Mutual Funds to Invest for a Long Term (15-18 Years)

POSTED BY akgc2 ON December 27, 2013 6:11 pm COMMENTS (7)

Hi

I want to investment Rs 12000/- every month go generate wealth in a long term (15-18 Years) for my Kid education. Rs 12K per month or 144K per annuam gives Rs 58 Lac at the end of 18 years at an annual return of 9%.

Also to avoid some of the market risk I have decided to put half (6000/-) of it in PPF which gives gauranteed tax free annual returns between 8.5 to 9%. I want rest of the amount (6000/-)  to be invested in 3 mutual funds (2000/- each). Three mutual funds so that if returns are not good in one I can sell it our after 2-3 years and put the money in better performaing funds I have.

Also I would like to know how good Gold ETF will be if I want to invest in one of them. This year has not been good for Gold ETF. e.g. Birla Sunlife Gold ETF and SBI Glod ETF has given a negative rerurns between 10-15% whereas Gold has given a negative retirn between 2-3%. There is a huge difference between the Actual Gold Return V/s these ETF.

 

Bases on funds past performance I have selected few Equity funds listed below.

Could you please help me to select some good funds.

 

I am inclined towards Reliance Pharma Fund and Franklin Infotech Fund which has given consistent returns for all the durations ranging from 1 months to 8 years.

 

Scheme Name

AUM (In crs)

ICRA Rankings

1 Mth

3 Mths

6 Mths

1 Yr

3 Yrs

5 Yrs

Since Inception

Franklin Infotech Fund

112.39

  

5.61

13.33

44.42

52.4

9.44

31.4

20.95

ICICI Prudential Technology Fund

109.49

  

8.72

29.98

58.42

62.5

16.5

37.9

8.64

SBI IT Fund

40.95

 

7.07

15.05

44.97

53.9

12.4

30.9

10.75

Reliance Pharma Fund

655.13

NIL

8.7

16

18.1

20.7

13.9

34.5

24.82

ICICI Prudential FMCG Fund

209.95

NIL

2.87

-1.68

2.24

8.67

21.5

29.1

18.01

SBI Pharma Fund

66.96

NIL

5.04

11.52

20.11

27.5

18.9

32

15

 

7 replies on this article “Mutual Funds to Invest for a Long Term (15-18 Years)”

  1. ashalanshu says:

    Dear Akgc, if long term is more than 15Y, you may invest in Eq. MFs. Instead of giving any assurance of 10 or 12 or 15% return, I w’d like to say – you ‘ll get good return.

    The selected funds for you ‘ll be just 2.
    Quantum Long Term Eq. fund Growth
    Franklin India Bluechip Eq. fund Growth

    Thanks

    Ashal

  2. akgc2 says:

    Hi Ashal
    Waiting for your reply..

  3. akgc2 says:

    Dear Ashal
    I know that mutual fund returns are not guaranteed, however I wanted some recommendation while choosing those.

    Or else if you have any better investment instruments to recommend please do let me know.

    Few more points to mention. Rs 1 Lac limit for Tax Rebate under 80c is already exhausted by means of PF, Insurance Policies, Home Loan Principal Repayment etc.

    I am looking for investments which can give me 10% or more Tax free returns in a long term.

  4. ashalanshu says:

    Dear Akgc, I can not guarantee the return on your investment money. You may expect a better performance from the MFs but this is not at all guaranteed.

    Thanks

    Ashal

  5. ashalanshu says:

    Dear Akgc, are you sure that 58L Rs. ‘ll be enough after 18Y? What if the requirement goes upto 75L or 1Cr.? how ‘ll you bridge the short fall? What about your own retirement? What about financial security of family through your life insurance?

    On what basis, you selected all these funds?

    thanks

    Ashal

    1. akgc2 says:

      Dear Ashal! 9% is the ideal (Minimum) returns I have taken for the calculation purpose. I hope it to be more for such a longer duration (11-15%) considering a mix investment. I do have some other investments like Property, Land etc.

      I also have close to 1 Cr Term Insurance for my Family Financial Security which soon I am planning to Increase to 1.5 Cr. Also I only plan to support my kid education till his Graduation (3-5 Years) from this accumulated money (58 Lac or so) after his 12th and let him support himself after this.

      I am considering that the current cost of a four year graduation program in a Govt college (IIT, Medical, CA, CFA) would be approx 6 Lac including Tuition Fee + Food + Hostel Fee. Hence 58 Lac should be good enough after 18 Years.

      Considering that education cost doubles in 6 years it would be 48 Lac (6*2*2*2) after 18 years.

      For my retirement I own a house (Worth 55 lac) on Loan which I must be able to close in next 10 years. Apart from this starting from Jan-2014 I have planned to put Rs 8.5K per month (Rs 1 Lac per year) in VPF account for next 26 Years (I am 34 yrs old currently) which should grow to Rs 93 Lac in 26 years @8.5% interest rate. My Salary PF deduction is just 780/- (Employee) + 780 (Employer) only and I don’t have any past PF balance as I withdrew everything one year ago.

      Again coming back to my original post, I want to invest Rs 12K per month for next 18 years such that I could get minimum 10% guaranteed annualized returns which would be compounded to Rs 72 Lac. I am considering 6K in PPF for 8.5% guaranteed return and rest half (6k) in mutual funds and expecting 11.5 % annualized returns to make it 10% average returns on total investment of 12K per month.

      So could you please recommend me some good Mutual Funds with SIP.

  6. Sumit says:

    HI,

    All the funds chosen by you are sector funds, these are not ideal diversified mutual funds that invest across all the sectors. These mutual funds invest only in stocks of a specific sector of market – like banking, pharma, FMCG, IT etc. Investment in sector is more risky since the performance depends on single sector.
    So unless you track the market situations and can use these funds opportunistically – sector funds are can not form the core of your portfolio.
    If you are looking for long term investment options you should not allocate more than 10% of your portfolio in a sector fund.
    So, better go for 3 or 4 diversified large, large-mid or balanced fund (and small-mid cap fund depending on your risk taking ability).
    You can have some gold in your portfolio as well, but restrict it between 5% to 10% of your total investment portfolio size, (unless you have specific goal like daughter/sister’s wedding) and re-balance it every year to keep the allocation in correct proportion.

    But before that know what should be your proportionate asset allocation in below link:
    http://www.behealthyinvestor.com/asset-allocation/

    Thanks

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