Single scheme shouldn’t form more than 40% of a portfolio

A second rule to follow could be: if in doubt, diversify

Illustration: ThinkStock
Illustration: ThinkStock

I have received a lump sum of Rs.50,000. I was thinking of investing this amount in one particular large-cap equity fund. But I was told that I should not put all of the money into a single scheme. I already have systematic investment plans (SIPs) in two large-cap and two mid-cap schemes, and a short-term debt fund.

—Damini Ghosh

Whether or not it is wise to invest this amount in a single scheme or spread it out into multiple schemes will depend on the overall size of your portfolio. For example, if you have a Rs.10-lakh portfolio, then having this Rs.50,000 (which forms 5% of your portfolio) going into a single scheme is fine. On the other hand, if your current mutual fund portfolio size is Rs.1 lakh, then it would be a better idea to spread it out.

You can use a thumb rule: do not let one scheme take up more than 40% of the portfolio.

A second rule to follow could be: if in doubt, diversify. Given that you already have four schemes that you can use for this purpose, and assuming that they all are doing satisfactorily, spreading out your lump sum investment amount among these schemes itself would be the safer choice.

I earn a very small amount every month ( Rs. 10,000). However, I want to invest around Rs. 2,000 a month in mutual funds, for the next 10-15 years. Which kind of mutual funds should I invest in?

—Payal D.

Saving 20% of the monthly income is the average savings rate for Indian households. However, given your income level and the current cost of living around the country, it is impressive that you are planning to save and invest at this level every month. I hope that you will be able to sustain it in the future as well, although as your income grows over the years, that should become lesser and lesser of a problem.

The key to successful long-term systematic investing is simply persistence in terms of staying with the plan.

Given the long-term nature of your investment horizon, choose good diversified equity funds for your portfolio. I would recommend a simple two-fund portfolio for your Rs.2,000 investment. A well-diversified fund such as UTI Opportunities will complement a small- and mid-cap fund such as ICICI Prudential Value Discovery. An investment of Rs.1,000 each will get you going on your investment journey.

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