Ultra-short-term debt funds are the best bet for immediate goals
I am 27, live in Mumbai, and earn ₹48,000 a month. After expenses of ₹25,000, I have been investing ₹1,000 each in three SIPs since June 2017: Aditya Birla Sun Life Frontline Equity Fund – Dividend – Regular Plan; Franklin India Flexi Cap Fund – Growth; and HDFC Prudence Fund – Regular Plan – Growth. These funds come to about ₹99,000. I also have an emergency fund of ₹266,000. Based on this information, kindly advise me on the following:
a) Are the funds I am investing in performing well, or should I shift?
b) Is it advisable to hold an emergency fund in a bank?
c) What should be my financial plan for marriage in 2022 and to buy a 1 BHK house in Mumbai?
e) I have taken a loan of ₹1 lakh from a friend, which I am repaying at ₹5,000 per month. Is there a fund using which I can repay faster and also earn some money in return?
Your current saving potential is about ₹23,000 after monthly expenses of ₹25,000. Your savings are of ₹3,000 and loan repayment is of ₹5,000, which leaves a balance of ₹15,000 that is not being saved. This, too, needs to saved in an investment plan.
The immediate need is to create a corpus for your marriage expenses. As the funds are required within a year’s time, you cannot take a risk with the money and can start investing in an ultra-short-term debt fund or can even start a bank recurring deposit. Likewise, most of your emergency fund corpus can also be invested. After marriage, you will need to re-evaluate your expenses and start investing for long term to buy a house in Mumbai.
As regards the loan, you can use the existing funds for its repayment and start monthly investment for the long term in an equity fund that can be an aggressive investment.
You are currently invested in large-cap, flexi-cap and hybrid equity funds. All these have been good performers over the last year but have been average performers over the last few years except for the hybrid, which is more consistent among the three. You may consider changing the large-cap and flexi-cap funds with ones such as Canara Blue-chip Equity. Mirae Large-cap in the large-cap space and Mirae Emerging Blue-chip in the large and mid-cap category can be considered for starting monthly investments. You can also add a mid-cap, where Kotak Emerging Equity is a good option.
Surya Bhatia is managing partner of Asset Managers.
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