I hold mutual fund (MF) units of Fidelity Equity, ICICI Pru Dynamic, Reliance Tax Saver, Reliance Media, SBI Magnum Global, ICICI Pru Infra and Sundaram Select Midcap. These are all growth options and I keep adding units to them. Does my portfolio need modification? I can hold these for at least five years and I prefer mid- and small-cap-oriented funds.
You have seven funds in your portfolio and I am assuming you invest equally in each. If that’s the case, then you are investing about 30% of your money in large-cap-oriented funds, 30% in small- and mid-cap-oriented funds, 30% in sectoral funds and the remaining in a tax-saving fund. You should try and fashion your additional investments in a manner that this portfolio moves towards a 60% allocation to large-cap-oriented funds (including tax-saving funds), 30% in small-and mid-cap funds and the remaining in sectoral funds.
You can continue adding to Fidelity Equity and ICICI Prudential Dynamic funds, which can form the core of your portfolio. If you are looking for alternatives in the small- and mid-cap funds, consider IDFC Premier equity fund and HDFC Mid-cap Opportunities fund.
I am 38 years old and have been invested in HDFC Top 200, HDFC Prudence and HDFC Equity through systematic investment plans (SIPs) for six months. I plan to stay invested for the next 10-15 years. Should I also invest in DSP BlackRock Top 100, Franklin India Blue Chip, ICICI Prudential Dynamic or HDFC Mid-cap? What about fixed maturity plans (FMPs)?
There are many ways to construct a good portfolio. You can choose narrowly focused funds and manage the distribution of your market exposure (from selection and diversification perspectives) yourself. Or you can choose broader market funds and leave the management of the exposure to the chosen fund managers. Your current portfolio has taken the second approach. The funds you have listed additionally have a more narrow focus (they are either purely large-cap funds or purely mid-cap-oriented funds) than the ones you are invested in. If you think you want to change your approach to portfolio design, or if you want to complement your broad portfolio with focused funds, you can use the schemes you have listed. Else, you can leave your current portfolio as it is.
FMPs are pure debt market funds that are closed for a fixed tenor (30 days to two years). They yield returns that are comparable with certificates of deposit rates prevailing at the time of the offer. You can view them as equivalent to a fixed deposit product except you don’t have a pre-declared yield in the case of FMPs. You can invest in them if you want a fixed debt segment in your portfolio.
Srikanth Meenakshi, Founder and director, FundsIndia.com
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