A portfolio with a large number of funds makes it harder to manage2 min read . Updated: 18 Jun 2020, 12:43 AM IST
High exposure to mid-cap or aggressive large- and mid-cap funds will hurt in market falls and make the climb back more challenging
I am 30 years old. My monthly salary is ₹75,000 and I have been investing ₹19,000 per month for the past one year: ₹5,000 in UTI Nifty; ₹2,000 each in DSP Tax Saver, Franklin India Taxshield, ICICI Prudential Long Term Equity, Aditya Birla Sun Life Pure Value, Motilal Oswal Multicap 35 and ICICI Prudential Nifty Next 50; and ₹1,000 each in SBI Focused Equity and L&T Emerging Businesses. I plan to buy a house after I turn 50. Please suggest funds to build a retirement corpus.
You have too many funds with small amounts. A large number of funds makes it harder to manage and over-diversifies the portfolio.
For tax purposes, stick with either DSP Tax Saver or ICICI Pru Long Term Equity and use it entirely for tax purposes. Stop systematic investment plans (SIPs) in the other and Franklin India Taxshield. Exit once the lock-in is over. Stop SIPs in ABSL Pure Value and L&T Emerging Business and exit in a phased manner—the former has long been an underperformer and the latter will account for a small portion of your portfolio.
For SIP of ₹13,000 (amount after saving in the equity-linked savings scheme), invest as follows. Retain ₹2,000 in Motilal Multicap 35. Increase SIP in ICICI Pru Nifty Next 50 to ₹3,000 and SBI Focused Equity to ₹2,000. Reduce SIP in UTI Nifty to ₹4,000. Invest the final ₹2,000 in ABSL Corporate Bond. If you increase SIPs at any time, increase in the debt fund. Reinvest the proceeds from the sale of equity funds into this debt fund in order to get reasonable debt allocation into your portfolio.
You can use the same funds for your retirement goal, or consider others such as Invesco India Growth Opportunities and Kotak Emerging Equity for high-risk options, and Kotak Standard Multicap and Mirae Asset India Equity for moderate risk options.
I have the following SIPs for the past two years: ₹3,000 each in HDFC Mid-Cap Opportunities and Kotak Standard Multicap; ₹2,500 each in L&T Emerging Businesses and Mirae Asset Emerging Bluechip; and ₹1,000 in SBI Small Cap. Can I continue with them for the next 20 years?
Your exposure to mid-cap or aggressive large- and mid-cap funds is high. This will hurt your portfolio in market falls and make the climb back more challenging. You can stop SIPs and hold funds such as L&T Emerging Businesses and HDFC Mid-Cap Opportunities. These funds are okay, but because of your overweight exposure to mid-caps, you can instead opt for funds such as Kotak Standard Multicap and even pick an index fund with the underlying index being Nifty Next 50.
Srikanth Meenakshi is co-founder, PrimeInvestor.in