Yes, mutual funds fulfill our dreams and these dreams can be of any type. Be it paying out loans, education of children or retirement planning. Systematic planning through mutual funds helps us fulfill these tasks without causing any pain.

As the per capita of India is expanding at a healthy rate, so are the aspirations and standard of living of the people in our country.

When it comes to discretionary spending, we are being influenced by western culture. The holidays and trips we aspire for, are one of the prime examples.

Yes, we might have heard that mutual funds can help you fulfill a long-term/medium term goal like a getaway to an exotic location.

But in this article, we will give you a detailed, step-by-step version on how they can help you plan a fabulous vacation across the world.

For the sake of simplicity, I have taken 10 cities in the world which are favorite tourist spots and are most visited. Also, I have taken into account the factor that we will stay invested in a particular fund for at least five years; post which the amount can be withdrawn to fulfill your dream vacation.

Here is our list:

  • New York
  • London
  • Tokyo
  • Shanghai
  • Singapore
  • Paris
  • Prague
  • Zurich
  • Madrid
  • Dubai

The cost involved in each trip would be huge and therefore, it would require substantial planning for the dream to become a reality.

 

In subsequent sections, I have identified an estimated cost that will be required for each of these trips and I have recommended five best mutual funds that will help you provide the adequate returns for executing the plan.

Let’s begin!

Below, I have shown a statement of expense that will be required for the trip.

Based on this analysis, the cost of traveling to these cities and staying for a week will cost the individual an average of INR 1.5 lakhs.

I have estimated this to be a one month trip and the cost of which will approximately be 15 lakhs. Let’s look at the chart below to understand better

City / Cities coveredYearCostCost after accounting for inflation
New YorkBeginning of 6th year2 lakhs2.43 lakhs
LondonBeginning of 7th year2 lakhs2.53 lakhs
Tokyo & ShanghaiBeginning of 8th year2.25 lakhs2.96 lakhs
SingaporeBeginning of 9th year1.5 lakhs2.05 lakhs
Paris, Prague, Zurich and MadridBeginning of 10th year2.75 lakhs3.91 lakhs
DubaiBeginning of 11th year1 lakhs1.48 lakhs
TOTAL11.5 Lakhs15.35 lakhs (app.)

Note: We have assumed inflation at an average of 4 percent for the next 10 years. The assumption seems reasonable given the situation that has panned out in the last few years.

Now that the first part of the task is over, let’s jump to find out the amount you should invest to achieve this number.

Based on the analysis, we have decided to suggest starting an SIP in six mutual funds from renowned fund houses and exceptional past record to accumulate this amount.

Let us get into the economics of it and try to decipher the calculation. Though there are some assumptions that have been accounted for to reach the goal, but these assumptions are on returns that have already been provided by these funds. Not just this, we have made sure to diversify the funds across categories so as to gain full leverage.

The Estimate

I have made two estimates. One showing the SIP route and the other showing the lumpsum route. You can choose what suite you best.

But SIP is what most investors prefer to achieve long term goals such as this.

If you follow the SIP route:

Fund NameCity TargetedAmount requiredInvestment Time PeriodExpected returnsApproximately SIP Amount (INR)Accumulated Amount
ICICI Prudential Bluechip Fund – Direct – GrowthNew York2.43 lakhs5 years14.9%29002.50 lakhs
Kotak Emerging Equity Scheme – Direct – GrowthLondon2.53 lakhs6 years19.1%20002.53 lakhs
HDFC Small Cap Fund – Direct – GrowthTokyo & Shanghai2.96 lakhs7 years19.2%18002.96 lakhs
Parag Parikh Long Term Equity Fund – Direct – GrowthSingapore1.71 lakhs8 years17.6%10001.95 lakhs
ICICI Prudential Banking and Financial Services Fund – Direct – GrowthParis, Prague, Zurich and Madrid3.91 lakhs9 years19.2%15003.92 lakhs
L&T Midcap FundDubai1.48 lakhs10 years21.2%5001.62 lakhs

If you follow the lumpsum route:

Fund NameCity TargetedAmount requiredInvestment Time PeriodExpected returnsApproximately Lump Sum Amount (INR)Accumulated Amount
ICICI Prudential Bluechip Fund – Direct – GrowthNew York2.43 lakhs5 years14.9%1220002.44 lakhs
Kotak Emerging Equity Scheme – Direct – GrowthLondon2.53 lakhs6 years19.1%900002.57 lakhs
HDFC Small Cap Fund – Direct – GrowthTokyo & Shanghai2.96 lakhs7 years19.2%870002.97 lakhs
Parag Parikh Long Term Equity Fund – Direct – GrowthSingapore1.71 lakhs8 years17.6%470001.72 lakhs
ICICI Prudential Banking and Financial Services Fund – Direct – GrowthParis, Prague, Zurich and Madrid3.91 lakhs9 years19.2%810003.94 lakhs
L&T Midcap FundDubai1.48 lakhs10 years21.2%220001.50 lakhs

Note: To avoid any biases, we have taken the returns that these funds have generated since inception

1.ICICI Prudential Bluechip Fund – Direct

Launched in 2013 and led by one of the pioneers in the asset management industry Mr. S Naren, ICICI Prudential Bluechip Fund can be considered as one of the few best large-cap funds present in the industry.

This fund has a strong track record of robust performance. It has beaten its benchmark NIFTY 100 TRI since inception.

Key Information

Launch Date01 – Jan – 2013
AUM (Size)20,101 crores
Minimum SIP100
Minimum for First Investment100
Performance w.r.t its benchmarkHas beaten the benchmark NIFTY 100 TRI over consistent periods of time
Age of the fund6 years
Expense Ratio1.26%
Turnover                  98%
Exit LoadIf the fund is redeemed between 0 to 12 months, exit load is 1%
Type Large Cap
Fund ManagerAnish Tawakley, Rajat Chandak, Priyanka Khandelwal

Top 10 Holdings

NameSectorInstrument% of Assets
HDFC Bank Ltd.Financial ServicesEquity6.9%
ICICI Bank Ltd.Financial ServicesEquity5.9%
RBIFinancial ServicesT-Bills5.0%
Infosys Ltd.ITEquity4.9%
Axis Bank Ltd.Financial ServicesEquity4.4%
HDFC Ltd.Financial ServicesEquity4.1%
ITC Ltd.FMCGEquity4.0%
Bharti AirtelCommunicationEquity3.6%
ONGCEnergyEquity3.4%
NTPCEnergyEquity3.3%

Holding Analysis

2.Kotak Emerging Equity Scheme – Direct 

Though the fund is in the mid-cap space, the volatility for the fund is lower than that of the benchmark. The expense ratio for the fund is one of the lowest at just 0.80 percent.

The fund size is also low reflecting that there is still a long way to go. Now that mid and small cap space have corrected, we can look to invest in this scheme as the number of units allocated would be more.

Key Information

Launch Date01 – Jan – 2013
AUM (Size)3,535 crores
Minimum SIP1000
Minimum for First Investment5000
Performance w.r.t its benchmarkHas beaten the benchmark S&P BSE Mid Cap TRI over consistent periods of time
Age of the fund6 years
Expense Ratio0.80%
Turnover                  24%
Exit LoadIf the fund is redeemed between 0 to 12 months, exit load is 1%
Type Mid Cap
Fund ManagerPankaj Tibrewal

Top 10 Holdings

NameSector% of Assets
IndusInd BankFinancial Services3.7%
Schaeffler India Ltd.Engineering3.5%
Atul Ltd.Chemicals3.0%
RBL Bank Ltd.Financial Services2.9%
The Ramco Cements Ltd.Cements2.8%
Bata India Ltd.FMCG2.6%
Finolex Cables Ltd.Engineering2.5%
Supreme Industries Ltd.Chemicals2.5%
Solar Industries Ltd.Chemicals2.3%
Godrej Agrovet Ltd.FMCG2.3%

Holding Analysis

3. HDFC Small Cap Fund – Direct

Though the fund has not given exceptional returns over the last one year; let us look at the performance of the fund as compared to the benchmark.

Over the long term, it has handsomely beaten its benchmark.

Key Information

Launch Date01 – Jan – 2013
AUM (Size)6,312 crores
Minimum SIP500
Minimum for First Investment5000
Performance w.r.t its benchmarkHas beaten the benchmark S&P BSE Smallcap TRI over consistent periods of time
Age of the fund6 years
Expense Ratio0.87%
Turnover                  37%
Exit LoadIf the fund is redeemed between 0 to 12 months, exit load is 1%
Type Small Cap
Fund ManagerAmar Kalkundrikar, Chirag Setalvad

Top 10 Holdings

NameSector% of Assets
NIIT Technologies Ltd.Technology3.9%
Sonata Software Ltd.Technology3.7%
Aurobindo Pharma Ltd.Healthcare3.6%
Chambal Fertilizers & Chemicals Ltd.Chemicals3.2%
Balkrishna Industries Ltd.Automobiles3.2%
Sharda Cropchem Ltd.Chemicals3.1%
Bajaj Finance Ltd.Financial Services2.8%
NRB Bearings Ltd.Engineering2.8%
Indian Bank Ltd.Financial Services2.5%
United Spirits Ltd.FMCG2.4%

Holding Analysis

4. Parag Parikh Long Term Equity Fund-Direct 

Given the volatility of the market and constant pressure to deliver returns, the portfolio is diversified by not just restricting to Indian stocks, but also taking exposure to global stocks some of them being Alphabet Inc., Suzuki (Japan), Facebook Co. etc.

The fund managers have varied experience in fund management and equity research.

Key Information

Launch Date24 – May – 2013
AUM (Size)1,619 crores
Minimum SIP1000
Minimum for First Investment1000
Performance w.r.t its benchmarkHas beaten the benchmark S&P BSE 500 TRI over consistent periods of time
Age of the fund6 years
Expense Ratio1.40%
Turnover                  172%
Exit LoadExit load of the fund is 2% if redeemed within 365 days. However, exit load is 1% if redeemed after 365 days but on or before 730 days
Type Multi Cap
Fund ManagerRaj Mehta, Rajeev Thakkar, Raunak Onkar

Top 10 Holdings

NameSector% of Assets
Alphabet Inc Class CTechnology9.7%
HDFC Bank Ltd.Financial Services7.9%
Bajaj Holdings & Investment Ltd.Financial Services6.6%
Persistent Systems Ltd.Technology5.7%
HDFC Ltd.Financial Services4.7%
Suzuki (Japan)Automobile4.5%
Hero Moto Corp Ltd.Automobiles4.4%
Facebook Co.Technology4.3%
Balkrishna Industries Ltd.Automobile3.8%
Axis Bank Ltd.Financial Services3.3%

Holding Analysis

5.ICICI Prudential Banking and Financial Services Fund – Direct

ICICI Prudential Banking and Financial Services Fund is one of the funds that should be considered in your portfolio.

Reason?

The Indian economy is set to grow and to sustain this growth the banking and financial services industry is the backbone.  Also, the portfolio mix of the fund is such that private sector banks are more as compared to the public ones.

Key Information

Launch Date01 – Jan – 2013
AUM (Size)2,604 crores
Minimum SIP500
Minimum for First Investment5000
Performance w.r.t its benchmarkHas beaten the benchmark S&P BSE Finance TRI over consistent periods of time
Age of the fund6 years
Expense Ratio1.20%
Turnover                  162%
Exit LoadExit load is 1% if redeemed within 15 days
Type Sectoral/ Thematic
Fund ManagerRoshan Chutkey, Priyanka Khandelwal

Top 10 Holdings

NameSector% of Assets
HDFC Bank Ltd.Financial Services9.8%
ICICI Bank Ltd.Financial Services9.3%
State Bank of IndiaFinancial Services6.2%
Yes Bank Ltd.Financial Services5.2%
Bajaj Finserv Ltd.Financial Services4.0%
ICICI Bank Ltd.Financial Services4.0%
HDFC Ltd.Financial Services3.5%
IndusInd Bank Ltd.Financial Services3.2%
Federal Bank Ltd.Financial Services3.1%
Muthoot Finance Ltd.Financial Services3.0%

Holding Analysis

6.L&T Midcap Fund – Direct 

Another 5 star rated fund in the mid-cap category is L&T Midcap fund.

Having consistently beaten the benchmark index and companies in the portfolio that are strong in fundamentals (RBL Bank, City Union, Emami Ltd., Divi’s Laboratories, Kajaria Ceramics) show that the fund managers are firm believer in India’s growth story.

Key Information

Launch Date01 – Jan – 2013
AUM (Size)3,733 crores
Minimum SIP500
Minimum for First Investment5000
Performance w.r.t its benchmarkHas beaten the benchmark S&P BSE Mid Cap TRI over consistent periods of time
Age of the fund6 years
Expense Ratio0.93%
Turnover                  46%
Exit LoadExit load is 1% if redeemed within 1 year
Type Equity – Mid Cap
Fund ManagerVihang Naik, Soumendra Nath Lahiri

Top 10 Holdings

NameSector% of Assets
RBL Bank Ltd.Financial Services3.3%
City Union Bank Ltd.Financial Services3.0%
Emami Ltd.FMCG2.6%
Torrent Pharma Ltd.Healthcare2.2%
The Ramco Cements Ltd.Construction2.1%
Divi’s Laboratories Ltd.Healthcare2.1%
Cholamandalam investment & Finance Co.Financial Services2.0%
Kajaria Ceramics Ltd.Construction2.0%
Abbott India Ltd.Healthcare2.0%
Indian Hotels Co. Ltd.Services2.0%

Holding Analysis

Conclusion

Though it seems a mammoth task to travel around the world and we do think that it requires a whole lot of cash, if you plan smartly, you will be able to achieve this dream through your investments.

You should also keep in mind that there might be times in the market, when these funds might not provide adequate returns as shown. The best thing to do in this scenario is to stick with the investment.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww