I have put Rs3,000 each in HDFC Top 200, IDFC Imperial Equity Plan A, L&T Equity, ICICI Prudential Focused Bluechip Equity and Rs5,000 in IDFC Premier Equity Plan A over the last three years through systematic investment plans (SIPs). I intend to continue it for the next 20 years and accumulate Rs1 crore. Am I on the right track? I have noticed that IDFC Imperial Equity has only 3-star rating now. Shall I stop my SIP in this scheme and put the money in some other scheme as lump sum? Please note that all the above investments are direct ones.
You invest Rs17,000 a month in a diversified portfolio with a large-cap bias. More than 70% of your portfolio is flowing to large-cap-oriented funds. Even the mid-cap fund (IDFC Premier Equity) in your portfolio has about a third of its investments in large-cap stocks. You will do well to add another mid-cap fund to your portfolio especially considering the fact that you are investing for the long-term (20 years). As you indicate, IDFC Imperial Equity fund has not being doing very well over the past several years, and can be replaced in your portfolio. I would suggest a move to a good mid-cap fund such as Religare Mid-cap fund or HDFC Mid-cap Opportunities fund in its place. The other funds can remain as they are.
If you continue with this quantum of investment in such a portfolio, you should not have any trouble reaching your Rs1 crore target. Given your pace of investment, even assuming a modest 10% compounded annual growth rate for the portfolio, you are set to reach close to double your target at the end of the time frame set by you.
I have decided to go with equity mutual fund investment instead of looking at stock for long-term investment. What is the kind of allocation I should make in various mutual fund categories (percentage of the fund that I should invest in large-, small- and mid-cap, and diversified equity) from a long-term returns perspective? I can then figure out the investments into some important funds in these categories.
Large-cap-oriented diversified funds have produced sustained good performance in the Indian mutual fund market. Hence, such funds should anchor an investor’s long-term portfolio. A 50-60% allocation to 2-3 funds from this category would be ideal. Small- and mid-cap funds which invest in growing companies, can take up not more than 30% of the portfolio. It would be good to select 2-3 funds from different fund houses in this category to diversify across stock-picking styles. If you choose to invest in international and/or thematic funds in your portfolio, please ensure that, put together, they do not exceed 10-20% of the portfolio.
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