Home >Money >Personal Finance >Timing the entry and exit in sector funds is essential

I am 31 years old. Please review my portfolio. My investment horizon is more than five years. I have systematic investment plans (SIPs) of 3,000 each in ICICI Prudential Equity Hybrid and Axis Bluechip; 2,000 each in Nippon India Smallcap and Nippon India Pharma; 1,500 in Franklin Feeder US Opportunities; and 500 in Aditya Birla Sun Life Special Opportunities. I have a lump sum investment of 50,000 in SBI Equity Hybrid Regular Dividend. Please advise.

—Arnab Kumar Chatterjee

For an investment amount of 12,000 a month, you have far too many mutual funds. Investing very small amounts in different funds will simply add to your portfolio’s complexity, while not contributing much.

You also need to be careful when going for new fund offers (NFOs) of mutual funds. There is little known about an NFO’s portfolio strategy or its ability to weather different market cycles. When the NFO offers no differentiation from established diversified funds, it is best to skip it.

Further, using sectoral funds as part of your long-term portfolio through SIPs is best avoided unless the sector or theme is one that is stable and long term in nature. Timing the entry and exit is essential for sector funds.

In long-term portfolios, it’s better to use simple equity and debt funds. Avoid hybrid funds as they do not offer much downside containment (which debt funds do) and do not offer variation in strategy (which you can get through pure equity funds).

You can break up and invest 12,000 as follows: 3,000 each in Axis Bluechip, Parag Parikh Long Term Equity, Nippon India Small Cap and Aditya Birla Sun Life Corporate Bond. This will give your portfolio a 75-25 equity-debt mix; the Parag Parikh fund will also provide international exposure.

Stop SIPs in the other funds, but retain investments made so far in SBI Equity Hybrid. Keep a close watch on the pharma fund and exit when returns are strong. It’s also advisable to review your portfolio once a year to ensure that your funds remain strong performers.

Srikanth Meenakshi is co-founder, Queries and views at

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