Model Mutual Fund Portfolio for Working/ Salaried People — Holy Grail Part III

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Coinmonks

6 min readJan 3, 2022

Hey guys…..sorry for the delay. Got caught up chasing deadlines for the college applications. But, my commitment to you is deeper than anything, therefore, there may be some delays but wouldn’t miss it for sure.

Ok….back to where we left in the last post. I am sure by now, you would have enough time to ponder over those questions as to how much insurance, pension and PPF you need and now you too see them as expenditure towards securing your old age and not as an investment. The quintessential question as to how much must be saved, also somehow must be clear in your mind. But once again let me reiterate that save what ever you can but not at the cost of your present. The smarter way is to be disciplined with your finances and follow few basic principles as monthly/ quarterly/ yearly expenditure planning along with a very basic rule of moving everything from your account to savings just prior to getting your salary. There can never be any rules to dictate what % of your earnings you should save. The savings component will depend on how much you earn and what are the committed liabilities.

Lets move ahead…..surely, you have spared a thought on this too and by now I expect you to know what is your potential to save. Therefore, lets see some cool but wise hacks to maximise your savings, be it in the mutual funds or otherwise.

Firstly, aim at least 10% higher than your actual capacity but keep in mind not to feel bad, if you miss the target. Many of us…including me, have very many wasteful expenditures and if somehow we curtail them, savings component will grow. This 10% will address that part of your earnings.

Secondly, if you generally get your salary or earning by a date then plan to invest also by a certain date, preferably within few days of your salary getting credited in your account.

Lastly, as far as possible, keep your salary account separate and away from investment account so as by mistake/ chance also you do not transfer funds from this. It will also help keeping your temptations in check as we often monitor salary account but rarely other accounts. And if you are restless and impatient one, the rule for you is that investment account can only be checked for balance if you have contributed for that month and that too only once….ha…ha….ha!!

Now the Mutual Funds…..if that is your preferred route.

I would recommend to divide the sum earmarked for investing in minimum 3 parts or ideally upto 5 parts to minimise risk and maximise returns as follows:-

1. At least 10% to 20% in Nifty or other Indices ETFs (Exchange Traded Funds), example:- Nippon Nifty Bees. It can be directly invested similar to buying any share provided you have a Demat trading account. The advantage is, while it will give good returns, it is almost like liquid money. Based on the delivery cycle of your broker, it can be at max T +2 days or else, if your broker provides eATM facility such as ICICIdirect, money can be in your account within 30 mins (limited to 50 thousand). The returns are similar to Large Cap Funds or Blue Chip Funds. This justifies aiming 10% higher than your saving potential. If you need the money for some urgent commitment, en-cash it. If not, you have saved more than your potential and pat yourself for that.

2. A second broad rule, which I follow is ….assuming retirement age as 60, subtract your age from it and multiply it by 2….for example, if you are my father’s age say 50, you will get a figure of 20…..this is the % you should be investing in aggressive instruments either directly through investing in shares or through MFs.

3. Half of the remaining, that is (80/ 2 =40%) for my father at least 40% in Large Cap and Blue Chip funds with Direct Plan — Growth option such as Kotak Bluechip Fund, Axis Bluechip Fund, ICICI Prudential Bluechip Fund etc…. in case you prefer nationalised banks over private, choose SBI Blue Chip Fund. Keep in mind to see at least last 5 year’s CAGR and not one year or 3 months.

4. Remaining money (around 40% in my father’s case) to be split in at least 2 parts if the investment capital is less, or else ideally in four parts as below:-

I — Choose one to two Mid Cap Fund with Direct Plan — Growth option such as SBI Magnum Midcap Fund, BNP Paribas Midcap Fund, ICICI Prudential Midcap Fund etc for maximising growth while distributing the risk between more than one funds.

II — At least one to two sectorial funds, on which ever sector you feel bullish be it Infra, IT, Banks etc. If you have none, then I will recommend you to consider Parag Parikh Flexi Cap Fund. It invests in Indian and Global market at a ratio of 65% to 35% to maximise your returns. But has an exit load of 2% if withdrawn within a year, or 1% if withdrawn between I year to 2 year, after that there is no exit load.

** Disclaimer — The suggested fund names are being used as an example. Please do your own research before investing. No matter which funds you choose, there will always be associated risks. In addition, yield of the funds keep on fluctuating and that is why CAGR is only indicative of how the fund performed in previous years but not a true reflection or prediction of how the fund is going to perform in future.

Important — Financially it does not matter, wether you choose SIP route or lump-sum investment in the same folio. But if you plan to invest periodically, SIP is more convenient as well as makes you a little bit more disciplined with investing. Lastly, unless there is a emergency or you have met your investing goals, do not dip in your savings.

Monitoring and Pruning — Have you ever bothered to check your FD account that how much interest has been accrued in that?? Then why bother with MF??? But, monitoring and pruning is important part of wealth creation. In case of MFs, you may check its performance yearly or at max once a quarter….more than that will make you obsessed with it and will compel you to make mistakes. Similarly due to its inherent nature, MFs will take minimum 3 to 5 years to show, how they have performed and that is the time to decide to continue with them or to move to some better scheme. This may be more applicable to sectorial funds and ETFs than for Blue Chip Funds. The thumb rule is …..do not disturb a fund which is doing well but at the same time even after a period of 3–5 years, if a fund is not performing as per expectations, it may be a time to consider other options. Most funds do not have any exit load after 1or 2 years but be sure to check, before you hit that redeem button.

That’s all for this post guys…….hope you will like it too. I have been receiving rave reviews about this series and I must thank all of you for that, for having shown faith in me and sharing my posts wide and far. If you like this post too….don’t forget to show your appreciation by hitting the clap button on bottom left and for newcomers, let me remind you to hit the FOLLOW button on top left to continue receiving my posts.

See you next week guys….with the last post of this series covering MF options for senior citizens who are retired and living a healthy / fuller life. Bye till then………

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Model Mutual Fund Portfolio for Working/ Salaried People — Holy Grail Part III

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Written by Dhruv Srivastava