Taking a call on lumpsum investments for 10 years, one can essentially invest in large cap and equity diversified funds, advises Harsh Roongta, CEO of apnapaisa.com. According to him, balanced funds like HDFC Prudence or a Reliance Regular Saving Balanced Fund would be best if the investor is looking for a 5 year term.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: Investor can invest Rs 30,000 as lumpsum in mutual funds. He doesn't have health insurance. He has been insured through his company. He earns around Rs 10 lakh per annum. How should he allocate the money?
A: With the kind of income that you have, unless you have a lot of assets, the Rs 60 lakh cover that you have is not sufficient. You probably need to enhance that to about a crore or so and obviously you know the way to do it is through an online term plan clearly.
As far as this Rs 30,000 lumpsum is concerned, you have a long-term view. If you have a 10 year view, then it’s probably a little different. But if you have a 5 year view, since the amount is not very large, I would recommend a lumpsum investment in a balanced fund.
You could choose between HDFC Prudence or a Reliance Regular Saving Balanced Fund. Essentially, for a 5 year horizon, that's what I would recommend, given the amount that you are planning to invest.
Q: If it's a 10 year frame?
A: If it's a 10 year frame, you can afford to go a little more aggressive. You can look at large cap and equity diversified funds rather than go for the relative safety of a balanced fund.
Q: An investor wants to invest Rs 2,000 per month in equity exposure. He wants to invest for 10-15 years for his children's education. How should he allocate the money?
A: If your time horizon is large, if it is 10-15 years, you should definitely look at a reasonably aggressive portfolio where you can put in about 90% in large cap and diversified equity funds. We had indicated the fund names in response to the first question. You can look at Franklin Bluechip. You can look at HDFC Top 200, DSP Blackrock Top 100.
I would advocate, if you don't have any debt exposure, out of this amount you put aside about Rs 200-300 every month in a PPF, about 90% in a equity mutual fund, about 10% in a high-yielding debt instrument like a PPF. That I would say would be a good mix.
You should review your insurance because employer provided insurance may not remain with you if you leave your job. Secondly, employers continuously review the cover because it's becoming more expensive. That's something I would advise you to review. Consult a good personal finance adviser and review your entire plan with him. That really would be the advice.