Achieving Investment Goals | Value Research Investors can use the core and satellite approach to achieve long-term financial goals…
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Achieving Investment Goals

Investors can use the core and satellite approach to achieve long-term financial goals…

I am 27 and am investing in mutual funds listed below with an SIP of Rs 6,000 in two of them, with the rest being lump sum investments. My goal is to achieve Rs 10 lakh in 3 years to buy a house and Rs 75 lakh in 20 years for long-term needs. Can I achieve these goals?
- Saurabh Deshmukh

You will need to invest Rs 23,000 a month in a portfolio of funds earning an annualised 12 per cent to achieve your goal to build a corpus of Rs 10 lakh in three years. If the portfolio earns at 15 per cent, your monthly investment reduces marginally to Rs 21,900. You can achieve this goal if you can contribute more than the current Rs 6,000 that you are investing. Likewise, to reach your goal of accumulating Rs 75 lakh in 20 years, you will need Rs 7,510 a month in an investment earning 12 per cent or Rs 4,950 earning 15 per cent to achieve the goal.

You have selected some good funds and with a few changes you should be able to achieve your financial goals. We suggest, you go with a core and satellite approach, which will give your mutual fund portfolio the necessary stability and growth for long-term wealth creation. You should look at investing 70-80 per cent in the core funds and the remaining in the satellite funds. This way the core will take care of stability and the satellite helps your portfolio earn the necessary push to improve the performance of the overall portfolio.

You can have 2-3 funds as core holdings comprising large-cap and large- and mid-cap funds, with the satellite component with sector funds and multi-cap funds to achieve long-term wealth appreciation. This way, the investments have the ability to absorb shocks as well as have the potential to earn higher returns over various market cycles. Add a large-cap fund such as DSPBR Top 100 Equity. Instead of Reliance Growth, consider investing in DSPBR Micro Cap or HDFC Mid Cap Opportunities. And, if the tax saver funds have completed the lock-in three years, you should consider exiting them.

What you need is investment discipline for long-term wealth creation through SIPs and make it a point to track the performance of the funds you have invested in periodically to make any changes in fund selection.

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
IDFC Imperial Equity Large Cap ***** 10.75 13.34
HDFC Top 200 Large & Mid-cap ***** 17.84 17.46
HDFC Tax Saver Tax Planning ***** 15.28 12.16
Reliance Growth  Mid & Small Cap *** 11.24 14.86
BSL Tax Plan Tax Planning *** 5.75 7.21
Returns as on March 31, 2011 Ratings as on February 28, 2011

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