Photo: iStock
Photo: iStock

Debt funds can help moderate volatility risk of any portfolio

Volatility, or how much the mutual fund's net asset value (NAV) moves, can be seen as a risk to your portfolio

I invest 3 lakh per month—L&T India Value Growth ( 45,000), HDFC Hybrid Equity Regular Growth ( 30,000), Motilal Oswal Multicap 35 Regular Growth ( 90,000), SBI Magnum Multicap Regular Growth ( 30,000), ICICI Prudential Bluechip Growth ( 1,05,000). Is my SIP portfolio good?

—Ashutosh

You are investing a considerable amount in an aggressive portfolio. The asset allocation is close to 95% in equity and a mere 5% in debt (in the form of the debt exposure in the hybrid fund that you are investing in). The funds themselves are good funds, and between their categories (within equity) they are distributed as 30% in large-cap funds and 65% in diversified funds (with the value fund also qualifying as a diversified fund from a risk perspective). Such a portfolio is fine if your risk appetite is very high and if your investing for the long term—more than 10 years. If you continue these investments for such a long term, say for 10 years, you will have invested 3.6 crore, but your portfolio worth could be more than 7 crore (assuming a 12% annual returns). Of course, this implies and requires that you stay invested and continue to invest during this period and get your portfolio periodically reviewed.

If, on the other hand, this comes as a surprise to you and you are not looking to invest in such an aggressive portfolio, then you can moderate the risk level by moving out of one of your multi-cap funds and start investing in a short-term debt fund such as HDFC Short Term Debt. For example, you could move your SBI Multicap allocation to this fund and that would up your debt allocation to 20% of your overall portfolio. Such a move would ensure that your portfolio contains volatility in different markets ensuring that your stay invested in your SIP portfolio.

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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com. Queries and views at mintmoney@livemint.com

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