Your Fund Portfolio

I am 30 years old, married and have a new-born son. I’m working in a PSU. I currently invest in the following funds : SBI Bluechip - ₹2,000, SBI Large & Midcap - ₹1,000, Canara Robeco Emerging Equities - ₹1,000, UTI Mid Cap - ₹500, and Adity Birla Sun Life Equity Hybrid ’95 - ₹1,000. I want to increase my investments by ₹2,500. My aim is long-term wealth creation. I can take above-average risks in investing for at least 10 years. Please evaluate my present holdings and let me know the tweaks required.

Vysakh K

Including the additional ₹2,500 that you want to invest, you will be investing a total of ₹8,000 every month. For this amount, it is enough if you invest in three funds. Since you have a time horizon of at least 10 years and can take above-average risks, you can invest about 60 per cent of this amount in funds that take higher exposure to mid- and small-cap stocks, which give a boost to your returns, and the remaining 40 per cent in funds that predominantly invest in large-cap stocks, which lend stability to your portfolio.

To execute this plan, continue with SBI Bluechip and push up your investment to ₹3,000 here. You can redirect the ₹1,000 that you are investing in SBI Large & Midcap to this fund. SBI Bluechip boasts of a good track record among large-cap funds. The remaining ₹5,000 can be divided equally between Canara Robeco Emerging Equities and L&T Midcap, two funds which have good exposure to mid-cap stocks.

Since you have a 10-year time-frame in mind and are willing to take risks, you can stop the SIPs in ABSL Equity Hybrid, a fund which follows a slightly conservative approach by investing up to 35 per cent of its portfolio in debt instruments. You can stop the SIPs in UTI Mid Cap, too, as the fund is an underperformer in the mid-cap category.

As you will be investing for a long period, it is important to review the performance of your investments periodically and replace underperformers if necessary.

While it is appreciable that you have started investing early, it is important to increase your monthly investments in mutual funds as and when your income increases. You can then create separate portfolios directed at retirement, your child’s education or down payment of a house, with different time horizons, and invest separately towards each of them.

Remember to diversify into debt investments such as FD, PPF, etc, too, for a well-rounded portfolio.

I am 35 years old and married. I have monthly SIPs totalling ₹40,000 in the following funds: ₹10,000 in HDFC Mid-Cap Opportunities, and ₹5,000 each in Reliance Large Cap, HDFC Small Cap, Reliance Small Cap, Reliance Growth, SBI Bluechip and SBI Focused Equity. I plan to start investing in a multi-cap fund from this month. Please suggest good funds to invest in for 10 years and above.

Jitendra Patil

There are two observations about your portfolio. One, you are investing in more than one scheme of a fund house. While there is nothing wrong with this per se, by choosing to concentrate on only a few fund houses, you are denying yourself the benefit of the different investing styles of different fund houses.

The second observation is that your portfolio is skewed towards funds in the high-risk category. You are investing ₹25,000 monthly — at least 60 per cent of your portfolio — in mid- and small-cap funds (HDFC Mid-Cap Opportunities, HDFC Small Cap, Reliance Small Cap, and Reliance Growth) and another ₹5,000 in a multi-cap fund (SBI Focused Equity). Put together, 75 per cent of your monthly savings in mutual funds are in schemes in the high-risk category. Besides, you also want to add another multi-cap fund. You need to assess if such high allocation to these two categories suits your risk appetite.

Otherwise, almost all funds in your portfolio, barring Reliance Growth, are good performers. You can replace this fund with Kotak Standard Multicap.

My brother has a one-year-old daughter. He wants to start SIPs of ₹1,000 each in two funds for his daughter’s education and wedding. Please suggest two funds. The time horizon is more than 15 years.

Kavindra Salunke

Children’s plans offered by mutual funds are a good way to save for your child’s future. Allowing an investment only in the name of a minor child, these plans typically have a lock-in of five years or till the child attains majority, whichever is earlier. These funds are either equity-oriented hybrid schemes that invest 65-90 per cent of their portfolio in equities, or debt-oriented hybrid funds that allocate 20-40 per cent to equities.

Since your niece is just one year old, your brother can invest in equity-oriented hybrid funds, as the risk of investing in equity can be spread over a long term of 15 years or more. Over the long term, equity also generates higher returns than debt. Among equity-oriented funds, you can choose HDFC Children’s Gift and/or ICICI Pru Child Care - Gift, both of which have a good long-term track record.

That said, if you have a slightly higher risk appetite, nothing prevents you from choosing diversified equity funds. Besides, you can also consider the Sukanya Samriddhi Scheme from the post office for girl children. It requires a minimum investment of ₹250 a year and will mature when the child turns 21. Deduction of up to ₹1.5 lakh under Section 80 C is available for investment in this scheme.

Send your queries to mf@thehindu.co.in

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