Many schemes in a portfolio won’t lead to diversification
Have a total of 4-5 funds with a large-cap fund, a couple of diversified funds and 1-2 small- or mid-cap funds.
I am 27 and have been investing ₹12,000 per month for the past eight months in SIPs. My portfolio includes Reliance Small Cap Fund (₹3,000), L&T Emerging Businesses Fund (₹3,000), IDBI Midcap Fund (₹1,000), ABSL Digital India Fund (₹3,000) and SBI Consumption Opportunities (₹2,000). All these are direct growth funds. I want to increase my monthly investment by ₹4,000 and have shortlisted some funds, including SBI ETF Sensex, Reliance ETF Sensex, Axis Bluechip Fund, Canara Robeco Bluechip Equity Fund and Edelweiss Large cap Fund. Please advise.
Your current portfolio is a high-risk portfolio with two small-cap funds, one mid-cap fund, and two thematic funds. I do not quite understand how you chose these funds. A couple of them are well-rated funds, but the others have not entered the ratings arena at all. To this rather eclectic mix of funds, you are seeking to add a bouquet of large-cap funds. In general, diversifying your portfolio in this direction is a good idea. But there is no need to add these many funds into the portfolio. One large-cap fund is sufficient in any portfolio, and even an index-tracking fund would suffice (either of the two funds you have short-listed would be fine). But the bigger question is that this will keep your portfolio as a high-risk portfolio with sporadically selected funds. Thematic funds need care and understanding of time of entry and exit. I would suggest that you prune your portfolio to a smaller list of a total of 4-5 funds with a large-cap fund, a couple of diversified funds and one or two small- or mid-cap funds. Also, please make your fund choices from curated lists of funds such as Mint30. Such selections are well analysed for past performances and consistency of returns.
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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.
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