds typically would at any time invest a minimum of 80% in large-cap stocks. Large Cap companies are stable businesses and given their size and track record, they are relatively less volatile during market downturns and are usually good compounders in the long term. To give you a perspective, during the recent time when Covid-19 hit the market, Large Cap funds have fallen less than the small and mid-cap funds.
The funds that you have intended to invest are fairly stable strategies with good track record.
SBI Small Cap is managed by R. Srinivasan who is also the head of equity. The manager is an astute stock picker. He runs the strategy with a blend of growth and value style of investing and follows a bottom-up investment strategy for stock selection. However, typically the fund has been investing 95-100% of its net assets in small-cap stocks. Small-cap stocks are excellent wealth creators over the long term, but also can be quite volatile in the short term.
Mirae Asset Emerging Blue Chip is a large and mid cap fund. While selecting mid-cap stocks, the manager typically looks for slightly higher ROE and growth rates as compared with large-cap stocks, given these stocks come with liquidity and other risks. The fund has displayed above average returns on all time frames and we have a high conviction on the fund manager – Neelesh Surana.
Invesco India Contra takes a contrarian view on the market. It tends to invest against the market sentiment and invests in underperforming stocks and sectors at low price points with a view that they will perform in the long run. These funds do better when the markets are falling but there is also a possibility that these can go through underperformance for years.
Mirae Asset Large Cap is an outstanding fund again managed by Neleesh Surana. We have a lot of comfort around the manager and his research-intensive investment approach. The fund has a well-considered process, which has resulted in an above average performance, a trend we expect to endure.
PGIM India Midcap Opportunities invests at least 65% of the corpus in companies ranked between 101-250 by market capitalisation. The fund also invests about 10-20% in small cap stocks which could add risk to the portfolio.
The weighted average exposure to Large, Mid & Small cap from the above funds are 53:37:10. However, we believe you should increase your exposure to large caps while decreasing your allocation to mid-caps. The ideal allocation should be 65:25:10. We also recommend you to have a diversified approach while investing in Small Cap funds.
Here are our analyst’s views on some of the Large Caps and Small Cap funds:
Large Cap Funds:
Small Cap Funds:
We recommend you review the portfolio periodically. While 18 years is a long period, you should check in on your investments at least once or twice a year to see how they're performing.
You need money for your child education, marriage and retirement, it would be good to have a dedicated portfolio for each goal.
We believe you should invest in debt funds as well. If you have a high risk appetite, you should allocate 80-85% of your portfolio to equities and 15-20% to debt. As you get closer to your goals, you can start de-risking your portfolio by shifting from equities to debt. For retirement planning, you can also consider including the New Pension Scheme.
We would also recommend consulting with an Investment Advisor who can assist you in drawing up an appropriate asset allocation for your portfolio. Regular monitoring of your investment portfolio is necessary to ensure alignment of your investments with your financial goal.
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