Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C K Venkatasubramanian | Updated on September 09, 2018 Published on September 09, 2018

I am currently investing ₹1,000 in SBI Bluechip and ₹1,000 in SBI FMCG. I am 31 years old and plan to continue investing till I turn 60. Can you please suggest some good funds (large- and mid-cap) in which I can invest for around 30 years? I can invest up to ₹4,000 per month.

Gourab Chattopadhyay

While choosing to invest for the long term, it is advisable to steer clear of sector or thematic funds. Investing in such schemes will require you to time the markets — a huge challenge for retail investors like you.

What may be a favoured theme now may not be so sought-after, or worse, shunned, at other times.

While FMCG as a theme may be a good defensive, it could still be risky, given that valuations of most stocks in the space are expensive.

The best course of action would be to invest in diversified funds that reflect your risk appetite and time horizon for goals.

Since you can invest ₹4,000 per month, you can split it between two funds. Exit SBI FMCG fund.

You can step up investments in SBI Bluechip, a quality large-cap scheme. Invest ₹2,000 in it.

Since you have asked for a mid-cap scheme, you can consider L&T Midcap, and invest the balance ₹2.000 in it.

While it is good to note that you wish to invest for the long term, you must always review funds once every year and take corrective action. You cannot mechanically hold on to a fund for as long as 30 years without periodically checking on its performance.

As your surplus increases, you can consider more funds. Also, you must have suitable asset allocation with investments in debt and, to a lesser extent, gold. Real estate can be considered for self occupation.

I have been investing in Tata Ethical Fund through monthly SIPs of ₹2,000 since 2015. Should I stop or switch it?

Fazlur Rehman

Tata Ethical is a thematic fund focussed on investing in Shariah- compliant sectors/companies. The fund avoids investments in companies involved in alcoholic beverages, gaming/casinos, non-halal food products and conventional financial institutions that lend and borrow for an interest. Shariah compliance also means that the fund avoids companies with higher debt-to-equity ratios. Avoiding many sectors means a restricted investment universe for the fund.

Lump-sum investments in the fund have fetched annual returns of 7.7 per cent in the past three years, while SIPs in the last three years have returned 11.9 per cent. However, the fund has underperformed its benchmark — Nifty Shariah 500 TRI — over both short and longer time-frames of one, three and five years.

On the other hand, diversified funds have delivered an average return of 13-15 per cent in the past three years. If you have a reasonable risk appetite, you can consider Aditya Birla SL Pure Value, a quality multi-cap fund.

If you can take very modest risks, you can opt for a large-cap scheme such as Axis Bluechip.

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