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How should I allocate monthly savings of ₹50k for long term?


I am a 36-year-old businessman. My goals are wealth generation for business and retirement. I prefer lump sum investments over SIPs in mutual funds. My monthly investment is 35,000–40,000, which I plan to increase to 50,000. My current corpus is 6 lakh. I hold investments in Quant Active, Axis Long Term Equity, Kotak Emerging Equity, DSP Tax Saver and Nippon India Small Cap funds. I hold some direct stocks too. I have a long-term horizon and can take medium-to-high risk. Please guide me on my investments.

—Suddipto Mandal

Before you turn to wealth generation, ensure that you have taken care of your ‘business emergency’ funds . While there are thumb rules for the personal or family emergency funds (generally an equivalent of six months of one’s salary), there aren’t one for business emergency funds. So, you would need to decide on the amount required for that and set it aside. This part of your corpus can be kept in ultra-low risk options like FDs or liquid funds. Then, you can turn your attention to wealth building.

The keys to long-term wealth creation are proper asset allocation and good investment choices. In your case, since you are investing for the long-term (8+ years), you can consider an equity heavy portfolio. An overall allocation of 80% to equity funds would be an acceptable level of portfolio risk. Within this 80%, about 10-20% can be set aside for direct investment in stocks, preferably bluechip stocks. The remaining 60-70% can go to equity MFs—predominantly diversified (flexi-cap category) funds.

Funds in your current portfolio are reasonable choices – although it has two tax-saving funds which usually do not find place in a conventional equity funds portfolio. You can consider replacing one of these with an index fund that invests in Nifty 100 index. In the overall portfolio, outside of the 80% equity allocation, remaining 20% should be put in short and ultra-short term debt funds to lend some stability to your portfolio.

Srikanth Meenakshi is a co-founder at PrimeInvestor.

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