Exposure to debt funds can cushion impact of sharp falls in the market1 min read . Updated: 29 Apr 2020, 10:32 PM IST
If you are okay with such market movements and can hold on to your investment, then it’s fine. If not, you can add some stabilizing component like debt funds or a hedging allocation, like to gold
I have a moderately high risk appetite. I have systematic investment plans (SIPs) of ₹5,000 each in Aditya Birla Sun Life Tax Relief 96 Growth, ICICI Prudential Bluechip, Mirae Asset Emerging Bluechip and Kotak Standard Multicap. Also, I have a ₹1,500 SIP in DSP Small Cap. I put about ₹10,000 every month directly into stocks across different sectors. Are my investments fine?
For a moderately high risk appetite, your portfolio has a high risk quotient. It’s a 100% equity portfolio. In markets such as the one we are seeing at present, such a portfolio will be subject to deep downturns and significant volatility.
If you are okay with such market movements and can hold on to your investment, then it’s fine. If not, you can add some stabilizing component like debt funds or a hedging allocation, like to gold. Together, they need not be more than 25% of your portfolio, but they will help cushion the shock of sharp falls. Otherwise, the funds in your portfolio are fine.
It is also good that you are investing some amount in direct stocks every month. But, again, these increase the overall risk that you are taking with your money. A bit of moderation could go a long way in ensuring that your long-term wealth grows steadily.
I invest in SIPs of ₹2,600 each in ABSL Frontline Equity, IDFC Multicap and HDFC Equity. I also invest ₹6,000 a month in Aditya Birla Liquid Fund instead of keeping it in a bank. Please review my portfolio.
It is smart of you to be investing regularly in a liquid fund rather than leaving money idle in your bank account. Please continue doing so. However, your SIP portfolio (the equity portfolio) could use some improvement. You are investing in two large-and-mid-cap funds along with a pure large-cap fund, all of which are of middling quality. Keeping to a similar constitution, you could move your large-cap allocation to HDFC Top 100 fund, and your other two funds to Aditya Birla Sun Life equity fund and Mirae Asset Emerging Bluechip fund. This would make for a high-quality portfolio with proven performers for the long term.
Srikanth Meenakshi is co-founder, PrimeInvestor.in