I am 30-year-old and invest Rs 2,000 per month through SIP in Franklin India Bluechip, Franklin India Prima, Templeton India Growth, Franklin India Prima Plus, Franklin India Balanced and Rs 4,000 per month in Templeton India Pension Fund. I have an investment horizon of over 10 years. Please advice me if I am on the right track.
Shubhendu Khan
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We must commend you on the selection of funds for they are all first rate. Furthermore, a Systematic Investment Plan (SIP) is a good way to go about investing as it spreads investments over different points of time. By the process of regular investing one gets to invest in the highs as well as the lows and this helps in averaging out the volatility in the market.
While all the funds are good ones with a strong history of performance, they belong to the same fund house. Prudence demands that you diversify across fund houses also.
Coming to your portfolio, 71 per cent is in equity while 18.5 per cent is in debt and 10 per cent in cash. Cash allocation is primarily due to Franklin India Balanced and Templeton India Pension Fund, which have 13.76 and 16.21 per cent in cash, respectively. This should, however, be tactical in nature and come down over time. 65 per cent of the equity portion is in large-caps, with the remaining 35 per cent in mid-caps. This may also be a bit too high and we would recommend moving this down to around 20 per cent. Increasing monthly allocation to Franklin India Bluechip to Rs 3000 and reducing that of Prima to Rs 1000 could be a way of achieving this lower allocation to mid-caps.
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Templeton India Pension Plan is subject to a three-year lock-in from the date of investment. After this three-year period you can redeem the investment by paying a 3 per cent exit load. Exit without load is only possible once you have reached the age of 58. We hope that you are aware of this in view of your ten-year investment horizon. The scheme also attracts a rebate (of 20 or 15 per cent depending on your income) under Section 88 (2) (XIII C) of the Income Tax Act. This is only applicable if your annual income is less than Rs 5 lakh. Your investment in this scheme will add up to Rs 48,000 a year and so you will be left with Rs 52,000 to invest in other tax saving instruments under Section 88.
On the whole, your portfolio is in good shape and to keep it this way rebalance from time to time.
This article was originally published on April 12, 2004.
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