I invest in direct plan, growth option of the following funds: Canara Robeco Bluechip Equity and Emerging Equities, Axis Bluechip and Small Cap, Mirae Asset Large Cap and Emerging Bluechip, Kotak Bluechip, ICICI Pru Technology, PGIM Midcap, Tata Small Cap and Parag Parikh Flexicap.
The allocation works out to 70 per cent in large-cap funds, 20 per cent in mid-cap funds and 10 per cent in small-cap funds.
Is my MF portfolio well balanced? I want to invest for the next 20 years in these funds. I am 31.
While you have mentioned that your allocations to large-, mid- and small-cap funds are in the ratio 70:20:10, you also have a flexi-cap fund (Parag Parikh), two large- and mid-cap funds ( Mirae Emerging Bluechip and Canara Robeco Emerging Equities) and a sector fund (ICICI Pru Technology) in your portfolio which don’t seem accounted for.
Since you haven’t given how much you are investing/have invested in all the funds you hold, we assume that large-cap funds form a majority of your portfolio, if not 70 per cent.
Given this, what stands out in your portfolio is your allocation in the light of your age and your time horizon for the investments. You are quite young and have a long investment horizon, but you have still chosen to put in a majority of the money in large-cap funds. This shows that you may have a low-risk appetite, as large-caps are usually considered less risky than many other equity fund categories. However, you must reconsider your decision to invest in four actively-managed funds in this category. Many actively-managed large-cap funds have been underperforming large-cap indices for quite some time now (read accompanying article on ABSL Frontline Equity
Hence, even if you have a relatively low-risk appetite, you need not have so many active large-cap funds in your portfolio. Among your investments, Canara Robeco Bluechip and Mirae Large Cap are rated 5-star by BL Portfolio Star Track MF Ratings, Axis Bluechip, 4-star and Kotak Bluechip, 3-star. While retaining investments in any of the two 5-star rated funds as of now, you can choose one or two passive funds such as HDFC Index fund – Nifty50/Sensex, UTI Nifty 50 Index, Nippon ETF Nifty 100 in addition, instead of the other large-cap funds you hold. These passive funds mimic the respective indices mentioned and come at a lower cost than actively-managed ones.
Most of your choices in the large- and mid-cap, flexi-cap, mid-cap and small-cap categories are rated either 5-star or 4-star by us, barring Tata Smallcap, which is relatively new. While you can continue with all these investments, keep a closer watch on Tata Smallcap to note performance vs peers and benchmark.
The tech sector fund too is unrated by us. Investments in sector funds are best approached tactically by timing your entry and exit. You can use sector funds as part of your satellite portfolio for sub-goals such as a vacation abroad, outside of long-term goals such as retirement.
Net-net, you can ensure that you have 40 per cent allocation to large-caps, 40 per cent to large- and mid-cap and flexi-cap categories put together and the remaining 20 per cent to mid- and small-cap categories. That would still not peg up the risk much, but at the same time be a reasonable allocation considering your age and time to goal.
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