Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 26, 2019 Published on January 26, 2019

I am currently investing in the following funds through SIPs for my future and don't want to stop them for at least the next 10 years. I invested wrongly in two tax-saving schemes and need your suggestion on them along with your view on the overall portfolio: ₹7,500 each in Kotak Standard Multicap and Invesco India Contra; Aditya Birla SL Equity – ₹5,000; ₹3,000 in Mirae Asset Emerging Bluechip and ₹2,000 each in HDFC Small Cap, DSP Tax Saver and Tata Tax Savings. I don't need these tax-saver funds for the ₹1.5 lakh Sec. 80C investment. These are wrongly invested. Shall I pause putting money in them and exit after three years? Also, I want to convert my funds into direct; can you please suggest the best way.

Vaibhav Vaidya

Most of the funds you hold have underperformed their benchmarks in the last one year. But you have no cause to worry, as the market volatility has taken a toll on many funds in the industry during this period.

All your funds, including the ELSS funds, have comfortably beaten their benchmarks over longer timeframes and are also top quartile performers in their respective categories.

Hence, barring the SIPs in the ELSS funds, you can continue to invest in the others. Since you have other tax-saving investments, you can pause investments in the ELSS funds and invest instead in diversified schemes. You can exit the ELSS investments after the mandatory three-year lock-in. Remember that each SIP in an ELSS fund will be locked-in for three years though.

As per your current allocation, you are putting in ₹12,500 in multicap funds ( Kotak Standard Multicap and ABSL Equity); ₹7,500 in a value fund (Invesco India Contra); ₹4,000 in tax-saving funds (DSP Tax Saver and Tata Tax Savings); ₹3,000 in a large and midcap fund ( Mirae Emerging Bluechip) and ₹2,000 in a small cap fund (HDFC Small Cap).

This allocation is titled towards a moderate-to-high risk appetite. Since you don’t have any large-cap funds in your portfolio, you can perhaps redirect the ₹4.000 from the tax-savings schemes to Axis Bluechip or Reliance Large cap.

If you wish to invest in direct plans of the same funds, you have to sell the exiting units in the regular plan and reinvest in the direct plan. Exit loads and short/long-term capital gains tax will be applicable as per the existing rules.

Another option would be to stop your existing investments in the regular plans but to continue to let the corpus float. For future SIPs, you can start direct plans. This way, you can probably avoid exit loads or short-term capital gains tax on any fund in which you have invested for shorter periods. You can pull out the investment value of your portfolio in the regular plan and reinvest it in the direct plans later on.

I am a moderate to aggressive investor. I aim for a return of 12-15 per cent for a period of five years. The total monthly investment is ₹35,000 in the following funds: Axis Long-Term Equity, Aditya Birla Sun Life Tax Relief, HDFC Hybrid Equity, ICICI Pru Banking and Financial Services, ICICI Pru Equity and Debt. Kindly comment on allocation, concentration risk and probability of the above returns achievement

Rajesh R

You have invested across fund categories such as equity (ELSS funds), hybrid and sectoral funds. Since you have not mentioned how much you are investing in each of the funds, it is difficult to comment precisely on your allocation. In terms of concentration risk, sectoral funds (such as ICICI Pru Banking and Financial Services) always run a high concentration risk. Timing your entry and exit into the fund assume great importance here.

Going by past performance, a 12-15 per cent annual return in five years’ time is achievable. However, since it is a market-linked product, one cannot predict the returns. A long-time horizon reduces the risk of under-performance as funds will have enough time to recover losses, if any, and move on. While five years is not short, it is not long either.

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