I am 29 years old and I have been investing for over a year now. I wish to build a corpus of about ₹2 crore by the time I am 50 years old. I am currently investing in Public Provident Fund (PPF), where I utilize my entire quota of Section 80C ( ₹1.5 lakh). I will extend the account for five to 10 years. In mutual funds, I invest ₹5,000 in ICICI Prudential Bluechip fund and wish to top up with ₹2,500 each year. I invest in recurring deposits (RDs) and fixed deposits (FDs) too. I don’t have a risk appetite to invest in small- or mid-caps. Do I need to invest more in mutual funds instead of RDs and FDs?
—Harshit Rastogi
Your asset allocation is spread primarily across debt (fixed income)—PPF, bank deposits including RDs—and a large-cap equity mutual fund. As you don’t have a risk appetite and are a low to moderate risk taker, the asset allocation is in order. However, you can consider having debt mutual funds versus FDs and RDs to increase tax efficiency along with multi-cap and large-and-mid-cap equity funds. Large-and-mid-cap is a new category which takes large- and mid-cap exposure of 35% each and the balance 30% is market-neutral. At the current asset mix with equity assumed to be 30%, your targeted return at best will be 9-9.5% before taxation; hence, you need to push a little to increase your returns over the long term.
