Have a short term investment goal? Invest conservatively

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Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: An investor can invest Rs 8000 per month. He has a time period of four years. The goal is Rs 25 lakh for his daughter's marriage. He has an insurance coverage of Rs 10,000 at premium of around Rs 1,500 per month. He and his family are covered by employer for health problems. What would your advice be?

A: Health insurance is taken care of. Life insurance is what you need to enhance. Since you already have certain amount of portfolio, you can invest the extra amount every month. As you are talking about marriage in the next three to four years, I would be a little conservative. On a conservative approach, pick up a mutual fund which puts about 20% into equity, to keep pace with inflation and rest 80% into debt.

It could be either a fund or funds with 20-80 composition or a Monthly Income Plan, which a lot of these mutual fund companies have. It would have this kind of a composition. If he keeps putting money into this on a regular basis, he would have some kind of corpus to accumulate wealth for his daughter's marriage.

Q: An investor wants to invest Rs 10,000 per month. His time period is about 30 years. His goal is Rs 1 crore and the reason is wealth creation. He has an LIC Money Back Plan with a premium of Rs 12,000 yearly and a sum assured of about Rs 5 lakh. He has got some current investments as well totally amounting to about Rs 54,000. What's the advice for him?

A: This is a fairly simple case. If he is talking about keeping aside Rs 10,000 every month and he is talking about 30 years period, that's fairly long. Even on a very conservative annualized equity return of 12%, he will have Rs 3.5 crore. He is talking about Rs 1 crore. If you look at historical Sensex performance over 2-3 decades and if you look at annualized returns of 15%, it will be more than Rs 5 crore.

So I don't think he should worry. Since he is young, he should put about 15-20% in gold. He should put another 40% into an index fund just to ensure that overall portfolio is not highly volatile. Rest of the money can go into a mutual fund which invests in mid and small cap because he has a long time horizon. He will be able to overshoot the targeted amount if he takes a risk and goes for this kind of a mutual fund.