Your Fund Portfolio

 

I have been a regular reader of your paper for the past 15 years. I like the Monday Portfolio section a lot. Most of my investment choices are driven by suggestions and rankings published in BusinessLine.

I currently invest in the direct plans of the following mutual funds through SIPs: ₹7,500 each in ABSL Equity Advantage and HDFC Top 100; ₹10,000 each in Franklin India Equity, ICICI Pru Value Discovery and Motilal Oswal Multicap 35; and ₹15,000 each in HDFC Hybrid Equity and SBI Magnum Midcap. I am 47 years old, and married with two children (16 and 13). I invest ₹20,000 monthly in VPF (Voluntary Provident Fund).

I have ₹3 lakh in equity, ₹12 lakh in PPF (Publuic Provident Fund), and FDs of about ₹5 lakh. I can continue or reduce the mutual fund investment (70 per cent of my salary) as per your advice. Kindly advise on my MF portfolio.

S Ray

You currently invest ₹75,000 per month in mutual funds, which you have mentioned is 70 per cent of your salary. This monthly outflow towards savings seems to be on the higher side. More so, because you are also contributing ₹20,000 a month to VPF outside of the SIP investments. It is not clear whether you have enough funds for routine monthly expenses outside of these investments. Ideally, one is expected to direct 20-30 per cent of one’s monthly income towards savings, 50 per cent towards routine expenses and another 20-30 per cent towards discretionary spends.

But this is not a hard-and-fast rule as it can vary based on each one’s circumstances. For instance, if another earning member of your family is taking care of other expenses, you can afford to direct more towards savings. You have also not stated your financial goals towards which the SIPs are directed — how much corpus you are looking at in how many years’ time. Thus, given the limited information available on your finances, it is difficult to state whether you should continue or reduce the outgo towards mutual fund investments.

Going by the investments that you have listed, you have spread it wisely across debt (PPF, VPF, FD) and equity (shares, equity mutual funds). Do make sure you have enough emergency funds to quickly tap into, as well as adequate health and life cover for yourself and your dependants.

Coming to your portfolio, you currently invest 30 per cent of your portfolio in relatively low-risk aggressive hybrid and large-cap funds (HDFC Hybrid Equity and HDFC Top 100); 50 per cent in the moderate-risk large- and mid-cap category (Aditya Birla SL Equity Advantage) and the multi-cap/value category (Franklin Equity, Motilal Oswal Multicap 35, ICICI Pru Value Discovery); and the remaining 20 per cent in relatively high-risk mid-cap funds (SBI Magnum Midcap). This allocation is suitable for someone with a moderate risk appetite.

As far as your funds go, you can replace SBI Magnum Midcap, which has underperformed both the category and the mid-cap index over both short- and long-term timeframes. Instead, choose L&T Midcap and Axis Mid Cap and divide the ₹15,000 equally among these two funds. While most of the other funds have underperformed their benchmarks over one and three years, they still sport a good track record over five years. You can continue investing in them for now. However, keep a close watch on them for the next 6-12 months. You can replace them if the underperformance continues.

Send your queries to mf@thehindu.co.in

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