Your Fund Portfolio

I work in a public sector bank. Currently, I am investing ₹3,000 each in Mirae Asset Emerging Bluechip, HDFC Mid-Cap Opportunities and ABSL Frontline Equity through the SIP route. The time horizon is five years for the HDFC fund, three for the Mirae one and 15 for ABSL Frontline Equity. I would like to add two more SIPs of ₹3,000 each — one for five years and the other for 20 years. I have shortlisted Mirae Asset India Equity, Canara Robeco Emerging Equities SBI Magnum Multicap for the five-year horizon and small cap funds DSP Small Cap, SBI Small Cap and Reliance Small Cap for the 20 year horizon. Is my strategy correct? Please comment on the new funds that I plan to invest in.

Ajay

Your fund choices, including the new ones, are well-researched, but the way you are going about investing in them needs a change. It is not clear if you have randomly fixed a time horizon for each of the funds, or if you have any specific financial needs at the end of each of the periods. Setting a goal and a time horizon to reach the same and creating a portfolio of funds in order to reach that goal is a better way to go about your investments.

With your current style of investing in only one fund for a particular time period, you are running a high concentration risk, especially if you have a time horizon of 1-5 years. Take Mirae Asset Emerging Bluechip for instance. Thanks to the market volatility over the past year, the fund sports an SIP return of just 0.98 per cent in the last one year. If the current trend continues over the next year or more, you run the risk of erosion in NAV or earning sub-par returns in this fund if you invest with a three-year horizon. Similarly, the mid-cap fund, too, may not deliver returns commensurate with the risk you are taking, if you have a horizon of less than five years.

Hence, you need to change your strategy. Investing in a basket of funds from varied categories for a particular goal diversifies your risk and optimises your risk-return potential. Also, a time horizon of 5-7 years is minimum for funds to go through a market cycle and deliver above-average returns. For long-term investments with a 15-20 year horizon, constant review of your holdings is a must. Choosing one fund today and continuing SIPs in it blindly for the next 15-20 years will not do much good. Underperformers must be weeded out and replaced.

I invest a total of ₹18,000 per month in the following funds: Axis Bluechip - ₹5,000, Canara Robeco Bluechip - ₹2,000, ICICI Pru Bluechip - ₹4,000, Tata Equity PE - ₹3,000, Kotak Standard Multicap - ₹2,000 and L&T Midcap - ₹2,000. I plan to invest for 10+ years. I want to build a good corpus for my daughter’s higher education (she is three years old now), and also towards general wealth building. I invest ₹2,500 each in Sukanya Samriddhi Yojana and PPF every month. Please let me know if my choices are good or if it needs any course correction?

Yadu Krishnan

Ideally, you need to create a separate portfolio for each of your goals, with a separate target value and time horizon in mind. About 60 per cent of your monthly investment of ₹18,000 is in safer large-cap funds (Axis Bluechip, Canara Robeco Bluechip, ICICI Pru Bluechip), about 15 per cent in medium- to high-risk value funds (Tata Equity PE), and the remaining 25 per cent in higher-risk mid- and multi-cap funds. This allocation is suitable for someone with a moderate risk appetite. Since you have a horizon of over 10 years, you also need not take high risks.

Most of your fund choices are well made. You can replace Canara Robeco Bluechip with Reliance Large Cap, which is a better performer over a longer time-frame of five years. You can continue your investments in the rest, for the time being. But since you have a long-term horizon, you need to review the performance of your funds periodically and replace, if necessary.

PPF and Sukanya Smariddhi are among the safest and best debt options available for long-term investments today. You can use the corpus from these to supplement your goals.

Remember to add to your monthly savings in mutual funds as and when your investible surplus increases.

Send your queries to mf@thehindu.co.in

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