I am 32 years old and have been investing in the following funds through the SIP route for the last two years: ₹3,000 each in ICICI Prudential Value Discovery and ICICI Prudential Bluechip, ₹2,500 in Reliance Multi Cap, ₹2,200 in HDFC Mid-Cap Opportunities and ₹2,000 in HDFC Balanced Advantage.
In four of the five schemes, I have opted for the dividend option.
I also have RD with banks with monthly instalments of ₹10,000.
In addition, I have a few lump-sum investments: ₹1. 2 lakh in HDFC TaxSaver, ₹45,000 in Reliance Tax Saver and ₹15,000 in Axis Bluechip.
I am planning to buy a house at the age of 40, and also want to save for my son’s higher education (now 4.5 years old). Please advise whether I have to make any changes to my portfolio. I can spare an additional ₹3,000 for investment in mutual funds.
Rakesh K
You currently invest ₹12,700 and can spare another ₹3,000, taking the total sum that you can invest to ₹15,700.
For the amount you are investing, you can get sufficient diversification with four funds. Otherwise, the portfolio will be spread too thin.
ICICI Prudential Value Discovery has been underperforming its benchmark substantially over the past few years. Switch to Tata Equity PE, a value-based fund with a solid track record, and invest ₹4,500 in it.
Most large-cap funds have been underperforming their benchmarks over the past one- and three-year periods. ICICI Prudential Bluechip is no exception. Though it does have a good long-term track record, keep a tab on its performance. If it worsens in the next few months, consider switching to Axis Bluechip, a consistent outperformer, and invest ₹4,500 in it.
Reliance Multi Cap has lagged behind peers and its benchmark over the past three to five-year period. Exit the scheme. Though it is not advisable to invest in two schemes from the same house, you can continue with HDFC Mid-Cap Opportunities and HDFC Balanced Advantage in light of their healthy performance records. Invest ₹3,350 in each of them.
Coming to your lump-sum portfolio, both the tax-saving schemes can be exited due to their prolonged underperformance. You can instead buy units of Aditya Birla Sun Life Tax Relief ’96 with the amount generated by exiting the other two schemes.
To be fair, tax-saving is another category in which most schemes have underperformed, even when investments were made in the SIP mode. Axis Bluechip can be retained.
We hope you understand that when dividends are given in mutual funds, their NAV reduces proportionately.
You will need to step up your investments when your surplus increases.
Coming to your goals, you will need to specify how much you want to spend for the house you wish to purchase or for your child’s higher education.
One suggestion would be to consider buying a house only if you would stay in it, as otherwise it may not be a lucrative investment.
For both the goals, factor in inflation. Just as an indicator, the broader markets have rallied 15-17 per cent annually in the past 10 years. While there is no certainty that this performance will be repeated in the next 10 years, it is a reasonable indicator for you to plan and increase your savings to meet your goals.
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