While you can consider hybrid debt funds to manage your short term goals, you should focus on equity funds to fulfill your long term targets, Rustagi said.
Here is the edited transcript of the interview on CNBC-TV18.
Q: I can invest Rs 20,000 per month. I require Rs 5 lakh in the next three years and Rs 30 lakh in the next 20 years for child education. I also require Rs 35 lakh for my child's marriage and Rs 1 crore for retirement after 30 years. Right now, I have invested Rs 5 lakh in the stock market and mutual funds. I have around Rs 1.80 lakh by way of mutual funds. How should I allocate the money?
A: Clearly, you have taken the right steps to begin with. For example, you have defined your goal and you know exactly how much is the time horizon for each of your goals. Also, you have set some targets which are the first steps to start financial planning.
Your short term goal, which is three years away, is not long enough for you to make your portfolio very aggressive. In fact, I would also say that the portfolio for each of the goals has to be separate. Don't make a mistake of having one combined portfolio because as you yourself mentioned, the time horizon for each of these goals is different. So try and make individual portfolio for each of these goals so you can keep track of it and you will know exactly which direction your portfolio is going.
Coming back to this three year goal, since you don't have long enough time horizon, you need to focus on options, which are not very aggressive. At best, you can look at some debt oriented hybrid funds. Typically, in this category, you have monthly income plans, where you can opt for growth options or asset allocation plan.
MIPs typically invest around 80-85% in debt and the rest is invested in equity. Some of the fund that you can consider here are Reliance MIP or DSP Blackrock MIP. In the asset allocation space, you can consider IDFC asset allocation fund.
For your long term goals, your focus has to be on beating inflation and earn a positive real rate of return which is gross return minus inflation. Your focus has to be on equity funds. You already have some of the equity funds in the portfolio. You already have around five ELSS and four open ended funds.
Considering your current investment, I think you have far too many funds. You need to reduce the number of funds. Remember that most likely if DTC is implemented from April 1 next year, ELSS schemes will cease to exist. So whenever you complete three years in those ELSS funds, try and exit from there and reinvest that money in some of the existing funds.
In your existing portfolio, you can retain HDFC Top 200 . You can also retain SBI Magnum Emerging Business Fund . From the other two funds that you have - Reliance Growth and Reliance Natural Resources, I would say opt for a fund like Reliance Top 200 . As a combination, that will be good. Since you have to invest some more money for your other goals, maybe you can add one or two funds and that should suffice for your portfolio.
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