Which direct stocks should I invest in to prevent overlapping?

I am 23-years-old, so I have 20-30 years to invest. I have invested in Axis bluechip fund, Axis mid-cap, Parag Parikh flexi-cap and Hdfc Sensex plan, via SIP (systematic investment plan) mode of ₹5,000 per month in each.

1. Is my mutual fund (MF) portfolio good or should I change anything?

2. If I can invest ₹25-30k per month, what should be percent allocation in direct stocks and in MFs?

3. If I invest in direct stocks given the fact I am already investing in MF, what type of stocks should I invest in so that there is no overlapping?

—Ashutosh Pal

At present, you are investing half your monthly allocation in large-cap funds , a quarter in a flexi-cap fund and the remaining quarter in a mid-cap fund. If there is one change I would make it would be to add an international fund to your portfolio in the form of Motilal Oswal S&P 500 index fund. However, fresh inflows into international funds have been suspended due to the mutual fund industry hitting the Sebi limit. The limit is expected to be raised soon. You can reduce your large cap fund allocations by ₹2,000 each and invest ₹4,000 in this fund. That would give you a portfolio that has better diversification. Investing in direct stocks can be exciting, and educative. However, it can also be risky and requiring a lot of attention and upkeep. Hence, it would be prudent to not exceed 20% of your investment portfolio size in terms of exposure to direct stocks. So, if you are investing ₹30,000 overall, keep your stock investment to not more than ₹6,000. You can get going with your stock investments in a phased manner to get comfortable and familiar with the process. You can start by investing in a handful of bluechip stocks and observe its movements with respect to the overall market. After a year or two, as your observational and analytical skills get honed better, you can start trying to pick out winners from a larger universe or mid and small cap stocks. In the initial phase, do resist the temptation of getting into initial public offers.

Shrikanth Meenakshi is founder of Primeinvestor.in.