Prableen Bajpai: Whenever we look at building a corpus – five years is the time factor – the return expectations of the products being chosen and the investor’s risk appetite matter. One can be comfortable with a return of 6-7%; someone else may be a risk taker and is okay with taking a full equity exposure. Broadly speaking, it would depend on the investor’s risk appetite and comfort level. Based on that, we can create a portfolio.

If someone is looking at some sort of low-risk portfolio, or only about 6-7% return, it would generally be an all-debt portfolio for that person. Such a portfolio would actually require a huge amount of money let in terms of lump sum about Rs 70 lakh in current slant about Rs 1.4 lakh as SIP.

As you go higher, in terms of increasing your risk appetite, the demand in terms of what to invest starts to decrease, as you take on higher risk and your expected return increases.

Broadly speaking, these are the categories that can be combined and used in a particular permutation by investors based on the appropriate risk appetite. One is the debt basket and there I have three funds, all of which are index and passive strategies within the debt segment. Now is a good time to take exposure to a five-year type of index fund in the debt space.

We are in the month of March. This therefore concerns approximately six financial years and the indexation payments would be higher. In all these cases there is no credit risk, but there is interest rate risk. All of these three funds have a target maturity, meaning if you hold them, regardless of the yield they put in today, they’re going to get that – it’s hovering around 6.2 to 6.5%. So these three funds are the IDFC Gilt Fund, the Axis Crisil fund that invests in government bonds, and the third is the Edelweiss PSU Bond SDL Index Fund.

The second category is largely hybrid. Hybrid gives you a combination of debt and equity. I chose the conservative hybrid category for someone who only wants to take a little exposure to stocks as it can go up from 10% to about 25% in stocks. The two funds I like are Kotak and Parag Parikh.

One of the popular categories with a maturity of about five years is the Balanced Advantage Fund category and the Hybrid Aggressive category. From here, investors can look at one fund of Edelweiss and Mirae.

These are not hardcore recommendations. These are just suggestions for investors to look at and can give them some decent returns.

Edelweiss had fallen just 13% during the March 2020 dip, while category funds were down about 32%. Even Mirae Asset has not given negative returns on a five-year rolling basis.

Let’s say someone parks some of their money in debt, perhaps something in hybrid or conservative debt space, and wants to take some exposure to pure stocks. Some of the funds I would suggest are the index funds – the Large Cap Index – this can be done by a market weighted index, the regular Nifty 50 oblique has an equal weighted strategy like DSP. I suggest DSP because that is the oldest fund we have in the equal Nifty space. Two active funds here are the Axis Flexi Cap and the Parag Parikh Flexi Cap. Again, these two funds performed consistently in terms of rolling returns.

International allocation is still a good thing and now is a good time to take some international exposure – maybe around 10% to 15% – depending on the investor’s risk appetite for getting into global equities. The options here could be the Kotak Nasdaq 100 or Aditya Birla Nasdaq 100.

A combination of these funds (it can be looked at) and based on that one can calculate the return.

If someone invests 20% in pure debt, 30% in a conservative fund and 50% in an equity fund, with the range of returns I’ve taken, they can get close to 10% portfolio returns with not very much high risk.


This post How To Make Rs 1 Crore Through SIPs In Five Years was original published at “https://www.bloombergquint.com/business/the-mutual-fund-show-how-to-make-rs-1-crore-via-sips-in-five-years”

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