How to achieve multiple goals with just 3 or 4 Mutual Funds?

POSTED BY Ram Mohan ON April 4, 2012 12:15 pm COMMENTS (5)

Hi Experts,

I’m back with one more question. Everybody recommends having only 3 or 4 mutual funds so as not to over-diversify.

But if I want to have a goal based approach to investing, how can I avoid having more than 4 funds?>

Simple example:

Currently I have 3 goals:

1) retirement — 25 years from now
2) Kid’s higher education — 19 years from now
3) Kid’s marriage — 25 years from now

If you look at the above, all are long term goals. So ideal portfolio allocation would be (just as an example) — 1 Large Cap, 1 Multicap and 1 Midcap (to add some additional gains with some risk)

So assume I have the following portfolio:

1) Franklin Bluechip fund — Large Cap
2) HDFC Equity fund — Multicap
3) IDFC Premier — midcap

So what will these investments be for? All 3? Doesn’t it make sense to diversify for each goal or have separate funds for each goal and monitor separately?

The reason being, my kid’s education may cost 50lacs in 20 years, but retirement in 25 years may require 1.5 crores. So, the investment strategy for each should be different and may result in a holding of more funds which is my current situation. Am I missing something here?

I’ve not added the additional fact that Debt should be part of your portfolio, but let’s ignore that for the moment to avoid more confusion.

Experts help!



5 replies on this article “How to achieve multiple goals with just 3 or 4 Mutual Funds?”

  1. Ram Mohan says:

    fair enough, I think now I understand how to use just 3 or 4 funds for my different goals. Probably better to use multiple folio #s to earmark different goals

  2. says:

    @Ramesh, that’s a good point, but then again won’t it be a hassle having too many folios of the same fund? I mean now the point becomes is too many funds a problem or too many folio #s a problem

    1. Ramesh says:

      In my opinion, multiple folios is not a big headache, since you have to track only 1 fund in that case, rather than 3 funds.

    2. Dear Ram, for the sake of discussion, let’s assume you are investing 5K Rs. in each of the funds i.we. 15K mly. Now after 10Y or 15Y or 20Y or 25Y as & when a goal arrives, you have the option to shift at least 75-80% money of that particular goal from these Eq. MFs to debt funds. Say for that 50L Rs. for your kid, you may shift 40L Rs. in to Debt funds around 15-16 years from now onwards.

      KISS at it’s best. Keep it simple silly.



  3. Ramesh says:

    You can have multiple folios, and mark each one separately for your retirement, education and marriage. That way, you can have the same fund but marked accordingly.

    Say, you got 1 lakh as some extra pay, you could put it in the folio marked as retirement. And so on.

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