Portfolio review request

POSTED BY Raj ON January 6, 2011 4:23 pm COMMENTS (7)


Jagoinvestor has changed my thinking about future planning. I’m 29 years old right now. I am looking forward for your valuable suggestions to create a better portfolio.

Myself and wife are working and our monthly savings is around 60K after household expenses and Rent. We are planning to work for another 20years and the below is my current portfolio:


Kotak Preferred Term Plan for 25 years @ 50L cover + 15L critical illness rider: 12712 p.a.

(Planning for another 50L term plan for myself and 50L+CIR term plan for wife in near future)

Mutual Funds:


  • Can Robeco Eqty Tax Saver: 10K
  • HDFC LT Tax Advantage: 10K
  • ICIC Pru Tax Plan: 5K
  • Fidelity Tax Advantage: 10K



LIC Market Plus-I Growth: 30K



  • Personal loan: 2L @ 13%
  • Gold loan: 1.6L @ 7%
  • Personal borrowings from friends and family: 2L


PPF: 40K

Our current monthly expenses are around 25K and we are planning to invest 20K per month for another 20 years for our retirement (with 10% increment in savings every year).

After reading Manish’s several blogs and comments I’ve decided to set a portfolio that looks like this:


  1. PPF: 5K monthly
  2. Gold / Index Funds / Debt Funds: 5K SIP
  3. Large cap equity funds: 4K SIP
  4. ELSS / Equity diversified funds: 4K SIP
  5. Midcap funds: 2K SIP


Is my asset allocation promising for hassle-free retirement life? Will I be able to generate CAGR of 13-15%. What are the other recommended savings instruments? Please share your valuable suggestions.


7 replies on this article “Portfolio review request”

  1. Ramesh says:

    A dynamic bond fund like this works in two ways which are better than PPF/FD:
    1. They can change their portfolios according to the interest rates. Presently, the interest rates are going higher, so these funds change to shorter duration deposits and get the benefit of higher rates. When the interest rates fall (which they will eventually do), these funds go into longer duration deposits and almost double the rate of return (a simple thumb rule).
    2. They are taxed yes. But the taxation takes into account the use of indexation. Indexation (cost inflation index) is about three-fourths of the inflation rate and has been about 8-9%. So you are taxed 20% after including indexation. If your return is less than indexation, then you have actually sufferred a loss. To be more clear. You invested 100 in year 1. after 1 year, you got 108 (but the indexation is 9%). so for tax purposes, you have a total gain of (-1) and there is no tax liability. People use double indexation benefits in FMPs by investing in 13 month FMP in March. That way they get indexation benefits of two years.

    So, overall your tax liability is minimum.

    Regarding the performance of this particular fund. In the last one year, the interest rate have been low, so all debt funds have sufferred and rightly so. I would be wary of a fund which performs significantly better than the average, without justification. If I put money in a debt fund, I would want to perform in that manner only – for low interest rates, low return and for high interest rates, high return!!
    I would be pretty happy with a 8.2% return over a period of 5 years from a pure-bond fund. Nobody else provides that much with that liquidity. Compare PPF (less or equal money with significant illiquidity), NSC (equal rate but interest is taxable), FD (less interest with tax on interest), etc.
    The dividend from a debt fund is tax-free in your hand. There are some other posts regarding the exact calculations. Please search the forum.

    Hope this helps.

  2. Raj says:

    Hi Ramesh,

    Thanks for your time and wonderful suggestions. Out of the 60K savings I’m planning to pay of my debts within one year after investing 20K in each month. Also I need a clarity on your below statement:

    7. Use PPF and a dynamic bond / income fund as debt portfolio.

    What is a dynamic bond / income fund?

    Thanks again for your time.

    1. Ramesh says:

      Dynamic bond / income funds are funds which invest in debt instruments of different tenures according to the interest rates. In contrast, a short-term fund will keep them only in short-term instruments. Same for long-term or GILT (govt bonds), etc.
      also, these funds are NOT debt oriented hybrid funds.

      Good funds in this category are BSL Dynamic bond / Kotak bond regular / BNP Paribas flexi bond / Canara Robeco Income.

      1. JayaprakashReddy says:

        Hi Raj & Ramesh,

        Raj – You have done good research and going on right way.
        Ramesh – That was excellent summarization and suggestion.

        Raj you didn’t mention about your PF amount which is going directly from salary as your contribution and may be your employer contribution too. Did you consider that amount in your debt part? This point is not valid if there is no PF component in your salary.

        Another observation is I never saw anybody mentioned PF as part of financial planning. Not sure why?
        Even this amount adds to your retirement corpus. Why not treat this as part of debt component which you have planned?

        1. Raj says:

          Our company does not contribute to EPF if basic salary exceeds 6500/-. With the current interest rate of 9.5% I wish I had EPF component 🙂

      2. Raj says:

        Hi Ramesh,

        How Kotak Bond (Regular Plan) (G) is better than PPF or FD? I could see in moneycontrol that annualized return of Kotak Bond (Regular Plan) (G) is just 8.2%. And I suppose there is tax liability on the interest / dividend you receive from Debt funds right. I’m confused.

        Could you please shed some light on this topic.

  3. Ramesh says:

    My views:
    You have studied a lot. But to me, you look confused presently (dont worry, it is normal in the initial stages of any new thing).

    1. Keep it simple.
    2. Equities provide the best way to make money over long term.
    3. A good debt portfolio provides reasonable decrease in volatility. Though, the long term returns will not be able to “conquer” inflation.
    4. Gold as an investment vehicle is “speculative”. More so, at the current rates and with the current “fad”. So, it should not be part of a long-term portfolio as a permanent member.

    Problems with current strategy:
    1. A large loan liability (of about 5.6 L). All the loans are non-asset forming.
    2. A large debt portion of the overall current portfolio. About 40%. (40k out of 105k).
    3. A proposed 50% allocation to debt in future investments.
    4. Thinking about a 13-15% CAGR growth. (This actually means an expectation of 20-24% growth from equity portfolio to compensate for the 6-8% debt returns). Looks very improbable over a long term.

    1. Payoff the loans first (personal – very high rate, first). Then, payoff friends and family loans (increases your social worth and self-esteem). And then the gold loan.
    2. Cannot see a medical insurance policy. It is recommended.
    3. contingency fund of about 1 lakh is also a must.
    4. Tax savings- Use PPF (minimum 500 each only). the mandatory amounts in insurance policy + LIC Market Plus. Rest maxed into the ELSS. Use only 1. whichever your research says.
    5. For future investments, I would say a 70-80:20-30 mix of equity:debt assets is suggested atleast. (always remember, an equity fund itself has a dynamic allocation of 70-85%).
    6. Use 2 multicap funds for equity. (if you ask me, choose between hdfc equity,templeton india growth/equity income, quantum long term equity, reliance rsf, fidelity equity).
    7. Use PPF and a dynamic bond / income fund as debt portfolio.
    8. Do not use gold etf.
    9. Try to use SIP with lumpsums (whenever, you have extra money).
    10. Regarding the insurance amount. your present insurance is reasonable enough at present.
    11. Also the savings amounts that you have mentioned are confusing. (60k savings. But only 20k to be invested??). If you have extra, save them.

    Hope this helps you. 🙂

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