I am 33 years old and invest in Axis Bluechip, Axis Banking and PSU Debt, Parag Parikh Long Term Equity, Kotak Standard Multicap, Mirae Asset Emerging Bluechip, L&T Midcap, HDFC Small cap and DSP Tax Saver funds. I can stay invested for the long term. Should I reinvest the money in the equity-linked savings scheme (ELSS) every three years in systematic investment plans (SIPs) of open-ended equity schemes? Also, can banking and debt funds be used for building an emergency corpus? Lastly, should I continue with L&T Midcap as its fund manager got changed?
You are investing in quality funds, but I’m not sure whether you have sufficient allocation to debt. Make sure you have at least 20-30% in debt funds. You can hold L&T Midcap and watch for any performance change.
For your strategy of exiting ELSS every three years, it may not always work. Three years is too short a period to invest in equities and since ELSS funds are equity funds, you may be giving it too short a time and may even have to book losses. Instead, review the performance after the lock-in and if it is poor, do not hesitate to exit.
Banking and PSU debt funds need at least a two-year holding period and as such cannot be part of an emergency portfolio. They swing to interest rate changes and can generate losses over a one-period. So, while credit risk is low, duration risk does exist.
I am 38 years old with monthly expenses of ₹20,000 and a surplus of ₹12,000. I am investing ₹5,000 for my child’s education (I will need this money in 10 years) in ICICI Prudential Bluechip; ₹1,000 in Public Provident Fund (PPF); and ₹3,000 in post office’s recurring deposit (maturing in 2024). Please review my portfolio.
Split your goals as children’s education and retirement, and start saving for them separately so that you know whether you are on the right track. You can invest an additional ₹3,000 in Kotak Standard Multicap. This is because your portfolio is debt-heavy and fixed deposits and PPF alone may not help you reach long-term goals. But you will need detailed financial planning to assess what is needed and how much you can save. Only then can you design an appropriate portfolio.
Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at [email protected]