I am 23 years old and have no dependents. I invest Rs. 6,000 in tax-planning schemes (ICICIPru Tax Plan, Franklin India Tax Shield, HDFC LT Advantage) and Rs 4,000 in other equity schemes (Sundaram Select Mid Cap, Magnum Contra). Is my portfolio optimally diversified? Further I need to select a couple of open-ended funds for my parents (senior government employees). The paramount concern for them is maximum security. They want preferably a government-owned fund house, which could deliver returns above those from public provident fund (PPF), government provident fund etc.
-Rahul Daniel
Your fund selection is good. However, you can substitute Franklin India Tax Shield with Magnum Tax Gain for its blockbuster performance. Your have chosen good open-ended equity funds. Overall your exposure between different market caps is balanced.
As far as funds for your parents are concerned, you must remember that mutual funds do not guarantee returns. Further, there is no capital guarantee instrument that will yield returns better than the government-backed instruments that you are aware of. However if they are willing to take a little risk, you could look at debt-oriented mutual funds or monthly income plans that have a very small portion of the portfolio invested in equities. These funds have the potential to yield better returns than some government securities, but remember that there are no guarantees.
This article was originally published on July 03, 2007.
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