He also suggests to invest in funds like HDFC Equity Fund and ICICI Discovery Fund or Franklin India blue-chip. Though he feels its very important to get an insurance amount done by the cheapest provider to the tune of the goal he expects from all of his investments.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q: The caller wants to invest and has a list of midcaps. Your advice on which one is perhaps best suited.
A: If he is clear that it is midcap, he should look at HDFC Midcap and Smallcap fund. He could also look at Templeton Prima though it has not been doing too well lately. I am choosing that fund largely because it has not been doing well now so maybe there is some kind of a catch up there that it will do.
Q: The caller is asking for investment for 10 years. Does he just put in or should he take this as a general question where you put it in a mutual fund, in an SIP over such a long period of 10 years. Do you keep revaluating, would you want to give him any advice on that?
A: Actually if he is investing in other largecap funds then he should look at investing in one of these funds which means over three-four funds he has been investing. He should keep a check at his funds but then very few people will have the ability to know why the fund has not performed well. Fund not performing well for one year because the markets itself were down is just fair for the game because that is what happens. So if he cannot find out why that is happening then it is very difficult for him to react.
Over a longer period, if he has a 15-year timeframe or a 10-year timeframe, over four-five years he should not worry too much, beyond that he should look at it. However, if the fund manager leaves or if the fund performance falls dramatically and the fund goes away from saying what it will do then he should worry. For example, if a midcap fund starts putting in a largecap portfolio or a largecap funds putting in a midcap portfolio and if they are not fair to the label or not true to the label, then it is of concern. Otherwise really he shouldn�t do too much. He is already investing in another largecap fund so he knows what is a largecap and midcap fund, so he should just stick to his layout.
Q: The caller can invest Rs 12,500 per month. How should he allocate the money?
A: If you want to reach a goal of Rs 15 lakh and you are putting Rs 12,500 per month, which you said, you will. Even assuming you do not increase this amount over a 15-year period, you will definitely reach a goal of about Rs. 15 lakh even at 12-13% - that is not an issue especially if you keep increasing the investments, you will definitely do that. So I would suggest something like an HDFC Equity Fund and ICICI Discovery Fund or Franklin India blue-chip - these are all good funds to invest. Since you also have your own equity portfolio, I think your investments are taken care of but just imagine what will happen if you are not there. I would suggest you to take a term insurance at to the amount, which you are hoping to have by investing. Let us say you want to reach a goal of Rs 30 lakh with all your investments, your own equity. Then at least take Rs 30 lakh term insurance from one of the cheapest providers that you can find in the market.