I’m 31 years old. I just exited with ₹3 lakh from a ULIP policy and ₹2 lakh from SBI Emerging Opportunities after a period of four years, due to poor returns.

I would like to reinvest this in mutual funds. I would like to invest ₹15,000 via systematic investment plans (SIPs) spread over a maximum of 3-4 funds.

I am a highly aggressive investor who is completely equity-oriented. I’m a serious long-term investor with a minimum time frame of 15 years on my investment. I do not require an ELSS as I already have a home loan running with a 25-year term and a ₹30,000 EMI.

Aditya Agarwal

It is good that you decided to bail out of under-performing investments. When you invest in ULIPs or mutual funds through regular SIPs, staying with a bad investment doesn’t just entail an opportunity cost. It also prompts you to throw good money after bad, every year.

However, do double-check if the investment you own is in SBI Emerging ‘Opportunities’ Fund. The only fund with a similar name run by SBI Mutual Fund is the SBI Emerging Businesses Fund. This fund has managed a 13 per cent CAGR in the last four years, which is not a bad return.

With an investment horizon of 15 years or more, you are right to be aggressive in your investment choices at this stage of your life. If there are bear markets between now and the time when you redeem your investments, there is more than enough time to wait out the adverse cycles and recoup your losses.

However, do note that most investors tend to over-estimate their risk appetite in bull markets. Do assess your ability to handle losses on your equity portfolio before making an all-out bet on equity fund.

Taking your aggressive risk appetite at face value, we would suggest a combination of multi-cap funds and small-cap funds for your long-term goals. From among the multi-cap equity funds, we think Franklin India High Growth Fund, ICICI Pru Value Discovery and HDFC Equity Fund are good choices.

Franklin High Growth invests in companies that have potential to deliver higher-than-market earnings growth. ICICI Pru Value Discovery is a market-cap and benchmark-agnostic fund that invests in stocks that are under-valued relative to their potential. It also takes contrarian calls on the market.

HDFC Equity fund, after suffering a slowdown in performance, has made a strong comeback. The fund has shown good ability to navigate market reversals and long-term cycles.

While the above clutch of funds invests in a mix of large-cap and mid-cap stocks, given your long horizon, you can also add a small or microcap fund to your portfolio for a kicker to your long-term returns.

Both DSP BlackRock Microcap Fund and Franklin India Smaller Companies would have been good choices here.

But DSP BlackRock Microcap has recently shut for fresh subscriptions. You will therefore need to go with Franklin India Smaller Companies Fund.

Do note that this recommended list of funds needs to be reviewed once in every six months. Given that you plan to invest in them over a very long time frame of 15 years plus, it is possible that some of these funds slip up in performance, while new multi-cap or small-cap winners emerge from the fund universe.

During your half-yearly reviews, do not worry too much about how your fund is performing relative to its category or peers. But if it is slipping behind its benchmark, especially for more than one year, that is reason to rethink your decision to invest in the fund.

Do opt for the Growth option so that your investment returns in these funds keeps compounding until maturity.

Send your queries to mf@thehindu.co.in

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