Your Fund Portfolio

I am 26 years old and have been investing in the following three mutual funds for the past one year. I wish to add one more SIP starting next month in a small-cap fund. I want to build a strong portfolio over the next few years. Please review by portfolio and give me suitable suggestions.

I invest ₹1,000 each every month in SBI Bluechip and SBI Magnum Global, and ₹2,000 in SBI Equity Hybrid.

In addition, I have invested ₹1,50,000 in SBI Dual Advantage Fund Series XXIV.

Aakash Patel

It is good to note that you have started investing in mutual funds early on in your career. But there are a few aspects that you must be aware of with regards to portfolio construction so that you are able to meet your targets comfortably.

You must not invest in too many funds from the same house as that would increase risks and also deny you the opportunity of benefiting from the investment styles of different managers.

You must also not spread the amount you invest too thin across several funds — for the ₹4,000 that you currently invest, one or, at the most, two funds would suffice.

Finally, investing in closed-ended funds is not advisable as exiting such schemes would not be possible till the time of maturity.

Coming to your portfolio, you can continue your SIP in SBI Hybrid Equity, given its steady track record. SBI Bluechip has been underperforming its benchmark as well as category over the past few years.

SBI Magnum Global invests only in MNC stocks and has not delivered well, especially when compared with the performance of its peers. You can stop SIPs in both these funds.

Now, you will have ₹2,000 by stopping these two SIPs. You can invest this ₹2,000 in Invesco India Contra, a value-oriented fund with a solid track record and a multi-cap approach. Any additional amount that you wish to invest can be parked in the two funds proportionately. As you are relatively new to the markets, these two schemes will help you generate returns without taking undue risks. Once you get comfortable with market-linked products and can take more risk, you can opt for other funds.

But if you are still keen on investing in a small-cap fund, you can consider Reliance Small Cap.

With reference to SBI Dual Advantage Fund Series XXIV, it is a closed-ended hybrid fund that matures in October 2020. You cannot exit the scheme before that.

I retired from the services of a private bank in August 2018. My pension and interest from deposits are just within ₹5 lakh. I may get arrears to the tune of ₹2 lakh due to a bipartite settlement. I would like to invest this amount in equity-linked savings schemes (ELSS) for quick returns. Please suggest two ELSS schemes.

P.Ramakrishna

Given that you have retired and have a pension and interest income of less than ₹5 lakh, there is very little risk that you can take by investing in equity products. Please also note that there is no scope for quick returns by investing in equity unless you can time the markets to perfection. Guessing the direction of the markets is a risky business. You may suffer a loss of capital if you invest for quick returns.

You must invest in equity funds only if you have a time horizon of at least five years. ELSS funds are locked for a period of three years. In any case, as your taxable income is below the ₹5 lakh slab, ELSS funds would be of very little use.

Consider options such as Senior Citizen Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) for lump-sum investments as rates are attractive. In case you have exhausted these avenues, you can explore safe company deposits such as those of Bajaj Finance and PNB Housing Finance.

Send your queries to mf@thehindu.co.in

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