Do not take high risk for short, medium-term goals
Exposing your portfolio to the diversity of the market will ensure that you accrue the benefits of multiple market cycles
I am 27 years old, and I have been investing around ₹25,000 in SIPs for the past three years. I am now planning to invest up to ₹50,000 aggressively for about 5-10 years. I have monthly investments of ₹10,000 in Franklin Smaller Companies Fund, ₹5,000 each in Franklin Focused Equity fund (formerly High Growth Companies fund), Mirae Asset Emerging Bluechip, Mirae Asset India Equity, DSP BR Tax Saver and in Axis Long Term Equity (ELSS). I also invest ₹7,500 each in SBI Small Cap fund and L&T Emerging Bluechip. Please tell me how I should modify my portfolio in terms of fund selection and allocation.
You are certainly investing in a highly aggressive portfolio. Not only is it all equity, your portfolio is also concentrated on the highly risky mid- and small-cap segments of the market. You are currently investing 60% (₹30,000) of your monthly amount in this segment, and the remaining 40% is going to broadly diversified funds (including the equity-linked savings schemes, or ELSS, which invest across market segments). You are young, and are consciously taking high risk with your investments. However, the time frame of your investment between 5 and 10 years is a bit on the short end for such a portfolio. So you may want to set your mind to handle a longer period of investing. Another thing about your portfolio is lack of exposure to the large-cap segment. Markets are cyclical in nature and when some segments do well, other segments tend to lag. So, exposing your portfolio to the diversity of the market will ensure that you accrue the benefits of multiple market cycles. For that purpose, I would recommend that you reduce your mid-cap exposure by at least 20% and move that to large-cap funds—either managed funds such as ICICI Prudential Bluechip fund or index funds such as UTI Nifty Index fund.
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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.
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