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I am 35 years old and doing monthly SIPs (systematic investment plan) in the following mutual fund (MF) schemes: Canara Robeco Blue Chip Equity and HDFC Index S&P BSE Sensex ( 6,000 each), Edelweiss Balanced Advantage and Mirae Asset Hybrid Equity ( 5,000 each), Kotak Small Cap ( 3,000) and SBI Magnum Medium Duration ( 10,000). Am I investing in too many funds? Is there any need for diversification into debt / gold?

— Name withheld on request

 

Ideally, 6 to 8 funds are good enough to build your MF portfolio. As the size of the portfolio increases, you may invest in a maximum of 10 funds to reduce the risk of being overdependent on any particular fund or fund house. 

However, the funds you are investing in are across equity, debt and hybrid categories. In our opinion, you can select the fund categories based on your investment objective. The debt funds can be used for short- to mid-term objectives, hybrid funds can be useful for mid-term goals, and for the long term, you can consider investing in equity funds.

When you follow this approach, your asset allocation will get structured based on your financial goals, rather than a predefined asset allocation. 

At present, your monthly investment of 35,000 across all the funds is approximately 60% in equity and 40% in debt. All the funds that you are investing in are good and have done well within their categories.

 If your investment objective is for the long term then you can reduce the SIP in debt and hybrid and invest more in equity funds. In equity, you can consider adding Parag Parikh Flexicap Fund and SBI Focused Equity Fund in your investment portfolio. 

From a hybrid fund perspective, both the funds that you are investing in are good. If you have regular investment in debt in the form of EPF, VPF or PPF, then you may stop the SIP in SBI Medium Duration Fund, if you are investing in the fund for a long term.

Harshad Chetanwala is co-founder at MyWealthGrowth.com.

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