MF Portfolio Doctor: Why Ranjan needs to rethink plan to buy a second house

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. Nihar Ranjan invests Rs 48,000 a month in equity funds, the Provident Fund and NPS. He is saving to buy a second house, his child’s studies and his retirement. Here’s what the doctor has advised:

Goals:

Investor’s existing portfolio

Portfolio check-up

• Goals are ambitious but early start will prove advantageous.
• Hike SIPs by Rs 17,000 to reach target for second house. May scuttle other goals.
• SIPs for child’s education have to be increased to Rs 22,000 and hiked by 10% every year.
• Once goal is reached, divert the surplus to other goals.
• Retirement target can be reached with Provident Fund, NPS and equity funds.

Note from the doctor

• Avoid investing in closed-ended funds. Open-ended schemes are more flexible.
• Also avoid tax inefficient options. PPF is better bet than recurring deposits.
• Review investments and rebalance at least once in a year.

II. Pavan More wants to amass Rs 5 crore by the time he retires in 15 years. He invests in equity funds and retirement schemes. Here’s what the doctor has advised him:

Goals:

Investor’s existing portfolio

Portfolio check-up

• Started investing in funds 1-2 years ago.
• Funds are well chosen but should cut exposure to small-cap funds.
• Gradually shift to debt funds or hybrid funds as retirement comes closer.
• For retirement income, withdraw systematically from debt funds.
• Instead of PPF, consider hiking contribution to PF for higher returns.

Assumptions used in the calculations
Inflation

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

Returns

• Equity funds: 12%
• Debt options: 8%

Portfolios analysed by Raj Khosla, Managing Director and Founder, MyMoneyMantra

Write to us for help
If you want your portfolio examined, write to [email protected] 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.