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Avoid investing in different funds of a single AMC as they perform in unison

Look for funds from other AMCs that are similar in nature and equal in performance capability

I am 35 years old with two children aged four and one. I started investing in the following funds at the start of this year for my children’s education: Axis Bluechip, Axis Midcap, Axis Small Cap and Mirae Asset Focused. I have a systematic investment plan (SIP) of 3,000 per month and aim to increase this over years to an amount of around 10,000 in the next five-seven years. Would this suffice considering the current inflation and increasing education expenses? When I searched for good funds, most of the funds were from Axis Mutual Fund. Is it a bad idea to put a lot of my investment in the same fund house? Is there a better allocation?

—Name withheld on request

Different types of financial goals have different characteristics. A goal for a retirement corpus can have a specific target amount, but it is possible to be flexible with the time frame (as in work a few more years or less). An education goal is rigid in terms of time frame—as in when the money will be required—but it can be flexible in terms of the amount required (government or private college; in India or abroad).

The amount you are investing now is insufficient for fully catering to the need of higher education. With two children, you would need to save and invest about 20,000 per month over a period of 15 years to get to a corpus of around 1 crore, which would be required for four-year professional degrees for both of them at that time. So, consider increasing your SIP amount to the maximum of your ability as soon as you can.

Investing in funds that belong to predominantly a single fund house is not a good idea. The reason is that funds from a single fund house tend to perform well or poorly in unison due to similarities in fund management styles or investment philosophies. You can always find funds from other asset management companies (AMCs) that are similar in nature and equal in performance capability. For example, you can consider funds such as Kotak Standard Multicap and DSP Midcap. Also, please review your portfolio every year to keep it up to date.

Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at mintmoney@livemint.com

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