Dalal Street Investment Journal - July 09, 2019

DSIJ.in JULY 8 - 21, 2019 I DALAL STREET INVESTMENT JOURNAL (^79)
Kindly review my portfolio as below. I am planning to
invest via SIP of 6,000 per month for the next 25 years and my goal is to accumulate80 lakh. So, if I continue
with the said portfolio, can I achieve my goal? Kindly
also guide me on whether any changes are required.
Reliance Large Cap Fund – 2,000/month Axis focused 25 Fund –2,000/month
Axis Small Cap Fund – 1,000/month L&T Emerging Businesses Fund –1,000/month

• Naval

Is it better to park cash in liquid funds or ultra-short

duration funds?

• Sandeep C

Name of the Fund Reliance Large Cap Fund

Axis focused 25 Fund

Axis Small Cap Fund

L&T Emerging Businesses Fund

Scheme Category Equity – Large Cap

Equity – Multi Cap

Equity – Small Cap

Equity – Small Cap

NAV

(As on June 26, 2019)

35.75

28.53

28.98

23.63

Expense Ratio

(As on May 31, 2019)

1.88%

2.08%

2.67%

2.00%

AUM (` / Crore)

(As on May 31, 2019)

13,170

7,978

402

6,177

Name of the Fund N/A

Scheme Category N/A

NAV

(As on June 26, 2019)

N/A

Expense Ratio

(As on May 31, 2019)

N/A

AUM (` / Crore)

(As on May 31, 2019)

N/A

Readers are requested to send only one query at a time so that more readers get a chance. Have questions relating to any aspect of

personal finance. Ask DSIJ at [email protected] and get your queries resolved.

A

s you have mentioned, you have 25 years to accumulate

the desired amount of `80 lakh. However, you have not

provided the financial goal for which you intend to

save, neither you have given us your risk profile. Also, you have

not mentioned whether or not the amount of `80 lakh that you

wish to accumulate is inflation-adjusted. So, to begin with, we

would assume certain things. We assume that the goal for

which you need `80 lakh is a need which you cannot avoid.

Another assumption made is the amount you mentioned is

inflation-adjusted and your risk profile is moderate. The rate of

return assumed is 10 per cent, considering you are a moderate

MF QueryBoard

MF page - 13

risk taker. Now, based on these assumptions and the informa-

tion provided by you, we need to calculate the actual SIP

required. So, the SIP required comes to `5,979.56 which can be

rounded off to `6,000. This is what you are planning to invest.

It is to be noted that we have assumed 60 per cent investment

in equity and 40 per cent investment in debt, which you need

to periodically rebalance and, as you reach near your goal, you

need to start moving some part of the equity to debt. Now, to

answer your question whether or not the portfolio as decided

by you can help you achieve your goal. Yes, it can help you

achieve it, but you would be taking risk that is way higher.

Having said that, you may be exposed to high volatility which,

if your goal is a need like child’s education, marriage or your

retirement, then it is not suitable. For such goals which are

your needs, a combination of debt and equity is essential.

However, if your goal is a want, then you can go ahead with

your existing portfolio.

Y

our risk profile and tenure would decide whether to invest

in liquid funds or ultra-short duration funds. If you wish

to park money for a period of three to six months, then it

makes sense to invest in ultra-short duration fund, as the returns

these funds are capable of generating would be better. Liquid

funds, on the other hand, cannot invest in bonds or papers

having a maturity period of more than 91 days. Since ultra-short

duration funds may take some risks, at times there is a probability

of loss. But materially, the probability of loss is relatively less. So, if

your investment tenure is three months to six months, then invest

in ultra-short duration funds. However, if your investment

duration is less than 91 days, then invest in liquid funds. The

recent changes made by the SEBI (Securities and Exchange Board

of India) may make liquid funds even more safer.