I am 30, married, and have a one-year-old son.
I have been investing in the following MFs for the past one-and-a-half years via SIPs in the growth option through direct plans — ₹5,000 in Principal Emerging Bluechip, ₹3,500 each in Mirae Asset India Equity, Aditya Birla Sun Life Equity and HDFC Hybrid Equity, and ₹2,500 in Kotak Standard Multicap.
I had also been investing through SIPs of ₹2,500 each in Axis Long Term Equity and Franklin India Taxshield for tax savings for the past three years.
I recently stopped the SIP in the Franklin ELSS (equity-linked savings scheme) after completing its lock-in and added ₹2,500 to the Axis ELSS’ SIP.
I have a moderately high risk appetite and my investment horizon is 10-15 years. Should I continue with this portfolio for good wealth creation?
I want to buy a car with the ELSS corpus in the next five years. Please review my portfolio and give me suitable suggestions.
BSR Rohan
It is good that you started investing in equity mutual funds in your 20s and have an investment horizon of 10-15 years. Over the long term, investment in equity funds have the potential to outperform debt investments.
A 12 per cent annualised return expectation over the long term is reasonable for investments in diversified equity funds. Barring the tax-saving schemes, you are currently investing in the rest for general wealth creation.
As your income levels increase, you can consider creating separate portfolios for separate goals such as your retirement or your child’s education.
Coming to your funds, you currently invest ₹7,000 a month in low-risk large-cap funds and aggressive hybrid funds (Mirae Asset India Equity which has been renamed as Mirae Asset Large Cap and HDFC Hybrid Equity) and ₹11,000 in moderate- to high-risk large- and mid-cap funds (Principal Emerging Bluechip) and multi-cap (Aditya Birla Sun Life Equtiy and Kotak Standard Multicap) categories.
This allocation is suitable for someone with a moderate risk appetite. The funds you are investing in have good performance track records.
A recent analysis by BusinessLine revealed that funds such as Mirae Large Cap and Kotak Standard Multicap are among the best funds for SIP investments. Hence, you can continue with your existing investments.
If you feel that you can take higher risks, you can add mid- or small-cap funds such as L&T Midcap or SBI Small Cap.
As far as your ELSS investments go, considering your young age, it is a better tax-saving vehicle than other instruments such as tax-saving deposits of banks or the post office.
Both Franklin Taxshield and Axis Long-Term Equity are good schemes. But for withdrawal, you must note that each SIP investment will be locked in for three-years.
Hence, you should time your withdrawal carefully so as to not let go of the tax benefits that you have received under Section 80 for them.
Since you are young and have the capability to take higher risk, it is good that you are focussing on investing in equity both for tax-saving and wealth-creation purposes.
At the same time, it is also a good idea to not put all your eggs in one basket.
With tax deduction on its initial investment, and tax-free interest and maturity proceeds, the Public Provident Fund (PPF) is one of the best long-term instruments to invest in on the debt side. Apart from the ELSS funds, you can consider investing in PPF for tax-saving purposes.
Also, ensure that you have adequate life and health insurance.
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