I am 29 and I earn Rs45,000 a month. My goal is to have Rs1 crore in 15-20 years. I have SIPs of Rs1,000 each in— Axis Long Term Equity Fund, Reliance Tax Saver (ELSS) Fund; Franklin India High Growth Companies Fund, and HDFC Equity Fund - Direct Plan - Growth. The rankings of my funds with HDFC and Franklin has come down. So, which funds should I switch to? Should I redeem these funds and start new investments? Also, I want to invest additional Rs5,000 a month as I am closing my postal life insurance. I want to invest Rs1,000 a month in Reliance Small Cap fund. Can you suggest a few more? For the next 8 months, I have a surplus of Rs5 lakh. Which liquid/ultra short-term fund should I invest in?
—Bhanu Ahirwar
Please do not be distracted by ratings and rankings for funds that are currently in your portfolio. As long as the funds are performing well in the time period you have invested them for, as these funds are doing, you should hold on to them. Ratings look at past performance and looking at them for your current investments is akin to looking at the rear-view mirror while driving. If the volatility of a fund is too much for you, you can consider switching the HDFC fund to HDFC Balanced fund. To address your SIP situation, you would need to save and invest Rs10,000 a month to reach your goal of Rs1 crore in 20 years (assuming a compounded annual growth of 12%). So, over the next few years, you should increase your Rs5,000 a month SIP to that level. It is, however, a good start to move to a term insurance plan and get started with the amount in SIP. You can add funds such as Aditya Birla Sun Life Frontline Equity fund and Franklin India Prima Plus to your SIPs (at Rs2,000 each). Regarding liquid or ultra short-term funds, you could choose funds such as Franklin India Ultra Short Bond fund or a liquid fund from a large asset management company (AMC) such as ICICI Prudential Asset Management Co. or HDFC Asset Management Co. Ltd.
