Limit your exposure to mid- and small-caps1 min read . Updated: 14 Jan 2021, 06:15 AM IST
Aim at a maximum of eight to 12 funds and don’t allow individual funds to account for more than 25% of your overall investment.
I am 25 years old and I have systematic investment plans (SIPs) of ₹5,000 in Kotak MultiCap Growth, Axis BlueChip, IDFC Corporate Bond and Axis Small Cap. I want to accumulate ₹10 crore in 25 years. I can increase my investment. Please advise. Also, when is it advisable to exit a fund?
Starting investments early in life is one of the best ways to build wealth. At a reasonable 12% annual return on your current investments, you will accumulate about ₹3.8 crore in 25 years. To reach ₹10 crore, you may have to increase your monthly investment by about ₹6,000 every year.
The funds you hold and the proportion of allocation to them are all fine. You can add more funds based on how much you are increasing your investment. Aim at a maximum of eight to 12 funds and don’t allow individual funds to account for more than 25% of your overall investment.
When adding funds, maintain the current asset allocation of 25% in debt and 75% in equity. You can add high-risk funds —mid-cap and/or small-cap-oriented—if your risk appetite is high but cap it at 25-30% of the portfolio.
You can exit a fund if it underperforms the index and its peers for at least four quarters, by a margin of at least three-six percentage points, and a recovery from this is not possible in the near term.
Srikanth Meenakshi is co-founder, PrimeInvestor.in