Avoid too many sector funds if you cannot constantly time entry and exit in them.

I am 33 and my current salary is Rs 3.5 lakh a year. I am investing Rs 7,000 a month through SIPs in the following funds as follows: HDFC Top 200 (Rs 1000), HDFC Balanced (Rs 1,500), Reliance Banking (Rs 1,000), Reliance Gold Savings (Rs 1,500), and Reliance Pharma (Rs 2,000). Besides these, I am also investing Rs 2,000 in smart step plus, ULIP (Child Plan) from Max New York Life Insurance.

By investing Rs 9,000 a month through SIPs, I hope to achieve Rs 1 crore in 20 years. Is the target feasible? Please suggest one or two more funds to invest Rs 2,000 or more for my retirement planning. Deepak Sharma

There are a couple of good aspects about the way you have gone about retirement planning. First, you have given yourself 20 years time. Second, you have set a realistic target.

If you invest Rs 9,000 a month for 20 years, and the sum earns 13 per cent, you will comfortably reach the target of Rs 1 crore. Having said that, your portfolio is messy and what is more, you have chosen five funds from just two fund houses. This move will deprive you of diversification in investing styles offered by other fund houses. Also, your portfolio is loaded with sector funds, which could be risky, unless you can constantly time entry and exit.

You have indicated that you can invest Rs 2,000 more. So excluding the sum parked in the ULIP, you will have Rs 9,000 a month to invest in mutual funds. Invest Rs 2,000 each in HDFC Top 200, Franklin India Bluechip, Canara Robeco Equity Diversified and IDFC Premier Equity.

The above portfolio will give you a blend of large-, multi- and mid-cap funds.

You can park Rs 1,000 in Reliance Gold Savings, which will give you adequate diversification into gold.

Exit both the sector (Reliance Banking and Reliance Pharma) funds, unless you can take on higher risk and take a call on the fundamentals of the sector.

These funds have delivered superior returns, but concentration and sector risks necessitate a more cautious approach. HDFC Balanced is an excellent fund in its category. But given your long investment horizon, investing in equity funds could give you higher returns.

Review your portfolio once a year, weed out any underperformers, and rebalance. Also, when your surplus increases, make sufficient investments in debt instruments such as PPF and bank deposits, in case you havent already done so.

In case of abnormally high returns in any year or if you reach your target corpus ahead of time, move the proceeds to safer debt options.

Coming to your ULIP investment, which is a child plan, we are not sure if it is for your goals or specifically for your childs needs.

Although we cannot comment on the ULIP plan, mutual funds by themselves may be a good way to save for long-term goals such a childs education costs.

HDFC Childrens Gift FundInvestment Plan is one such option that you can consider. Investments in this fund can be done on behalf of a minor, ideally for meeting the childs long-term goals. The fund has a lock-in period of three years or until the child is 18, whichever is later.

Queries may be e-mailed to mf@thehindu.co.in.

(This article was published on July 28, 2012)