I am 29 and earn Rs 43,000 every month. I have an Ulip with Reliance for the past four years where I pay Rs 50,000 as annual premium. I want to invest in mutual funds for more than five years. How much of my income should I invest to beat future inflation to achieve investment appreciation? What should be the ideal portfolio across different funds?
- Naveen Kumar
Unlike life insurance where you decide on the extent of cover based on your income, age and financial dependents; mutual fund investment is based on your ability to invest and a financial goal. You should set aside an amount that you can regularly invest in a mutual fund and initiate an SIP for the same. As you appear to be new to investing, we suggest you start investing in a balanced fund such as HDFC Prudence or Reliance Regular Savings Balanced fund. Once you experience investing in these funds over a period of 6-8 months you will be able to observe the way your investments grow and how mutual funds work. You can then consider investing in a large- or large- and mid-cap fund to form the core holdings of your mutual fund portfolio.
It is true that in the long run equity is the asset class to beat inflation as well as help with long-term wealth creation. What you need is discipline to invest regularly and systematically in broad equity-diversified funds to beat inflation. As for an ideal portfolio, a lot depends on your risk profile and the financial goal. But, a fund portfolio made of core funds accounting for up to 80 per cent holdings made of large-, large- and mid-cap funds with the satellite made of multi cap, mid- and small-cap funds besides sector and thematic funds is a good allocation.