MF portfolio doctor: Singh's ambitious targets require big increase in SIPs

Dilip Singh is saving for downpayment of a house and his child’s goals. After checking Singh's portfolio, our mutual funds portfolio doctor says that Singh needs to hike SIPs every year. Here are other notes from the doctor.

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Review mutual fund portfolio at least once a year. Change if any fund’s performance slips.

Not many investors know whether they have invested in the right funds and if their fund portfolio is on track. The Portfolio Doctor assesses the health of the fund portfolio, examines the schemes and their suitability with regard to the goals and, if required, recommends corrective measures. The advice given is based on the performance of the funds, the risk profile of the investor as well as his financial goals.

I. Dilip Singh is saving for downpayment of a house and his child’s goals. Here is the doctor’s advice:


Goals
inmfpd1

Portfolio check-up
  • Started late but investing regularly for past 3-4 years.
  • Holds too many funds with small-ticket SIPs.
  • Portfolio has a decidedly mid- and small-cap orientation. Be ready for volatility.
  • Shift from equity to debt for house goal.
  • Education goals can be reached by 10% hike in SIPs every year.
  • Marriage goal needs 5% increase in SIPs every year.
Investor's existing portfolio
inmfpd2

Note from the doctor
  • Don’t invest in too many funds. It only duplicates the holdings without diversifying.
  • Review investments and rebalance at least once in a year.
  • Reduce risk when goal is near so that you don’t miss the target.

II. Dump laggards to reach goal-
T. Joseph wants to accumulate Rs 35 lakh in 15 years. Here’s what the doctor has advised him:


Goal
inmfpd3

Portfolio check-up
  • Current investments will comfortably grow to Rs 35 lakh in seven years.
  • But if target is adjusted for inflation, will have to increase SIPs by 10% every year.
  • Avoid lump sum investments in equitylinked instruments. SIP route is safer.
  • Review mutual fund portfolio at least once a year. Change if any fund’s performance slips.
  • Reduce risk when goal is near so that you don’t miss the target.
inmfpd4

Assumptions used in the calculations

Inflation
Education expenses: 10%
For all other goals: 7%

Returns
Equity funds: 12%
Debt options: 8%
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Portfolios analysed by Raj Khosla, Managing Director and Founder, MyMoneyMantra

If you want your portfolio examined, write to etwealth@timesgroup.com with "Portfolio Doctor" as the subject. Mention the following information:
  • Names of the funds you hold.
  • Current value of the investment.
  • If you have SIPs running in any of them.
  • The financial goals for which you invested.
  • How much you need for each financial goal.
  • How far away is each goal.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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