C.R. Chandrasekar CEO and Co-Founder, FundsIndia.com says, “For you to meet the desired goal, your investment needs to grow at a compound annual growth rate of 8.5% over five years. You will need substantial exposure to equity to achieve this. You can consider an 80:20 equity-debt portfolio. Invest Rs 20 lakh (40%) in Mirae Asset India Equity, Rs 12.5 lakh (25%) in Parag Parikh Long Term Equity, Rs 7.5 lakh (15%) in Franklin India Prima and the rest in HDFC Corporate Debt. You can invest the lump sum, Rs 10 lakh, in the debt fund right away. Spread your investment in equity funds over the next six months.”
I want to invest Rs 1 crore in minimum risk products for my daughters’ future. Both of them are under 10. I am 40 years old and fall in the 30% income tax bracket. Please advise.
Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics says, “Assuming that you will need the money when your daughters enter college, you can choose a combination of debt and equity in an 80:20 ratio for creating a portfolio. Although you have shown preference for minimum risk products, it’s important to understand that the overall risk of a portfolio can be negated to quite an extent by choosing the right product mix. With the 80:20 split, a major chunk of your money will grow at a comparatively stable rate, while the allocation towards equity will help boost the overall portfolio return.
Within the debt category, you can opt for accrual funds. Within accrual funds, one corporate bond fund and two credit risk funds with an equally weighted allocation should suffice. These funds have historically given 8-9% return and will reduce your tax liability compared to other fixed income products, as they enjoy indexation benefit. The remaining 20% of the corpus (Rs 20 lakh) can be invested in two large-cap funds for 7-8 years and shifted into a short-duration debt fund as you approach your goal.”