Mutual Funds

Your fund portfolio

Aarati Krishnan | Updated on March 17, 2019 Published on March 17, 2019

I am a 43-year-old NRI who is a direct investor in mutual funds through the MF Utilities platform. I started my investments during the demonetisation in November 2016. I have bought all my funds through lump-sum investments during the major corrections happening since November 2016 based on my own research. Ten out of my 12 MFs are in the green. The main idea was to diversify across market capitalisation and fund houses. My goal is long-term wealth creation with a horizon of 17 years. I plan to buy lump-sum units worth ₹5,000 or more during any major correction. I invested ₹8 lakh in 2016, ₹3.32 lakh in 2017 and ₹7 lakh in 2018.

The following funds are in the green: ABSL Frontline Equity, SBI Bluechip, HDFC Mid-Cap Opportunities, Franklin Focused Equity, DSP Small Cap, ICICI Pru Value Discovery, L&T India Value, HDFC Hybrid Equity, Franklin Asian Equity and UTI Ultra Short Term. Two funds are loss-making — Sundaram Rural and Consumption, and ICICI Pru Nifty Next 50. Now, I have a feeling that I have too many funds and don’t have a good multi-cap fund. Can you please review my funds?


We must commend you for this strategy because it takes a lot of conviction to buy equity funds during corrections when everyone is shying away from them. The best time to buy equities is when stock prices are correcting. You are quite right to diversify across market capitalisation and fund houses.

But having said this, when it comes to long-term wealth creation, your current approach can trip you up on three counts. For one, the amount you save and invest has a greater bearing on the size of the final corpus you build, than the returns you make. With your current system of investing lump-sum amounts only during market corrections, you could end up saving and investing much less than what you are capable of for your income levels. When you do SIPs, a financial planner can start with your targeted corpus and back-work the sum you need to invest each month to get to your goal.

Two, there can be extended periods in the stock market when stock prices are moving either sideways or upwards. Avoiding investments at these times and waiting for a correction to arrive may mean missing out on opportunities to make returns during a secular up-trend. Equity returns are always lumpy and high returns are often compressed into very short periods. Therefore, not being invested at such times can severely dent wealth creation in the long run.

Three, to achieve good investment results from equities, it is important to work to a fixed asset allocation plan — between equity and debt, among large-, mid- and small-caps, and between the value and growth styles of investing. Such a strategy is easier to implement when you make regular investments via SIPs in a limited set of funds. With a lump-sum strategy, you can end up with a diverse set of funds that don’t adhere to any specific asset allocation plan.

Finally, assuming you are a working professional whose career isn’t related to the stock market, your current strategy will require you to devote a lot of time to managing and monitoring your portfolio. If you happen to take your eye off the ball for a few months, your investments will come to a standstill and can lead to missed opportunities, too.

Given these issues, we would suggest that you move to a SIP strategy which puts your investments on autopilot. Estimate the annual and monthly amounts you can afford to invest in mutual funds every year. After setting up regular SIPs based on this amount, you can always top up your investment periodically when markets correct. You must also explore online investing platforms that offer a ‘value-averaging’ feature with their SIPs. Unlike plain-vanilla SIPs that channel the same amount of money into equity funds irrespective of market levels, value-averaging SIPs allow you to invest more when markets are falling and less when they are rising.

As your goal is to create long-term wealth, you shouldn’t be worrying about whether your portfolio is in the red or green for short periods such as one or three years. Your choice of funds should be based on their long-term track record over complete market cycles.

With a 17-year horizon, you can afford to have an 80-20 equity-debt allocation. We suggest you consider UTI Corporate Bond instead of UTI Ultra Short Term for your long-term debt allocation. For your equity portion, we suggest equal investments in ICICI Pru Nifty Next 50(large-cap), L&T Value (multi-cap value), Franklin Focused Equity (multi-cap growth), HDFC Mid-Cap Opportunities and DSP Small Cap. You can move your existing investments into these funds in the suggested proportion. But given that the recommended funds can underperform and need changes over time, do review your portfolio twice a year.

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