SENSEX NIFTY
Aug 23, 2012, 03.40 PM IST | Source: CNBC-TV18

Consider hybrid funds to create corpus in short span

In an interview with CNBC-TV18 Hemant Rustagi, Wiseinvest Advisors answered personal finance queries of investors. According to Rustagi, if one wants to create a corpus and the time horizon is not long enough, then the focus should be on hybrid funds.

In an interview with CNBC-TV18 Hemant Rustagi, Wiseinvest Advisors answered personal finance queries of investors. According to Rustagi, if one wants to create a corpus and the time horizon is not long enough, then the focus should be on hybrid funds.

Below is the edited transcript of Rustagi’s interview with CNBC-TV18.

Caller:  I can invest Rs 7,000 per month for five years with a target of Rs 35 lakh for higher studies. How should I allocate the money?

A: Indeed it’s going to be very difficult to achieve target of Rs 35 lakh with this kind of investment. But, the key factor is the time horizon of five years and the fact that money has to be invested every month. This means the average holding period is going to be just two and a half years. So, this is not a period where one can be very aggressive.

The caller already has invested in two funds and he has stopped SIP for one of the thematic funds, the infrastructure one. There is already another equity fund in the portfolio. So, in my view because the purpose is to create a corpus for his higher education and the time horizon is not long enough, he should focus on hybrid funds primarily.

He can look at a mix of equity oriented hybrid fund and a debt oriented hybrid fund. He can invest around Rs 3,000 in equity oriented hybrid fund and Rs 4000 in debt oriented hybrid fund. As far the funds are concerned, he can look at HDFC Balanced Fund and on the debt oriented hybrid fund he can look at MIP as a category where he can consider investing in Reliance MIP. If I assume an annualised return of around 11%, he will get to somewhere around 5.5 or 5.6.

Because the objective is higher education, one suggestion is to consider taking a loan that will be better. As far as existing investments are concerned, my suggestion would be not to focus too much on very aggressive fund. Rather than investing in midcap he should look at diversified fund, which has a bias towards large cap stocks maybe he can look at ICICI Focused Bluechip or HDFC Top 200.

In the MIP category, since I have recommended Reliance MIP and if the caller is going to invest in that then he should retain only one MIP. There is no need of having two MIPs in the portfolio. On the short term debt fund side, better option would be Birla Sun Life Dynamic Bond Fund. This is the way the portfolio can be structured. It is going to be impossible to get to his target maybe he can consider taking a loan for higher education.

READ MORE ON  debt, equity, MIP

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