I am 29 years old. I am investing in ELSS mutual funds
via SIP. I have holdings in:
Axis Long Term Equity Fund (Rs 3,000/month)
Tata India Tax Saving Fund (Rs 500/month)
Mirae Asset Tax Saver Fund-Direct Growth-Growth (Rs 1,000/month)
Kotak Tax Saver Scheme - Direct Plan - Growth (Rs 500/month)
My goals is wealth creation and avail tax benefit. Could you please let me know if my investments needs some changes?
--Pranav Rakheja
You are currently investing Rs 5,000 in four ELSS or tax saving/planning
mutual fund schemes. Here are a few quick observations. You are trying to over-diversify your tax-saving mutual fund portfolio. You just need one or two tax-saving mutual fund schemes in your portfolio. Two, investing Rs 5,000 per month is unlikely to help you to create a huge corpus. For example, assuming an annual return of 12 per cent, you would be able to create a corpus of around Rs 50 lakh in 20 years, which would be too little to buy a home, your retirement, etc.
This is the reason why we e always ask our readers to adopt a goal-based investment strategy. Start with identifying your financial goals, find out the time you have to achieve them, and choose your mutual funds based on your risk profile. For example, if you have a short-term goal that need to be met in two years, you cannot risk your capital. So, you would choose a short duration or short term debt mutual fund scheme. Suppose you need to invest for a long-term financial goal that needs to be achieved in 10 years. If you have a high risk tolerance level, you would choose a mid cap scheme to achieve the goal. If your risk appetite is conservative, you might opt for large cap mutual fund schemes.
If you are new to mutual funds, you should seek the help of a mutual fund advisor before proceeding further.