Time is on your side, use equity funds to achieve your goal
05-Jan-2011 •Research Desk
I have a one year old daughter whose education and marriage I want to plan from now. I am looking to set up Rs 60-70 lakh for this purpose in then next 20 years. I have already started one SIP of Rs 3000 with Reliance Regular Savings Equity Fund. I wanted to start another SIP of Rs 3000 for which I am looking to invest in IDFC Premier Equity Plan A or HDFC Balanced Fund. Please suggest me which one to go for?
It is a good though to start saving from now on for your one-year old daughter. And the best way to do that is to invest in mutual funds regularly through systematic investment plans. If you regularly invest the Rs 6,000 a month in mutual funds that earn 15 per cent, you can build a corpus worth Rs 90 lakh in twenty years. One can achieve building the corpus that you have in mind in the time frame that you are looking at.
Your selection of Reliance Regular Savings Equity Fund, is a multi-cap fund which is 4-star rated fund and has fared very well in the long-term. While IDFC Premier Equity Plan A, a 5-star fund is a mid- and small-cap fund, HDFC Balanced, a 4-star fund is an equity-oriented hybrid fund. As your goal is a long way to go, you can think of investing in the mid- and small-cap fund, provided you understand the risk it carries, especially when compared to a balanced fund wherein only 60 per cent of the fund invests in equities with the balance in debt instruments.
Do track your investments once a year to evaluate the progress and if there is any need for change in fund selection as a fund that is good today may not be so forever. It will also be a good idea to move towards balanced funds as your reach closer to the year when you need this corpus to check the portfolio from any shocks from equity market swings.