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Asset Allocation to help achieve goals

I am 26years old salaried person with annual CTC of 3.5L. My goal is to build a house in a posch area of Chennai. I have invested 1L in FD with interest of 9.10%. And 1L in NSC (5Years). I would like to invest 1L as lump sum in the following mentioned funds, can you please suggest if this asset allocation would help me achieve my goal? Following is the fund I have chosen for investment Equity Diversified Fund - L&T India Value fund, Index Fund - GS Nifty BeES, Balanced Fund - Tata Balanced Fund, also in ELSS as SIP of Rs. 5000 every month; Please advise?

Oct 27, 2015 by Nirmala, Chennai  |   Mutual Fund

L&T India Value Fund has given an annualized return of around 15% in the last 5 years. GS Nifty BeES on the other hand has given annualized returns of 6.5% in the last 5 years. Tata Balanced Fund has given annualized returns of 14.7% in the last 5 years. While it extremely difficult to predict the future, if these funds simply maintain their historical performance you can expect a weighted average compounded annual returns of 12%, from your mutual fund and ETF investments over the next 5 years, assuming you have allocated amounts to each of these three investments. It is also likely that you can higher returns from these investments over the next 5 years. L&T India Value Fund and Tata Balanced Fund are among the top rated funds in their respective categories. GS Nifty BeES is a Nifty ETF and therefore, to a large extent, will mirror Nifty returns.

You have not mentioned the term of your FD. Assuming it is for 5 years, your fixed income returns (FD and NSC) will be 8.9% per annum over the next 5 years. Please note that FD interest is fully taxable as per your income tax rate. The NSC interest is deemed to be reinvested within 80C, provided you mention that in your IT returns and it is within your overall 80C limits. Given the CTC that you have mentioned, if you can make enough 80C investments through your ELSS SIP, you can save the taxes on both your FD and NSC interest.

Based on the above, you can estimate how much returns you can get over the next 5 years and see if it meets your investment objective of building your house. When estimating your returns, you should also factor in the SIP returns of your ELSS investments (use our SIP calculator). If you are falling short, you should consider increasing your investment in your diversified equity fund or ELSS or balanced fund, depending on your financial planning requirements.

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