Your fund portfolio

I am interested in investing in mutual funds through the SIP (systematic investment plan) route, and have started investing in tax savings schemes.

At present I am investing ₹1,500 each in Axis Long Term Equity and ICICI Pru Tax Plan. I want to remain invested for a period of 60 months.

Are my fund choices appropriate?

I wish to invest another ₹3,000 for another 60-120 months. Which are the best schemes to invest in?

- Haresh Barrela

You have made a reasonable start to mutual fund investing by parking sums regularly in tax-saving funds.

Please remember that each instalment made in ELSS (equity linked savings scheme) funds is locked for a period of three years. So, if you invest in tax funds every month for five years, you can withdraw your last instalment only after the eighth year.

A single scheme would generally suffice for tax saving purposes, though both Axis Long Term Equity and ICICI Pru Tax Plan have performed quite well over the past several years. But you need not stop investing in either of the schemes for the time being, given their track record.

Of course, it is assumed that you have also explored debt options for tax saving such as PPF, NSC and bank FDs, etc.

Coming to the additional ₹3,000 that you wish to invest every month, you can consider UTI Equity, a large-cap fund with a proven long-term track record. If you can take more risks, you can start investing in a mid-cap fund such as ICICI Pru Value Discovery.

If you want a multi-cap approach, you can consider Franklin India Flexicap.

It would be advisable to invest in these schemes with at least a five-seven-year time horizon.

I have been investing ₹3,000 each in IDFC Premier Equity, Sundaram Select Midcap, Franklin India Prima and Birla Sunlife Top 100 for the past two years through the SIP route. I see that IDFC Premier Equity has not been performing well.

Should I continue investing in the scheme? Are there chances of better performance in the coming six-eight quarters?

Also, please give your views on the other schemes that I hold.

- Pratik

Your portfolio seems quite mid-cap intensive with three such schemes figuring in it and one large-cap oriented fund in Birla Sin Life Top 100.

You have not specified any time horizon or goal towards which you are investing. But your risk appetite does seem to be on the higher side given your penchant for putting money in mid-cap schemes.

You are right in your assessment that IDFC Premier Equity has been underperforming top peers in recent years.

It would not be easy to predict if a turnaround is in the offing, though the scheme has a pretty strong long-term track record. You could consider stopping further investments in the scheme and wait to see if a recovery does come about before committing additional sums.

Coming to your portfolio, Sundaram Select Midcap has been a reasonable performer over the years.

But there are much better schemes in the mid-cap pack where you can park your money. Hence you can stop further investments in the scheme.

Franklin India Prima has been a steady performer over the years, though it is not a chartbuster.

You can retain the scheme. But if you want a more aggressive fund with a stronger record, you may consider switching to Franklin India Smaller Companies and invest ₹3,000 in it.

Invest ₹3,000 each in ICICI Pru Value Discovery and HDFC Midcap Opportunities. These are mid-cap schemes with a proven long-term track record.

You can retain your holding in Birla Sun Life Top 100.

Given that you have an aggressive portfolio, you need to have a seven-ten-year horizon to derive maximum benefit from a mid-cap intensive portfolio.

Over the years, as you grow older, consider creating a more balanced portfolio with adequate weightage to large-cap schemes as well.

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