parking a huge amount of 30L in MF

POSTED BY Padma Roy ON September 12, 2012 2:19 pm COMMENTS (9)

Dear Manish,

i hv recvd some 30L from my mother. I am s/w engr 36 yrs but not working for last 5 yrs to raise my son 4.5 yrs old. I hv already been investing into stocks and mutual funds for last 6-7 yrs. hv seen many gains and losses and hv decided to stick to MF only.

i hv few queries and chalked out some plan to invest this money, pls be kind enough to take some time to review & give your valuable inputs. Thanks a ton!

hv selected few folowing MFs which would comprise say 60% of the 30L ie. 18L:

1. Franklin bluechip (large cap) (~6Lac) (5K sip will take 10 yrs to invest)

2. HDFC top 200 (large-midcap) (~6Lac) (5K sip will take 10 yrs to invest)

3. ICICI pru discovery (mid-small) (~3Lac) (5K sip will take 5 yrs to invest)

4. IDFC premier eq (mid-small) (~3Lac) (5K sip will take 5 yrs to invest)

hv selected the foll 2 balanced funds for the remaining 30% of 30L ie. 9L

5. Birla SL 95 (balanced fund) (~4.5Lac) (lumsum or sip ?)

6. UTI CRTS 81(G) eq-oriented hybrid fund (~4.5L) (lumsum or sip ?)

the remaining 10% ie. 3L

7. Gold ETF like Reliance Gold savings (~3L) (5K sip will take 5 yrs to invest)

imp query:

1. if i select say 5 funds from 5 AMC for STP, do i also need to have 5 debt/liquid funds of the respective AMC for the STP. otherwise if i do a normal SIP then the big amount wud be just lying around in the bank acc. Please suggest

2. even if i start 5K SIP/STP into the above funds, to invest such large amount it wud take few years. so shud i increase the SIP and invest within 3-4 yrs and is it right?. or shud i keep allow 5k SIP and invest it over 9-10 yrs and meanwhile let some chunk of money be invested in one of the balance funds UTI CRTS 81(G) eq-oriented hybrid

i hope you are getting my problem of parking this huge money till it gets invested over the period of 5-10 yrs. Let me also add that i might get another 12L in near future. 

i am very sorry for such a big mail and taking so much of your time.

thanks and best regards,

padma

9 replies on this article “parking a huge amount of 30L in MF”

  1. Padma Roy says:

    Dear Rameshji,

    thanks for all the efforts and time. i’ll certainly try my best to directly go thru AMC and avoid ICICI direct. i am completely convinced to have only 2 or max 3 funds. i never thought that using these online brokers were actually eating away a part of our hard-earned money. please accept my humble thanks.

    best regards,
    padma

  2. Padma Roy says:

    Dear Rameshji,

    agreed, you have very well explained the funda “In debt funds, more the time, more the interest, simple”, how dumb of me to not even think abt that.

    yes i would certainly like to follow on your suggestions
    1. i will do lumsum into debt fund instead of SIP

    2. did you mean ICICI Prudential Flexible Income Plan Regular- Growth (min inv=15K). since the ICICI premium fund has 100L as min investment and not 10L.

    3. for templeton the liquid fund can be franklin india TMA liquid plan (G). For short term Franklin india low duration fund (G) as you suggested.

    4. i hv been using ICICI direct for last many yrs since it is very easy, handy. i came across an article here which explains abt the unnecessary charges that affect the long term goals. so what do you suggest.

    thanks and best regards
    padma

    1. Ramesh says:

      1. Ok.
      2. It seems I mistakenly just checked the Investment Details on VRO comprehensive page, instead of checking it within that plan. You are right that it needs 100L and not 10L. So it does not fulfil your need. The Flexible Income Regular fund is ok.
      3. You do not really need a specific Liquid fund.
      4. You need to check out what extra charges you are paying. enumerate them and are they fixed or related to the amount of investment (in which case, it is really bad). Ease and handiness are great things, provided they do not eat too much into your investment amount. Best is to get direct AMC access, and this is important also because of the fact, that the new rules allow the AMCs to provide you directly invested funds, which should have even lesser FMC because of decreased distributor’s fees and trail commission. In any case, direct AMC is better, even without this option. And this is another reason for you to have a max of 2 AMCs only.

  3. Padma Roy says:

    Dear Rameshji,

    1. yes, she has gifted me and i m not managing her money. she doesnt need anything.
    2. it is my way to show gratitude, so that she may spend on herself.

    3. i hv mentioned that i am going for SWP only IF required.
    4. i can do without HDFC balance fund also and continue with the remaining 3.
    5. i m going with MIP only for parking and future pump-in. it is only like FD for me but with some eq exposure.
    6. i hv been doing this flowchart thing for last 3 weeks and after your replies many of my doubts and confusions hv been cleared.
    as you mentioned abt the probllm with shifting money, then i can select MIP of either ICICI or Franklin so that atleast i can pump into one of the existing MF.

    actually this time i do not want to be very aggressive so i m taking care.

    thanks and best regards,
    padma

    1. Ramesh says:

      1,2,3. ok.
      4. Good idea too. Better to go with 2 funds only.
      5. MIP is not a good idea in your case. Because, since you will be trying to pump into equity, when the markets fall (or a better def, when your equity ratio falls below a stipulated level), it is a better idea to separate the two assets completely. Which means, you will be better off with a pure debt instrument, rather than a mixed one like MIP. Rememeber, you are not trying to have a great performance expectation from the MIP. In falling markets, the MIP will fall too, which to a large extent, defeats the purpose of yours.

      My fund suggestions will be:
      1. Franklin Blue Chip or Franklin Prima Plus (has a slightly wider universe) and Franklin Low Duration Fund / Franklin ST Income fund.
      2. ICICI discovery with ICICI Pru Flexible Income Premium fund.

      Moreover, you Should not go with SIP into debt funds. Why would you want to lose the interest income for 5-6 months. In debt funds, more the time, more the interest, simple. Regarding ICICI Pru Flexible Income premium fund, this fund requires a minimum 10lakh investment first-up, which you have actually. You could split 10L and 5L into the two or as you find it ok. I am just showing the various combinations. In the end, keep it simple.

      How are your going about investing into these funds? Online platform like fundsindia / Banking channel / direct AMC?

  4. Padma Roy says:

    Dear ZionView and Rameshji,

    thanks a lot for the encouraging advice. actually i was bit reluctant to put this big amount in only 2 funds and wanted to play a bit safe. I already have ICICI pru discovery so now i think i wud go with the foll 3 funds:

    1. Franklin Bluechip G (20K /wk, ~1L/month, ~5L/5months)
    2. ICICI pru discov G (20K /wk, ~1L/month, ~5L/5months)
    3. HDFC Balanced G (20K /wk, ~1L/month, ~5L/5months)

    total 15L wud be invested in 5 months, for the other 15L i am thinking on different lines. Please review.

    4. Reliance MIP(G) (60K /wk, 3L/month, ~15L/5months)

    i wish to have some regular earnings from next year so that i can give back to my mother, so can i go for Reliance MIP (G). As this is a debt fund, it can act both as a parking fund and also have some eq exposure. better than bank FD. Also the lock-in period is only 1yr so after a yr i can even do SWP. I wud go for “growth” option to gain compounding power and then i can anytime use this money to pump more in the existing MF when markets go down substantially (after lock-in).
    In the past many times i didnt had money to pump more when market crashed so this time i m trying to take care of that.

    Please let me know your feedback as i am very much convinced with this new strategy.

    thanks for all the wonderful suggestions which is helping me to think from all directions.

    best regards,
    padma

    1. Ramesh says:

      To be more clear, answer these questions:

      1. Is this 30 lakhs gifted to you by her for your own purpose? OR is it her money which she has given to you to manage on her behalf?
      2. Regarding the regular earning and giving back to her, is it your way (non-compulsive) of showing gratitude? OR she does need it regularly?

      The point is:
      1. If she needs money on a regular basis (say monthly or tri-monthly,etc), a regular SWP of that particular amount is a very good way, but then you will have to adjust according to her need and a corresponding suitable amount has to be put in the Reliance MIP.

      2. If she does not ‘really need’ the money, then there is no particular need to do a SWP. Just remove a suitable amount, as and when it suits you, from one of the funds, and internally balance these funds.

      Also, by getting into 4 fund houses, you are probably complicating things for yourself. It will not be easy to shift money from one to another directly, if the funds are of different houses. Think over this.

      Pumping money more is just another name of asset allocation and balancing.

      And, better you make a written summary / flowchart / algorithm of the entire thought process of this. The ’30L Hello World” program, if I may say. 😉

  5. TheZionView says:

    Padma,

    Let me put it in simple way. You want to invest 30L in Equity based Mutual Funds( i assume you are investing this for long term that is 10-15 years).

    In that case you should have just need two MFs which provides good diversification. You dont need 6-7 Funds as you have given. Also this investment period should be within 6-12 months as SIP.Don’t invest through sip for 10 years as you will loose the power of compounding during this period.

    So choose 2 funds and invest in them with next 6-12 months.
    I would suggest below 2 funds which will give good diversification

    Franklin bluechip (Large)
    IDFC premier eq (mid-small) or Quantum long term equity fund (Multi Cap)

    I don’t have comment on the gold fund as i don’t understand them clear enough.

    Create a STP in your chosen 2 funds for 6-12 months and leave them there to grow for your future.

    Remember you job is not over with investing.You should also monitor the chosen fund performance every year and take appropriate action.

    1. Ramesh says:

      Perfectly put.

      @Padma,

      Your notion of putting 5k per month is entirely impractical, besides being a very bad idea from a financial point of view. Where have you got the idea that 5k per month is the ideal amount? Why not 10k per month? or for that matter 1L per month or 1L per day.

      I would have actually gone even more strongly instead of 6-12 month period, in this manner-

      1. Decide your asset allocation. You seem to have decided on 75% equity: 15% debt: 10% gold. Fair enough, since you have got a decent exposure of seeing the equity markets.

      2. Understand the term “myopic loss aversion”. It really will not make much of a difference if you invest in next 1 month or next 6 months, if your view is much much longer than that.

      3. Do not get too many funds. The above mentioned two (of 3) funds are great. A combination of a conservative equity fund (like Franklin Blue Chip) and a balanced fund like UTI’s fund or Birla MIP Savings 5 is also a decent combination.

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