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Should I select different funds for different financial goals

The words super, great, wonderful not enough to appreciate your service. Really this site giving knowledge that making future safe. So thanks from heart. Am NRI, 27 year age. My Financial Plans are, Buying House - Rs 40 Lakhs (5 year), (Short term) Business Capital - 50 Lakhs (11 year), (Medium term) Children Marriage - 1 Crore (20 years ), (Long Term) Retirement Plan - 5 Crores (30 years). So my question is I have to maintain different portfolio’s according to my goals because from my understandings for this corpse at least I need 80, 000 - 100,000 per month. That I can’t now. so I thought first I will invest for my short term goal (1) and meanwhile for second goal. After 5 year I plan to continue for my others goals gradually. Hence for Short term I choose debt funds. For 1 goal (Short Term - 5 year), (some equity funds for 2 - goal) L&T Ultra Short Term (Debt) - 5000, Birla Sun Life Short-Term Fund (Debt) - 10000, SBI Magnum Gilt Fund (Debt) - 5000, Franklin India Prima Plus (Diversified) - 2500, Birla Sun life Frontline Equity Fund (Large) - 2500, HDFC Balanced - 5000, Total SIP = Rs. 30,000 per month. After 5year (rest of goals – long term), Franklin India Prima Plus (Diversified) - 5000, Birla Sun Life Frontline Equity Fund (Large) - 10000, HDFC Balanced - 10000, Franklin India Smaller Companies Fund (Small) - 10000, Mirae Asset India Opportunities Fund (Diversified) - 5000, Birla Sun Life Short-Term Fund (Debt) - 10000, Total SIP = 50,000 per month Gradually depend upon my future growth I will increase SIP on large and Diversified funds. For assets allocation I remain invest in debt. So please advise is this portfolio and plan will help to achieve my goal?

Apr 24, 2017 by Michael, Chennai  |   Financial Planning

Thanks for the kind words which we truly appreciate.

Your idea to plan for different life goals by creating separate investment baskets is an ideal approach.

You have also selected good funds for your short term/ medium and long term goals. Your short term goal is of 5 years and you want to create a corpus of Rs 40 Lakhs by investing Rs 30,000 through monthly SIPs. This goal looks unachievable as you are investing Rs 20,000 in debt/ gilt funds and only Rs 10,000 in equity funds. This portfolio can get you maximum 11% annual return and after 5 years you can expect a corpus of Rs 24 Lakhs only against your goal of Rs 40 Lakhs. Therefore, there will be a short fall of Rs 16 Lakhs.

We feel that you should increase your equity allocation fro this goal and also feel that instead of investing separately in debt you should invest in balanced funds as it has minimum 35% debt in its portfolio but the taxation is of equity. If you invest in balanced funds and increase your equity allocation you may expect an annual return of 13-14% and expect a corpus of around Rs 26 Lakhs. However, it will still be short of Rs 14 Lakhs!

To achieve the above short term goal of Rs 40 Lakhs, you should increase your monthly SIP to Rs 45,000 from current levels of Rs 30,000!

Medium/ Long term goals - For these you plan to invest Rs 50,000 per month and the selected funds are equity and balanced funds. Assuming 14% annual return, you can expect a corpus of Rs 1.57 Crores after 11 years. Therefore, you can meet your business capital goal of Rs 50 Lakhs and keep the rest for meeting other long term goals while continuing the Rs 50,000 monthly SIP.

You need to review the above investments regularly and once the short term goal and medium term goals are achieved, you will have to plan for your long term goals, that is child's higher education and marriage and your retirement.

Wishing you all the best! Thanks for writing to Advisorkhoj!!

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