I am 25 years old and I have two daughters. I wish to save money for my daughters' education and marriage expenses. My monthly income is Rs 6,000. I pay Rs 783.25 per month as premium for various LIC schemes. Further, I have three recurring deposits in post office containing Rs 1,400 per month for five years. Through SIP I am investing Rs 500 per month each in Franklin India Flexi Cap Fund and Reliance Equity Fund under growth option. I'm new to investing.
-Mrityunjay
Given that you are saving close to 40 per cent of your income, you are on the right track. The fact that you have started planning so early is very commendable. Further, the goals identified by you will be met in the very long term of 15-20 years; as a result you could look at a higher equity exposure. We recommend equity due to the tax efficiency that it offers as well as the fact that over the long run, equity outperforms all other asset classes.
As regards the composition of your mutual fund portfolio, you must realise that owing to its investment mandate, Reliance Equity hedges its portfolio. As a result it is unlikely to outperform its peer group during bullish phases. It will at the same time be better suited to protect the downside. If this appeals to you, then you could continue with this fund, else you could switch your systematic investment plan installment to Reliance Vision.
Franklin India Flexicap is a good choice and the fund has shown promise over its relatively short performance history so far.
This article was originally published on June 06, 2007.
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