I am 23 years old and draw a monthly salary of ₹50,000. I want to invest ₹15,000 per month in mutual funds via SIPs. My investment horizon is 5-6 years. What mutual funds should I invest in?
—Name withheld on request
A time horizon of 5 to 6 years is a reasonable period for investing in equity funds. You will be able to accumulate a corpus of approximately ₹14.5 lakh if we consider a 10% annual return on your SIPs. You can invest in a blend of index fund, large- and mid-cap, flexicap and mid-cap funds for the long-term. You can consider setting up SIPs in the following funds: ₹4,000 in UTI Nifty Index Fund, ₹4,000 in Canara Robeco Emerging Equities Fund, ₹4,000 in Parag Parikh Flexicap Fund, and ₹3,000 and Kotak Emerging Equities Fund. You can consider increasing the SIPs every year to accumulate a higher amount.
I have eight years to retire and my mutual fund agent advised me to book profit in HDFC Top 100 Fund, and invest in an HDFC debt fund through systematic transfer plan (STP), and then transfer this amount to an HDFC Index Fund through STP. Should I go ahead with this?
Also Read : What are the taxpayers’ expectations from budget 2023?
—Name withheld on request
The suggestion by your MF agent to book profits by switching into debt funds and reinvesting in index fund sounds tactical on which we will not be able to comment as we do not have the details of the entire portfolio and stages at which you had invested.
As you still have eight years to retire, one of the strategies could be to start de-risking a part of your equity MF investment into debt funds around two years before retirement. This can be done by doing STP from equity to debt funds. Then, you will be able to give more time to your equity MFs and create a higher corpus.
You should have a reasonable allocation in equity even after retirement to ensure your overall portfolio has better inflation-adjusted returns.
Harshad Chetanwala is co-founder at MyWealthGrowth.com.