Every week, personal finance experts answer our readers’ queries in the wealth edition. Here is a query on financial planning answered by an expert.

I am 45 years old. I have been investing Rs 1,000 per month each in HDFC Hybrid Equity, Aditya Birla Sun Life Frontline Equity; Rs 1,500 each in Mirae Asset Large Cap, Mirae Asset Emerging Bluechip; Rs 2,000 in SBI Bluechip; Rs 2,500 in Motilal Oswal Nasdaq 100 Fund of Fund for the last three years through SIPs. A month ago, I invested Rs 47,400 in 10-year Sovereign Gold Bonds. I have also started investing Rs 500 per month in DSP World Gold Fund. I have an EPF/VPF corpus of Rs 1.25 crore. I earn Rs 1 lakh a month. My goal is to accumulate Rs 50 lakh in five years through my mutual fund investments. Are my investments on the right track?

Prableen Bajpai Founder FinFix® Research & Analytics replies: Your target of Rs 50 lakh is steep. Your monthly investment of Rs 10,000 and realistic expected returns of 10% CAGR will generate a corpus of around Rs 15 lakh in the next five years. To reach the target, your monthly investments need to be increased substantially (by around Rs 40,000 per month). Based on the purpose of the goal, review if it can be pushed further to enable more time to plan better or, alternatively, look at resetting it. Your portfolio has three largecap funds, resulting in duplication instead of diversification. Continue with one of them and increase the allocation towards it. You have invested in Sovereign Gold Bonds, which are equivalent to buying physical gold in electronic form. However, note that DSP World Gold Fund does not track the price of gold. The fund invests in companies that are engaged in mining of gold, and hence its movement depends on the share price of those companies. EPF/VPF offers linear compounding and is a very good investment. However, based on the available information, your asset allocation is skewed towards fixed income. Reevaluate all your financial goals and make changes to the existing asset allocation accordingly.

My 62-year-old husband will soon retire. He will not get any gratuity or PF but has invested Rs 43 lakh in PPF; about Rs 50 lakh in stocks, Rs 6 lakh in mutual funds, besides Rs 35 lakh across PMYY, SCSS, life insurance policies and bank deposits. He wants to take up another job and from the money that he will earn, he wants to invest about Rs 1 lakh per month for 1-3 years. He wants to invest in large-cap, hybrid and balanced advantage funds. We need to protect the capital. Can you please suggest some good funds?

Dev Ashish, Founder, StableInvestor and Sebi-registered investment advisor replies: The key phrase in your query is capital protection. If that’s the case, anything that your husband decides to pick from large-cap, hybrid and balanced advantage funds will have a large equity component and hence, will not be suitable for pure capital protection. That said, it seems there are already some solid debt products in the portfolio like PPF, PMVVY, SCSS and bank deposits. I assume that if your husband wishes to invest in mutual funds, then he is willing to remain invested for at least five years or more. Also, it is assumed that you shall not be dependent on these funds for regular monthly expenses. With these assumptions and having a broader aim of capital protection plus reasonable growth for a balanced portfolio, he can look at having 30% in large cap and flexicap funds, 40% in debt funds and 30% in aggressive hybrid and/or balanced advantage funds. Pick just one scheme from each fund category: Invest Rs 15,000 in a Nifty 50 index fund (UTI/HDFC/SBI); Rs 15,000 in a flexi-cap fund (PPFAS/Canara Robeco); Rs 10,000 in an aggressive hybrid fund (Mirae/Canara Robeco/ICICI Pru); Rs 20,000 in a dynamic asset allocation fund (HDFC/Edelweiss/ ICICI Pru); Rs 20,000 in a low duration fund (ICICI Pru/Axis) and Rs 20,000 in a short-term debt fund (HDFC/Kotak). Before picking these funds, do check for portfolio overlap with the existing mutual funds that you have. Another possible alternative can be NPS Tier 2 account that doesn’t have restrictions like Tier 1 accounts.

Read more: EconomicTimes

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