Analysis on Long Term Investment Portfolio

POSTED BY Ravi ON September 29, 2012 3:17 pm COMMENTS (20)

Hi Gurus πŸ™‚

This is an excellent place to discuss investments πŸ™‚

I am 31 years old, married. Wife is working.

I have monthly house and car loan, against which i am paying 23K+7K EMI per month. My car loan will get over in another 3.5 yrs, and house load will get over in around next 7 years.

I have term plan from HDFC standard life, yearly premium 13k(after taxes). I also have ICICI health and home assure policy against my home loan, one time premium already paid against this policy.

After paying off EMIs, monthly expenses, and some liquid savings in our regular bank accounts, I have around 25K per month for investment. I am relatively new to investments and market. So I am planning to go ahead with mutual funds ( and not shares).

Now, I am thinking to invest 75% in MFs, and rest 25% I am planning to invest equally in physical Gold coins/bars and one PPF account. This is on long term basis investment – for period of 10-15 years. Will keep reviewing performance of MF schemes ofcourse and will take actions accordingly. As my age will go up and my EMIs getting cleared, i will slightly reduce my ratio in MF, and push that to debt+gold.

Here is the thought process after going thru various MF schemes and their returns over a period of last 1 yr, 3 yrs and 5 yrs.

5k large-cap   icici focused blue chip – growth
5k mid-cap     birla sun life mnc fund – growth
4k diversified  reliance quity opportunity retail fund – growth
5k ELSS         reliance equity tax saver and quantum tax saver
3k gold          physical coins/bars from jwellers
3k debt          PPF

ELSS+PPF = 8K per month, which will cover 1 lac under 80c tax saving investment for my wife. My 1 Lac under 80c is already covered by home loan.

I have tried to pick best schemes from good AMC houses. I would have loved to include HDFC somwhere in my portfolio, but just not able to decide where. May be I can replace birla sun life or reliance equity opportunity, but with which HDFC scheme?

Please let me know above portfolio looks fine, or we have better ideas or suggestions.


20 replies on this article “Analysis on Long Term Investment Portfolio”

  1. Ramesh says:

    “Over a period of 15 years…. PPF will return me CAGR at around 11%….Tax Saver MF scheme will return me less than that over 15 yr period?”

    This was the context in which I raised the query.

    Plus, PPF will give you 8% CAGR, and FD will give you less than that. This is not equivalent to PPF giving you 11% (as you mentioned), and FD as 8% with corresponding investment.

    Anyways, in my opinion, such calculations are absolutely wrong in every way. Besides, any debt fund, govt funded, will only be giving you less than inflation returns over a long run.

    In the end, it is your money, your decision and your responsibility.

  2. Ravi says:

    this was being considered in the scenario of FDs Vs. PPF. Wherein interest earned against FD has to be considered for taxation.

    Ofcourse, MF will give tax free interest amount if held for long term. But to diversify from equity investments only, we normally other options like ppf/fd/bonds. In such a case PPFs are better and this point was communicated thru the example of how money will grow in PPF, at around 11% CAGR, compared to FD.

  3. Ravi – For someone in the 20% tax bracket an 8.8% tax free return is equivalent to a 11% taxable return.

    11% is thus a NOTIONAL RETURN ‘not a real return’. It means you get paid notionally 11% then pay 20% tax on it which reduces return to 8.8%. And btw 8.8% is not guaranteed each year and PPF rates will be reset.

    1. Ravi says:

      yes, its because the interest earned income is also tax free. Thanks for the clear wordings πŸ™‚

      Btw, for ppf account, do we need savings account in same bank? Can we open it later, if its only needed at the time of maturity for depositing the accumulated principal+interest amount?

    2. Ramesh says:

      Compare that with above 1 year, long term capital gains tax = zero for equity oriented MF / ELSS. Apply that for 20% or 30% tax bracket people and calculate the returns. Even the dividend declared in ELSS are tax-free even if they are declared the next day of investment.

      Returns means real returns, and not after doing financial wizardry. Sorry if that is harsh.

  4. Couple of things:

    Dont go for Gold coin/bars. You can buy ETF like GOLDEX and when you want jewelery you can sell ETF and buy the same. Jewelery etc. is an emotional asset not cash generating, if you will.

    PPF – while it is ideal to invest lump sum at beginning of the year there is no harm in treating it like a SIP and investing equal amounts each month before the 5th. The reason is that you anyway have to accumulate over a period of time (in SB acct mostly) and invest in April instead why not invest periodically each month for the previous FY if you will.

    I would look at HDFC Tax saver. Also would make Tax saver 3k and PPF 5K each month.

    1. Ravi says:

      Gold investment is more because of 2 reasons ( more so because of 2nd point πŸ™‚ )
      1. Gold ETF is based on prices of Gold in terms of USD ( international market price), so its relatively stable, as compared to its rise in Indian market.
      2. Physical gold is also as per wishes of my wife.

      Over a period of 15 years…. PPF will return me CAGR at around 11%….Tax Saver MF scheme will return me less than that over 15 yr period?

      1. Ramesh says:

        The govt gives 8.x% on PPF, then how are you supposed to get 11%. Some kind of dubious maths there, I suppose. Can you explain?

        1. Ravi says:

          Dear Ramesh,

          Its because of compound interest calculation which gets applied on a period of 15 years.

          I only realized this after going thru several blogs on this super place πŸ™‚

          You can check several articles on this site on PPF.


          1. Ramesh says:

            You appear to be so mistaken.

            PPF is already a compounded interest scheme. Only trickery can make an 8% into 11%.

            Show me, if it is otherwise. Post exact links and methods which prove it.

  5. Ravi says:

    Hi Ashal,

    My loan is already covered by home and health assure policy of ICICI, that is taken against my loan if anything goes wrong with me.

    I have taken 1C term cover, which i think is alright. Can still think about going for some other term plan, if I am convined about higher coverage.

    However, at the moment I am looking at what MF schemes to pick. 8K per month has to go for tax saving plans, so 5K in tax saving MF, and 3K in PPF. My wife wants some investment in Gold too, so 3K per month in physical gold. This is my distribution, i may not invest it every month, i might end up investing in quarterly, or as per market trends, but this is the per month calculation and ratio.

    Now I am looking at what schemes to pick for total 19k MF investment, out of which 5K will be in tax saving funds.

    1. Dear Ravi, is it ICICI Lombard policy or ICICI Prudential Policy?

      The direct answer for MF & investment – please pick just 2 funds & invest in those funds. Regarding PPF, instead of depositing mly, please invest in a lump sum between 1st to 5th of April every year to get full year’s interest.



      1. Ravi says:

        Hi Ashal,

        Home assure policy is by ICICI Prudential.
        Thanks for your suggestion regarding PPF investment, yes i will deposit all at once between 1st and 5th april πŸ™‚


  6. Dear Ravi, May I know the loan amount details, your salary & wife’s salary, EMIs, mly living expenses, sum assured under that HDFC Term plan……?



    1. Ravi says:

      Hi Ashal,

      my package = 12L,
      wife’s package = 5L,
      home loan amount = 20L for 15 yr total period,
      car loan = 3.25L for 5 yr period,
      EMIs = 23K for home loan and 7k for car loan,
      HDFC term plan sum assured = 1 crore,
      regular monthly expense = 20k,
      other liquid saving per month = 25k


      1. Dear ravi, on what basis, you opted for 1C term cover? Once the family size increases, what ‘ll happen to wife’s job? “ll she continue or ‘ll she resign?

        Please clarify.

        Hop I’m not irritating you.



        1. Ravi says:

          Hi Ashal,

          Wife will continue the job, may be will take temporary maternity break.
          My parents keep visiting us every now and then, so they will be with us most of the time during those times.

          1C term plan sounded like good coverage considering the 30 yr period.

          Not at all irritating, you are trying to help me πŸ™‚


          1. Dear Ravi, 12L Rs. yly income + 20L Rs. home loan, your ideal cover should be around 15 times of yly income + 20L home loan. Even if we assume that your wife ‘ll continue her job after you, your yly income multiple should be around 12. So you should have a term cover of at least 12*12L + 20L = 1.64C Rs.
            Even if we tone down a bit, it should be around 1.5C.

            Your views please.



  7. Ramesh says:

    Try this combination:

    1. 7k in HDFC Equity
    2. 7k in Quantum Long Term equity
    3. 5k in Quantum Tax saver.
    4. No comments on gold from my side.
    5. 3k in PPF.

    Reasoning: Use less number of funds. And give good managers, full mandate to invest anywhere. No need to limit their mandate in bluechip or anything. QLTEF and quantum’s tax saver have similar portfolio too.

    1. Ravi says:

      Hi Ramesh,

      I had selected my suggested schemes after researching thru I compared these category ( large, mid and diversified) funds for their performance in last 1, 3 and 5 periods.

      Shall i research on other websites?


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