Which Mutual Funds can help you with your short and long term goals?

—Name withheld on request

with monthly income of 50,000, would be an ideal savings target for every month 10,000 (20% of your income). To use this investment, you have three financial goals – one in the very short term of two years, and two in the longer term (15+ years). For the short term goal of buying a car, you can take only minimal risk, if any, with your investment. Hence, you can invest money in very short duration debt funds like HDFC Mutual Fund or Money Market Fund from Kotak Mutual Fund. Money market funds invest in money market instruments with maturity of up to one year.

After saving enough for your car down-payment and meeting that goal, you can start investing for your long-term goals of child’s education and retirement. Unlike money market portfolios, you can take on significant risk in the form of equity fund exposure with these portfolios. A good idea would be to split your monthly SIP into two portfolios – one for each of your financial goals, and manage them separately. In each of these portfolios, you can use index funds like UTI Nifty Index Fund and aggressive funds like Parag Parikh Flexi Cap Fund and Axis Midcap Fund. Flexi Cap Funds are open-ended dynamic equity schemes that invest in large cap, mid cap and small cap stocks. Such funds invest at least 65% of their corpus in equity instruments. On the other hand, a mid cap fund should invest at least 65% of its corpus in mid cap companies.

You can create sets of 3-4 funds for each of the two portfolios with significant equity exposure and allow them to grow over the long term.

Srikant Meenakshi is the co-founder of PrimeInvestor.