Don’t invest only in aggressive funds even if you have a high risk appetite

I have been investing ₹2,500 each per month through systematic investment plans (SIPs) in the following schemes for the last three years: Franklin India Focused Equity, Aditya Birla Sun Life Frontline Equity, HDFC Mid-Cap Opportunities and ICICI Prudential Value Discovery. I have also started SIPs of ₹3,000 each per month in SBI Small Cap and Mirae Asset Large Cap. Is the selection of my funds alright considering my investing period is 15 years?

—Niranjan Kumar

You can stop SIPs in Aditya Birla Sun Life Frontline Equity and ICICI Prudential Value Discovery. While both funds were strong performers earlier, their performance has been lagging in the past two-three years. But hold your investments made so far. Continue SIPs in Franklin India Focused Equity, HDFC Mid-Cap Opportunities and SBI Small cap funds. Increase your SIP amount in Mirae Asset Large Cap to ₹4,000 and invest the remaining ₹4,000 in Aditya Birla Sun Life Corporate Bond, a debt fund. This will give you a 75:25 equity:debt portfolio, a reasonable allocation given your time frame.

Review your portfolio annually to ensure your funds continue to remain good.

I have been investing in HDFC Small Cap and Mirae Asset Tax Saver funds. I invest lump sum amounts when stock markets are down. Since I am in my early 20s, I want to diversify my portfolio. I have a high risk appetite. Which funds should I invest in?

—Nikhil Bisht

When you are building a portfolio, you need to have funds from different categories that have different investment styles. Though you may have a high risk appetite, don’t be tempted into going only for aggressive funds. Such funds are volatile and can severely cut into your returns during corrections, which will be hard to recover from.

Moderate-risk funds you can consider adding are Kotak Standard Multicap, Invesco India Contra and ICICI Prudential Equity and Debt (hybrid fund). High-risk aggressive funds can be DSP Midcap and Invesco India Growth Opportunities. You could also add debt funds such as Kotak Corporate Bond or Aditya Birla Sun Life Corporate Bond to balance risk.

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