I am 42 years old and want to construct my mutual funds portfolio in the best possible way. For debt, I invest in Public Provident Fund (PPF) and Employees’ Provident Fund (EPF). I have invested a total of ₹1 crore in mutual funds in the following schemes— Rs10 lakh each in large-cap funds Axis Bluechip and ICICI Next 50, ₹20 lakh each in multi-caps Mirae Asset India Equity and Kotak Multicap, ₹10 lakh each in HDFC Mid-cap Opportunities, L&T Emerging Business and Reliance Small Cap, and ₹10 lakh in Tata Digital India fund, which is a sector fund. Should I move my investment from Tata Digital to L&T Mid Cap fund? Please let me know if I should change my allocation in any of the schemes?
The portfolio that you hold is an aggressive one and consists very good funds.
It’s good that you recognize the importance of debt investing in the overall scheme of things and identify that your PF contributions make up for the same.
Regarding your question about choosing between a sector fund and a mid-cap fund, we need to first look at the nature of sector funds. But before that, I am going to assume that this is a long-term portfolio with at least a 10-year time horizon. If that is the case, you need to evaluate whether or not a sector fund should find a place in such a portfolio. Funds like these that invest in particular themes or market sectors are good for investments meant for the medium term where you can time your entry and exit.
As far as investing in information technology funds are concerned, they’ve had a very good run in recent years despite the sluggishness in the overall market and, hence, this is as good a time as any to tune your portfolio to reflect its long-term diversified nature. So, my advice to you would be to move out of this sector fund and buy a more diversified fund.
The L&T fund that you have chosen in this regard is a good mid-cap fund to move to.
Srikanth Meenakshi is co-founder and COO, FundsIndia.com.