Mutual Funds

Your Fund Portfolio

K Venkatasubramanian | Updated on December 30, 2018

I am 36 years old and work in a private sector company. Presently, I invest in the following mutual funds through the SIP route every month: Franklin India Focused Equity - ₹2,000, Franklin India Smaller Companies - ₹2,000, ICICI Pru Bluechip - ₹4,500, ICICI Pru Value Discovery - ₹4,500, Aditya Birla SL Equity - ₹4,000, Motilal Oswal Midcap 30 - ₹2,000, Mirae Asset Emerging Bluechip - ₹2,000, and ABSL Tax Relief ’96: ₹12,500.

I am a long-term investor and do not need the amount invested in SIPs for the next 10 years. Should I rebalance my MF portfolio by stopping SIPs in funds that have been giving poor returns? Please review my portfolio and advise.

Satish Nayak

You are investing a healthy sum of ₹33,500 in mutual funds with a long-term focus. As such, you have made a good start by investing for the future. But your portfolio needs a bit more focus in terms of the types of funds invested in and also a better allocation method to individual schemes.

It would also be better if you have specific goals to save towards, as it will enable you to choose the right funds, taking into account the time horizon, risk appetite and criticality of the target.

Franklin India Focused Equity has been underperforming its benchmark over the past few years and can be exited. Franklin India Smaller Companies has a solid track record over medium and long timeframes, and delivers returns by taking only modest risks despite having a small-cap focus. You can continue the SIPs in the scheme.

ICICI Pru Bluechip and ICICI Pru Value Discovery are schemes with good long-term records over five and 10-year time-frames, but have delivered lackadaisical performances over the past one- and three-year periods. You can stop further SIPs in these two schemes and keep a watch over their performance for any signs of improvement. Instead of these two schemes, you can invest in Invesco India Contra, a fund that has a large-cap bias and is also value-oriented, thus combining the traits of the two funds from the ICICI stable.

Aditya Birla SL Equity is a solid multi-cap fund with a proven track record. You can continue investing in the fund. Motilal Oswal Midcap 30 has been underperforming its category over the past few years and hence can be exited. Instead, invest in DSP Midcap, a fund with a steady record of outperformance. You can continue investing in Mirae Asset Emerging Bluechip.

Coming to the allocation to individual schemes, invest ₹5,000 each in Invesco India Contra, Aditya Birla SL Equity and Mirae Asset Emerging Bluechip. Invest ₹3,000 each in Franklin India Smaller Companies and DSP Midcap.

The idea of the changed allocation is to have a balanced portfolio with a blend of large-cap, multi-cap, mid-cap and value-oriented funds.

You can continue the SIPs in Aditya Birla SL Tax Relief ’96. But be aware that each instalment is locked for a period of three years. Also, ₹12,500 seems a tad high, unless this is the only tax-related investment you are currently making under Section 80C. If you have an Employees’ Provident Fund (EPF) account or park sums in Public Provident Fund (PPF) or other avenues that also enjoy the tax benefits of ₹1.5 lakh available under 80C, you can reduce the investments in the tax-saving mutual fund. You can instead channelise the surplus into the other schemes mentioned earlier, in the same proportion.

Review the funds in your portfolio once a year and take corrective action when necessary. Book profits or exit schemes and move to safer debt avenues if you reach your targeted corpus ahead of time.

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Published on December 30, 2018

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