New Delhi :
My name is Nitish and I am 30 years old. my current hand salary is ₹44,000 My investments are as follows: Premium for term insurance ( ₹1,400 monthly for the cover of ₹1 crore), the company provided the National Pension System ( ₹1,000 per month), and recurring deposits ₹10,000 per month other than investments in mutual funds [HDFC Hybrid Equity Fund Direct Plan Growth( ₹1,000); DSP Equity & Bond Fund ( ₹1,125); L&T Hybrid Equity Fund Direct-Growth ( ₹1,000); Axis Bluechip Fund Direct Plan-Growth ( ₹1,000); ICICI Prudential Equity & Debt Fund Direct-Growth ( ₹1,000)]. I am investing total ₹5,125 per month of these. Please advise whether these funds are suitable for long tenure up to 20 years, or should I switch to some other mutual fund?
-Nitish
It is good to see that you have started your investment journey and at the same time have ensured financial security for your family with the help of term life insurance. As you are planning to build wealth in 15 to 20 years, you can definitely consider equity-oriented mutual funds to build it.
A few changes in your current investment strategy may work better for you as you are looking to invest for the long term. Currently, you are investing ₹10,000 every month in Recurring Deposit (RD), which is generally used by investors who want to deposit a specific amount for near-term or short-term needs. If you have such an objective then you can continue with it, else you can start investing a part of this RD in equity mutual funds for long term.
Ideally, you should set aside 6 to 9 months of your mandatory monthly expenses in a bank account or fixed deposit as a contingency fund, if it is not there yet.
Another change you can consider is to reduce your investment allocation in hybrid funds. Around 80% of your monthly SIP is being invested in hybrid funds. Though these hybrid funds invest around 70-80% in equities, but if your idea is to take less risk at this stage then you can consider investing the same money in large-cap and index funds. At this stage, you can consider investing in equity-oriented funds when you are young and at the same time aim to invest for 15-20 years. Following are some of the funds that you can consider investing through SIP for your long term goals: Axis Bluechip Fund (you are already investing in it); Any Nifty Index Fund; Mirae Asset Large Cap Fund; Parag Parikh Flexicap Fund; and UTI Flexicap Fund.
Harshad Chetanwala is the founder of MyWealthGrowth.com. Have personal finance questions? Email mintmoney@livemint.com
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