How can I build a good portfolio for future, long-term life goals?

I am a 33-year-old IT professional with a 1-year-old daughter and have just started investing in mutual funds (MFs). I have nearly 8 lakh in my savings account and 2 lakh in MFs. I want to start investing for my retirement and my daughter’s education. I would also like to upgrade to a new home for which I would need 25 lakh in the next five years. How much should I invest and which MFs are good for this?

—Name withheld on request

You have three goals now and reasonable time to build a corpus for each of these goals. You may set your house upgrade as the top priority, followed by the other two goals. A part of the money can be turned into a contingency fund. For this, you can keep aside 6-9 months of your monthly mandatory expenses. The rest of the amount can be invested for your home upgrade. If we assume you invest 2 lakh from the bank account for this goal, then at 10% per annum (p.a.) it could become approximately 3.2 lakh. For the remaining 21.8 lakh, you will need to invest 28,500 per month. This will meet your goal if the invested amount grows at 10% p.a.

As for the other goals, you have 22 years for your retirement and nearly 16 years to accumulate for your daughter’s higher education. Some idea on the goal amount and employees’ provident fund (EPF) balance would have been helpful here. If we assume your current monthly expenses to be 60,000, then considering the inflation of 6%, you will need to accumulate about 5.95 crore for your post-retirement needs from the age of 56 to 85 years. During this period, you may withdraw nearly 2 lakh per month to take care of your monthly expenses in line with the annual inflation of 6%. To reach the retirement goal, you must invest 66,000 per month for 22 years.

For your daughter’s education, if we assume you want to accumulate 50 lakh in 16 years, then you will need to invest 9,000 per month for 16 years as the 2 lakh in MFs can also be mapped to this goal. If the total monthly investment amount at this stage appears to be higher than your monthly surplus, then you can follow the strategy of increasing the monthly investment amount every year by 10-20% as you grow further in your career. Following are the funds you can consider investing for these goals: UTI Nifty Index Fund, Parag Parikh Flexi Cap Fund, IIFL Focused Equity Fund, ICICI Prudential Bluechip Fund, Kotak Emerging Equity Fund and SBI Large & Mid Cap Fund

You should review these funds every six months to ensure that you are on the right track. The key to investing in equity MFs is to have a long-term horizon, which you have in terms of your goals.

Harshad Chetanwala is co-founder at MyWealthGrowth.com.

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