MF portfolio doctor: Ulip charges will hit returns. Here's what Fernandes should do


Not many investors know whether they have invested in the right funds and if their fund portfolio is on track. The Portfolio Doctor assesses the health of the fund portfolio, examines the schemes and their suitability with regard to the goals and, if required, recommends corrective measures. The advice given is based on the performance of the funds, the risk profile of the investor as well as his financial goals.

1. Sunil Kaushik invests in equity funds and debt schemes for multiple goals. Here’s the doctor’s advice:

Goals

27-1

Portfolio check-up

  • Investing systematically in equity funds for past 3-4 years.
  • Holds too much in fixed deposits. Equities account for barely 15% of portfolio.
  • Small and midcap funds are volatile but can be rewarding in long term.
  • Retirement goal of Rs 40,000 a month is modest. Raised to Rs 60,000 a month.
  • Life expectancy of 80 years also too low. Increased to 85 years.
  • Retirement goal can be reached by small 5% hike in SIPs every year.

Investor’s existing portfolio

27-2

Note from the doctor


  • Fixed deposits are not tax efficient. Invest in debt funds instead.
  • Also avoid sector funds. Diversified are better.
  • Don’t invest in too many funds. Avoid buying yearly winners.
  • Review investments, rebalance once a year.
  • Reduce risk when goal is near so that you don’t miss the target.

2. Ulip charges will hit returns
Mikhail Fernandes invests in equity funds and a Ulip to buy a house. Here’s what the doctor has advised him:

Goals

27-3

Investor’s existing portfolio

27-4

Portfolio check-up


  • Portfolio is packed with small-cap funds. Be ready for volatile returns.
  • Avoid using insurance as an investment. Mutual funds offer greater flexibility.
  • Goal is ambitious but can be met if SIPs are hiked by 10% every year.
  • Review mutual fund portfolio at least once a year. Change if any fund’s performance slips.
  • Reduce risk when goal is near so that you don’t miss the target.

Assumptions used in the calculations

Inflation
Education expenses: 10%
For all other goals: 7%

Returns
Equity funds: 12%
Debt options: 8%

(Portfolios analysed by Raj Khosla, Managing Director and Founder, MyMoneyMantra)

If you want your portfolio examined, write to etwealth@timesgroup.com with “Portfolio Doctor” as the subject. Mention the following information:

  • Names of the funds you hold.
  • Current value of the investment.
  • If you have SIPs running in any of them.
  • The financial goals for which you invested.
  • How much you need for each financial goal.
  • How far away is each goal.





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