Will raising my mutual fund SIPs by 15% every year help me achieve my goals?

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I have been investing in mutual funds via systematic investment plans (SIP) for the past 3 years now. My age is 37 Years. Currently I have planned the following financial goals. One, I would like to have Rs. 65 lakh, 20 years from now for daughter’s education and another Rs. 65 lakh in 23 years for her marriage. For my retirement, I would like to accumulate Rs. 2.5 crore in 25 years’ time. Apart from this, I have two loan EMIs of Rs. 6,000 in total for 2 years and I wish to close these before July 2022. 

I’m currently investing in the following funds through monthly SIPs – 7000 each in ICICI Prudential Bluechip Fund, Axis Bluechip Fund, Axis Focused 25 Fund and Aditya Birla Sun Life Tax Relief 96 Fund (ELSS), Rs. 6000 in Mirae Asset Emerging Bluechip Fund and Rs. 4000 in SBI Small Cap Fund. My current accumulated corpus is Rs. 12.5 lakh approximately via these funds. I also have a term life insurance of 3 crore for my family. 

I have a few questions. Is my portfolio sufficient for my goals? If there are any changes required, can you please suggest what needs to be done? What steps should I take to close my liabilities stated above within a year? Should I invest more in the existing small cap fund or the large cap fund? I have been increasing my SIPs every year by 15 % and will continue to do so. Will this be sufficient to achieve my goals?

–Name withheld on request

 

Given your current investment amount of 38,000 per month, you should be able to reach your financial goals with money to spare. Your daughter-related goals of higher education and marriage require a total of 12,000 per month ( 7000 for education and 5000 for marriage – all calculations assuming a 12% annualized portfolio returns over long term). For your retirement, a monthly investment of 14,000 is required which also is well within your investment scope. Of course, to accommodate for inflation, you do need to continue your current level of investments. It is also a great idea to step up your investments annually by 15%. Given that inflation is unlikely to be at that high a level during this period, your annual increases will provide more than enough buffer to meet your financial goals, even after adjusting for inflation.

Coming to the funds in your portfolio, you have an all-equity portfolio with two large-cap funds, a flexi-cap fund, a tax-saver, and two mid and small cap funds. This is a good mix of categories to have in a portfolio. However, when it comes to large cap funds, you will do well to move at least one of the two funds to an index fund such as one that tracks the Nifty 100 index.

The part about your liabilities in your email requires me to make some assumptions. I am going to assume that you are looking to close it off by July 2023, and that you would need an amount close to 72,000 ( 6000 x 12 months). If it is such an amount, or anything within your existing corpus, you can go ahead and close it off without impacting your portfolio in any way.

And, for your final question, yes, it would be a good idea to review and adjust your portfolio every year. You may want to hire the services of a fee-only advisor who can do this for you and also ensure that your portfolio progression is in line for your financial goals.

 

 

Srikanth Meenakshi is co-founder, PrimeInvestor. Send in your queries at mintmoney@livemint.com and get them answered by industry experts.

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