If your fund has not been performing, it is important for you to know if this is due to poor fund performance or market underperformance
I am 30 years old and looking to build a portfolio over the next 20 years. I have no particular goal in mind. My systematic investment plans (SIPs) are: ₹6,000 each in Mirae Asset Emerging Bluechip and Canara Robeco Emerging Equities; ₹5,000 each in Motilal Oswal Nasdaq 100 Fund of Fund and Motilal Oswal S&P 500 Index; ₹3,000 each in Axis Bluechip, Aditya Birla Sun Life Tax Relief 96, Axis Small Cap and HDFC Index Fund-Sensex Plan; and ₹2,000 in Axis Gold. I am also investing ₹4,000 in a debt fund. My total investible amount is ₹40,000. I have allocated 85% to equity, 10% to debt and 5% to gold. I have tried to allocate around 60% to active and 40% to passive schemes. Are my plans good enough for the long term or should I make any changes?
You should reduce equity allocation to 80% of the portfolio, and increase the debt portion to 15%. Your equity funds are predominantly high-risk as they have higher allocations to mid-cap and small-cap stocks. Though you may have a long time frame, such allocations will induce high volatility in a portfolio. Lower volatility helps a portfolio generate better returns over time.
Restructure your SIPs thus (assuming you have a high risk appetite, since your current portfolio indicates it): put ₹6,000 in Axis Bluechip and ₹5,000 in HDFC Sensex. Reduce SIP to ₹4,500 each in Mirae Asset Emerging Bluechip and Canara Robeco Emerging Equities. Reduce SIP to ₹2,500 each in Motilal Nasdaq 100 FOF and Motilal S&P 500—or you can just stop one of the SIPs and maintain ₹5,000 in the other. International diversification can be capped at 15% of the portfolio. You could increase SIP in debt to ₹7,000. You have not mentioned which debt fund you have. Please ensure that it has nil-to-minimal credit risk. Hold all investments made so far.
I have invested ₹75,000 in the last five years via SIP but I stopped it in April 2019 as the fund was not performing well. Should I redeem all the units and invest elsewhere or hold the money in the mutual fund?
If your fund has not been performing, it is important for you to know if this is due to poor fund performance or market underperformance. For you to know this, first compare the fund with its benchmark to see if it is trailing its benchmark. In case the underperformance, if any, is less than 2-3 percentage points, you may continue to hold for at least a year and give it time. If the underperformance is over five percentage points, wait for another three-four quarters and then shift it to a consistent fund.
You don’t need to do systematic transfer since there is no risk of market timing when you are switching within the same asset class (equity to equity). But if you are worried about moving to a new fund in one shot, then do a SIP of over 6-12 months.
Hopefully, you have continued your SIP of ₹75,000 in other funds. If not, restart SIPs and do not let your savings stop. Make sure you have three-four asset allocated baskets of equity and debt funds instead of deploying ₹75,000 in a single fund.
Srikanth Meenakshi is co-founder, PrimeInvestor.in. Queries and views at firstname.lastname@example.org
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