Question to pick a Fund with a specified GOAL

POSTED BY sunil ON January 15, 2013 12:04 am COMMENTS (3)

Dear All,

I have a goal of having 300000 with in 6 years for one of my goal… and i feel this tenure would be enough for repeaing benefits out of Equity Markets.

Also, at the same time i am planning to make tax planning using this money in Mutual FUnds… not sure on DTC (let me rethink when it comes).

I have gone through Canara, Reliance, HDFC, Quantam and ICICI Prudential Tax Plan Mutual Funds…

I personally feel all of these are heavily invested in Large Cap stocks… however, being in stock markets for quite a while i feel the Interest rate cuts (which might take place this year) and the rreforms to continue…. this is a good time for not only frontline stocks but Mid and Small cap companies to rally and make new highs…

Hence i feel Reliance tax Saver which has highest Mid and Small Cap composure to be my choice of Fund. However, i completely agree that this poses a significant risk if Markets tumble down…… But this goal i am setting for Capital Aprreciation and not for (or not viewing only) Capital Protection.

I will not be bothered about few hick ups here and there.

This Fund is invested highly in Automobile, Engineering and Financial rest others focus on Financial sector the most. I feel if the financial sector is to get new life into it it will take automobile as well with it… hence giving this Fund a double advantage…

This is my small analysis… i would encourage people to cut this analysis and let me know if i am thinking the right way.

3 replies on this article “Question to pick a Fund with a specified GOAL”

  1. Dear Sunil, if you are going to use ELSS for your target there is some change in the calculation as suggested by dear JGM above. Sue to lickin period, you can only invest till 36 months so that you can redeem your money of last sip if 36th month’s into 72nd month.

    @ 12% yly growth rate, you need to invest 9850 Rs. or 10000 Rs. rounded off.

    Please think over this issue & reply.

    thanks

    Ashal

  2. Fully agree with justgrowmymoney. SIP or even periodic investments in ELSS is not a great idea especially with a goal only 6 years away because of the lock-in. If your fund underperforms in those 3 years all you can do is sit and watch.

    This happen to me with Sundaram Tax saver which was one of the best funds when I started out. Manish even did a video on this. Then its slide started. I am still pulling out my SIPs!

    2900 each month for 6 years assumes 15% year on year. More likely over a 10 year
    period.

    btw capital appreciation and protection are linked. Its just that for goals far away one can compromise on short-term protection to achieve long term appreciation.
    The question is, is 6 years long-term?
    I dont think so. It more short-medium term. So you need to cut back on the volatility as suggested above.

    Alternatively investing just 3100 each month in a good balanced fund at 12% returns will get you there
    12% over 6 years is quite possible without too much volatility.

  3. To accumulate 3 lacs in 6 years years you need to contribute ~ INR 2900 each month for 72 months.

    I would not invest this fully in ‘mid and small caps’ alone – I would sure include Large Caps at least for 30-40% to give that lower volatility. I am assuming your other steps to a financial plan (Term plan, Health Insurance etc.) are in place.

    Again Reliance Tax Saver is only a recent leader in the ELSS category and ELSS as a group as such have sure lagged Large Caps and Mid Caps over 3 to 5 year periods. Avoid ELSS for the goal purpose unless you also want to save taxes.

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